Chime Enterprise recently hosted a webinar titled “Positive Change is Coming: The Future of Earned Wage Access and Its Impact on Your Business.” The webinar featured speakers Jason Lee, Chief of Chime Enterprise, and Lori Duggan, HR and Total Rewards Leader. You can find a recap of the webinar below:
Background
On July 18, 2024, the CFPB issued a proposed interpretive rule suggesting that EWA should be treated as a loan, subject to the Truth in Lending Act provisions, but with carve-out for no-fee solutions. This rule, which hasn’t yet been signed into law, is meant to protect employees from paying excessive fees to access their earned wages, likening it to not charging fees for biweekly paychecks.
EWA adoption continues to grow
From 2021 to 2024, there has been a 95% growth in EWA participation, with 5-15 million U.S. employees enrolled in employer-integrated EWA programs. With 15-20% of EWA user earnings accessed before payday, this signals a trend toward increased user dependence on EWA.
While user participation is growing, so are the fees users pay to access their earned wages. Each user spends, on average, $150-$300 in fees annually.
This growth indicates a shift toward treating EWA as regular pay rather than an advance, and the speakers suggest that this growth has drawn the CFPB’s attention and reinforced the need for regulatory clarity to protect consumers.
How does the CFPB proposed rule affect employers?
The proposed CFPB has implications for employers offering an EWA solution to their employees. There are three options for these employers:
- They can pay the fees for the employees; however, this could be challenging because of unpredictable usage and budgeting
- They can wait for regulatory clarity, which might necessitate an interim solution
- They can implement a new no-fee EWA solution, which would mean evaluating potential new EWA providers
The world is changing, and as an employer, you need a compliant, simple and easy solution for all employees to use. The solution you choose must also be easy to implement and self-driving after it’s launched. Option 3 provides the easiest path to compliance, but you’ll need to start planning today because this could take some time unless, of course, you’re already working with a no-fee EWA provider.
What does the future of Earned Wage Access look like?
What does the ideal EWA solution look like down the road? It should be simple, easy to use, integrate easily with other financial products, and have a seamless employee experience. Innovation and technology will drive costs down, enabling no-fee solutions and eliminating barriers to earned wage access in compliance with the CFPB’s preference for no-fee solutions.
Suggested action items for employers offering EWA solutions to their employees:
- Stay informed about the EWA regulatory landscape through webinars, events and legal counsel.
- Evaluate your current EWA program and consider options for compliance, such as paying fees, implementing interim solutions or adopting no-fee solutions.
- Explore no-fee EWA solutions that prioritize simplicity, ease of use, integration with other financial products and a seamless employee experience.
- Prepare for the inevitable shift towards no-fee EWA solutions by consulting resources like the Earned Wage Access Preparedness Plan.
The bottom line? Zero-fee EWA will be here sooner rather than later, so prepare now to stay compliant.