Truth in Lending (Regulation Z); Earned Wage Access Programs

Publisher lists this guidance as withdrawn/rescinded: Truth in Lending (Regulation Z); Earned Wage Access Programs, 85 FR 79404 (Dec. 10, 2020); withdrawn on May 12, 2025 .

79404 Federal Register/ Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
54
See also 12 CFR part 1026, Supp. I,
introduction comment 3(a) (‘‘Rules of construction.
Lists that appear in the commentary may be
exhaustive or illustrative; the appropriate
construction should be clear from the context. In
most cases, illustrative lists are introduced by
phrases such as ‘including, but not limited to,’
‘among other things,’ ‘for example,’ or ‘such as.’ ’’).
55
12 CFR part 1026, supp. I ¶ 46(b)(5)–1.
56
Public Law 111–203, 124 Stat. 1376 (2010).
57
12 U.S.C. 5512(b)(1).
58
15 U.S.C. 1640(f).
59
5 U.S.C. 553(b).
60
5 U.S.C. 603(a), 604(a).
61
44 U.S.C. 3501 et seq.
62
5 U.S.C. 801 et seq.
1
Bureau of Consumer Fin. Prot., Advisory
Opinions Policy (Nov. 2020), https://
files.consumerfinance.gov/f/documents/cfpb_
advisory-opinion_policy_2020-11.pdf.
2
Bureau of Labor Statistics, Length of Pay Periods
in the Current Employment Statistics Survey (last
modified Aug. 29, 2019), https://www.bls.gov/ces/
publications/length-pay-period.htm.
3
Rob Levy & Joshua Sledge, Ctr. for Fin. Serv.
Innovation, A Complex Portrait: An Examination of
Small-Dollar Credit Consumers, at 6 (2012), https://
s3.amazonaws.com/cfsi-innovation-files/wp-
content/uploads/2017/01/31163518/A-Complex-
Portrait-An-Examination-of-Small-Dollar-Credit-
Consumers.pdf. (Center for Financial Services
Innovation became the Financial Health Network in
2019, check the Fin. Health Network’s about page,
https://finhealthnetwork.org/about/ (last visited
Nov. 16, 2020).)
postsecondary education expenses,
regardless of whether the pre-existing
loan was a private or Federal loan.
While the commentary refers only to
consolidation of multiple pre-existing
loans, the commentary is not intended
to be exhaustive,
54
and the Bureau does
not believe there is any principled
reason to conclude that the
postsecondary education purpose of
multiple loans may transfer to a new
loan, while the postsecondary purpose
of a single loan transferred to a new loan
may not.
55

Accordingly, the Bureau interprets the
commentary’s reference to loans that
‘‘consolidate a consumer’s pre-existing
private education loans’’ as simply
referencing the type of consolidation
loan that existed at the time the
commentary was issued by the Board.
Thus, for the reasons discussed in this
advisory opinion, the Bureau interprets
the phrase ‘‘expressly for postsecondary
educational expenses’’ to include loans
that either consolidate Federal
education loans that were themselves
originated expressly for postsecondary
education expenses or to refinance a
single private or Federal education loan
that was originated for such purpose.
As a result, these consolidation or
refinance loans are covered under the
term ‘‘private education loan’’ in TILA
and Regulation Z and are therefore
subject to TILA and Regulation Z’s
requirements in subpart F (including
Regulation Z’s disclosures, prohibition
on co-branding, 30-day rumination
period, and a right to cancel).
II. Regulatory Matters
This advisory opinion is an
interpretive rule issued under the
Bureau’s authority to interpret TILA and
Regulation Z, including under section
1022(b)(1) of the Dodd-Frank Act Wall
Street Reform and Consumer Protection
Act,
56
which authorizes guidance as
may be necessary or appropriate to
enable the Bureau to administer and
carry out the purposes and objectives of
Federal consumer financial laws.
57

By operation of TILA section 130(f),
no provision of TILA sections 130,
108(b), 108(c), 108(e), or 112 imposing
any liability applies to any act done or
omitted in good faith in conformity with
this interpretive rule, notwithstanding
that after such act or omission has
occurred, the interpretive rule is
amended, rescinded, or determined by
judicial or other authority to be invalid
for any reason.
58

As an interpretive rule, this advisory
opinion is exempt from the notice-and-
comment rulemaking requirements of
the Administrative Procedure Act.
59

Because no notice of proposed
rulemaking is required, the Regulatory
Flexibility Act does not require an
initial or final regulatory flexibility
analysis.
60
The Bureau has also
determined that this advisory opinion
does not impose any new or revise any
existing recordkeeping, reporting, or
disclosure requirements on covered
entities or members of the public that
would be collections of information
requiring approval by the Office of
Management and Budget under the
Paperwork Reduction Act.
61

Pursuant to the Congressional Review
Act,
62
the Bureau will submit a report
containing this interpretive rule and
other required information to the United
States Senate, the United States House
of Representatives, and the Comptroller
General of the United States prior to the
rule’s published effective date. The
Office of Information and Regulatory
Affairs has designated this interpretive
rule as not a ‘‘major rule’’ as defined by
5 U.S.C. 804(2).
III. Signing Authority
The Director of the Bureau, Kathleen
L. Kraninger, having reviewed and
approved this document, is delegating
the authority to electronically sign this
document to Grace Feola, a Bureau
Federal Register Liaison, for purposes of
publication in the Federal Register.
Dated: November 30, 2020.
Grace Feola,
Federal Register Liaison, Bureau of Consumer
Financial Protection.
[FR Doc. 2020–26662 Filed 12–9–20; 8:45 am]
BILLING CODE 4810–AM–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Part 1026
Truth in Lending (Regulation Z);
Earned Wage Access Programs
AGENCY: Bureau of Consumer Financial
Protection.
ACTION: Advisory opinion.
SUMMARY: The Bureau of Consumer
Financial Protection (Bureau) is issuing
this advisory opinion to resolve
regulatory uncertainty regarding the
applicability of the definition of credit
under Regulation Z, which implements
the Truth in Lending Act (TILA), to
certain earned wage access (EWA)
programs that conform to the summary
of material facts provided in part I.B of
this advisory opinion.
DATES: This advisory opinion is
effective on December 10, 2020.
FOR FURTHER INFORMATION CONTACT:
Edward Blatnik, Acting Assistant
Director; Will Wade-Gery, Senior
Advisor; or Nathalie Prescott, Attorney;
Office of Innovation, at
officeofinnovation@cfpb.gov or 202–
435–7000. If you require this document
in an alternative electronic format,
please contact CFPB_Accessibility@
cfpb.gov.
SUPPLEMENTARY INFORMATION: The
Bureau is issuing this advisory opinion
through the procedures for its Advisory
Opinions Policy.
1
Refer to those
procedures for more information.
I. Advisory Opinion
A. Background
According to the Bureau of Labor
Statistics, nearly two-thirds of U.S.
private businesses use biweekly,
semimonthly, or monthly pay periods.
2

The Bureau understands that the
interval of time between hours worked
and receiving a paycheck can contribute
to employees’ financial distress,
particularly for new hires when the
length of time between the first day of
employment and the first paycheck may
be longer than subsequent paycheck
intervals, depending on where the hire
date falls in a pay cycle. A study by the
Financial Health Network found that 38
percent of respondents cited timing
mismatches between income and
expenses as a reason for using short-
term, small-dollar credit.
3

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79405 Federal Register/ Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
4
See Jose Pagliery, Why do we get paid every two
weeks instead of daily?, CNN Bus. (Feb. 10, 2016),
http://money.cnn.com/2016/02/10/technology/
daily-paychecks/index.html; see also Julian Alcazar
& Terri Bradford, In the Nick of Time: The Rise of
Earned Wage Access, Fed. Reserve Bank of Kan.
City, at 4 (Sept. 2020), https://
www.kansascityfed.org/publications/research/rwp/
psrb/articles/2020/rise-earned-wage-access
(‘‘Payroll providers often cite costs, both financial
and time, as the reason they are unable to pay
employees more frequently.’’).
5
See 82 FR 54472, 54547 (Nov. 17, 2017).
6
See David S. Mitchell, The Aspen Inst., Payroll
Innovation: How Smarter, Faster Paychecks Could
Mitigate Volatility, at 5–6 (May 2017) (‘‘When
employers—as well as workers themselves—decide
they want to access their pay earlier and faster, they
must turn to the technical experts—financial
service and payroll providers—to operationalize the
new policy.’’).
7
12 CFR 1026.2(a)(14).
8
82 FR 54472, 54547 (Nov. 17, 2017).
9
Bureau of Consumer Fin. Prot., Advisory
Opinions Policy (Nov. 2020), https://
files.consumerfinance.gov/f/documents/cfpb_
advisory-opinion_policy_2020-11.pdf.
10
The definition of ‘‘credit’’ in TILA is virtually
identical to Regulation Z’s definition of the term.
See 15 U.S.C. 1602(f). Although this advisory
opinion focuses on Regulation Z and concludes that
its definition of ‘‘credit’’ does not apply to Covered
EWA Programs, for similar reasons the Bureau
clarifies that the same analysis applies to TILA’s
definition of ‘‘credit’’ and thus that Covered EWA
Programs do not involve the offering or extension
of ‘‘credit’’ under TILA.
11
This advisory opinion is limited in its
application to Covered EWA Programs. It has no
application to EWA programs that are not Covered
EWA Programs as described in this part I.B. As a
result, products that meet some but not all of the
characteristics may be credit under Regulation Z.
12
The term ‘‘Covered EWA Transaction’’ means
the transactions between a Provider and an
employee that are associated with a Covered EWA
Program.
13
See 84 FR 48246 (Sept. 13, 2019).
14
12 CFR 1005.2(b)(3).
15
The Provider Account may charge the
employee, at cost, for non-standard uses of the
Provider Account or associated card, such as
foreign ATM use, card replacement, check
provision, or directing ACH payments from the
Provider Account.
16
EWA programs where a provider obtains any
authorization to transfer funds from a consumer’s
Continued
Despite advancements in payment
technologies over the past several
decades, several obstacles prevent
businesses from easily implementing
shorter pay cycles. For instance, there
may be cash flow limitations on
businesses that depend on incoming
payments and receivables, which
subsequently need to be processed and
deposited.
4
The Bureau has noted that
periodic wage payment ‘‘appears to be
largely driven by efficiency concerns
with payroll processing and employers’
cash management.’’
5
Employers may
also face a lack of technical ability and
regulatory uncertainty about State wage
and hour laws as contributing factors.
6

Earned wage access products have
recently emerged in the marketplace as
an innovative way for employees to
meet short-term liquidity needs that
arise between paychecks without
turning to more costly alternatives like
traditional payday loans. EWA products
seek to address the lag between
consumers’ hours worked and receipt of
their paychecks by facilitating advance
access to earned but as yet unpaid
wages. EWA providers are developing
programs with a variety of business
models and fee structures. Typically,
these programs involve an EWA
provider enabling employees to request
a certain amount (or share) of accrued
wages, disbursing the requested
amounts to the employees prior to
payday, and later recouping the funds
through payroll deductions or bank
account debits on the subsequent
payday.
The Bureau understands that there is
uncertainty about the application of
Regulation Z to EWA programs.
Specifically, the Bureau has been asked
whether EWA providers are offering or
extending ‘‘credit’’ within the scope of
the regulation.
7
The Bureau itself has
acknowledged that there is uncertainty
concerning the conditions under which
EWA programs involve an offer of
‘‘credit’’ under Regulation Z.
8

On November 30, 2020, the Bureau
issued its Advisory Opinions Policy, the
primary purpose of which ‘‘is to provide
a formal mechanism through which the
Bureau may more effectively carry out
its statutory purposes and objectives by
better enabling compliance in the face of
regulatory uncertainty.’’
9

The Bureau is issuing this advisory
opinion under the Advisory Opinion
Policy to resolve regulatory uncertainty
regarding the application of Regulation
Z to the particular type of EWA program
described in the Summary of Material
Facts in part I.B below (Covered EWA
Program). Specifically, this advisory
opinion clarifies that a Covered EWA
Program does not involve the offering or
extension of ‘‘credit’’ as defined by
section 1026.2(a)(14) of Regulation Z.
10

B. Summary of Material Facts
For purposes of this advisory opinion,
the term ‘‘Covered EWA Program’’
means an EWA program that includes
all of the following characteristics:
11

(1) The provider of the Covered EWA
Program (Provider) contracts with
employers to offer and provide Covered
EWA Transactions
12
to the employer’s
employees.
(2) The amount of each Covered EWA
Transaction does not exceed the accrued
cash value of the wages the employee
has earned up to the date and time of
the transaction, which amount is
determined based upon timely
information provided by the employer
to the Provider. The Provider may not
rely upon information provided by the
employee, or on estimates or predictions
of hours worked or hourly wage rates.
The ‘‘accrued cash value of the wages’’
are wages that the employee is entitled
to receive under State law in the event
of separation from the employer for
work performed for the employer, but
for which the employee has yet to be
paid.
(3) The employee makes no payment,
voluntary or otherwise, to access EWA
funds or otherwise use the Covered
EWA Program, and the Provider or its
agents do not solicit or accept tips or
any other payments from the employee.
(The Bureau notes that there may be
EWA programs that charge nominal
processing fees—and thus differ from
the fee structure described in this
section B(3)—that nonetheless do not
involve the offering or extension of
‘‘credit’’ as defined in § 1026.2(a)(14).
Such programs are not covered by this
advisory opinion, but providers of such
programs may request clarification from
the Bureau about a specific fee structure
by, for instance, applying for an
Approval under the Policy on the
Compliance Assistance Sandbox).
13

To conform to this characteristic, the
Provider must provide EWA funds to an
account of the employee’s choice, and
the Provider cannot charge fees for the
delivery of EWA funds to that account.
If the employee chooses a prepaid
account as defined under Regulation
E
14
and that account is managed,
issued, or otherwise facilitated by the
Provider (Provider Account), the
Provider cannot charge fees for opening
that Provider Account. In addition, the
Provider Account must allow the
employee reasonable use of that account
at no charge. In this context,
‘‘reasonable use’’ means, inter alia, that
any prepaid card associated with the
Provider Account must be issued on a
major network brand that permits use at
multiple, unaffiliated merchants; the
Provider Account must not charge fees
for use of an associated card to buy
goods or services at merchants that
accept the associated card; the Provider
Account must not impose any periodic
fees; and the employee must have some
free and reasonably accessible means to
obtain cash from the Provider
Account.
15

(4) The Provider recovers the amount
of each Covered EWA Transaction only
through an employer-facilitated payroll
deduction from the employee’s next
paycheck.
16
One additional payroll
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79406 Federal Register/ Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
account, including both electronic payment
authorizations and checks and including
authorizations that the provider may not actually
utilize, do not meet the requirements of this section
B(4).
17
For example, a Covered EWA Transaction may
occur in week one of an employee’s pay cycle, but
the employer learns of and subjects the employee’s
paycheck to a required wage garnishment in week
two of the pay cycle. As a result of the garnishment,
the employee’s paycheck is less than the amount of
the Covered EWA Transaction.
18
The Bureau’s Regulation Z does not apply to ‘‘a
person excluded from coverage of this part by
section 1029 of the Consumer Financial Protection
Act of 2010, title X of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, Public Law
111–203, 124 Stat. 1376.’’ 12 CFR 1026.1(c)(1).
19
12 CFR 1026.1(c)(1).
20
12 CFR 1026.2(a)(14). TILA defines ‘‘credit’’ as
‘‘the right granted by a creditor to a debtor to defer
payment of debt or to incur debt and defer its
payment.’’ 15 U.S.C. 1602(f).
21
The Board of Governors of the Federal Reserve
System recognized that, ‘‘while the concept of
credit is central to Truth in Lending, the regulatory
definition may be difficult to apply in particular
fact situations . . . [A] precise, easy-to-apply
standard cannot be devised to resolve all
questions.’’ 45 FR 80648, 80652 (Dec. 5, 1980)
(proposing revisions of Regulation Z); see also 46
FR 20848, 20851 (Apr. 7, 1981) (adopting the
definition from the December proposal and noting
that ‘‘[t]he regulatory definition may be difficult to
apply in particular fact situations’’).
22
12 CFR 1026.2(a)(14).
23
Debt, Black’s Law Dictionary (11th ed. 2019).
24
This often occurs in the employer-employee
context, for instance, when an individual whose
employment has been terminated receives her final
paycheck via paper check on her last day at work,
which may not be the same day as a scheduled
payday.
25
Cf. 12 CFR part 1026, supp. I, comment
2(a)(14)–2 (‘‘Credit includes a transaction in which
a cash advance is made to a consumer in exchange
for the consumer’s personal check, or in exchange
for the consumer’s authorization to debit the
consumer’s deposit account, and where the parties
agree either that the check will not be cashed or
deposited, or that the consumer’s deposit account
will not be debited, until a designated future
date.’’).
26
Payroll deductions may not be attempted in
any other pay period in the event the paycheck
corresponding to the Covered EWA Transaction is
insufficient to cover the full amount of the
transaction. However, in the event of a technical or
administrative error, one additional payroll
deduction may be attempted on the following
payday.
27
12 CFR part 1026, supp. I, comment
2(a)(14)–1.
28
46 FR 20848, 20851 (Apr. 7, 1981) (‘‘The
regulatory definition [of ‘credit’] may be difficult to
deduction may be attempted in the
event of a failed or partial payroll
deduction due to administrative or
technical errors. Administrative or
technical errors include, for instance, an
application programming interface (API)
malfunction or a mistake in the
employer’s payroll process (e.g.,
miscalculation of an employee’s base
pay or overtime award), but do not
include, for instance, situations in
which the employer has garnished an
employee’s wages following a Covered
EWA Transaction.
17

(5) In the event of a failed or partial
payroll deduction, the Provider retains
no legal or contractual claim or remedy,
direct or indirect, against the employee,
although the Provider may choose to
refrain from offering the employee
additional EWA transactions.
(6) Before entering into a Covered
EWA Transaction, the Provider clearly
and conspicuously explains to the
employee, and warrants to the employee
as part of the contract between the
parties (and ultimately complies with
these warranties) that it:
(a) Will not require the employee to
pay any charges or fees in connection
with the Covered EWA Transaction;
(b) Has no legal or contractual claim
or remedy, direct or indirect, against the
employee in the event the payroll
deduction is insufficient to cover the
full amount of a Covered EWA
Transaction, including no right to take
payment from any consumer account;
and
(c) Will not engage in any debt
collection activities related to a Covered
EWA Transaction, place a Covered EWA
Transaction amount as a debt with or
sell it to a third party, or report to a
consumer reporting agency concerning a
Covered EWA Transaction.
(7) The Provider will not directly or
indirectly assess the credit risk of
individual employees, including
through obtaining and reviewing credit
reports or credit scores about the
individual employees.
C. Legal Analysis
Regulation Z applies to any non-
exempt
18
individual or business that
offers or extends credit when four
conditions are met: (i) The credit is
offered or extended to consumers; (ii)
the offering or extension of credit is
done regularly; (iii) the credit is subject
to a finance charge or is payable by a
written agreement in more than four
installments; and (iv) the credit is
primarily for personal, family, or
household purposes.
19
Section
1026.2(a)(14) of Regulation Z defines
‘‘credit’’ as ‘‘the right to defer payment
of debt or to incur debt and defer its
payment.’’
20
Neither Regulation Z nor
TILA define the term ‘‘debt.’’
It is unclear whether the term ‘‘credit’’
in section 1026.2(a)(14) of Regulation Z
includes Covered EWA Transactions.
21

For the reasons set forth below, the
Bureau concludes that Covered EWA
Transactions are not ‘‘credit’’ for
purposes of § 1026.2(a)(14).
First, the Bureau concludes that
Covered EWA Transactions do not
provide employees with ‘‘the right to
defer payment of debt or to incur debt
and defer its payment’’ because Covered
EWA Programs do not implicate a
‘‘debt.’’
22
Regulation Z does not define
‘‘debt.’’ The common meaning of the
term debt is a ‘‘[l]iability on a claim; a
specific sum of money due by
agreement or otherwise.’’
23
But the
Bureau has determined that no such
liability of the employee arises in the
context of a Covered EWA Program.
Rather, the Bureau believes that a
Covered EWA Program facilitates
employees’ access to wages they have
already earned, and to which they are
already entitled, and thus functionally
operates like an employer that pays its
employees earlier than the scheduled
payday.
24
For instance, a Provider must
have knowledge, from timely
information the Provider receives from
the employer, of the accrued cash value
of an employee’s wages at the date and
time of the Covered EWA Transaction.
The Covered EWA Transaction cannot
be more than this amount, which
reduces the risk that EWA funds do not
correspond to funds the employee has
actually earned and is entitled to receive
on payday. Further, a Provider can
recover EWA funds, directly or
indirectly, only through an employer-
facilitated payroll deduction that occurs
on the next scheduled payday,
25
which
corresponds to the pay period when the
employee actually earned the funds
related to the Covered EWA
Transaction.
26
In addition, EWA funds
are transferred to an employee’s chosen
account at no cost to the employee, just
as receiving a paycheck costs employees
nothing. And the only eligibility
criterion for an employee to participate
in a Covered EWA Program is whether
the partner employer gives the
employee access to the program; the
Provider does not directly or indirectly
assess an employee’s credit risk for a
Covered EWA Transaction, just as
underwriting is not used to issue a
paycheck.
Second, interpreting § 1026.2(a)(14)
not to apply to Covered EWA
Transactions is consistent with
comment 2(a)(14)–1.v to Regulation Z.
This comment provides ‘‘[b]orrowing
against the accrued cash value of an
insurance policy or a pension account if
there is no independent obligation to
repay’’ is ‘‘not considered credit for
purposes of the regulation.’’
27
As the
Board of Governors of the Federal
Reserve System explained when it
revised Regulation Z to implement the
Truth in Lending Simplification and
Reform Act, in such instances, ‘‘credit
has not been extended because the
consumer is, in effect, only using the
consumer’s own money.’’
28
The Bureau
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79407 Federal Register/ Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
apply in particular fact situations, and the Board
therefore offers the following guidance, which will
also be incorporated into the commentary.’’); see
also 46 FR 28560, 28560 (May 27, 1981) (proposing
official Regulation Z commentary) (‘‘The
commentary does not purport to be exhaustive. It
concentrates on material of general application
whose inclusion will, in the staff’s view, be useful
to the widest possible audience . . . [T]he
commentary will address prevalent credit
transactions, to the extent that they present
important questions under the regulation. It will
not, however, attempt to address each credit plan’s
unique set of facts. The commentary instead
identifies several basic factors characterizing that
type of transaction. Creditors must then determine
whether the discussion applies to their own
transactions given their particular variations.’’); 46
FR 50288, 50288 (Oct. 9, 1981) (adopting official
Regulation Z commentary) (‘‘The commentary
modifies the staff’s approach to providing
interpretations of Regulation Z. Under the previous
regulation, individual staff opinions were issued in
response to inquiries about specific fact situations
and were normally limited to those facts. Over time,
more than 1,500 separate opinions were issued.
While this commentary provides specific guidance
and examples, it employs language of somewhat
more general application for use by the widest
possible audience.’’).
29
This could happen, for instance, if an
employee’s wages become subject to garnishment or
an employer goes out of business after an EWA
transaction but before the scheduled payday.
30
See Meyers v. Clearview Dodge Sales, Inc., 384
F. Supp. 722, 728 (E.D. La. 1974), aff’d in part, rev’d
in part, 539 F.2d 511 (5th Cir. 1976), cert. denied,
431 U.S. 929 (1977) (‘‘In construing a piece of
remedial legislation such as the Truth-in-Lending
Act, designed to protect consumers, courts must
focus on the substance of a transaction rather than
its mere form.’’); see also Edwards v. Your Credit,
Inc., 148 F.3d 427, 436 (5th Cir. 1998) (applying
substance-over-form analysis to TILA claim);
Arrington v. Colleen, Inc., No. Civ. AMD 00–191,
2001 WL 34117735, at *4 (D. Md. Mar. 29, 2001)
(‘‘A common task of courts is to determine whether
particular conduct or transaction falls into a class
of conduct or transactions that a statute regulates.
Such is particularly the case here, where the TILA
regulates the extension of credit in various forms
and in fact anticipates that the form of credit will
be ever-changing.’’).
31
The Provider may charge, at cost, for non-
standard uses of the Provider Account or associated
card as noted in part I.B.
32
Oasis Legal Fin. Group, LLC v. Coffman, 361
P.3d 400, 410 (Colo. 2015) (noting in the context of
the UCCC that ‘‘growth in the repayment obligation
over time is a finance charge and a hallmark of a
consumer loan’’).
33
82 FR 54472, 54547 (Nov. 17, 2017). The
Bureau further noted that this ‘‘is especially likely
where the employer does not reserve any recourse
upon the payment made to the employee other than
the corresponding reduction in the employee’s
paycheck,’’ but that other initiatives are more likely
to constitute ‘‘credit’’ under Regulation Z. Id. ‘‘For
example, if an employer cannot simply reduce the
amount of an employee’s paycheck because payroll
processing has already begun, there may be a need
for a mechanism for the consumer to repay the
funds after they are deposited in the consumer’s
account.’’ Id.
34
Id. at 54548. The Bureau contrasted this with
‘‘other products [that] rely on estimates of wages
likely to be accrued, or accrued on average, and
may make advances against expected wages that are
not already earned and accrued.’’ Id.
believes there are significant similarities
between comment 2(a)(14)–1.v and a
Covered EWA Program. For instance,
like the accrued cash value of a
consumer’s insurance policy or pension
account, the accrued cash value of an
employee’s earned but unpaid wages is
the employee’s own money. That is, an
employee is ‘‘in effect, only using the
[employee’s] own money’’ when she
accesses earned wages through a
Covered EWA Program, and is not
incurring debt or deferring its payment.
Moreover, ‘‘there is no independent
obligation to repay’’ a Covered EWA
Transaction, since the Provider may
only recover the corresponding EWA
amounts via the allowed employer-
facilitated payroll deduction (or in the
event of an administrative or technical
error, one additional employer-
facilitated payroll deduction) and has
no claim direct or indirect against an
employee for nonpayment in the event
of a failed or partial deduction.
29

Third, the totality of circumstances of
a Covered EWA Program supports that
these programs differ in kind from
products the Bureau would generally
consider to be credit. Courts tend to
agree that a transaction’s substance, not
its form, controls whether it qualifies as
TILA ‘‘credit,’’ and they generally
undertake fact-specific inquiries and
weigh multiple factors when analyzing
the true nature of a transaction.
30
The
Bureau notes that features often found
in credit transactions are absent from
Covered EWA Programs. Unlike many
credit transactions, for instance:
•Providers have no rights against the
employee in the event of nonpayment.
As explained above, a Provider must
warrant to employees that it has no
contractual claim or remedy, direct or
indirect, against them in the event a
payroll deduction is insufficient to
cover amounts corresponding to a
Covered EWA Transaction. A Provider
also must warrant that it will not, with
regard to any such transaction, engage
in debt collection activities, report to
consumer reporting agencies, or sell or
place the transaction as a debt with any
third party. Employees have no
obligation to make any payments
directly or indirectly to a Provider at
any time. This is true even if, for
instance, an employer goes bankrupt
before attempting a payroll deduction.
•Providers do not charge employees
to participate in a Covered EWA
Program, open a Provider Account,
transfer EWA funds to the Provider
Account (or to the employee’s choice of
account), or use an associated card
issued on a major network to buy goods
or services at the multiple merchants
that accept the card. And Provider
Accounts must allow employees to have
reasonable use of the accounts at no
charge, which means, inter alia, that the
Provider Account and associated card
must not impose any periodic fees.
31

•No interest or other fees are charged
against a Covered EWA Transaction,
ensuring that the amount the Provider is
entitled to recover does not ‘‘increase[ ]
with the passage of time, another
characteristic of a loan.’’
32
The absence
of interest and other fees demonstrates
that Providers are not taking on the type
of credit risk characteristic of a typical
credit transaction.
•There are no late fees or
prepayment penalties associated with a
Covered EWA Transaction.
•Providers do not take any payment
authorization from employees, such as a
check, ACH, or debit card authorization.
•Providers do not pull credit reports
or credit scores on individual
employees or otherwise assess their
credit risk.
•Providers do not report information
concerning Covered EWA Transactions
to consumer reporting agencies.
•Providers do not engage in debt
collection activities related to Covered
EWA Transactions or place such
amounts as debt with, or sell such
amounts to, any third party.
Finally, the Bureau notes that its
interpretation of § 1026.2(a)(14) in the
context of a Covered EWA Program is
consistent with the Bureau’s discussion
of these types of products in its 2017
Payday Lending Rule, where it noted
that ‘‘some efforts to give consumers
access to accrued wages may not be
credit at all. For instance, when an
employer allows an employee to draw
accrued wages ahead of a scheduled
payday and then later reduces the
employee’s paycheck by the amount
drawn, there is a quite plausible
argument that the transaction does not
involve ‘credit’ because the employee
may not be incurring a debt at all.’’
33

The Bureau stated that it ‘‘is aware that
some of these products provide access
to the consumer’s own funds in the form
of earned wages already accrued but not
yet paid out because of administrative
and payroll processes historically
developed by employers.’’
34

Similarly, Covered EWA Programs are
designed to ‘‘provide access to the
consumer’s own funds’’ through
Covered EWA Transactions that are
limited to the accrued cash value of
employee wages. Providers recover
amounts corresponding to such
transactions through payroll deductions
and they retain no right to pursue
claims against employees in the event of
a failed or partial deduction.
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79408 Federal Register/ Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
35
12 U.S.C. 5512(b)(1).
36
15 U.S.C. 1640(f).
37
5 U.S.C. 553(b).
38
5 U.S.C. 603(a), 604(a).
39
44 U.S.C. 3501 through 3521.
40
5 U.S.C. 801 et seq.
This advisory opinion applies solely
to the question of whether Covered
EWA Programs (i.e., those meeting all of
the characteristics described in part I.B
above) fall under the definition of credit
in section 1026.2(a)(14) of Regulation Z
identified above. This advisory opinion
has no application to any other
circumstance, and it does not offer a
legal interpretation of any other
provisions of law.
The Bureau continues to seek
stakeholder feedback and evaluate
whether the Bureau should provide any
additional guidance (including through
its advisory opinion and innovation
policies) about the application of
Regulation Z to EWA programs that
differ from those described in part I.B
above.
II. Regulatory Matters
This advisory opinion is an
interpretive rule issued under the
Bureau’s authority to interpret TILA and
Regulation Z, including under section
1022(b)(1) of the Dodd-Frank Act, which
authorizes guidance as may be
necessary or appropriate to enable the
Bureau to administer and carry out the
purposes and objectives of Federal
consumer financial laws.
35

By operation of TILA section 130(f),
no provision of TILA sections 130,
108(b), 108(c), 108(e), or 112 imposing
any liability applies to any act done or
omitted in good faith in conformity with
this interpretive rule, notwithstanding
that after such act or omission has
occurred, the interpretive rule is
amended, rescinded, or determined by
judicial or other authority to be invalid
for any reason.
36

As an interpretive rule, this advisory
opinion is exempt from the notice-and-
comment rulemaking requirements of
the Administrative Procedure Act.
37

Because no notice of proposed
rulemaking is required, the Regulatory
Flexibility Act does not require an
initial or final regulatory flexibility
analysis.
38

The Bureau has also determined that
this advisory opinion does not impose
any new or revise any existing
recordkeeping, reporting, or disclosure
requirements on covered entities or
members of the public that would be
collections of information requiring
approval by the Office of Management
and Budget under the Paperwork
Reduction Act.
39

Pursuant to the Congressional Review
Act,
40
the Bureau will submit a report
containing this interpretive rule and
other required information to the United
States Senate, the United States House
of Representatives, and the Comptroller
General of the United States prior to the
rule’s published effective date. The
Office of Information and Regulatory
Affairs has designated this interpretive
rule as not a ‘‘major rule’’ as defined by
5 U.S.C. 804(2).
III. Signing Authority
The Director of the Bureau, Kathleen
L. Kraninger, having reviewed and
approved this document, is delegating
the authority to electronically sign this
document to Grace Feola, a Bureau
Federal Register Liaison, for purposes of
publication in the Federal Register.
Dated: November 30, 2020.
Grace Feola,
Federal Register Liaison, Bureau of Consumer
Financial Protection.
[FR Doc. 2020–26664 Filed 12–9–20; 8:45 am]
BILLING CODE 4810–AM–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2020–0542; Project
Identifier AD–2020–00582–E; Amendment
39–21351; AD 2020–25–09]
RIN 2120–AA64
Airworthiness Directives; Pratt &
Whitney Division Turbofan Engines
AGENCY: Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
SUMMARY: The FAA is adopting a new
airworthiness directive (AD) for all Pratt
& Whitney Division (PW) PW4164,
PW4164–1D, PW4168, PW4168–1D,
PW4168A, PW4168A–1D, and PW4170
model turbofan engines with a certain
outer combustion chamber assembly
and 3rd stage low-pressure turbine
(LPT) duct segments installed. This AD
was prompted by reports of damaged or
failed 3rd stage LPT duct segments on
PW engines with the Talon IIB outer
combustion chamber assembly
configuration installed. This AD
requires removing and replacing certain
3rd stage LPT duct segments. The FAA
is issuing this AD to address the unsafe
condition on these products.
DATES: This AD is effective January 14,
2021.
ADDRESSES: For service information
identified in this final rule, contact Pratt
& Whitney Division, 400 Main Street
East, Hartford, CT 06118; phone: (800)
565–0140; email: help24@pw.utc.com;
website: https://fleetcare.pw.utc.com.
You may view this service information
at the FAA, Airworthiness Products
Section, Operational Safety Branch,
1200 District Avenue, Burlington, MA
01803. For information on the
availability of this material at the FAA,
call (781) 238–7759. It is also available
at https://www.regulations.gov by
searching for and locating Docket No.
FAA–2020–0542.
Examining the AD Docket
You may examine the AD docket at
https://www.regulations.gov by
searching for and locating Docket No.
FAA–2020–0542; or in person at Docket
Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays. The AD docket contains this
final rule, any comments received, and
other information. The address for
Docket Operations is U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT:
Carol Nguyen, Aviation Safety Engineer,
ECO Branch, FAA, 1200 District
Avenue, Burlington, MA 01803; phone:
(781) 238–7655; fax: (781) 238–7199;
email: carol.nguyen@faa.gov.
SUPPLEMENTARY INFORMATION:
Background
The FAA issued a notice of proposed
rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would
apply to all PW PW4164, PW4164–1D,
PW4168, PW4168–1D, PW4168A,
PW4168A–1D, and PW4170 model
turbofan engines with a certain outer
combustion chamber assembly and 3rd
stage LPT duct segments installed. The
NPRM published in the Federal
Register on June 12, 2020 (85 FR 35812).
The NPRM was prompted by multiple
reports of damaged or failed 3rd stage
LPT duct segments that resulted in
engine surges, in-flight shutdowns,
diversions, and air turnbacks. The
reports were attributed to elevated gas
path temperature at the outer diameter
of the turbine flowpath and high-
pressure turbine (HPT) 2nd stage blade
outer air seal spallation, which led to
the distortion and liberation of 3rd stage
LPT duct segments. In the NPRM, the
FAA proposed to require removing and
replacing certain 3rd stage LPT duct
segments. The FAA is issuing this AD
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