In an op-ed appearing in American Banker on December 20, 2023, Lauren Saunders, associate director at the National Consumer Law Center, and Yasmin Farahi, deputy director of state policy at the Center for Responsible Lending discuss how states are starting to grapple with purportedly new categories of small-dollar loans: earned wage advances and other types of fintech cash advances.
The two organizations recently issued state recommendations for regulating earned wage advances. Our top recommendation, especially for states with strong lending laws, is to follow the Connecticut approach: Enforce and, if necessary, clarify and strengthen credit laws to cover fintech cash advances, without creating a new category specifically for them.
“States have a choice: They can adopt real protections, or they can enshrine a system where workers pay to be paid and fintech cash advances are the new payday loan.”
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