REGULATING EARNED WAGE ACCESS

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.