Newly published reports on earned wage advances and buy now pay later support the warnings

WASHINGTON, D.C. – Congress should do more to protect consumers from abuse by so-called “fintech” lenders and, at minimum, should not enable that abuse through legislation, the Center for Responsible Lending (CRL) said yesterday in testimony at a Congressional subcommittee hearing. That message was reinforced by letters from a coalition of advocates warning that bills, considered as part of the hearing, would further expose consumers to harm.

The fintech-focused hearing was entitled “Modernizing Financial Services Through Innovation and Competition.” Mitria Spotser, vice president and federal policy director at CRL, pointed to the irony of the title in her opening statement (see video): “Some of the regulatory exceptions that are being asked to be made today are to, in fact, not have to compete on price.… So, we are talking about products that are asking that they not be held accountable to the same disclosure obligations that other financial institutions – credit unions, community banks – across this country are required to do.”

Spotser later testified, “If it looks like a duck, swims like a duck, quacks like a duck, it’s probably a duck. Buy now pay later, early wage access, they look and function like credit…. They should be regulated as such.”

In written testimony for the hearing (linked here), Ms. Spotser stated: “We need consumer protections to prevent lenders from stripping wealth from low-wage workers and struggling families under the pretense of clever marketing and high-tech innovation.”

The testimony explains CRL’s opposition to three bills considered at the hearing: the two bills described below and the Examining Consumer Choice in Digital Payments Act, which would restrict the ability of the Consumer Financial Protection Bureau to regulate buy now pay later and other fintech loans.

In a letter sent to the House Financial Services Committee, a coalition of consumer advocates warn about the Financial Services Innovation Act of 2023: “The end result would be a ‘Sahara desert’ of consumer protections.”

In a separate letter, worker and consumer advocates write about the Earned Wage Access Consumer Protection Act: “In the guise of offering protections, the bill obscures its true effect: to exempt fintech cash advances from the Truth in Lending Act, to endorse a form of loan that makes workers pay to be paid, and to facilitate new evasions by payday lenders.”

CRL recently published the policy brief "Paying to be Paid: Consumer Protections Needed for Earned Wage Advances and Other Fintech Cash Advances."

Just yesterday, CRL joined with the Consumer Federation of America in publishing, “Issue Brief: Consumer Understanding of Buy Now, Pay Later in California.”


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