WASHINGTON–Consumers need “strong protections” from fintech cash advances that “create debt traps,” according to, the Center for Responsible Lending (CRL) and the National Consumer Law Center.
The organizations, which have released an issue brief, “State Recommendations for Earned Wage Advances and Other Fintech Cash Advances,” said they found numerous abuses.
“Fintech cash advances are credit and should be regulated as credit, with guardrails to prevent abuses,” said Andrew Kushner, senior policy counsel at the Center for Responsible Lending. “State legislators and regulators should reject industry attempts to exempt fintech cash advances from basic consumer protections. These joint recommendations are the minimum protections needed in any legislation to protect consumers from common abuses we see with fintech cash advance loans.”
More In-depth Report
Separately, the CRL said it has also released a separate, more in-depth issue brief titled, “Paying to be Paid: Consumer Protections Needed for Earned Wage Advances and Other Fintech Cash Advances.”
"The predatory payday loan industry exploded after lawmakers bought the fiction that deferred check cashing wasn’t credit, and providers of earned wage advances and other fintech cash advances are pushing the same playbook, seeking loopholes with no meaningful protections,” said Lauren Saunders, associate director at the National Consumer Law Center. “Data confirming the average 330% APR cost of fintech cash advances shows the need for the same interest rate limits and cost caps as other forms of credit to prevent a debt trap.”
Recommendations Made
The key recommendations in the joint CRL / NCLC brief for state policymakers include:
- States should enforce existing credit laws and, if necessary, clarify that they cover fintech cash advances
- If a separate regulatory regime specific to fintech cash advances is considered, it should be only for employer-integrated earned wage advances; cap the total costs lenders can collect at a nominal fee of a few dollars per month, and expressly state that all payments are charges that count toward this cost cap, including so-called “tips”; require the “voluntary” payments like “tips” default to $0; and permit advances to be repaid only through payroll deduction or another method that is direct from the employer, and expressly bar repayment through debiting a user’s bank account, which can trigger overdraft and nonsufficient funds fees.
Other Recommendations
The issue brief also recommends licensing, data collection, and debt collection limits, but warns that those measures alone are insufficient.
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