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Earned Wage Access Debate Set to Heat Up Between FinTechs and Regulators


The debate between regulators and FinTechs over the state of earned wage access (EWA) innovations looks set to heat up through the next several months.

In a Feb. 7 letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, the American Fintech Council urged that a meeting be set up with “relevant stakeholders” to have a “comprehensive conversation of EWA and consideration of a formal rulemaking.”

The CFPB, noted the council has “multiple options in their regulatory toolkit that could be used to formally or informally regulate the emerging EWA market.” Cautioning against “shoehorning” EWA products into existing lending laws, the Council said there has been a “patchwork approach” toward EWA regulation at the state level, and urged that there be engagement at the federal level.

The state-by-state approach that has been taking shape was profiled here by PYMNTS several months ago, where Nevada and Missouri were but two examples of the standards set for how firms would be registered as EWA providers, and whether they’d have recourse against borrowers.

The Key Debates

The CFPB, for its part, sent a letter to California regulators late last year, and said that it will look to issue guidance on EWA and how existing laws might be brought to bear on EWA services. Among the key issues is whether the products are to be treated as loans, or whether they don’t fall under the definition of credit extended to employees.

The debate is sharpening as a number of providers are coming to the forefront in offering EWA to various firms and platforms. In one recent example, EWA company Immediate closed a $16 million funding round to accelerate its trajectory in the workplace financial health sector.

PYMNTS has reported through its own research, in collaboration with Ingo Money, and in a report titled “The Rise of Instant Payroll and Early-Access Compensation,” that a majority of working Americans wanted their employers to give them access to wages each day. We found that more than half of those with EWA said they had used it.

The data show that almost all — 96% to be exact — of corporates that offer earned wage access say the product helps attract new talent, and 75% of millennials say it would influence their acceptance of a job offer. This last point is critical, as jockeying for younger employees remains intense and loyalty means that companies need to worry less about churn and re-filling/retraining talent. As many as a quarter of companies have said they have lost employees due to delayed payroll.