Earned Wage Access (EWA) service providers are pushing back against a proposed rule by the Consumer Financial Protection Bureau (CFPB) that would regulate some early wage payments as loans.

Phil Goldfeder, CEO of the American Fintech Council (AFC), which represents about a dozen EWA providers, said in an interview that the council may sue over the proposal and continue pushing for more industry-friendly legislation in states across the country.

AFC members include EWA providers such as DailyPay, Earnin, Dave, and Payactiv. The council also plans to ask the CFPB to extend the public comment period for theproposed rulereleased last month. Currently, the deadline for public comments is August 30.

The CFPB's action aims to strengthen oversight of the rapidly growing EWA industry and its dozens of providers, which allow workers to access earned wages before the regular payday. The CFPB'sproposed rule explainsthat, under current federal law, EWA payments that include fees and tips should be considered loans.

"Earned wage advance products are often marketed and designed for employers rather than employees," CFPB Director Rohit Chopra said in arelated press release. "The CFPB's action will help workers understand the costs of these products and prevent a race to the bottom in business practices."

This move by the CFPB departs from the initial policy on EWA during the Trump administration. If Trump returns in this year's presidential election after the Biden administration, this regulatory direction could shift again.

"Earned wage access is not a loan and should not be regulated as such," Goldfeder said in an interview last week. "We are deeply disappointed in the CFPB's position, especially their 180-degree reversal from the 2020 guidance that most responsible companies used to build their programs."

When asked if the AFC might sue the CFPB over the EWA proposal, Goldfeder said it is an option. "We are exploring all options," Goldfeder said. "We have engaged with multiple law firms to explore all options to protect American consumers and financial choices."

The AFC has not yet submitted formal comments on the proposed rule but plans to do so and will also request an extension of the comment period. So far, 18 comments have beensubmitted to the federal rulemaking docket, most of them from individuals.

Goldfeder believes that if the rule takes effect, it would "harm" millions of Americans who rely on these EWA products, some of whom might have to turn back to loan sharks to access earned wages early.

"Unfortunately, if the CFPB moves forward with this interpretive rule, companies will have to adjust and transform their business models," Goldfeder predicted, noting that providers might stop offering services or raise prices, making them "unaffordable for many Americans."

The AFC is not opposed to regulation in any form and has supported state laws requiring registration. Currently, five states, including Nevada and Wisconsin, have passed such laws, and the industry is pushing for more states to adopt similar measures. Other states, including California, lean toward the CFPB's regulatory approach.

Overall, the AFC opposes treating EWA payments as loans and subjecting them to federal laws like the Truth in Lending Act. "Earned wage access is an emerging product that requires an independent regulatory framework to ensure consumers have both access to services and safety protections," Goldfeder said.

When issuing the proposed rule, the CFPB said it had studied the industry and found that workers using such services do so an average of 27 times per year, with fees translating to annual percentage rates exceeding 100%.

There are currently dozens of EWA providers with varying business models. Some offer services directly to consumers, while others provide them to workers through employers. Some providers charge fees for services or features like expedited payments, while others allow users to tip for the service.

Some companies have already prepared for the possibility that early wage payments could be considered loans and do not oppose the CFPB's proposal. These include digital bank Chime andClair, which have welcomed the CFPB's efforts to regulate the industry.

"We built our entire program assuming this would happen," said Nico Simko, CEO of Clair. He co-founded the New York-based company in 2020. "At Clair, we don't offer advances unless they comply with lending laws and the rules the CFPB has implemented in the past. So for us, the reality is, this is just business as usual."

A CFPB spokesperson declined to comment on extending the public comment period or delaying implementation of the rule.