In March, U.S. Department of Treasury issued its annual General Explanations of the Administration’s Revenue Proposals, commonly known as the “Green Book.” Among other revenue proposals, the Treasury addressed the treatment of on-demand pay arrangements or earned wage access (EWA) programs, which have risen in popularity in recent years (previously discussed in our Labor and Employment Blog). EWA programs generally allow employees to access accrued wages before the end of their regular pay cycle. Continue Reading Treasury Department Proposes Non-Loan Status for Earned Wage Access
On January 18, acting CFPB General Counsel Seth Frotman sent a letter to three representatives of consumer advocacy groups addressing the CFPB’s November 2020 advisory opinion on earned wage access (EWA) products. The letter responded to concerns that the advisory opinion was being used as justification by the proponents of a pending New Jersey law that would allow third-party EWA providers to charge fees or permit “tips” for their products without having to abide by the state’s 30% usury cap. Continue Reading CFPB Addresses “Confusion” Over Earned Wage Access Program
On December 18, the Arizona Attorney General issued an opinion on earned wage access (EWA), which determined that fully non-recourse EWA products do not constitute consumer loans subject to consumer loan regulations, and correspondingly, that providers of non-recourse EWA products would not be considered consumer lenders subject to licensure under Arizona law. The opinion found that an EWA product could be identified as fully non-recourse when the provider:Continue Reading AZ Attorney General Concludes Non-Recourse EWA Not a Loan
On June 30, the CFPB issued an order terminating an EWA provider’s Sandbox Approval Order relating to its earned wage access products. In December 2020, the CFPB provided the company special regulatory treatment, including a temporary safe harbor from liability under TILA/Reg. Z because, in part, the EWA program did not involve the offering or extension of “credit” as defined by Reg. Z. In its press release, the CFPB note that the “temporary safe harbor is for offering and providing certain earned wage access products, subject to good faith compliance with the terms of the approval order.”
Ahead of an upcoming merger between a digital banking platform and a special purpose acquisition company, both parties disclosed in a regulatory filing last week that the platform received a Civil Investigative Demand (“CID”) in June 2020 related to its “cash paycheck advance business in compliance with the prohibition against UDAAPs, the EFTA, and, to the extent it applies, the Truth in Lending Act.” According to the filing, the platform provided the CFPB with all information and documents required by the CID, and on September 27, 2021, the CFPB staff notified the company that it currently did not intend to recommend that the CFPB take any enforcement action.
On August 5, California’s Department of Financial Protection and Innovation (DFPI) announced that it entered into a consent order with a New York-based FinTech company that offers student Income Share Agreements (ISAs) to finance post-secondary education and training. According to the DFPI, it is the first agreement to subject an ISA provider to state licensing and regulation. The agreement reflects the DFPI’s decision to treat these private financing products as student loans for the purpose of the California Student Loan Servicing Act (SLSA). Below are significant highlights from the agreement:
- The DFPI found that the SLSA defines “student loans” broadly to include “any loan” or “extension of credit” and does not exclude contingent debt.
- Under the ISAs, students agree to repay a school a fixed percentage of their future gross income after graduation, but only if the student is employed and making more than an agreed-upon amount.
- The settlement provides that the DFPI will issue the company a conditional license under the SLSA based on its finding that ISAs are “student loans” for the purposes of the SLSA.
On February 11, the California DFPI issued an opinion letter in response to an EWA provider’s request for a specific ruling from the DFPI about whether the company’s EWA solution is subject to licensure under the California Financing Laws (CFL) and California Deferred Deposit Transaction Law (CDDTL). In response, the DFPI concluded that the provider does not originate or facilitate loans subject to the CFL or CDDTL, and that neither the provider nor its employer partners are subject to the CFL or CDDTL’s licensing requirements. Continue Reading DFPI Approves EWA Provider