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Arizona AG Concludes Non-Recourse, No-Interest Earned Wage Access Products Are Not “Consumer Lender Loans” Requiring a License

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Arizona Attorney General Mark Brnovich released opinion No. 22-(R22-011), concluding earned wage access (EWA) products that are fully non-recourse and no-interest are not “consumer lender loans” under Arizona law. Thus, those who make, procure, or advertise EWA products are not required to be licensed as a “consumer lender” by Arizona’s Department of Insurance and Financial Institutions. The AG’s findings apply to EWA providers working with an employer as well as those working directly with an employee.

According to the AG, an EWA product is fully non-recourse if the provider does not:

  • Obtain a legal, contractual right to repayment against the employee,
  • Engage in any debt collection activities on any unpaid balance,
  • Sell or assign an unpaid balance to a third party, and
  • Report non-payment to any consumer credit reporting agency.

The AG also concludes that a no-interest EWA product is one that does not impose a finance charge under Arizona law, although certain fees are permitted. The AG suggests such fees could include a voluntary gratuity, a fee for expedited transfer of an EWA payment, or the earning of interchange revenue from money spent using a payment card.

A consumer lender license is required to engage in lending in Arizona. A consumer lender is any person or entity advertising to make “consumer lender loans” to consumers, which are broadly defined under Arizona law as lending money to consumers in various contexts.

The AG states that EWA products are not a “loan of money” because an EWA product that is non-recourse is “neither for the employee’s temporary use, nor is there a condition that the funds shall be returned.” Rather, EWA products provide employees with funds that they have already earned and need not be returned to the provider. Additionally, the AG believes an EWA product does not impose finance charges since a non-recourse EWA product requires only repayment of a principal balance, which is not an amount payable incident to or as a condition of a consumer lender loan. The AG noted that some EWA products may charge a fee; however, as long as any fees are included in the exceptions in the finance charge definition, a provider would not be considered to have imposed a finance charge.

The AG references several other decisions informing his analysis. A Consumer Financial Protection Bureau (CFPB) advisory opinion, published on December 10, 2020, concluded that certain EWA products provided through an employer without charging the consumer a fee did not constitute “credit” under the Truth in Lending Act. The CFPB’s advisory opinion, however, was issued under the agency’s prior director, Kathy Kraninger. The CFPB, under its current director, initially cast doubt on the advisory opinion’s validity in a January 18, 2022 letter to consumer advocates, and later rescinded the advisory opinion on June 30, 2022. These recent actions regarding EWA products indicate the CFPB may reach a different conclusion than the Arizona AG, especially since concluding that EWA products are not extensions of credit would place them outside of the CFPB’s jurisdiction.

The AG also relies on the CFPB’s 2017 Payday Lending Rule as well as a California Commissioner of Financial Protection and Innovations’ 2022 opinion that concluded that when an EWA provider works directly with an employer to allow employee access to an EWA product, the EWA product is not a “loan” under California Financial Code § 22009.

In a May 2022 blog post, we discussed the U.S. Department of Treasury’s proposed amendments to the Internal Revenue Code clarifying that EWA products, offering on-demand pay, are not loans.

Troutman Pepper will continue monitoring developments affecting EWA programs and reporting on any relevant updates.


Troutman Pepper State Attorneys General Team

Ashley Taylor – Co-leader and Firm Vice Chair
Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. He focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). Drawing upon his experience as a deputy attorney general, Ashley has developed an extensive consumer practice with regard to the consumer financial services industry.
Clay Friedman – Co-leader
Clay is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. Informed by nearly a decade in a state attorneys general office, and more than 25 years in private practice, Clay spends much of his time representing clients in singular or multistate regulatory actions. Clay has repeatedly led teams before all 50 state attorneys general and also handles matters with the Federal Trade Commission, the Consumer Financial Protection Bureau, and other local, state and federal agencies.
Stephen Piepgrass
Stephen represents clients interacting with, and being investigated by, state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in heavily regulated industries.
Michael Yaghi
Michael handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
Ketan Bhirud
As a former government official at the state and federal level, Ketan leverages extensive experience in the public and private sectors to skillfully represent client interests.
Avi Schick
A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
Chris Carlson
Chris represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
Natalia Jacobo
Natalia is an associate in the firm’s business litigation practice. She recently received her J.D from the University of California, Davis School of Law.
Namrata Kang
Namrata is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. Her work includes advising clients in regulatory investigations and compliance matters, in addition to representing clients in civil litigation matters.
Susan Nikdel
Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes. Susan also represents banks, fintechs, and financial services companies in connection with regulatory examinations and investigations brought by the CFPB, state attorneys general, and the California Department of Financial Protection and Innovation.
Whitney Shephard
Whitney is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
Trey Smith
Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement practice. His experience includes serving as a summer associate at the firm in 2021.
Daniel Waltz
An experienced litigator, Daniel advises and represents regional, national and international companies, financial institutions and insurers in all facets of business, complex commercial and insurance coverage litigation. He is committed to working with his clients to find creative solutions to meet their needs.
Stephanie Kozol
Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.

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