The House of Representatives’ Financial Services Committee advanced a bill Wednesday, over Democrats’ objections, that would benefit the growing earned wage access industry. 

The bill, introduced by Republican House members Bryan Steil of Wisconsin and French Hill of Arkansas, vice chairman of the committee, would set up federal guidelines for EWA companies offering workers access to their paychecks before their regularly scheduled paydays.

The legislation would regulate both employee-sponsored and direct-to-consumer EWA offerings; provide a fee-free option for workers; and make sure that the EWA companies cannot use debt collectors, Steil, a bill cosponsor, said at a committee markup session Wednesday.

Democratic representatives, including Nydia Velázquez of New York, Al Green of Texas, Stephen Lynch of Massachusetts and Brad Sherman of California, objected to the bill. 

“This bill would exempt all forms of earned wage access products from the Truth in Lending Act,” Green said. The bill would prevent workers from receiving “information about the true cost of these products,” including the annual percentage rate involved in such an advance, he said.

Velazquez agreed with Green that APR disclosures mattered for EWA, saying that some EWA providers can charge APRs as high as 300%. She also added that the Consumer Financial Protection Bureau already had the regulatory authority to regulate the industry. The bureau has expressed interest in regulating the industry, mirroring a less industry-friendly approach taken by the state of California. 

California Congress member Sherman challenged Republican statements that EWA was simply wage access that did not need to be regulated like other lines of credit.

“This is a payday loan in every sense,” Sherman said. “So let's expose it to the same rules as payday lending.”

Steil strongly resisted defining EWA as payday loans, arguing that EWA offerings simply give workers access to their pay as they earn it. Congress member Andy Barr of Kentucky built on that argument, using it to justify why consumer disclosure requirements shouldn’t apply.

“APR doesn't apply to a non-credit product,” Barr said. Criticism of the CFPB has been validated by its approach to this issue because it shows that “instead of actually protecting a competitive marketplace,” where Americans can tap products to help them make ends meet, “the CFPB is eliminating access,” he said.

If the bill is signed into law, it would provide a federal framework for EWA that would replace an increasingly patchwork set of state laws. Some states, such as Nevada and Wisconsin, have taken an industry-friendly approach to EWA, while others, including California, have pursued stricter regulations.

By James Pothen on April 18, 2024
Original link