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CFPB Proposes Rule to Regulate Paycheck Advances, Apply Truth-in-Lending to Fintech Cash Advances

Jul 18, 2024, 01:31 PM

The U.S. Consumer Financial Protection Bureau (CFPB) has announced that paycheck advances, also known as 'earned wage' advances, are considered consumer loans and are subject to existing federal lending laws. The CFPB's proposed rule aims to ensure that consumers receive clear and accurate information about the costs associated with these loans. This includes counting 'tips' and expediting fees as finance charges, which would significantly raise the advertised costs of payroll advances. The rule is designed to set federal guardrails for this fast-growing market, which is often marketed to employers rather than employees. The move has garnered criticism for not considering the unique characteristics and benefits of earned wage access products to consumers. Additionally, the CFPB moved to apply federal truth-in-lending requirements to the growing market for fintech cash advances.