Get Ready! Changes to Employer-Offered EWA Programs are Right Around the Corner

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On July 18, 2024, the Consumer Finance Protection Bureau (CFPB) proposed a landmark interpretive rule that will likely transform the landscape of employer-integrated earned wage access (EWA) and on-demand pay. The proposal states that paycheck advance products made to employees by vendors and providers are loans, which creates substantial implications for both employees and employers if and (more likely) when the guidance is final.

To date, EWA providers have allowed employees to access their pay for either a fee or a “tip,” as some providers call it. The CFPB states that this practice makes an EWA advance a loan, subject to the provisions of the Truth in Lending Act of 1968. The proposed interpretive rule suggests that the CFPB strongly prefers that the future of employer-earned wage access is one where employees don’t pay a fee to access their earned pay.

CFPB EWA Regulation Impact on Payroll

The CFPB’s proposed interpretive rule could significantly impact your EWA program if or when it becomes law. Here are just some of the technical and practical considerations to consider so you can stay ahead of any future announcement:

• How will your existing EWA offering align with the new CFPB interpretive rule?
• What changes must you make to ensure full compliance with the Truth in Lending Act (TILA) as interpreted by the CFPB?
• When would this type of proposed rule become effective? What are the implications of the CFPB’s proposal on the states?
• If EWA is a loan, does this technically make your company a loan originator or broker? What responsibilities do you have given that designation?
• Will TILA compliance impose additional reporting requirements on payroll departments?
• What is the implication of a potential “industry lawsuit” against the CFPB?
• Will my company be expected to pay the fees moving forward? How will this impact my company’s budgeting process?
• Will my payroll provider need to be informed of any changes to our program?
• What alternatives or adjustments should EWA providers consider in their on-demand pay offerings to reduce reliance on fees that might be regarded as finance charges?

To get you started on looking at these considerations, Chime created an Earned Wage Access Preparedness Plan that you can access here.

Start preparing now

The CFPB’s proposal — whether it becomes final law — is transparent in its view that zero fees for employees to access their pay are in the not-too-far future. Because of this, best-in-class employers will likely not want to be caught flat-footed should earned wage access regulations force them to alter the structure of their EWA/on-demand pay programs. The best employers who offer on-demand pay are already planning for this transition to zero fees. By preparing for this change now, you can deliver complete continuity of service to employees who rely on this vital benefit.

To help employers navigate this transition, we offer free tools to support your preparation. Fill out your information on this form to receive our proprietary Earned Wage Access Preparedness Plan.

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