The Consumer Finance Protection Bureau has announced new rules in response to the increasing use of paycheck advance products. At least 5% of American workers utilized paycheck advance products in 2022, as reported by the CFPB. These products allow workers to access a portion of their pay before their scheduled payday, but often come with fees and high interest rates.
The proposed rules by the CFPB aim to regulate these products by aligning them with existing laws for payday loans. Companies offering these products would be required to disclose fees upfront to consumers. Government officials are also concerned about employer-backed programs, emphasizing the importance of transparency and preventing predatory practices.
Director Rohit Chopra of the CFPB stated, “The CFPB’s actions will help workers know what they are getting with these products and prevent race-to-the-bottom business practices.” The agency highlighted the doubling use of these programs between 2021 and 2022, signaling the need for stricter regulations.
Comment gathering is currently underway, with the potential for finalized rules to be issued later this year.
