REGULATING EARNED WAGE ACCESS

Protect Washington Workers from New Predatory Earned Wage Advance Loan Products

Earned Wage Advances (EWA) are a type of short-term loan that allows consumers to access a portion of their earned wages before their regular payday. While they provide quick access to funds, EWA loans often come with high fees and/or high-interest rates, which can create financial strain if used repeatedly. Just like payday loans, EWA loans can lead to a cycle of borrowing, potentially causing further financial challenges for consumers who are already living paycheck to paycheck.

There are two types of EWAs:

  • Direct-to-Consumer EWAs, which are essentially digital payday loans, named differently in an attempt to evade Washington State's strong payday loan protections.
  • Employer-Integrated EWAs, where the employer contracts with an EWA company to provide the short-term loan option.

How are EWAs predatory?

  • Sky high fees and hidden costs. 
    • EWA fees average over 300% APR, well over Washington State's 25% interest cap on small loans.
    • Some EWA lenders include automatic tips, hiding the real cost and pressuring workers to pay tips for accessing their own wages.
  • Creates a debt trap for low-income families.
    • Encourages repeated borrowing, potentially leading to overdraft fees and a cycle of debt.
    • Low-wage workers are especially vulnerable, needing as little as one hour’s pay to qualify for these high-cost loans.
%
Washington EWAs users experienced increased overdrafts.
This Is The
%
Average APR for an EWA Loan
%
Users with 6+ EWAs per month account of all EWA users.

We're committed to ensuring EWA legislation creates meaningful protections for Washington consumers.

While HB 1063/SB 5328 takes an important step to regulate Earned Wage Advance products, more is needed to ensure these Washington consumers are protected from the predatory nature of these short-term loans. Learn more about our advocacy efforts:

Resources on Earned Wage Advances

  • California Department of Financial Protection discussed key EWA trends in this study such as the prevalence of transaction and subscription fee models, with $765 million advanced through 5.8 million transactions. Notably, 73% of tip-based transactions included tips averaging $4.09, while the average annual APR for both tip and non-tip companies was around 331%.
  • The Consumer Financial Protection Bureau repealed previous guidance issued in 2020 regarding EWAs and issued new recommendations, finding that many EWA products were loans subject to the Truth in Lending Act.
  • The Center for Responsible Lending found in a recent study that many EWA borrowers are trapped in a debt cycle and that these products result in high overdraft fees and payday loan use. The CRL also issued a Washington EWA fact sheet.
  • Other states, including Connecticut, California, and Maryland, have found that EWAs are loans under their state law.
  • The Consumer Financial Production Bureau found in this report that employer-integrated EWAs have interest rates averaging 109%.

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