Fintech Legal Report - October 2021

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Weekly Fintech Focus

  • Rohit Chopra is sworn in as CFPB Director.
  • Consumer advocates request that the CFPB change or revoke its opinion on earned wage access programs and its innovation sandbox programs.

Chopra Sworn in as CFPB Director

On October 12, 2021, Rohit Chopra was sworn in as the CFPB Director. Acting Director David Uejio will leave his post but will remain at the CFPB as he awaits his likely confirmation to a fair housing role at HUD as the Assistant Secretary for Fair Housing and Equal Opportunity. Mr. Chopra joins the CFPB leaving a vacancy at his former position at the FTC. The President’s nomination of Alvaro Bedoya to replace Mr. Chopra at the FTC is still pending, and until confirmation, the FTC will be divided 2-2 between Republican and Democratic Commissioners.

Upon his arrival at the CFPB, Mr. Chopra named numerous people to key senior positions at the agency.

In his remarks to staff, Mr. Chopra emphasized certain themes within the CFPB’s mission, including (1) ensuring financial marketplaces meet the needs of all families, workers, and communities; (2) using the agency’s tools to promote competition and shift market power toward consumers and law-abiding businesses; (3) striving for a marketplace where families are treated fairly and can seek help in times of trouble; and (4) anticipating emerging risks to preempt a crisis.

Consumer Advocates Request CFPB Change Opinion on Earned Wage Access Programs and Cut Sandbox Programs

The past year has seen regulators actively engaging with Earned Wage Access (EWA) programs. In general, an EWA provider enables employees to request a portion of the wages the employee has accrued prior to their standard payday or the date on which funds are disbursed to the employee. The EWA provider then recoups the funds through a payroll deduction or a bank account debit on the employee’s payday. In December 2020, the CFPB issued an advisory opinion on EWA programs, which set out criteria under which EWA transactions would not be “credit” for purposes of Regulation Z. In February 2021, the California Department of Financial Protection and Innovation entered into MOUs with a number of EWA companies to monitor these companies as they provided their services to consumers in the state.

Now, nearly 100 consumer groups, including the National Consumer Law Center and the Center for Responsible Lending, are requesting that the CFPB modify or rescind its 2020 advisory opinion because it is based on “unsound reasoning” that could “facilitate widespread evasions of credit laws beyond [EWA] programs.” In short, the consumer groups urge the CFPB to regulate all fee-based EWA products as credit. Specifically, the consumer groups argue that virtually every EWA program available provides a third-party advance of funds to the consumer before the consumer’s payday that must be repaid later out of the paycheck, which should be considered a loan.

Beyond the modifications to EWA guidance, the consumer groups also ask that the CFPB eliminate or significantly alter the current CFPB innovation programs like the Compliance Assistance Sandbox. They argue that these programs provide a secretive process by which industry can seek exemptions of incorrect interpretations of consumer protection laws without proper visibility by consumers, competitors, or the general public.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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