By Hannah Lang
Dec 22 (Reuters) – A U.S. consumer finance agency said on Monday that popular “earned wage” advances on worker paychecks do not resemble consumer loans, reversing course from guidance the regulator put out last year under then President Joe Biden.
In an advisory opinion, the U.S. Consumer Financial Protection Bureau said most paycheck advances were not subject to the Truth in Lending Act, meaning that companies that offer the products are not required to provide workers with certain disclosures, such as the cost and terms of credit.
The opinion is not legally binding, but is intended to provide clarity for industry participants, the CFPB said.
A growing number of providers offer paycheck advances, including digital bank Chime, which allows customers to access up to $500 of their wages interest-free before payday with no mandatory fees.
Several states including Nevada and Wisconsin have specified in state law that such products are not loans, but Congress has not passed a law clarifying the issue on a federal level.
Last year, the CFPB had released interpretive guidance that moved to set federal guardrails for the fast-growing market, stipulating that paycheck advances were equivalent to consumer loans and arguing that doing so would provide greater transparency for consumers.
Under President Donald Trump, the CFPB has moved to walk back several of the agency’s actions under the previous administration, advancing Trump’s effort to curtail policies he views as a burden on businesses.
Last month, the agency proposed narrowing key civil-rights-era anti-discrimination requirements for the financial industry, following an executive order from Trump earlier in the year to eliminate the use of disparate-impact liability.
(Reporting by Hannah Lang in New YorkEditing by Frances Kerry)
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