Chris Willis, Keith Barnett, Jason Cover, and Mark Furletti discuss the future of earned-wage access (EWA) products following the Consumer Financial Protection Bureau's (CFPB) rescission of previous guidance.
In this special joint episode of The Consumer Finance Podcast and Payments Pros, Chris Willis, co-leader of Troutman Pepper Locke's Consumer Financial Services Regulatory Practice, is joined by Keith Barnett and Jason Cover from the Payments Pros podcast, along with Troutman Pepper Locke Consumer Financial Services Partner Mark Furletti. They discuss the future of earned-wage access (EWA) products following the Consumer Financial Protection Bureau's (CFPB) rescission of previous guidance. The conversation explores the history and evolution of EWA products, initially designed as employer-based solutions to provide employees early access to earned wages without extending credit.
The group highlights regulatory challenges, including the CFPB's changing stance and the impact of state laws on EWA offerings. They examine how these products are structured to avoid being classified as credit, focusing on optional fees and the absence of repayment obligations. The discussion also addresses the legal landscape, noting potential state-level regulatory landmines and private litigation. The episode emphasizes the importance for fintechs and payroll processors to navigate these complexities carefully, especially in states with stringent regulations like California and New York. The podcast concludes with insights into the future of EWA, stressing the need for compliance with evolving state and federal laws.
The Consumer Finance Podcast and Payments Pros – The Payments Law Podcast — Regulatory Rollback: Legal Challenges and Opportunities in Earned-Wage Access
Hosts: Chris Willis and Keith Barnett
Guests: Jason Cover and Mark Furletti
Date Aired: July 24, 2025
Chris Willis:
Welcome to this special joint edition of The Consumer Finance Podcast and Payments Pros. I'm Chris Willis, the co-leader of Troutman Pepper Locke's Consumer Financial Services Regulatory Practice, and today I'm joined by the host of Payments Pros, Keith Barnett, my other co-leader of the Consumer Financial Services Regulatory Practice, Mark Furletti, and our partner, Jason Cover, to talk about the future of earned-wage access products after the rescission of the CFPB’s last administration guidance on that subject.
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Now, as I said, obviously, from reading the news and from listening to this podcast, that the CFPB under the current administration withdrew close to 70 pieces of informal guidance a little bit earlier in May of this year. And we're having a series of podcasts that will analyze the impacts of the withdrawals of those various pieces of guidance. Today, we're going to be talking about where earned wage access products stand after the withdrawal of guidance pertinent to that subject. As I said, I'm joined by Keith, Mark, and Jason. So, gentlemen, thank you for being on the podcast today.
Mark Furletti:
Thanks, Chris.
Chris Willis:
Mark, let me start with you. If you don't mind, just give the audience some background from which to appreciate the magnitude of the developments that are going on. Tell us about the history of earned wage access as a term and the types of products the term covers.
Mark Furletti:
Sure. So, Chris, we started seeing these products emerge, I'd say, not quite a decade ago, but a while back. Historically, these products were employer-based. Let me explain what I mean by that. Imagine that there is an employer and an employee is set up to get paid every two weeks by that employer. The employee after working one week has earned the wages for that week. So, to the extent the employer was to give the employee access to those wages, that's not an extension of credit. That's not giving the consumer money that they have not already earned. So, the theory was that these were not extensions of credit subject to lending walls because you were giving employees access to money that was already technically theirs, just hadn't yet been paid.
The next iteration of this came through payroll processors. So, we started seeing payroll processors partnering with employers to facilitate these transactions. Again, that's basically the same theory, i.e. the employee was getting access to wages that they had already earned. And then kind of the next phase of this was having third parties who were neither employers nor payroll processors start to offer these types of dances. In that case, the theory changed a little bit. It wasn't that they were giving employees access to money they had earned because they weren't quite sure they're not the employer, so they weren't able to necessarily know how much the employee had earned, although sometimes they could estimate it by looking at deposits into their deposit account.
But rather, they set these things up to not be credit because there was no obligation to repay. So, the employee was given the advance, but there was not an obligation on the part of the employee to repay it, although if they wanted to get future advances, they would have to. And so, a hallmark of credit is an absolute obligation to repay. When there is no such obligation, it should neither be credit under federal law nor under most state law.
Now, we'll talk about later, Keith will talk about some expansion of state laws to cover transactions of this type. But certainly, it's like no obligation to repay, and then sometimes giving employees access to money they've already earned was the basic concept. Then two other things just to mention as background are tips and expedited funding fee. So, a lot of the third-party based products are offered by companies that, because their position is that there's no obligation to repay, there is an optional tip that the provider asked the consumer if they want to pay in order to basically, compensate the provider of the advance. It's not a finance charge and it's not interest because it's not required, arguably. But that's one of the main forms of compensation for these. That's why people do it, particularly the third party, as opposed to just being an employee benefit.
Then there's also expedited funding fees are a key feature of these products. That's where there might be a way of the consumer getting the advance faster by paying a fee. So, again, the argument would be that an expedited funding fee is not interest. It's optional. It doesn't have to be paid. So, at a high level, that's kind of the types of products and the theory that leads to under consumer credit law for how those products are generally offered.
Keith Barnett:
Mark, just to elaborate, one other common feature would be like a membership fee. Sometimes these products are offered with a broader range of suites and services. Then two other important characteristics are how the payments are paid, even though they may be non-recourse or no obligation for the employer-based programs. Those would be deducted from your payroll, right? So, the wages that were earned, but not yet dispersed, are deducted from the two-week payment that Mark referenced. And then for non-employer-based, they're typically
recovered through some sort of payment authorization, whether that's ECH debit or sometimes folks have a checking account with the party offering the EWA product. But typically, there's a one-time authorization of some sort to recover those funds that are advanced.
Chris Willis:
Okay, thank you, gentlemen. Now, the trigger for today's episode is the withdrawal of an advisory opinion on earned wage access products that the CFPB had issued last year. That, however, wasn't the CFPB's first foray into this issue. Can you tell us something about how the CFPB has weighed in on these types of products over the years?
Jason Cover:
Yes, Chris. So, this actually, it's not ancient history. Way back in 2020, there was an initial advisory opinion offered under the first Trump administration, and that tried to distinguish between the two products that mark reference broadly, right? The employee-based versus direct-to-consumer product. So, that advisory opinion tried to “codify” or make clear that employer-based products involved an agreement with the employer in it were not credit under Regulation Z and not subject to those disclosures. It identified a couple conditions of those. Those were providing to the consumer with no more than the amount of crude wages earned, provisioned by a third party fully integrated with the employer, no consumer payments beyond recovery of the amounts in the payroll deduction, the next paycheck, and then no other recourse or collection activity, and no underwriting or credit reporting.
So, a lot of the similar features, but the crux of it was that employer-based program. It remains silent about the direct consumer or third party earned wage product. So, that was left kind of as something open in the air. And then shockingly, of course, it was rescinded by the Trump administration in late January, one of their last final acts. And then you alluded to this, Chris, the trump administration was also busy. They had a very different opinion on how EWA worked. That was offered by them last summer. I think Mark and I and Keith, I believe, also did a podcast on that way back when this, again, shockingly reversed the previous opinion. And I think, Mark mentioned that all of these features are common to things not being credit or someone offering them not being a creditor, and that obligation to repay being the crux of it. The first thing that this interpretive goal did was say, “Hey, if there's any kind of way to recover the payment, whether that's a payment authorization, a payroll deduction, et cetera, that's actually an obligation to repay even if it can be canceled.”
Then it's sought to clarify some of the ways that this is economically driven that Mark mentioned, like the expedited funding fees, tips, and the CFPB characterized those as finance charges under Reg Z that require disclosure. So, you're a creditor requiring disclosure, and now these are finance charges requiring disclosure. I think the podcast has me being shocked and outraged that they would classify these types of payments as something that's imposed on the consumer as an incident to an extension of credit, which is the definition of a finance charge under Reg Z. If something's optional, it's hard to see how it's imposed as a condition to credit.
So, then we're back to square circle. This month, it's May right now. Maybe it isn't when the podcast is released, but the current Trump administration has rescinded that interpretive rule. So, at the federal level, there's no guidance to go by. And even if there were, it seems like it flops every couple of years regardless.
Chris Willis:
Yes. Thanks for telling us the history of this sort of, I'm going to call it a regulatory flapjack, Jason, as it's been flipped over again and again and again through subsequent administrations. But in all seriousness, with things back to ground zero on this issue at the CFPB, what other regulatory landmines exist with these products?
Keith Barnett:
As of the date of this recording, there are about 13 states that have either enacted EWA laws or issued state AG opinions concerning EWA. Many more states have proposed EWA laws that may or may not make it out of the state legislatures this year. But irrespective of whether or not these laws have been enacted, there is a common theme amongst the state laws and state AG opinions that affect how FinTechs, payroll processors, payment processors will do business in the states, in addition to those who are just providing EWA access.
There are concerns, as Mark mentioned earlier, that EWA is tantamount to pay a lending. Right? So, you have these state laws that limit the charges to employees. And you also have EWA providers that have to make disclosures related to these costs. And the EWA providers and some of these laws may not ask for information that is tantamount to asking the employee to apply for credit. Similarly, along those same lines, some of these laws prohibit, for example, reporting of information to consumer reporting agencies and some of these states require licensure or registration by the EWA provider.
Now, for what it's worth, there are some states that exempt employers from the law or payroll providers from the law, if the payroll processor is of forming the EWA itself. Some states have exempted banks from the EWA laws. With respect to how these state EWA laws have affected or will affect FinTechs and processors, to be clear here, the state laws for the most part address two types of EWA products. Those that are considered to be employer-integrated and those are considered to be employee-integrated. Many techs and processors, for the most part, as Mark mentioned earlier, have stayed away from contracting directly with the employee. And instead, their contractors are directly with the employer, not the employee. And they only provide tech, the tech access, to the employer and nothing else.
The way this works is that the employee has access on an app powered by the fintech or the payroll processor. The flow of funds goes from the employer to the processor to the employee. The funds do not originate from the processor or the fintech provider to the employee, and even if the funds do not originate from the fintech or processor, the fintech or processor may create some sort of money transmitter licensing issues in some states if the fintech is in the flow of funds.
So, there will be some instances in which the flow of funds will be directly from the employer to the employee, some of those traditional EWA access that Mark was talking about earlier. But also, getting back to this whole whether or not this is going to be a credit thing, the way processors and FinTechs have been able to get around this is that, like I said earlier, they've been only contracting with the employer and they will also only charge the employer for the services and not the employee.
In some instances, with our clients, if an employer cannot afford to make the advances, some of our FinTech clients do provide a program through which they advance funds to the employer and charge the employer a fee for the advances, but if the FinTechs are doing that, they just need to make sure that they comply with state lending laws. Mark, do you have anything else to add to that?
Mark Furletti:
I would just say that in terms of landmines, it remains mostly under state law. I think you still have an issue under federal law of the absolute obligation to repay. We would advise clients to, if their business model is based on that, as opposed to the employer model Keith was just describing, that folks steer clear of the absolute obligation. And then in terms of the specific state legislation, there's a few trends. There's like states that think EWA is good. They pass what I would call like enabling legislation that permits the product. It may lighten it, but generally it's permissive and requires disclosures and prohibits certain practices that the legislature thinks is bad. So, those are kind of like permissive or good laws for providers.
And then you see good regulatory developments. So, you see like a state AG, possibly like the Arizona Attorney General issuing guidance that EWA transactions are not consumer credit when properly structured. So, that's good. And then we kind of see bad things. So, Connecticut, as an example, amending its law to cover these transactions as credit under a small loan law, for example. Or you see some negative regulatory guidance out of a state. Then you have a bunch of states in the kind of final buckets. You have like the states that are doing good thing, enabling it, the states that are doing bad things to shut it down. Then we have states that are doing nothing. In those, you just want to be conscious of what the usury law says and the types of transactions they cover to ensure that if it's no obligation or it's employer-based, that there's no argument, it's not subject to some state statute.
So, to Chris' initial question, are there still landmines? Yes, there are. Most of them are at the state level, but you still need to concern yourself with federal law.
Chris Willis:
Okay, thanks. And Keith, in addition to the sort of EWA-specific laws that you all have been talking about, are there any other state laws that the industry should be aware of with respect to EWA regulation?
Keith Barnett:
Yes, some of my clients have encountered those, at least from the payments part of it, and not surprisingly, the states that they encounter, California and New York. Let me give a couple of examples.
So, in California, well, I mean, this happens generally, but there are times in which an employee will be overpaid. There could be a clerical error or for other reasons. In California, they have a state law under the Labor Code, I believe it's section 221, that prohibits employers from clawing back or deducting wages that have already been paid to employees without express permission from the employee. So, the employers would actually have to take the employees to court in order to get the overpaid wages in the event the employees do not provide such permission. This can lead to several roadblocks, as you can imagine.
Let's be clear here. The EWA employees are hourly employees who may not still be at the job when that error is discovered, or they may not have the same bank account. Or if they're still on the job under California law, the employer cannot retaliate against the employee for pushing back on the employer's request for some sort of clawback. So, the employers provide EWA should not allow, in order to deal with this, they should not allow employees to obtain 100% of their wages early. There should be some sort of limit to avoid this from happening or to keep this from happening. Maybe something like 70% or something like that. So, you don't run the risk of overpaying an employee.
Another issue that's come to mind, it's been making the news lately, and this is in New York, they have been dealing with state lending laws and wage assignment laws when it comes to EWA. In fact, there's an EWA provider that is currently involved in a legal dispute with the New York Attorney General, and she alleges that this provider's practice constitutes illegal payday lending with, as Mark mentioned earlier, with fees and tips leading to what New York describes as impermissible annual interest rates. And the New York AG is saying that the EWA provider's most common product, which is a seven-day paycheck advance offered for $2.99 actually reflects an annual interest rate of more than 750%.
And according to this lawsuit, the EWA provider contracts with the employee's company, so they're employers and require the employers to send the workers’ paychecks directly to the EWA providers first on payday, which would allow the providers to deduct all amounts that is owed before passing on the remaining balance to the employee. In that respect, the New York Attorney General alleges that this EWA provider is violating New York's wage assignment laws. So, you have several things that we're looking at here, at least in California, the inability to easily claw back over payments. And in New York, you have state lending laws and wage assignment laws to look out for as well, even when there is a direct legislation involving EWA.
Chris Willis:
Makes sense. But I assume there's also an overlay of potentially private litigation here. Mark, Jason, what's been going on? What trends are there in private litigation with respect to EWA products?
Jason Cover:
Chris, I think the, and this is even, in the last couple months, there just seems to be a rash of military lending act, class action litigation popping up. If you Google military lending EWA cash advance, you'll find a bevy of websites sort of attempting to collect folks for their class actions. But essentially, they're just getting back to the core concepts again, right? They assert that these products are credit and they the assert that all of the fees and charges associated with them are finance charges subject to military APR so above 36%. And then assert a class so that's something to keep an eye on if you're interested in these products. We've seen that pop up recently.
Then just winding slightly, I think at both the state and federal level, state AGs, FTC, there has been focus on the enrollment process itself and the so-called dark patterns and then sometimes what's going on behind the scenes with things. One of the earliest criticisms of these products came from New York shockingly enough and the alleged that some of the providers were tying the amount that they would suddenly give you after your first advance whether or not you tip. So, if you give nice tip, they'd bring you more access to credit the next time around. If you didn't, they might give you the bare minimum. So, there's outside of just that product structure, there are some other things to keep in mind when you're thinking about these products and deciding them.
Chris Willis:
Okay, thanks, Jason. Keith, back to you. You've talked about a wide variety of state laws, both EWA-specific and these more general laws like labor and employment-related laws. How are those state laws affecting the manner in which FinTechs, payment processors, and payroll processors are approaching EWA products in those states?
Keith Barnett:
They're paying very close attention in those states and have reacted accordingly. So, the payroll processors, for example, who want to provide EWA access to employers, try to make sure that they are not actually the ones that are sending the money for several reasons. One, in some states you could run a foul of money transmitter laws, but second and most importantly, at least with respect to EWA, is to make sure that they're not required to perform all of these disclosures that are required under the laws or do any type of licensure or registration.
The same thing with the FinTechs as well. They are trying to provide mechanisms through which they can still make money, but also not have to go through any of the registration requirements or the disclosure requirements.
Chris Willis:
Got it. How do you think in general the recent lawsuits from state regulators will affect processors in FinTechs who provide EWA access to both employers and employees? In other words, where do you see the future of EWA with all of this in the mix?
Keith Barnett:
I see for the more careful processors and FinTechs, they will continue to refrain from offering the products directly to employees and stick with the employer-based model. But in doing so, stick with the employer-based model whereby the employer is just using their tech in order to provide the early access as opposed to providing money directly to the employees or charging the employees directly. So, instead indirect charges to the employers.
We also expect to see more legislation. I mean, there are like 20-something states that have EWA legislation in the hopper requiring disclosures or preventing providers from asking for information that would be an extension of credit or other legislation that is designated to prevent advances from becoming low. So, our FinTech and payroll processing clients are watching these things very closely in order to avoid those potential landmines.
Chris Willis:
Makes sense.
Mark Furletti:
Adding to what Keith said, on the other side, the employee-focused side, I think the no obligation that's the safest way to go on that side is to continue to ensure that consumers can cancel the transactions so that there's no absolute obligation to repay. That should, in most states, keep folks out of the consumer credit laws altogether.
Chris Willis:
Okay. Well, gentlemen, thank you very much for being on the podcast today to discuss this important and evolving issue. We're, of course, going to continue to watch it as you can tell the three of these lawyers have very carefully and you'll hear updates about this as they develop both on our blogs and on this podcast. Of course, thanks to all of our listeners for tuning in to today's episode.
As I said, don't forget to visit and subscribe to our blogs, TroutmanFinancialServices.com and ConsumerFinancialServicesLawMonitor.com. And while you're at it, why not visit us on the web at troutman.com and add yourself to our Consumer Financial Services email list. That way we can send you copies of the alerts and advisories that we produce from time to time, as well as invitations to our industry-only webinars. And of course, stay tuned for a great new episode of these podcasts hitting your podcast feeds soon. Thank you all for listening.
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