The Consumer Financial Protection Bureau (CFPB) today proposed an interpretive rule explaining that many paycheck advance products, sometimes marketed as “earned wage” products, are consumer loans subject to the Truth in Lending Act. The guidance will ensure that lenders understand their legal obligations to disclose the costs and fees of these credit products to workers. “If someone gives you money and you must repay it later, then that is a loan.  It’s common sense,” said Jay Speer, consumer rights attorney with the Virginia Poverty Law Center.

The CFPB released data from several lenders offering paycheck advances through employers, finding that the average worker is stuck in a cycle of reborrowing, taking out 27 loans a year (and some over 40) with an average APR over 100%, but potentially as high as 580.4%. While some employers offer early pay for free, the CFPB found that over 90% of workers paid one or more fees, primarily expedite fees, and that speed was an “integral feature” of the credit.

Decades ago, many workers across the economy would get paid at the end of their shift or after performing the task they were hired for. But in today’s economy, most people don’t get paid until days or weeks later. That means American workers are essentially giving a free loan to their employers.

“Big employers have an incentive to delay payment to workers. Delaying pay reduces costs and what Wall Street calls ‘working capital,’” said Rohit Chopra, CFPB Director.  “While some delays might be explained away for a number of reasons, they typically work in favor of the employer and against the worker.”

“Workers should not have to pay a fee to be paid,” said Dana Wiggins with Virginia Poverty Law Center.

VPLC and our allies have been working hard during the last two sessions of the Virginia General Assembly, keeping the lobbyists of these products from getting an exemption from our Fairness in Lending Act by declaring them, somehow, not loans. The CFPB proposed this rule after concluding investigations, market monitoring, coordination with state regulatory bodies, and fact-finding with lenders, employers, and consumer advocacy groups.

We hope the CFPB’s determination that these are loans will put a stop to lobbyists for workplace payday lenders from again trying to pass legislation in the 2025 Virginia General Assembly.