NCLC submitted a letter to the Vermont House Committee on Commerce and Economic Development re: H 87, An act relating to earned wage access service providers. The letter explains that the bil presents a significant threat to consumers, and particularly to low-income consumers in Vermont. In particular:
- Both employer-based earned wage advances (EWAs) and direct-to-consumer “tip”-based advances are forms of fintech payday loan and should be regulated as such. There is a strong consensus among nearly 100 consumer, civil rights and labor groups that these products should be viewed as loans.
- EWAs and other fintech payday loans have similar problems of rollovers and multiplying fees as traditional payday loans. Fees look small but drain wages and could add up to 498% APR or higher.
- Vermont law is clear that EWAs and other fintech payday loans are loans. H. 87 would override Vermont law to create a large loophole in Vermont’s lending laws.
- Any exemption for fintech payday loans would be exploited by traditional payday lenders, who would revamp their products to claim that their loans, as well “represent” wages and are not loans.