Truth in Lending (Regulation Z); Consumer Credit Offered to Borrowers in Advance of Expected Receipt of Compensation for Work

Publisher lists this guidance as withdrawn/rescinded: Truth in Lending (Regulation Z); Consumer Credit Offered to Borrowers in Advance of Expected Receipt of Compensation for Work, 90 FR 3622 (Jan. 15, 2025); withdrawn on May 12, 2025 .

3622 Federal Register/ Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations
1
While the terms ‘‘employer’’ and ‘‘employee’’
are used throughout, this advisory opinion applies
more broadly to situations where consumers receive
payment for work performed.
2
A recent CFPB report describes rapid recent
growth in one part of this developing market. See
CFPB, Developments in the Paycheck Advance
Market, at 3 (July 2024) (hereinafter 2024 Paycheck
Advance Report).
U.S. Code citation CMP description New maximum amount
(4) 12 U.S.C. 1782(d)(2)(A) ..... Tier 1 CMP for inadvertent failure to submit certified statement of insured
shares and charges due to the National Credit Union Share Insurance
Fund (NCUSIF), or inadvertent submission of false or misleading statement.
$4,596.
(5) 12 U.S.C. 1782(d)(2)(B) ..... Tier 2 CMP for non-inadvertent failure to submit certified statement or sub-
mission of false or misleading statement.
$45,946.
(6) 12 U.S.C. 1782(d)(2)(C) ..... Tier 3 CMP for failure to submit a certified statement or the submission of a
false or misleading statement done knowingly or with reckless disregard.
$2,297,385 or 1% of the total assets of the credit
union, whichever is less.
(7) 12 U.S.C. 1785(a)(3) .......... Non-compliance with insurance logo requirements ............................................ $157.
(8) 12 U.S.C. 1785(e)(3) .......... Non-compliance with NCUA security requirements ........................................... $365.
(9) 12 U.S.C. 1786(k)(2)(A) ..... Tier 1 CMP for violations of law, regulation, and other orders or agreements .. $12,567.
(10) 12 U.S.C. 1786(k)(2)(B) ... Tier 2 CMP for violations of law, regulation, and other orders or agreements
and for recklessly engaging in unsafe or unsound practices or breaches of
fiduciary duty.
$62,829.
(11) 12 U.S.C. 1786(k)(2)(C) ... Tier 3 CMP for knowingly committing the violations under Tier 1 or 2 (natural
person).
$2,513,215.
(12) 12 U.S.C. 1786(k)(2)(C) ... Tier 3 CMP for knowingly committing the violations under Tier 1 or 2 (insured
credit union).
$2,513,215 or 1% of the total assets of the credit
union, whichever is less.
(13) 12 U.S.C.
1786(w)(5)(A)(ii).
Non-compliance with senior examiner post-employment restrictions ................ $413,388.
(14) 15 U.S.C. 1639e(k) .......... Non-compliance with appraisal independence requirements ............................. First violation: $14,435
Subsequent violations: $28,866.
(15) 42 U.S.C. 4012a(f)(5) ....... Non-compliance with flood insurance requirements ........................................... $2,730.
(b) The adjusted amounts displayed in
paragraph (a) of this section apply to
civil monetary penalties that are
assessed after the date the increase takes
effect, including those whose associated
violation or violations pre-dated the
increase and occurred on or after
November 2, 2015.
[FR Doc. 2025–00737 Filed 1–14–25; 8:45 am]
BILLING CODE 7535–01–P
CONSUMER FINANCIAL PROTECTION
BUREAU
12 CFR Part 1026
[Docket No. CFPB–2024–0032]
Truth in Lending (Regulation Z);
Consumer Credit Offered to Borrowers
in Advance of Expected Receipt of
Compensation for Work
AGENCY: Consumer Financial Protection
Bureau.
ACTION: Advisory opinion rescinding
previous advisory opinion.
SUMMARY: The Consumer Financial
Protection Bureau (CFPB) is issuing this
advisory opinion to rescind an advisory
opinion it issued in November 2020 that
described how one particular type of
‘‘earned wage’’ product does not involve
the offering or extension of ‘‘credit’’ as
that term is defined in the Truth in
Lending Act and Regulation Z.
DATES: This advisory opinion is
applicable January 15, 2025.
FOR FURTHER INFORMATION CONTACT:
George Karithanom, Regulatory
Implementation & Guidance Program
Analyst, Office of Regulations, at 202–
435–7700 or at: https://
reginquiries.consumerfinance.gov/. If
you require this document in an
alternative electronic format, please
contact CFPB_Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION
:
I. Advisory Opinion
A. Background
One major source of demand for
consumer credit is derived from the
mismatch of when American workers
receive compensation for their labor and
when they incur expenses. While there
have long been sources of credit for
consumers to pay expenses in advance
of receiving their compensation, there
are a number of new offerings that seek
to provide additional choices for
consumers.
Instead of being paid daily or upfront,
American workers generally provide
services before employers pay for those
services some time later—typically on a
biweekly or semi-monthly wage cycle.
1

Employers have a strong incentive to
delay payment, since these delays
reduce working capital needs. Nearly
three-quarters of non-farm payroll
employees remain paid biweekly or
even less frequently, and the remainder
are generally paid their wages weekly.
To address liquidity challenges, many
consumers therefore turn to credit
products, such as payday loans,
personal installment loans, and credit
cards. In recent years, American
consumers have significantly expanded
their use of products sometimes
marketed as ‘‘earned wage access’’ or
‘‘earned wage advance.’’
2
As these
paycheck advance products generally
have features that make them subject to
the CFPB’s jurisdiction, the CFPB has
sought to understand these and other
products, particularly those offered
online, by engaging in ongoing
monitoring of the market, including, for
example, collecting and analyzing data,
engaging with stakeholders (e.g., market
participants, consumer groups, and
States), tracking and studying market
developments, and conducting market
research, among other things.
While many of these products have
similarities to payday loans, there are
important distinctions. The CFPB has
found that there are two emerging
models of earned wage products:
employer-partnered and direct-to-
consumer.
For ‘‘employer-partnered’’ products,
providers contract with employers to
offer funds in amounts not exceeding
accrued wages. Those funds are
recovered via one or more payroll
deductions, lowering the consumer’s
paychecks accordingly, with other
recourse options generally unavailable
to the provider. In contrast, ‘‘direct-to-
consumer’’ products provide funds to
employees in amounts that are not as
strictly limited by accrued wages. Some
of these products limit advances to an
amount estimated to be below accrued
wages and do not consider other factors.
Others consider estimated accrued
wages as one of several factors when
determining the amount to advance.
Still others do not expressly state that
estimated accrued wages are a factor
considered despite being marketed as
earned wage products. Regardless of the
exact model, funds are generally
recovered via automated withdrawal
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3623 Federal Register/ Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations
3
This includes, without limitation, prepaid and
payroll card accounts.
4
As described, direct-to-consumer products lie
outside the scope of the ‘‘wage advance’’ (12 CFR
1041.3(d)(7)) and ‘‘no cost advance’’ (12 CFR
1041.3(d)(8)) exclusions from the CFPB’s 2017
Payday Rule. Employer-partnered products,
however, may be (but are not necessarily) within
the scope of one exclusion or both, with their
revenue model particularly relevant to that
determination. See 12 CFR 1041.3(d)(7)(ii)(A),
(d)(8).
5
See 2024 Paycheck Advance Report, supra note
2, n.7. Several recently enacted State laws prohibit
providers of earned wage products, including
direct-to-consumer products, from compelling
consumer repayment of earned wage amounts and
fees through various means, such as lawsuits or
third-party debt collection. See, e.g., Mo. Rev. Stat.
§ 361.749(5)(6) (2023); Wis. Stat. § 203.04(2)(f)
(2023); cf. Mont. Op. Att’y Gen., Vol. 59, Op. 2 (Dec.
22, 2023) (finding earned wage products do not
meet the state law definitions of ‘‘consumer loan’’
or ‘‘deferred deposit loan’’ when they are ‘‘fully
non-recourse,’’ among other criteria).
6
Truth in Lending (Regulation Z); Earned Wage
Access Programs, 85 FR 79404 (Dec. 10, 2020).
7
Regulation Z defines credit at section 12 CFR
1026.2(a)(14).
8
See 2020 Advisory Opinion, supra note 6, at
79405–06.
9
The opinion stated that it had no application to
such products. Id. at 79408 (‘‘This advisory opinion
applies solely to the question of whether Covered
EWA Programs (i.e., those meeting all of the
characteristics described in part I.B above) fall
under the definition of credit in section
1026.2(a)(14) of Regulation Z identified above. This
advisory opinion has no application to any other
circumstance, and it does not offer a legal
interpretation of any other provisions of law.’’).
10
12 CFR 1026.2(a)(14).
11
15 U.S.C. 1602(f).
12
12 CFR 1026.2(b)(3).
13
Pollice v. Nat’l Tax Funding, L.P., 225 F.3d 379,
410 (3d Cir. 2000) (‘‘Although [TILA] does not
contain a definition of the term ‘debt,’ we believe
the term as used in [TILA] should be construed as
it is defined in the FDCPA.’’).
14
85 FR 79404 at 79406 (emphasis added).
15
2020 Advisory Opinion, supra note 6, at 79407
(emphasis added).
16
See 12 CFR 1041.3(d)(7), 1041.3(d)(8).
from the consumer’s bank account,
3
and
generally without limit to the provider’s
ability to seek further recourse as
necessary.
4

Some of the differences between these
two types of earned wage products,
however, are starting to erode. For
example, some direct-to-consumer
providers are now connecting directly to
payroll records and recouping funds
from payroll deductions, and ongoing
State legal developments may cause
them to limit their recourse options as
well.
5

Before the CFPB’s market monitoring
of these products intensified, the CFPB
issued an advisory opinion in November
2020,
6
that described how one
particular type of earned wage product
does not involve the offering or
extension of ‘‘credit’’ as that term is
defined in the Truth in Lending Act
(TILA) and Regulation Z (2020 Advisory
Opinion).
7
The opinion explained that
an earned wage product is not TILA or
Regulation Z credit if it meets all of
several identified conditions, including:
providing the consumer with no more
than the amount of accrued wages
earned; provision by a third party fully
integrated with the employer; no
consumer payment, voluntary or
otherwise, beyond recovery of paid
amounts via a payroll deduction from
the next paycheck, and no other
recourse or collection activity of any
kind; and no underwriting or credit
reporting.
8
The 2020 Advisory Opinion
was silent about whether earned wage
products that do not meet all of these
conditions are credit under TILA and
Regulation Z.
9

In July 2024, the CFPB proposed an
interpretive rule on this same topic
(2024 Proposed Interpretive Rule) and
voluntarily sought public comment. The
comment period closed on August 30,
2024.
B. Legal Analysis
The CFPB is rescinding the 2020
Advisory Opinion for two fundamental
reasons: (i) its legal analysis is
significantly flawed in numerous
respects; and (ii) it engendered
substantial regulatory uncertainty.
1. The 2020 Advisory Opinion’s Legal
Analysis Is Significantly Flawed in
Numerous Respects
Section 1026.2(a)(14) of Regulation Z
defines ‘‘credit’’ as ‘‘the right to defer
payment of debt or to incur debt and
defer its payment.’’
10
TILA defines
‘‘credit’’ virtually identically as ‘‘the
right granted by a creditor to a debtor to
defer payment of debt or to incur debt
and defer its payment.’’
11
However,
TILA and Regulation Z do not define
‘‘debt.’’ Regulation Z provides that
undefined terms ‘‘have the meanings
given to them by state law or
contract.’’
12

The first analytical flaw of the 2020
Advisory Opinion is that its
consideration of the meaning of ‘‘debt’’
under state law was insufficient. It did
not mention the Regulation Z rule of
construction that undefined terms have
the meanings given to them by state law
or contract. It only cited a portion of the
definition of debt in a recent edition of
Black’s Law Dictionary, and did not
survey the definitions of debt in state
laws, or other relevant bodies of law,
including applicable circuit court case
law on the definition of ‘‘debt’’ in TILA
and Regulation Z.
13

Second, the 2020 Advisory Opinion
inferred that the consumer does not
incur a liability when using the
narrowly limited type of earned wage
product covered by the opinion, but did
not sufficiently justify the inference.
The main rationale provided for the
inference was that this type of product
‘‘functionally operates like an employer
that pays its employees earlier than the
scheduled payday.’’
14
The opinion did
not elaborate on what constitutes
functional operation, or the relevance of
the fact that the employer is not literally
paying the employee’s wages early.
Third, the 2020 Advisory Opinion did
not consider all relevant factors as part
of the ‘‘totality of the circumstances’’
approach it applied to determine what
is ‘‘credit.’’ The opinion stated only that
‘‘features often found in credit
transactions are absent from’’ this type
of product and that transactions
involving this type of product are
‘‘[u]nlike many credit
transactions....’’
15
The 2020
Advisory Opinion, however, did not
consider any of the features of wage
advance products commonly found in
credit transactions, including a
consumer’s receipt of funds, consumer
repayment of those funds, and the wage
garnishment tool used to effectuate
repayment. Nor did the 2020 Advisory
Opinion explain how its ‘‘totality of the
circumstances’’ approach derived from
the definition of ‘‘credit.’’
Fourth, the opinion’s claim that it was
supported by certain statements in the
2017 Payday Rule is unpersuasive. The
Payday Rule did not make a
determination as to whether earned
wage products are credit, stating only
that some product constructs ‘‘may not
be’’ credit. The CFPB declined to
perform the more detailed analysis
necessary to come to a considered
conclusion on the boundaries of TILA
and Regulation Z at that time because
the rulemaking was based on the CFPB’s
UDAAP authority, not TILA and
Regulation Z. Some earned wage
products may not be covered by the
Payday Rule because of its ‘‘wage
advance’’ and ‘‘no cost advance’’
exclusions.
16
However, these exclusions
can only apply to earned wage products
to the extent that such products are
TILA and Regulation Z credit. As a
result, the CFPB’s earlier decision to
exclude certain earned wage product
constructs from the Payday Rule has no
impact on the credit status of such
products under TILA or Regulation Z.
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3624 Federal Register/ Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations
17
U.S. Gov’t Accountability Off., GAO–23–
105536, Financial Technology: Products Have
Benefits and Risks to Underserved Consumers, and
Regulatory Clarity is Needed 36–37 (2023) (citing
industry requests for clarification). The CFPB has
acknowledged the need for clarification in this area.
See, e.g., Letter from Rohit Chopra, Dir., Consumer
Fin. Prot. Bureau, to Michael Clements, Dir. of Fin.
Mkts. and Cmty. Inv., U.S. Gov’t Accountability
Off., (Feb. 13, 2023) in U.S. Gov’t Accountability
Off., GAO–23–105536, supra, at 51; Letter from
Seth Frotman, Acting General Counsel, Consumer
Fin. Prot. Bureau, to Beverly Brown Ruggia, N.J.
Citizen Action, et al., at 2 (Jan. 18, 2022).
18
See, e.g., Off. of the Att’y Gen., State of Ariz.,
Opinion No. I22–005 (Dec. 16, 2022), available at
https://www.azag.gov/sites/default/files/2022-12/
I22-005.pdf.
19
See, e.g., ZayZoon, Comment Letter on Cal.
Dep’t of Fin. Prot. and Innovation Notice of
Proposed Rulemaking [PRO 01–21], at 4 (May 17,
2023), https://dfpi.ca.gov/wp-content/uploads/sites/
337/2023/08/46-PRO-01-21-ZayZoon-US-Inc.-
5.17.23_Redacted.pdf; Innovative Payments Ass’n,
Comment Letter on Cal. Dep’t of Fin. Prot. and
Innovation Notice of Proposed Rulemaking [PRO
01–21], at 4 (May 11, 2023), https://dfpi.ca.gov/wp-
content/uploads/sites/337/2023/08/10-PRO-01-21-
Innovative-Payments-Association-5.11.23_
Redacted.pdf.
20
See Consumer Fin. Prot. Bureau, Payactiv
Approval Order, at 5 (Dec. 30, 2020), https://
files.consumerfinance.gov/f/documents/cfpb_
payactiv_approval-order_2020-12.pdf.
21
See id.
22
See id. at 4 n.15.
23
See Consumer Fin. Prot. Bureau, Order to
Terminate Sandbox Approval Order (June 30, 2022),
cfpb_payactiv_termination-order_2022-06.pdf.
24
12 U.S.C. 5512(b)(1).
25
15 U.S.C. 1640(f).
26
44 U.S.C. 3501–3521.
27
5 U.S.C. 801–808.
2. The 2020 Advisory Opinion
Engendered Substantial Regulatory
Uncertainty
In the months and years following
issuance of the 2020 Advisory Opinion,
it became increasingly evident that it
failed to clarify the status of earned
wage products under TILA and
Regulation Z. Indeed, in 2023, the U.S.
Government Accountability Office
issued a report recommending that the
CFPB clarify their status.
17
This
muddying of the waters flowed directly
from the extreme narrowness of the
opinion. Few if any of the products in
the market at the time of or subsequent
to issuance fit the mold outlined by the
opinion. As a result, stakeholders were
left to speculate about the CFPB’s view
about the credit status of the many
products actually being offered.
Worse still, the 2020 Advisory
Opinion has been widely cited in
support of legal conclusions that it did
not reach. For example, it has
erroneously been cited for the general
propositions that no-fee earned wage
products are not credit,
18
and that
employer-partnered earned wage
products are also not credit.
19

In addition, some regulatory
uncertainty may have resulted from the
near-contemporaneous issuance of an
‘‘Approval Order’’ that gave one
provider a temporary safe harbor from
liability under TILA and Regulation Z
with respect to a specific product that
did not satisfy all the conditions that the
2020 Advisory Opinion identified as
taking such a product outside the reach
of TILA and Regulation Z.
20
The 2020
Advisory Opinion applied only to
products that had all of the numerous
characteristics identified above,
including that they were free to
consumers. In contrast, the Approval
Order encompassed earned wage
transactions in connection with which
the consumer incurred fees.
21
However,
it was never of general interpretative
applicability,
22
and was terminated
even before its temporary status
expired.
23

II. Regulatory Matters
This is an advisory opinion issued
under the CFPB’s authority to interpret
TILA and Regulation Z, including under
section 1022(b)(1) of the Consumer
Financial Protection Act of 2010, which
authorizes guidance ‘‘as may be
necessary or appropriate to enable the
Bureau to administer and carry out the
purposes and objectives of the Federal
consumer financial laws....’’
24
By
operation of TILA section 130(f), no
provision of TILA sections 130, 108(b),
108(c), 108(e), or section 112 imposing
any liability would apply to any act
done or omitted in good faith in
conformity with this advisory opinion,
notwithstanding that after such act or
omission has occurred, the advisory
opinion is amended, rescinded, or
determined by judicial or other
authority to be invalid for any reason.
25

The CFPB has determined that this
advisory opinion would not impose any
new or revise any existing
recordkeeping, reporting, or disclosure
requirements on covered entities or
members of the public that would be
collections of information requiring
approval by the Office of Management
and Budget under the Paperwork
Reduction Act.
26

Pursuant to the Congressional Review
Act,
27
the CFPB will submit a report
containing this advisory opinion and
other required information to the United
States Senate, the United States House
of Representatives, and the Comptroller
General of the United States prior to the
rule’s published effective date. The
Office of Information and Regulatory
Affairs has designated this advisory
opinion as not a ‘‘major rule’’ as defined
by 5 U.S.C. 804(2).]
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2025–00381 Filed 1–14–25; 8:45 am]
BILLING CODE 4810–AM–P
DEPARTMENT OF COMMERCE
Bureau of Industry and Security
15 CFR Parts 732, 734, 740, 742, 744,
748, 750, 762, 772, and 774
[Docket No. 250107–0002]
RIN 0694–XC112
Public Briefing on Framework for
Artificial Intelligence Diffusion
AGENCY: Bureau of Industry and
Security, U.S. Department of Commerce.
ACTION: Notification of public briefing
on regulatory action.
SUMMARY: On January 10, 2025, the
Office of the Federal Register posted for
public inspection a Bureau of Industry
and Security (BIS) interim final rule:
‘‘Framework for Artificial Intelligence
Diffusion’’ (RIN 0694–AJ90). This
document announces that, on January
15, 2025, BIS will host a virtual public
briefing on this rule. This document
also provides details on the procedures
for participating in the virtual public
briefing.
DATES: Virtual public briefing: The
virtual public briefing will be held on
January 15, 2025. The public briefing
will begin at 12 p.m. Eastern Standard
Time (EST) and conclude at 1 p.m. EST.
Deadline to register: Register by 9 a.m.
EST on January 15, 2025, for virtual
participation.
ADDRESSES: To attend this event
virtually, register at: https://
events.gcc.teams.microsoft.com/event/
a0c17530-aae8-43e0-b64c-
e2f9bafbbcf4@44cf3ec3-840c-4086-b7de-
e3bc9a6c2db4.
Recordkeeping: A summary of the
briefing will be posted for the record at:
https://regulations.gov under the
regulations.gov ID for this notice (BIS–
2025–0001).
FOR FURTHER INFORMATION CONTACT: For
questions on this virtual public briefing,
contact Hillary Hess, Regulatory Policy
Division, Office of Exporter Services,
Bureau of Industry and Security, U.S.
Department of Commerce at 202–482–
2440 or by email: RPD2@bis.doc.gov.
SUPPLEMENTARY INFORMATION:
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