NEW YORK (AP) — The Consumer Financial Protection Bureau said Thursday that apps that allow workers to access their paychecks in advance, often for a fee, are providing loans and therefore subject to the Truth in Lending Act, a 1968 law that requires lenders disclose all loan costs and fees.
If enacted, the proposed rule would provide clarity to a fast-growing industry known as Earned Wage Access, which has been compared to payday lending. The agency wants borrowers to be able to “easily compare products” and to prevent “race-to-the-bottom business practices,” CFPB Director Rohit Chopra said on a call with reporters.
Earned Wage Access apps have been around for more than a decade, but they gained popularity in the years prior to the pandemic and since. The apps extend small short-term loans to workers in between paychecks so they can pay bills and meet everyday needs. On payday, the user repays the money out of their wages, along with any fees.
According to its report, the Consumer Finance Protection Bureau found that, in 2022, at least 5% of American workers used an earned wage product at least once. They estimate that 7 million workers were advanced $22 billion through apps that worked with their employers, and 3 million workers were advanced $9.1 billion through direct-to-consumer apps.
The agency’s research shows the average worker who uses Earned Wage Access takes out 27 of these loans a year, meaning one…
