Truth in Lending (Regulation Z); Consumer Credit Offered to Borrowers in Advance of Expected Receipt of Compensation for Work
Published Date: 1/15/2025
Rule
Summary
Starting January 15, 2025, the CFPB is changing the rules about payday-style loans that let workers get paid early before their paycheck arrives. This update means these 'earned wage advance' products are now officially considered credit, so lenders must follow stricter rules to protect borrowers. If you’re someone who uses or offers these early-pay loans, get ready for clearer protections and fairer terms!
Analyzed Economic Effects
3 provisions identified: 1 benefits, 2 costs, 0 mixed.
November 2020 Opinion Rescinded
The CFPB rescinded its November 2020 advisory opinion effective January 15, 2025. If you offered or relied on earned-wage products that the 2020 opinion said were not credit, that narrow interpretive opinion no longer applies going forward (actions previously done in good faith under the 2020 opinion are addressed by TILA section 130(f)).
Earned‑wage Products Under CFPB Jurisdiction
The CFPB states that many earned wage advance (paycheck advance) products have features that make them subject to the CFPB's jurisdiction and Regulation Z's definition of credit; this advisory opinion action is applicable January 15, 2025. If you receive payment for work and use such products, they may fall within TILA/Regulation Z oversight.
Direct‑to‑Consumer Advances Use Bank Withdrawals
The CFPB notes that many direct‑to‑consumer earned wage advance products generally recover funds via automated withdrawal from consumers' bank accounts and often without limit on recourse. If you use these direct-to-consumer advances, your account may be debited automatically and providers may have broad collection options.
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