"Responsible [earned-wage access] products provide consumers with the ability to access their own, earned wages, rather than taking out a payday loan, incurring overdraft fees, or taking on high-cost debt," writes American Fintech Council CEO Phil Goldfeder in arguing for a new regulatory framework that would treat EWA as a legitimate product.
StockerThings - stock.adobe.com
To the editor,
The American Fintech Council has long supported the creation of regulatory frameworks in states across the country forearned-wage access products that ensurestrong consumer protection. As an organization, we were founded on the idea of protecting workers from high-cost and predatory products and recently released industry standards for responsible EWA providers.
In their recent op-ed ("States must protect consumers from high-cost fintech cash advances," Dec. 20, 2023), the National Consumer Law Center and Center for Responsible Lending demonstrate a categorical misunderstanding of earned-wage access products. Calling it an "advance" is misleading and doesn't change the fact that EWA is providing safe access to wages that have already been earned. They are perpetuating a false narrative and promoting unfounded and unsubstantiated claims about EWA that will cause further confusion and harm the very families they purport to represent. Responsible EWA has become a safe, transparent and affordable tool for families living paycheck to paycheck.
Anew study on EWA by the Financial Health Network found that most consumers have a positive experience with EWA. The report further noted that families plan to continue using the service and that it increases their ability to pay bills on time. Many users took advantage of EWA for the first time to cover an emergency expense that compounded their daily expenses. Responsible EWA products provide a consumer with the ability to access their own, earned wages, rather than taking out a payday loan, incurring overdraft fees or taking on high-cost debt.
While these groups praise the actions of the Connecticut Department of Banking, tens of thousands of Connecticut families are about to lose access to a critical financial service on Jan. 1, and tens of thousands more will have their levels of service reduced or eliminated. For some, it's easier to misclassify a responsible financial product as a loan and misapply the existing regulatory structure than it is to recognize the nuances of an innovative service and pragmatically work with transparent industry participants to build a regulatory framework that encourages the financial options created by responsible innovators.
Simply put, EWA is not a loan. If lawmakers were to follow the misguided recommendations of the National Consumer Law Center and Center for Responsible Lending, they would be protecting broken legacy systems and predatory lenders that have left minority and rural communities in a cycle of debt and despair.
We fully recognize the difficulties of creating a new regulatory framework. However, across states, we are seeing legislators boldly consider new tools to provide meaningful and important protections to consumers, oversight of the growing EWA industry and the guardrails around which providers can grow and innovate. We applaud them for their ability to take on the difficult task of developing new regulatory tools, as opposed to the easy path of misapplying existing regulatory tools and look forward to working across states in the upcoming legislative sessions.
Amid steady customer growth, USAA's banking arm failed to make the investments necessary to satisfy either its regulators or some decades-long customers. Changes in the executive suite haven't fixed the problems.
The Consumer Financial Protection Bureau has significantly raised the transaction threshold for its larger participant rule — which defines which firms will be affected — from 5 million annual payments to 50 million.
