In this opinion piece for the Chicago Tribune, Woodstock Institute’s Senior Vice President of Policy and Advocacy Brent Adams shares our concerns with the Consumer Financial Protection Bureau’s recent proposed interpretive rule on paycheck advance products, also known as earned-wage access (EWA).
More detailed info on our position is also available in our comment letter to the Bureau.
Further, treating payments made by consumers in an EWA transaction as finance charges would almost always cause EWA products to run afoul of Illinois’ interest rate cap, which is a 36% APR. This means the CFPB rule could effectively outlaw the product and require consumers to turn to industries such as payday lenders and pawnbrokers, which cost significantly more per transaction.
If opponents succeed in their effort to eliminate this relatively new industry, consumers will be the ones who lose, and the old-fashioned predatory lenders will win. Avoiding this outcome is important enough to endure the unpleasantness of disagreeing with your closest friends.
