Should Earned Wage Access Products Be Considered “Credit”?
Earned wage access (EWA) products are increasingly reshaping the employer-employee relationship, with widespread adoption as well as regulatory scrutiny. EWA allows employees to obtain a portion of their accrued wages they have already earned before their regular payday. These programs are intended to help consumers bridge cash-flow gaps between pay periods. EWA is an alternative to small-dollar credit and credit alternative options—such as payday loans, credit cards, or overdraft protection—that consumers have historically used to cover interim expenses. Unlike traditional credit, EWAs are typically non-recourse, so consumers have no legal duty to repay the advance in the event of a default . In recent months, federal courts across multiple jurisdictions have signaled a growing willingness to treat EWA as a form of credit . In the past quarter alone, federal district courts in California, Washington, Maryland, and Pennsylvania have issued rulings adverse to EWA providers. And notabl...