Should Earned Wage Access Products Be Considered “Credit”?

Earned wage access (EWA) products are increasingly reshaping the employer-employee relationship, with widespread adoption as well as regulatory scrutiny. EWA allows employees to obtain a portion of their accrued wages they have already earned before their regular payday. These programs are intended to help consumers bridge cash-flow gaps between pay periods. EWA is an alternative to small-dollar credit and credit alternative options—such as payday loans, credit cards, or overdraft protection—that consumers have historically used to cover interim expenses. Unlike traditional credit, EWAs are typically non-recourse, so consumers have no legal duty to repay the advance in the event of a default.

In recent months, federal courts across multiple jurisdictions have signaled a growing willingness to treat EWA as a form of credit. In the past quarter alone, federal district courts in California, Washington, Maryland, and Pennsylvania have issued rulings adverse to EWA providers. And notably, the Northern District of California recently held that EWA constitutes credit, thereby bringing it within the scope of the Military Lending Act (MLA) and its prohibition on mandatory arbitration clauses.

Below, we highlight key takeaways from recent EWA cases and outline considerations for how providers can best prepare for emerging regulatory and litigation trends.

Courts Are Increasingly Skeptical That EWA Carries No Obligation to Repay

In a recent ruling on a motion to compel arbitration, a California district court in Vickery v. Empower Finance Inc. (“Vickery”) addressed whether an EWA agreement containing a mandatory arbitration clause violated the MLA. Because the MLA only applies to extensions of consumer credit, the central question was whether EWA constitutes “credit.”

The court held that EWA is a form of credit under the MLA. It rejected the EWA provider’s arguments that consumers had no legal obligation to repay, a feature that the EWA industry points to when distinguishing EWA from credit. The court noted that borrowers authorize the provider to debit their accounts for repayment, even after disconnecting the linked account, and that the provider reserves the right to deny future advances if a prior advance is not repaid in full.

The court further relied on the definition of “credit” in the Truth in Lending Act (TILA) and Regulation Z, which is identical to the definition of credit pursuant to the MLA. That definition of “credit” includes cash advances made in exchange for authorization to debit a consumer’s deposit account.[1] These characteristics undermine the assertion that consumers have no obligation to repay. For those reasons, the court concluded that the EWA constituted credit under the MLA.

Other federal courts have used similar reasoning when considering whether EWA is credit. In the Western District of Washington, a court found an EWA provider’s claim of “no legal repayment obligation” unpersuasive given the provider’s mandatory debit authorizations and clear expectation of repayment. In Maryland, a court found that plaintiffs plausibly alleged EWA constituted credit, reasoning that repayment methods—such as verifying paychecks and granting account access—may be even more effective than traditional debt collection mechanisms.

These decisions reflect growing judicial skepticism toward the longstanding industry argument that an advance is not credit simply because there is no legal obligation to repay.

Expedited Transfer and Other EWA Fees Are Finance Charges

The California court also found in Vickery that expedited transfer fees tied to EWA constitute finance charges. The MLA applies when credit is extended primarily for household purposes and is either subject to a finance charge or payable in more than four installments. 32 C.F.R. § 232.3(f)(1). Because EWAs are typically repaid in a single installment—when the consumer is paid the wages that were the subject of the advance—the determination that EWA involves a finance charge becomes critical.

The court reasoned that expedited transfer fees are “incident to or a condition of” the EWA. The court cited the provider’s marketing emphasis on instant access to wages as evidence that speed was a material feature of the product. The court’s determination that expedited payment fees qualify as finance charges—combined with its conclusion that EWAs constitute credit—brought the product squarely under the MLA’s coverage.

Other federal courts have echoed the rationale articulated by the California district court when determining whether certain EWA fees constitute finance charges:

• In Washington, the district court found that plaintiffs adequately alleged expedited payment fees and subscription fees were finance charges, noting that the EWA product’s promise of immediate access was integral to its appeal.
• In Maryland, the district court allowed to proceed claims alleging that “lightning fees” and tips functioned as finance charges because the product’s advertising tied those fees directly to instant access to funds.
• In Pennsylvania, the district court held that plaintiffs plausibly alleged that expedited payment fees and tips were undisclosed finance charges under TILA, emphasizing that consumers are effectively unable to obtain the promised credit without paying such fees and tips.

States Regulators and Policymakers Are Increasingly Active

While courts have been increasingly active in EWA matters, state regulators have also shown a keen interest in regulating these products. In California, the Department of Financial Protection and Innovation (DFPI) recently finalized regulations classifying “income-based advances” as loans subject to state consumer financial laws, requiring providers to register under the California Consumer Financial Protection Law (CCFPL) beginning February 15, 2025 and to submit operational and financial information, clear disclosures of fees (including “optional payments”), and annual reporting on activities/fees/complaints, as well as to be subject to examination. With uncertainty at the federal level, Maryland, Connecticut, and several other state regulators have also recently passed relevant laws governing EWA providers. In New York, legislation is pending that would give New York Department of Financial Services (DFS) power to regulate EWA providers via licensing and oversight, defining “earned wage access provider” and setting registration/annual-reporting requirements.

Key Takeaways for EWA Providers

Many of these rulings have survived the motion to dismiss stage but have not been decided on the merits. That said, they suggest an evolution of judicial attitude toward EWA. Courts’ willingness to allow these claims to proceed may significantly increase litigation exposure and compliance costs for providers.

As a result, EWA providers should consider taking the following steps:

• Reevaluate advertising practices, particularly those highlighting “instant” or “lightning” access to wages. Courts have repeatedly pointed to such claims as evidence that expedited fees are finance charges.
• Evaluate whether their agreements include mandatory arbitration provisions. As recent decisions demonstrate, the use of mandatory arbitration clauses may be prohibited if EWA is determined to be credit for MLA purposes.
• Monitor emerging case law closely, as the trend toward treating EWA as credit could reshape regulatory expectations for the industry.
• At the same time, monitor how states are looking to regulate EWA products, including whether to create new supervisory structures or bring them into existing ones.

We will continue to track developments in EWA-related litigation and monitor how courts interpret and apply the MLA and TILA to these products.

[1] There have been significant developments in the interpretation of “credit” apart from, and subsequent to, the Regulation Z official interpretation cited by the court. In 2020, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion stating that certain employer-offered EWAs do not constitute credit under TILA. The agency reversed course in 2024 and proposed an interpretive rule indicating that EWA is credit pursuant to TILA. In January 2025, in one of its final actions under the previous administration, the CFPB issued another—now rescinded—advisory opinion reaffirming that EWA should be treated as credit and rescinding its 2020 opinion to the contrary.