79404 Federal Register / Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations 

54See 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. 

56Public 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. 

1Bureau of Consumer Fin. Prot., Advisory 

Opinions Policy (Nov. 2020), https:// 

files.consumerfinance.gov/f/documents/cfpb_

advisory-opinion_policy_2020-11.pdf. 

2Bureau 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. 

3Rob 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/wpcontent/uploads/2017/01/31163518/A-ComplexPortrait-An-Examination-of-Small-Dollar-CreditConsumers.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-andcomment 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 shortterm, small-dollar credit.3


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4See 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.’’). 

5See 82 FR 54472, 54547 (Nov. 17, 2017). 

6See 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). 

9Bureau of Consumer Fin. Prot., Advisory 

Opinions Policy (Nov. 2020), https://

files.consumerfinance.gov/f/documents/cfpb_

advisory-opinion_policy_2020-11.pdf. 

10The 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. 

11This 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. 

12The term ‘‘Covered EWA Transaction’’ means 

the transactions between a Provider and an 

employee that are associated with a Covered EWA 

Program. 

13See 84 FR 48246 (Sept. 13, 2019). 

14 12 CFR 1005.2(b)(3). 

15The 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. 

16EWA 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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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). 

17For 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. 

18The 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). 

21The 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). 

24This 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. 

25Cf. 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.’’). 

26Payroll 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 nonexempt 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 employerfacilitated 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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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.’’). 

29This 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. 

30See 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.’’). 

31The Provider may charge, at cost, for nonstandard uses of the Provider Account or associated 

card as noted in part I.B. 

32Oasis 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 employerfacilitated payroll deduction (or in the 

event of an administrative or technical 

error, one additional employerfacilitated 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-andcomment 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 highpressure 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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