US Agency Proposes Treating Paycheck Advance Products as Consumer Loans

The Consumer Financial Protection Bureau (CFPB) proposed a rule affirming that lenders providing paycheck advance loans are extending consumer loans and thus subject to provisions under the Truth in Lending Act. The CFPB rule relates to earned wage products that offer workers access to a portion of their unpaid wages prior to their payday. The employee is required to repay the amount from their paycheck together with some charges, which include interest rates and fees for expedited access to funds. The CFPB found that interest rates for these products tend to be more than 100 percent annual percentage rate (APR), which is higher than credit cards. Moreover, APRs vary depending on factors like the size of the transaction and duration of the loan, with the expedited fees making up the majority of costs paid by a customer....