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Financial Services Law Insights and Observations

CFPB ends EWA sandbox

Federal Issues CFPB Regulatory Sandbox Earned Wage Access TILA Regulation Z Consumer Finance

Federal Issues

On June 30, the CFPB issued an order terminating a financial services company’s sandbox approval order related to its earned wage access (EWA) lending model. As previously covered by InfoBytes, the Bureau issued a two-year approval order to the company in December 2020, which provided the company safe harbor from liability under TILA and Regulation Z (to the fullest extent permitted by section 130(f) as to any act done in good faith compliance with the order). The company’s product allowed employees access to their earned but unpaid wages prior to payday and granted employees of a participating employer the ability to download the company’s app and agree to the company’s terms prior to engaging in an EWA program. The Bureau said in its announcement that it had informed the company earlier in June “that it was considering terminating the approval order in light of certain public statements the company made wrongly suggesting a CFPB endorsement of its products.” According to the Bureau, the company then requested termination of the order in order, citing the need to make changes to its fee model that would have required modifying the existing approval order. The Bureau noted that the company “requested termination of the order so it could make fee model changes quickly and flexibly.” The Bureau’s announcement indicated that it plans to issue guidance “soon” regarding earned wage access products and the definition of “credit” under TILA and Regulation Z.

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