CFPB Rescinds Earned Wage Product Advisory Opinion

On January 15, 2025, the CFPB, under Director Chopra, rescinded its 2020 Advisory Opinion (AO) on earned wage products stating that it had flawed legal analysis and caused regulatory uncertainty.  The AO had described how certain earned wage products were not credit under the Truth in Lending Act (TILA) and Regulation Z. 

The CFPB stated that the AO caused regulatory uncertainty by setting forth conditions that, if met, meant an earned wage product was not TILA or Regulation Z credit, but the AO did not clarify if products that did not meet all of those conditions were credit under TILA and Regulation Z.  And the CFPB stated that the AO had flawed legal analysis because, among other things, it did not:

• Adequately consider the state law definitions for “debt”;
• Justify its inference that consumers do not incur liabilities with this product; and
• Consider all relevant factors in its “totality of the circumstances” approach to defining credit.

The AO had been issued before the CFPB had increased market monitoring and analysis of these paycheck advance products.