Delivering for American Consumers: A Review of Fintech Innovations and Regulations (January 13, 2026)
Summary
Hearing record Delivering for American Consumers: A Review of Fintech Innovations and Regulations, before the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence of the Committee on Financial Services, U.S. House of Representatives, on January 13, 2026 (Serial No. 119–50). Opening statements are listed for Hon. Bryan Steil and Hon. Stephen Lynch, with a statement by Hon. French Hill, Chairman of the Committee on Financial Services. Witnesses include Ms. Jodie Kelley of the Electronic Transactions Association (ETA), Mr. Kevin Lefton of Stream, Mr. Ram Palaniappan of EarnIn and Mr. Todd Zywicki of George Mason University Antonin Scalia Law School, each with a prepared statement.
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“Delivering for American Consumers: A Review of Fintech Innovations and Regulations (January 13, 2026).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-119hhrg63578-delivering-for-american-consumers-a-review-of-fintec-cf5b97e229/
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DELIVERING FOR AMERICAN CONSUMERS:
A REVIEW OF FINTECH INNOVATIONS
AND REGULATIONS
HEARING
BEFORE THE
SUBCOMMITTEE ON DIGITAL ASSETS, FINANCIAL
TECHNOLOGY, AND ARTIFICIAL INTELLIGENCE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
SECOND SESSION
JANUARY 13, 2026
Serial No. 119–50
Printed for the use of the Committee on Financial Services
(
www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
63–578 PDF WASHINGTON : 2026
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HOUSE COMMITTEE ON FINANCIAL SERVICES
FRENCH HILL, Arkansas, Chairman
BILL HUIZENGA, Michigan, Vice Chairman MAXINE WATERS, California, Ranking
FRANK D. LUCAS, Oklahoma Member
PETE SESSIONS, Texas SYLVIA R. GARCIA, Texas, Vice Ranking
ANN WAGNER, Missouri Member
ANDY BARR, Kentucky NYDIA M. VELÁZQUEZ, New York
ROGER WILLIAMS, Texas BRAD SHERMAN, California
TOM EMMER, Minnesota GREGORY W. MEEKS, New York
BARRY LOUDERMILK, Georgia DAVID SCOTT, Georgia
WARREN DAVIDSON, Ohio STEPHEN F. LYNCH, Massachusetts
JOHN W. ROSE, Tennessee AL GREEN, Texas
BRYAN STEIL, Wisconsin EMANUEL CLEAVER, Missouri
WILLIAM R. TIMMONS, IV, South Carolina JAMES A. HIMES, Connecticut
MARLIN STUTZMAN, Indiana BILL FOSTER, Illinois
RALPH NORMAN, South Carolina JOYCE BEATTY, Ohio
DANIEL MEUSER, Pennsylvania JUAN VARGAS, California
YOUNG KIM, California JOSH GOTTHEIMER, New Jersey
BYRON DONALDS, Florida VICENTE GONZALEZ, Texas
ANDREW R. GARBARINO, New York SEAN CASTEN, Illinois
SCOTT FITZGERALD, Wisconsin AYANNA PRESSLEY, Massachusetts
MIKE FLOOD, Nebraska RASHIDA TLAIB, Michigan
MICHAEL LAWLER, New York RITCHIE TORRES, New York
MONICA DE LA CRUZ, Texas NIKEMA WILLIAMS, Georgia
ANDREW OGLES, Tennessee BRITTANY PETTERSEN, Colorado
ZACHARY NUNN, Iowa CLEO FIELDS, Louisiana
LISA MCCLAIN, Michigan JANELLE BYNUM, Oregon
MARIA SALAZAR, Florida SAM LICCARDO, California
TROY DOWNING, Montana
MIKE HARIDOPOLOS, Florida
TIM MOORE, North Carolina
Ben Johnson, Staff Director
SUBCOMMITTEE ON DIGITAL ASSETS, FINANCIAL TECHNOLOGY, AND
ARTIFICIAL INTELLIGENCE
BRYAN STEIL, Wisconsin, Chairman
TOM EMMER, Minnesota, Vice Chairman STEPHEN F. LYNCH, Massachusetts,
BILL HUIZENGA, Michigan Ranking Member
WARREN DAVIDSON, Ohio BRAD SHERMAN, California
JOHN W. ROSE, Tennessee BILL FOSTER, Illinois
WILLIAM R. TIMMONS, IV, South Carolina JOSH GOTTHEIMER, New Jersey
MARLIN STUTZMAN, Indiana AYANNA PRESSLEY, Massachusetts
BYRON DONALDS, Florida RITCHIE TORRES, New York
ZACHARY NUNN, Iowa SYLVIA R. GARCIA, Texas
TROY DOWNING, Montana BRITTANY PETTERSEN, Colorado
MIKE HARIDOPOLOS, Florida SAM LICCARDO, California
TIM MOORE, North Carolina
(II)
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C O N T E N T S
Tuesday, January 13, 2026
OPENING STATEMENTS
Page
Hon. Bryan Steil, Chairman of the Subcommittee on Digital Assets, Financial
Technology and Inclusion, a U.S. Representative from Wisconsin .................. 1
Hon. Stephen Lynch, Ranking Member of the Subcommittee on Digital As-
sets, Financial Technology and Inclusion, a U.S. Representative from Mas-
sachusetts ............................................................................................................. 2
STATEMENTS
Hon. French Hill, Chairman of the Committee on Financial Services, a U.S.
Representative from Arkansas ............................................................................ 4
WITNESSES
Ms. Jodie Kelley, Chief Executive Officer, Electronic Transactions Association
(ETA) ..................................................................................................................... 4
Prepared Statement ......................................................................................... 7
Mr. Kevin Lefton, Global General Counsel, Stream ............................................. 24
Prepared Statement ......................................................................................... 26
Mr. Ram Palaniappan, Founder and Chief Executive Officer, EarnIn ............... 30
Prepared Statement ......................................................................................... 32
Mr. Todd Zywicki, Law Professor, George Mason University Antonin Scalia
Law School ............................................................................................................ 40
Prepared Statement ......................................................................................... 42
Ms. Delicia Reynolds Hand, Senior Director, Digital Marketplace, Consumer
Reports .................................................................................................................. 73
Prepared Statement ......................................................................................... 75
APPENDIX
MATERIALS SUBMITTED FOR THE RECORD
Hon. Bryan Steil:
Chamber of Progress 60112 ..............................................................................
National Asian/Pacific Islander American Chamber of Commerce and
Entrepreneurship (National ACE) ............................................................... 114
Labor Council for Latin American Advancement (LCLAA) .......................... 117
UnidosUS Action Fund .................................................................................... 119
Maxine Waters:
America’s Credit Unions .................................................................................. 121
National Multifamily Housing Council (NMHC), the National Apartment
Association (NAA), and the Real Estate Technology and Transformation
Center (RETTC) ............................................................................................ 123
Center for Responsible Lending (CRL) ........................................................... 126
Hon. Bryan Steil and Hon. Maxine Waters:
U.S. Black Chambers, Inc. (USBC) ................................................................. 135
(III)
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IV
Page
RESPONSES TO QUESTIONS FOR THE RECORD
Written responses to questions for the record from Representative Bryan
Steil
Mr. Kevin Lefton .............................................................................................. 138
LEGISLATION
H.R. ———, the Earned Wage Access Consumer Protection Act ........................ 141
H.R. ———, the Fostering the Use of Technology to Uphold Regulatory Effec-
tiveness in Supervision (FUTURES) Act ........................................................... 156
H.R. ———, the Financial Services Innovation Act of 2026 ................................ 164
H.R. ———, the Model Risk Management Modernization Act ............................ 182
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DELIVERING FOR AMERICAN CONSUMERS:
A REVIEW OF FINTECH INNOVATIONS
AND REGULATIONS
Tuesday, January 13, 2026
U.S. HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON DIGITAL ASSETS, FINANCIAL
TECHNOLOGY,
AND ARTIFICIAL INTELLIGENCE,
COMMITTEE ON FINANCIAL SERVICES,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:08 a.m., in room
2128, Rayburn House Office Building, Hon. Bryan Steil [chairman
of the subcommittee] presiding.
Present: Representatives Steil, Hill, Huizenga, Davidson, Rose,
Timmons, Downing, Haridopolos, Moore, Lynch, Waters, Sherman,
Foster, Pressley, Torres, Garcia, and Liccardo.
Chairman STEIL. The Subcommittee on Digital Assets, Financial
Technology, and Artificial Intelligence will come to order.
Without objection, the chair is authorized to declare a recess of
the committee at any time.
Today’s hearing is titled, ‘‘Delivering for American Consumers: A
Review of FinTech Innovations and Regulations.’’
Without objection, all members will have 5 legislative days with-
in which to submit additional material for the chair for inclusion
in the record.
Chairman STEIL. I now recognize myself for 4 minutes for an
opening statement.
OPENING STATEMENT OF HON. BRYAN STEIL, CHAIRMAN OF
THE SUBCOMMITTEE ON DIGITAL ASSETS, FINANCIAL TECH-
NOLOGY AND INCLUSION, A U.S. REPRESENTATIVE FROM
WISCONSIN
Technology continues to revolutionize our financial system, from
payments to newer applications, like earned wage access. Digi-
talization, cryptography, and artificial intelligence give consumers
faster, cheaper payment, flexible access to earned income, and new
ways to manage everyday purchases. These innovations have the
potential to improve Americans’ financial well-being by making
their day-to-day finances more practical, predictable, and afford-
able.
Historically, workers were paid when they earned wages, yet
today, many workers in our economy go home without their earn-
ings. Holding an employee’s pay until the end of a payroll cycle is
(1)
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a relatively modern practice. Earned wage access helps restore this
link between work and pay by allowing workers the flexibility to
access their wages as they earn them. This flexibility can help fam-
ilies deal with unexpected expenses, from medical bills to car re-
pairs, or simply pay recurring bills timelier. By providing timely
access to earned income, Earned Wage Access (EWA) can help
Americans achieve their financial goals and help businesses im-
prove worker satisfaction, retention, and overall productivity.
Importantly, innovations, like EWA and buy now, pay later op-
tions, often coexist and intertwine with traditional financial insti-
tutions. Banks and other lenders are vital partners with financial
technology (fintech), providing liquidity and credit as well as access
to infrastructure like payment rails. These partnerships provide
more efficiency and options for consumers and create new products
to enhance competition. Our financial institutions can also benefit
from partnering with fintech companies by enhancing their offer-
ings and allowing small and community institutions to deploy cut-
ting-edge tools.
As we explore the benefits of fintech innovation, we must make
sure that our regulatory framework is fit for purpose. A well-func-
tioning framework for fintech should focus on risks posed by spe-
cific activities, not the identity or business model of the provider.
Fintech products that meet consumer demand and improve Ameri-
cans financial lives should have clear, practical legal pathways for
operation and strong consumer protections. By supporting thought-
ful and balanced regulation, we can encourage innovation while en-
suring consumer protection and promoting financial well-being for
American households and businesses alike. Today’s hearing will in-
form these efforts, and I thank our witnesses for their upcoming
testimony.
I will now recognize the ranking member of the subcommittee,
Mr. Lynch, for 4 minutes for an opening statement.
OPENING STATEMENT OF HON. STEPHEN LYNCH, RANKING
MEMBER OF THE SUBCOMMITTEE ON DIGITAL ASSETS, FI-
NANCIAL TECHNOLOGY AND INCLUSION, A U.S. REPRESENT-
ATIVE FROM MASSACHUSETTS
Mr. LYNCH. Thank you very much, Mr. Chairman. I also would
like to thank our witnesses for your willingness to come forward
and help the committee with its work. This hearing continues our
committee’s work to examine fintech innovation, including the use
of fintech liquidity products, such as buy now, pay later services
and earned wage access. This is an area of great promise and po-
tential to overcome preexisting barriers and to expand economic op-
portunity if we include proper guardrails that assure necessary
consumer protections. This hearing continues our work, and these
products present an attractive source of capital liquidity to help
people meet short term needs. However, some consumer advocates
and other stakeholders have pointed to multiple consumer protec-
tion concerns associated with fintech business models that incor-
porate hidden fees, lack meaningful underwriting and are not sub-
ject to adequate oversight, and they may target vulnerable con-
sumers with deceptive claims about credit building.
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With the use of these products surging since the beginning of the
coronavirus disease 2019 (COVID-19) pandemic, our committee’s
work on this issue has become increasingly vital to ensure that the
proper oversight and adequate consumer protections are in place.
As ranking member of this subcommittee, I participated in multiple
hearings to examine the proliferation of fintech-powered earned
wage access services that enable employees to receive a cash ad-
vance on their paycheck prior to payday, often at an inflated fee
or at the cost of a voluntary so-called tip. Whether offered through
an employer or through a direct-to-consumer provider, this on-de-
mand pay market has grown rapidly with employers and providers
now advancing billions of dollars in wages to millions of employees
annually.
As reported by the Harvard Kennedy School in a recent study on
the proliferation of earned wage access products, 40 percent of the
people who have access to an earned wage access application
through their employer use it at least once a week. Over 75 percent
of respondents indicated that they were using their money to pay
for regular bills rather than emergency expenses, with one typical
user noting, ‘‘It just turned into a cycle of always taking money
out.’’ Moreover, the rush fees, tipping options, and other hidden
charges associated with certain business models—not all—collec-
tively amounted to an estimated annual percentage rate of more
than 300 percent in some cases. Similarly, a growing number of
consumers are now relying on buy now, pay later services to make
ends meet. With Federal Reserve data indicating that nearly a
hundred million Americans used buy now, pay later at least in
2025. These services, which allow consumers to pay for purchases
over multiple partial payments, are now widely available at check-
out both online and in person, where a customer can opt into serv-
ices and receive approval in minutes without a hard credit check.
Despite purporting to offer free services, some buy now, pay later
loans, especially longer-term loans, can ultimately be more costly
than using a traditional credit card. The Federal Reserve reports
that nearly one-fourth of buy now, pay later users did not make
payments on time and faced later fees. Considering the prolifera-
tion of buy now, pay later, earned wage access, and other fintech
liquidity products, the consumer protection and enforcement mis-
sion of the Consumer Financial Protection Bureau is more impor-
tant than ever.
Unfortunately, President Trump does not agree. The Trump Ad-
ministration has undertaken unprecedented and unlawful efforts to
dismantle the very agency that should be protecting consumers
against fraud and exploitation in this very area, including the
issuance of cease work orders that halted virtually all Consumer
Financial Protection Bureau (CFPB) enforcement supervision and
enforcement functions, the abandonment of dozens of pending en-
forcement cases, and the attempted termination of about 90 per-
cent of CFPB Agency staff. I urge my colleagues to defend the
CFPB in the face of these attacks. It will help with the innovation
that we all desire to see in this wage space. Thank you, Mr. Chair-
man, and I yield back the balance of my time.
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Chairman STEIL. The gentleman yields back. I now recognize the
chairman of the full committee, Mr. Hill, for 1 minute for an open-
ing statement.
STATEMENT OF HON. FRENCH HILL, CHAIRMAN OF THE COM-
MITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE
FROM ARKANSAS
Chairman HILL. Thank you, Chairman Steil, for your great lead-
ership of our subcommittee. This hearing is really deeply personal
for me. For the past 4 decades as a former community banker and
investor, I have seen how technology has expanded across banking,
sharpened competition, and broadened choices for consumers and
financial products. Earlier, as a payment system innovator, I wit-
nessed banks’ strong demand for modern tools and how meeting
that demand delivered real benefits for our customers across the
board. This committee has long championed innovation and respon-
sible partnership between traditional financial institutions and
technology companies. That commitment is now more important
than ever. We should encourage regulators to foster those partner-
ships, unlock innovation, and reduce unnecessary regulatory bur-
dens. I look forward to the discussion today on how we can work
together to promote innovation, strengthen competition, and ex-
pand consumer choice. Thank you Mr. Chairman, and I yield back.
Chairman STEIL. The gentleman yields back. Today, we welcome
the testimony of Jodie Kelley, chief financial officer of the Elec-
tronic Transactions Association; Mr. Kevin Lefton, global general
counsel at Stream; Mr. Ram Palaniappan, founder and chief execu-
tive of EarnIt; Todd Zywicki, law professor at George Mason Uni-
versity at the Antonin Scalia School of Law; and Delicia Reynolds
Hand, senior director of digital marketplace at Consumer Reports.
We thank each of you for taking the time to be here. Each of you
will be recognized for 5 minutes to give an oral presentation of your
testimony.
Without objection, your written statements will be made part of
the record.
Ms. Kelley, you are now recognized for 5 minutes for your oral
remarks.
STATEMENT OF JODIE KELLEY, CHIEF EXECUTIVE OFFICER,
ELECTRONIC TRANSACTIONS ASSOCIATION
Ms. KELLEY. Thank you. Chairman Hill, Chairman Steil, Rank-
ing Member Lynch, and members of the subcommittee, thank you
for the opportunity to testify today. My name is Jodie Kelley, and
I am the chief executive officer of the Electronic Transactions Asso-
ciation, or ETA, the leading trade association representing the
global payments industry. Our members, from banks and networks
to fintech innovators, process more than $57 trillion in transactions
annually and power commerce for millions of American consumers
and businesses. Today, I would like to make three points. First,
digital payments are essential national infrastructure, delivering
enormous value to consumers and small businesses. Second, this
innovation already operates within a robust regulatory framework.
Third, targeted Federal leadership, especially on fraud and artifi-
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cial intelligence, can strengthen that framework without slowing
innovation.
Payments have evolved from cash and checks into a secure dig-
ital ecosystem that underpins daily economic life. Payments are
how Americans get paid, pay bills, run businesses, and manage
emergencies. Digital payments enhance affordability by expanding
consumers’ effective spending power. Credit cards, buy now, pay
later options, and cash back rewards help families manage unex-
pected expenses and smooth cash-flow. In 2024 alone, consumers
received more than $43 billion in cash back rewards. Those are real
dollars returned to real household budgets. For small businesses,
digital payments are now table stakes. Entrepreneurs can start
businesses with a smartphone and accept payments instantly. Em-
bedded payments integrated directly into business software allow
small firms to manage sales, payroll taxes, and compliance all in
one place.
Businesses that accept digital payments see sales increase by 8
to 10 percent, and the efficiency gains are significant. In 2024, fast-
er checkout and back office automation saved small businesses an
estimated 806 million labor hours and generated $34 billion in in-
cremental sales. At the national level, the payments ecosystem con-
tributes more than $350 billion annually to gross domestic product
(GDP) and directly supports approximately 2 million U.S. jobs:
high-quality, good-paying jobs across every State.
The industry continues to evolve through mobile wallets, peer-to-
peer payments, embedded finance, and AI-driven fraud prevention.
Artificial intelligence is now central to payment security. AI sys-
tems detect sophisticated fraud in real time, often before con-
sumers are harmed, while reducing false declines and improving
customer experience. Looking ahead, agentic commerce, where AI
agents transact on behalf of consumers and business, offers real
promise, but trust, authorization, and accountability must remain
foundational.
Now, this payments innovation does not occur in a regulatory
vacuum. Payments providers operate under a comprehensive
framework of Federal and State laws covering consumer protection,
anti-money laundering sanctions, privacy, cybersecurity, oper-
ational resilience, and licensing. In addition, the industry has de-
veloped strong self-regulatory standards, including Payment Card
Industry Data Security Standard (PCI DSS), Europay, Mastercard,
and Visa (EMV) specifications, and network-level rules. This activ-
ity-based approach has protected consumers while allowing innova-
tion to flourish.
While new legislation is largely unnecessary, two areas do stand
out for Federal leadership. The first is fraud and scams. Fraudsters
increasingly rely on social engineering and AI-driven deception.
The payments industry invests billions of dollars annually to com-
bat fraud, but payments are often the final step in scams that
begin elsewhere on social media, through text messages, or over
the phone. ETA supports enhanced cross-sector collaboration and
legislation, like the bipartisan Taskforce for Recognizing and Avert-
ing Payment Scams (TRAPS) Act, to disrupt scams at their source.
The second area is artificial intelligence. AI in payments is already
governed by Federal consumer protection and safety and soundness
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rules. However, a growing patchwork of State AI laws threatens to
fragment national payment systems. ETA urges Congress to estab-
lish a uniform, risk-based, technology-neutral AI framework that
builds on existing laws.
The digital payments industry delivers extraordinary benefits to
American consumers, small businesses, and the broader economy.
We look forward to working with Congress to help ensure pay-
ments innovation continues to deliver secure, affordable, and inno-
vative financial services. Thank you, and I look forward to your
questions.
[The prepared statement of Ms. Kelley follows:]
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Chairman STEIL. The gentlewoman yields back. Mr. Lefton is
recognized for 5 minutes.
STATEMENT OF KEVIN LEFTON, GLOBAL GENERAL COUNSEL,
STREAM
Mr. LEFTON. Thank you. Chairman Steil, Ranking Member
Lynch, and distinguished members of the committee, thank you for
your time today and for the invitation to speak about earned wage
access and its importance to consumers everywhere. My name is
Kevin Lefton, and I am the global general counsel of Stream. In
this capacity, I oversee the legal and regulatory functions for our
organization. Stream is an employer-integrated, earned wage ac-
cess provider operating across the United States, United Kingdom,
EU, and Canada. In addition to EWA, we provide a comprehensive
suite of financial well-being resources designed to enhance the fi-
nancial health of our users.
Stream, alongside many of our industry peers, remains a staunch
advocate for thoughtful regulation that prioritizes consumer protec-
tion. We stand as an important non-credit alternative to the high-
cost products that trap consumers in a cycle of debt. It is a funda-
mental premise of my testimony today that EWA services do not
constitute credit, are not loans, and should not be regulated as
such. EWA is a critical tool for frontline and hourly workers in all
industries, including healthcare, hospitality, manufacturing, edu-
cation, and many others. By allowing employees to access wages
they have already earned but have not yet been paid due to tradi-
tional biweekly or monthly payroll cycles, EWA provides a low-to
no-cost alternative to the high interest rates and high-cost fees of
other financial products.
We cannot talk about EWA without talking about the essential
consumer-focused benefits and consumer protections of EWA’s ben-
efits and protections that are absent in credit and other high-cost
products. EWA lacks all the hallmarks of traditional credit and
loan products. Specifically with Stream, there is always a free op-
tion to use our service, and the nominal fee for instant access
should a consumer choose to use that feature is typically lower
than a standard automated teller machine (ATM) withdrawal fee.
There is no interest. There is no underwriting. We do not pull cred-
it reports or base access to EWA services on creditworthiness.
There is no debt collection. We do not report to the credit bureaus
or engage in collection activity of any kind. The service is truly
nonrecourse, and no debt is ever incurred. If there is ever an issue,
Stream does not go after the consumer. We do not sue them, and
we do not report them to debt collections.
The arguments that are often presented against earned wage ac-
cess are flawed because they conflate a nonrecourse financial
wellness tool with a high-cost lending product. Labeling EWA as
credit ignores the basic reality that workers are simply accessing
capital they have already earned. Applying a traditional credit
framework, like an interest rate, to a non-credit product is mis-
leading and, ultimately, harmful to the millions of hardworking
Americans who simply want the option of having access to their
own wages so that they can manage their own money when they
see fit. Applying a traditional credit framework, like an annual per-
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25
centage rate (APR), to a flat, nominal, transparent fee is also mis-
leading and creates a false protection that would effectively ban a
low-cost or free service. These arguments do not protect consumers.
They limit consumer options and force them back toward the very
high-interest and high-cost fees that EWA was designed to elimi-
nate.
A lot has been written about EWA, and there is a lot of mis-
leading information out there, but here are the key takeaways I
would like to leave you with about EWA. EWA is either free or has
a nominal fee. There is no interest. There is no debt collection.
There is no underwriting. EWA is a nonrecourse service, and, most
importantly, there is nothing wrong with allowing American con-
sumers to decide how and when they can access their money
through a product and service they want and like. EWA represents
a shift toward a more equitable financial system for hourly and
frontline workers, allowing them to better plan for the future and
manage life’s emergencies with dignity. We urge this committee to
support a framework that recognizes EWA as a critical non-debt so-
lution for the American worker.
Thank you for your time and I look forward to your questions.
[The prepared statement of Mr. Lefton follows:]
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Chairman STEIL. Thank you. Mr. Palaniappan, you are now rec-
ognized for 5 minutes.
[No response.]
Chairman STEIL. You may you want to check your microphone.
Mr. PALANIAPPAN. Better now? Okay.
STATEMENT OF RAM PALANIAPPAN, FOUNDER AND CHIEF
EXECUTIVE OFFICER, EARNIN
Mr. PALANIAPPAN. Thank you. Chairman Steil, Ranking Member
Lynch, and members of the subcommittee, thank you for the oppor-
tunity to testify today. My name is Ram Palaniappan. I am the
founder and CEO of EarnIn, and I am honored to return and con-
tribute to the discussion on how financial innovation can improve
the lives of American consumers. Paying bills and managing ex-
penses is top of mind for people every day. Innovation helps with
that by making pay more timely and efficient. Innovations last only
if they actually make people’s lives better and earned wage access
is an example of such innovation. Its use is growing because of the
real impact that it has on people’s lives. EarnIn started as an
earned wage access company and now also offers a modern payroll
platform that is used by over 10,000 companies, along with con-
sumer tools that make the way people experience their pay better.
Today, about 1 percent of the people in the U.S. who get a pay-
check use EarnIn to access all or part of their pay.
The idea for EarnIn started when I was working at another com-
pany. I heard that some of my employees were struggling between
paychecks. That surprised me because they were paid well. I spoke
with one of them. She said she needed money the next day, and
could not wait until the following Friday, which was payday. She
had already worked the hours, she had earned the money, but pay-
day was still days away. The issue was not how much she earned;
it was when she got her pay. I could not get the payroll system to
pay up for the hours that she had already worked, so I gave her
the money that she had already earned, and we settled it when
payroll ran, and I continued helping many other of my employees
the same way, just as happens with many other small businesses.
What began as a one-time solution has become a reliable way for
people to pay their bills on time and avoid expensive fees. EarnIn
started with the simple idea that people should have access to the
money that they have already earned when they want it, not when
payroll decides.
Today, most employees are paid digitally, but these digital dol-
lars move more slowly than any other digital product. You work
every day, and then you are paid once in 2 weeks or maybe once
a month. Just imagine if other digital products worked the same
way. If your phone said type your text messages every day and it
would send them out every 2 weeks, you would not use that, but
that is how payroll still works today. The biweekly or monthly pay
cycle is a relic of an outdated era that is holding back the benefits
of efficiency and today’s technology from the people who need it the
most. By shortening the work-to-pay gap, EarnIn helps people
manage everyday expenses, like groceries, rent, utility and trans-
portation. We are proud to do this in a way that puts the worker
first without mandatory fees, interest, or credit checks.
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Multiple independent research studies have confirmed that work-
ers are better off when they have access to their pay when they
need it. A study by researchers at the University of Oregon on over
a million EarnIn customers found a sustained monthly increase of
11-and-a-half percent in incomes. That is about $335 on average.
Users work more shifts, miss work less, and manage their finances
better. Another study from University of California, Los Angeles
(UCLA) on a dataset from a different provider found similar re-
sults. Incomes went up over 10 percent. Liquidity acts as upward
mobility with reduced overdrafts and no debt cycles.
Behind the data are millions of real people. One customer, a gov-
ernment employee, has a side business making custom candles. He
used to wait until payday once he received an order to buy his sup-
plies. Now he uses EarnIn, and as soon as he receives an order,
he buys his supplies. That has let him do more orders a month and
increased his income. Another EarnIn customer, Rae, a Southern
California mother and retail supervisor who is undergoing cancer
treatment, shared that on some days she feels better than others.
Payday does not always align with when she is feeling better, but
EarnIn gives her the flexibility and peace of mind, allowing her to
take her daughter out on good days without being restricted by
paycheck timing.
Earned wage access can be delivered in different ways, including
through employer-integrated programs or directly to workers. The
direct-to-consumer model means employees can access the benefits
wherever they work. Today, EarnIn serves over 2 million cus-
tomers, including many in public service, healthcare, education,
and small businesses across the country. Notably, about 1 percent
of House staffers use EarnIn.
I appreciate Chair Steil and Representative Torres for their bi-
partisan leadership to establish a clear Federal framework for
earned wage access, and I look forward to continued collaboration
in expanding access to these innovations to workers anywhere. I
am happy to answer questions. Thank you.
[The prepared statement of Mr. Palaniappan follows:]
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Chairman STEIL. Thank you very much. Mr. Zywicki, you are
now recognized for 5 minutes.
STATEMENT OF TODD ZYWICKI, LAW PROFESSOR, ANTONIN
SCALIA LAW SCHOOL, GEORGE MASON UNIVERSITY
Mr. ZYWICKI. Thank you. Chairman Hill, Chairman Steil, Rank-
ing Member Lynch, and members of the subcommittee, I am Todd
Zywicki. I am the George Mason University Foundation Professor
of Law at Antonin Scalia Law School, the former chair of the CFPB
Task Force on Federal Consumer Law, and co-founder and co-direc-
tor of the Institute for Consumer Financial Choice at the Scalia
Law School.
The modern American consumer finance system is really a mir-
acle if you think about it. You can walk into a car dealership today
and walk out an hour later with a car. I mean, just think about
how transformative that has been for the world. As Ms. Kelley
mentioned, we can make payments anywhere in the world 24 hours
a day—day, night, online, in person—anywhere in the world. As
Congressman Lynch mentioned in his opening statement, I think
very notably, just think about the way in which access to innova-
tion and financial services helped us to deal with the disruptions
of the COVID pandemic and the ability of people to bank online,
pay online, do all these sorts of things, as well as the alternative
underwriting models that were developed for data when people
were not getting paid and the like.
Above all, it is really democratized access to financial services.
Innovation, more than anything, has been a vehicle for including
people who traditionally have been underincluded by the tradi-
tional finance system, and how did this happen? Choice, competi-
tion, innovation is, basically, what has happened: new entry, often
obstructed, often blocked by old incumbents, but new innovative
technologies. Thinking back to the development of the Fair Isaac
Corporation (FICO) score and the introduction of computers, which
reduced discrimination, which opened competition. Think about
even the telephone and the way in which telephones allowed credit
cards to be marketed across State law. Think about payments. Just
think about the way in which technology enabled us to go from
knuckle busters on credit card processing to always on instant
verification at a checkout, and most recently, of course, the devel-
opment of the internet.
Some of these innovations were really just developments of a bet-
ter way of delivering an older product, such as buy now, pay later
(BNPL), which replaces old installment loans, or EWA as we have
heard about, which helps consumers or employees get money from
their employers. Sometimes they are totally new, such as alter-
native data and underwriting systems and some of the payment
systems we see today. Regardless of what they are, one thing they
have in common is they must have a regulatory regime that sup-
ports innovation and that does not block it.
An obvious point is that the regulation must reflect the tech-
nology, as we said, whether it is the Supreme Court’s decision, the
Marquette decision, that allowed credit cards to be marketed across
State lines more effectively, whether it was debt collection rules
that dealt with the telephone and the fact that you could then
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make phone calls across State lines, but second, it always also re-
quires the right jurisdiction to deal with things. We went from a
period of local credit to a period of national credit driven by depart-
ment stores and the like, to what we have today, which is nowhere
and everywhere via the internet. We have to have the right juris-
dictional bodies acting on a lot of these things.
So, we saw in the 1960s and 1970s, as the consumer finance sys-
tem became more national, we saw more national laws dealing
with Equal Credit Opportunity Act (ECOA), dealing with debt col-
lection and the like. The products that are the focus of today’s
hearing are a good example. These are products that are offered on
the internet. They do not bear any relationship to local jurisdic-
tional boundaries and the like, and so thinking about sophisticated
and appropriate places for the Federal Government to regulate and
to, even when necessary, preempt State laws, I think that are im-
portant.
I am very pleased with a lot of the innovations and reforms in
the regulatory framework of the past few years, whether it was the
recent decision by the Office of the Comptroller of the Currency
(OCC) to recognize national trust banks for fintech firms, whether
it was the CFPB’s actions with respect to some of the regulations
that they did, the decision of the CFPB to keep the 1033 rule and
reframe it in a way that is more useful. I think there is a lot more
that could be done, and I think a lot of the legislation that is the
subject of this hearing moves in the right direction in terms of
opening up competition, national markets in a more resilient in
more responsive, technologically based regulation.
In conclusion, history teaches that consumers do best when we
recognize their ability to plan their own finances and we give them
choice, competition, and the ability to plan their own lives, and not
substitute the judgment of bureaucrats for American families.
Thank you.
[The prepared statement of Mr. Zywicki follows:]
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Chairman STEIL. Thank you very much. Ms. Reynolds Hand, you
are now recognized for 5 minutes.
STATEMENT OF DELICIA REYNOLDS HAND, SENIOR
DIRECTOR, DIGITAL MARKETPLACE, CONSUMER REPORTS
Ms. REYNOLDS HAND. Thank you. Chairman Hill, Chairman
Steil, Ranking Member Lynch, and distinguished members of the
subcommittee, thank you for the opportunity to testify today. My
name is Delicia Reynolds Hand, and I am the senior director of the
Digital Marketplace at Consumer Reports. There, I lead our work
ensuring digital financial products work for consumers, not against
them. Before Consumer Reports, I spent nearly a decade at the
CFPB.
This hearing asks an important question—is fintech delivering
for American consumers—and I would like to make three points.
First is affordability. Affordability is key for consumers. Americans
are stretched thin. Groceries and rent cost more, and credit card
rates are near historic highs. In this environment, consumers will
turn to products like buy now, pay later and earned wage access
to manage cash-flow. This in itself is not a problem. The problem
is when they cannot easily see what they are paying, they cannot
compare options, and debt stacks invisibly across providers. The
CFPB’s own recent data point on buy now, pay later shows that
BNPL usage continues to grow. Consumers are now taking an av-
erage of six loans per year from a single provider, up 11 percent,
and that is just one lender. Many consumers use multiple pro-
viders, creating obligations that do not appear on traditional credit
reports. Simple guardrails, such as cost disclosure, lets people com-
pare options, and other guardrails against debt stacking allow con-
sumers to avoid invisible overextension. These are not anti-innova-
tion. They are baseline requirements for a market that works.
On earned wage access, we are glad to see the draft legislation
before you contains real protections, like a no-cost option, disclo-
sure rules, prohibition on late fees. However, we are concerned that
the bill also categorically excludes EWA from credit law and pre-
empts State authority. Under the Truth in Lending Act, credit is
defined as ‘‘the right to defer payment of debt or incur debt and
defer its payment.’’ If it works like credit, we should regulate it like
credit, and by that measure, EWA is credit.
Second, consumers need accountability, especially for new inno-
vation like AI. AI is no longer emerging in financial services. It is
embedded. It is approving loans, freezing accounts, flagging fraud,
as mentioned, determining who gets access to products at what
price. These systems operate at machine speed, and if something
goes wrong, accountability moves slowly, if it moves at all. Con-
sumer Reports recently surveyed over 4,000 Americans on AI in fi-
nancial services. Three-quarters are concerned that AI could lead
to unfair treatment. When consumers encounter AI, many also re-
port negative experiences. Fifty-seven percent do not believe cur-
rent laws adequately protect them.
Consumers should have the ability to opt out independent audits,
a simple way to appeal, and public reporting on accuracy and bias
testing; in other words, transparency, accountability, and human
review. The subcommittee is considering the Financial Services In-
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novation Act, which would create sandboxes allowing companies to
seek waivers from existing consumer protection rules, not just for
AI, but for any financial innovation, and that just gets the burden
wrong. Consumer harm during a test period is still harm, and the
consumer whose account is frozen or wrongfully denied credit does
not care whether it happened in a sandbox.
Last, enforcement. I spent nearly a decade at the CFPB. I have
seen what happens when we have an Agency that is active and
mandating and holding its mandate to hold institutions account-
able, and we are seeing what is happening when that capacity is
dismantled. The CFPB has lost the majority of its enforcement ca-
pacity. Staff have been let go. Examinations have stopped. The
Agency Congress created to be the cop on the beat is being
hollowed out, and at the same time, this subcommittee is consid-
ering important legislation that would expand fintech activity and
waive existing protections. That is a practical problem, not a solu-
tion. Who will supervise compliance with the EWA bill’s disclosure
requirements if no one is there to do it? Who investigates when AI
systems malfunction at scale? The bills before you assume a func-
tioning regulator from a consumer protection standpoint, and as-
sumption no longer holds.
So, the question today is not whether fintech innovation should
continue. It absolutely should, but the question is whether con-
sumer protections scale alongside with it, or whether consumers re-
main the shock absorbers for risk. We are ready to work with the
subcommittee. We have tested the products’ surveyed consumers,
and I appreciate the opportunity to be here and welcome your ques-
tions. Thank you.
[The prepared statement of Ms. Reynolds Hand follows:]
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Chairman STEIL. Thank you very much. The gentlewoman yields
back. We will turn now to member questions. I will recognize my-
self for 5 minutes for questions.
Mr. Palaniappan, we are at a transformational stage here. EWA
gives individuals access to the wages they earned. If you and I, a
hundred years ago, were hired to carry sacks of potatoes at Ms.
Kelley’s farm, we worked our tails off all day long, we would expect
to have been paid at the end of our day’s work. Large enterprise
resource planning (ERP) systems came in and made it very difficult
to pay people every day. Now many people get paid every 2 weeks,
some people every month. It makes it hard to meet the bills and
so, one of the questions becomes, how do we regulate this new
space under earned wage access where individuals are receiving ac-
cess to the wages that they have already earned?
Attached to this hearing is my discussion draft, the Earned Wage
Access Consumer Protections Act, where we start to dig into this,
making sure that there is a no-cost option, full disclosures for indi-
viduals taking advantage of EWA products and so, one of the ques-
tions is, is this credit? Do we need a new regulatory framework?
We just heard Ms. Reynolds Hand suggest that this is credit and
should be regulated like credit, but if we were carrying sacks of po-
tatoes at Ms. Kelley’s farm, we would expect to get that money at
the end of the day, and it sure does not sound like credit. It sounds
like I am getting access to the money that I earned. So, I come to
you, Mr. Palaniappan. Can you walk me through the distinctions
that you see between EWA products and credit under the Truth in
Lending act in Reg Z?
Mr. PALANIAPPAN. Sure. So, like you said, what earned wage ac-
cess does is it changes the timing of when somebody receives their
pay, which is different than a credit product where you are giving
somebody money and I think calling it what it is not, calling it
credit actually confuses the customer because with the credit prod-
uct, they expect interest to accrue. They expect there to be a repay-
ment date. They expect that there will be penalties if it does not
get paid. They expect that there will be collections. They expect
that it is going to affect their credit report. None of those happen
with earned wage access, and so calling it credit actually will con-
fuse the customer. In terms of the legal aspects of credit, I think
Kevin, who is an attorney, might actually be better positioned to
talk about how it is different to credit.
Mr. LEFTON. Sure. Thank you. I think that is an important ques-
tion and probably one of the most important questions of today.
The Truth in Lending Act (TILA) and Reg Z apply to consumer
credit that is subject to a finance charge, and EWA is not consumer
credit, and I will explain, and the flat fee is not a finance charge.
The CFPB recently stated in its December 23 advisory opinion that
EWA is not credit because no debt is incurred. You must have a
debt to have credit, and a debt is an obligation to repay.
Chairman STEIL. Should we think of that as a distinction be-
tween employer-sponsored EWA and direct-to-consumer EWA?
Mr. LEFTON. No.
Chairman STEIL. That is part of the conversation that we are
hearing.
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Mr. LEFTON. No, I think that is a great question, but no debt is
no debt. So, if there is no obligation to repay on the direct-to-con-
sumer and there is no obligation to repay on the employer-inte-
grated, I think it is the same. I think the fundamental question is,
is there an obligation to repay, and the answer is no for EWA be-
cause it is a nonrecourse product.
Chairman STEIL. So, Mr. Zywicki, I am going to come to you and
kind of continue to pull on this same string. One of the challenges
that we face are these new and innovative products are not always
fitting neatly into the regulatory framework that, really, has not
been updated since the 1970s, and so this is new technology that
was not around and available now over 50 years ago. What are
some of the principles that you think we should be looking at to
strike the right balance in this innovative space?
Mr. ZYWICKI. Exactly right. I think that frames it correctly,
which is, obviously, it needs to be, as I said in my remarks, respon-
sive to the current technology. It needs to be responsive to the
right jurisdictional boundaries. Our laws are really set up in a
paper-based world back in the 1970s, and, finally, I think we really
need to tailor it to who consumers are, where they are, and how
they get information. Nowadays, people do things on the phone, not
with great big stacks of paper, and so in terms of getting the right
disclosures at the right times so that consumers can understand
them on these products, I think those are the principles we should
look like; take a consumer-focused approach to how they get infor-
mation.
Chairman STEIL. Should it be risk focused, should it be activity
focused, or should it be how the business purports the business
model itself? What is the best way for us to be thinking that
through?
Mr. ZYWICKI. I think the best way to think about it is how do
we empower consumers to find the products that they want as eas-
ily as possible. One of the things about EWA and BNPL is they are
pretty simple products usually, and consumers can generally un-
derstand them, but I would say what we want to think about is
how do consumers take in the information, how do they use the
products, and focus on from the consumer perspective.
Chairman STEIL. Thank you very much. I think we have some
really innovative space here and appreciate your testimony. I yield
back.
I will now recognize the ranking member, the gentleman from
Massachusetts, Mr. Lynch, for 5 minutes.
Mr. LYNCH. Thank you very much, Mr. Chairman. First of all, I
want to recognize a couple of my dear, dear colleagues and friends
in the audience, Congressman Lacy Clay from Missouri and Con-
gressman Ed Perlmutter from Colorado, two outstanding Members
of Congress when they were here, and they are missed, and good
to see that they are gainfully employed.
[Laughter.]
Mr. LYNCH. Just turning to the issue of earned wage access, so
before coming to Congress, I was an iron worker for about 20 years,
worked in the construction industry, mostly building high-rise of-
fice towers, that type of thing. The way it worked in the construc-
tion industry is we would work Monday through Friday, and then
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the following Wednesday, we would get a paycheck. So, by the time
payday rolled around at the end of the day on the following
Wednesday, we had loaned the company 8 days of labor. So, we
floated, basically, providing credit to our employer, and life does
not work that way. It did not work that way back then, and it does
not work that way today. Back then, you had to ask for what they
called a drag. A drag was an advance on your money, so it is the
similar model here, but it was much less fair and transparent back
in the day, so there is definitely the need for this, right? We need
innovation, as several of our witnesses have pointed out. Mr.
Zywicki and others have said we can expand opportunity, we can
expand bank access if we do this properly. I do want to just ac-
knowledge what Ms. Reynolds Hand has pointed out, that if we do
not do this properly we allow this innovation to come in a way that
we actually encourage, or let me put it this way: We unfairly re-
quire companies that are doing the right thing to compete with bad
actors if there is no regulation, you know. We just know human na-
ture, and we may put people in a bad situation, especially because
of the demographics.
Ms. Reynolds the recent bipartisan working group that we had
here on artificial intelligence that I co-chaired with Chairman Hill
specifically examined the impact of AI algorithms that target cer-
tain customers based on certain characteristics, including protected
characteristics. Given the importance of consumer data feeding AI,
there is a concern that some of these companies may use algo-
rithms in BNPL buy now, pay later, and earned wage access prod-
ucts that feed off consumer datasets that violate their privacy and
may be impermissible for other reasons. Can you talk about do we
have any transparency or any visibility on how these firms are
using those datasets, how they were acquiring them?
Ms. REYNOLDS HAND. Sure. Absolutely. Over the last several
years, Consumer Reports has evaluated, we have reviewed policies,
and actually dug into the fintech apps, various kinds—buy now,
pay later, peer-to-peer (P2P) apps, digital wallets, crypto wallets,
for example—to examine how consumers use them, what they do.
To your point, all across the board, even basic banking apps, more
data is collected than is needed. That data is then passed on and
sold and used. Consumers are upmarketed. It also allows the com-
panies to strategically understand what consumers are willing to
pay and what they are not willing to pay, and prices can be set
using this data that they gather from consumers. We do see mul-
tiple use. Consumers do not have control over their data. These
apps are typically set to a default that is obscured, hard to find,
and so it can have a disparate impact on communities of color, poor
communities, and other consumers.
Mr. LYNCH. Okay. Thank you. My time is going to expire, but I
would just ask you if you might be able to share with the com-
mittee in writing ways that we might mitigate the potential bias
used against certain populations, especially the 40 percent of BNPL
users who are Black or Hispanic organic, as identified by the Fed-
eral Reserve Bank of Philadelphia. Thank you. I yield back.
Chairman STEIL. The gentleman yields back. The vice chair of
the full committee, the gentleman from Michigan, Mr. Huizenga, is
recognized.
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Mr. HUIZENGA. Mr. Chairman, I find myself in an odd position
agreeing with Mr. Lynch on a couple of things: one, acknowledging
our colleagues, Mr. Lacy Clay, Mr. Perlmutter. I am not sure I
would have used ‘‘outstanding’’——
[Laughter.]
Mr. HUIZENGA [continuing]. but they are very good friends and
great colleagues to have worked with across the aisle, both of them,
and I do appreciate that. It is interesting, Mr. Lynch’s work as an
iron worker. My family, the small company that I own, is in con-
struction as well. It is seasonal, and I can tell you we go through
that payroll process every week. We have chosen as employers to
pay every week because I do not want to disadvantage my guys.
I can tell you, I am speculating here a little bit, but I am pretty
sure that Henry, Cole, Larry, and a couple of the other guys would
be really excited about being able to have access to their cash daily
after they put in a 10-or an 11-hour workday in a gravel pit, and,
frankly, they deserve it.
Now, the realities are, is by the time they finish up at 5:30–6 on
a Friday, we got to go get the hours, figure that out, get that into
our payroll processor, and by the time that the checks are cut—we
still are old school—they can choose to whether they want to have
direct deposit or not, but we are still sending checks in the mail
to some of these guys, and sign the check and they finally get it
on Thursday. Amen. Hallelujah. Let us actually pay for people’s
work in a timely manner as we possibly can.
So, I am going to start with Ms. Kelley here, and I want to touch
on the transmitter licensing which I know you mentioned in your
testimony. Currently, there exists a patchwork of State licensing
regimes, and so it is kind of a quick two-part question here. First,
what difficulties do you—do startups face when trying to develop
or scale a new payment system, and second, what is the cost and
complexity of complying with varying jurisdictional frameworks?
Ms. KELLEY. Yes, Congressman, thank you for that question. It
is an important one. When you think about fintech startups and
what it takes for them to get in market and operate, uniformity is
so important, and the example you provide is one where there is
incredible disuniformity. You have a small startup trying to get
into business in 49 different jurisdictions with 49 different licens-
ing requirements. We know that is expensive, we know it costs lit-
erally millions of dollars, and we know it takes a long time, as
much as 2 years, and that is a death knell for a small business try-
ing to get up and running. Then, of course, if they do manage to
get up and running, there are 49 different compliance regimes they
have to apply with.
Mr. HUIZENGA. Well, that is okay. We will just have the
Huizenga Gravel Company compliance department take care of
that. Oh, wait a minute, that is me.
Ms. KELLEY. Well, that is exactly right. Small businesses have to
focus on their business.
Mr. HUIZENGA. Yes.
Ms. KELLEY. They do not have an army of compliance profes-
sionals and others who can help us navigate that patchwork, so it
is an excellent example of a real-world problem that startups and
businesses have.
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Mr. HUIZENGA. It is better than Mr. Steil and me carrying your
sack of potatoes on the metaphorical farm.
Ms. KELLEY. Exactly.
[Laughter.]
Mr. HUIZENGA. All right. Mr. Zywicki, good to see you again as
well. What role do nonbank firms play in partnering with fintechs,
and how do these relationships help drive innovation that might
not otherwise occur within traditional banking system? We are see-
ing this all the time, right? I mean, you certainly did at CFPB.
Mr. ZYWICKI. Yes, thank you for that. It is really remarkable.
Banks do some things pretty well, but banks do not always do in-
novation that well, especially smaller banks.
Mr. HUIZENGA. Their regulators tend not to like that.
Mr. ZYWICKI. Yes, their regulators often are not friends of inno-
vation, but especially small banks. I think one of the things we are
seeing is that a lot of fintechs are partnering with small banks,
which I think are strengthening the dual banking system. A lot of
these are State banks, smaller banks and so, what I think we are
seeing is, especially in a regulatory environment where, for various
reasons, including regulation, we are getting more and more con-
solidation and concentration in the banking system. I think the
way in which fintechs are strengthening the ability of small banks
to compete with big banks, they are often more nimble, they are
more responsive, and that sort of thing. That is really been an en-
gineer. Big banks innovate as well, but I think the ability of
fintechs to partner with small banks has been a huge part of this
story.
Mr. HUIZENGA. Okay. I have 30 seconds left, and, sorry, with a
name like Huizenga, I am not trying to be disrespectful when I
mispronounce Palaniappan, right? Close-ish? Let me move to you
on the remaining time. What elements of your current financial in-
stitution regulatory framework may be inappropriate for startups?
I may have to take that in written form, but maybe briefly.
Chairman STEIL. Why do we not ask the gentleman to provide
that in written form, cognizant of the time?
Mr. HUIZENGA. I yield back. Thank you.
Chairman STEIL. Thank you.
Chairman STEIL. The gentleman yields back. I will now recognize
the gentlewoman from California, the ranking member of the full
committee, Ms. Waters, for 5 minutes.
Ms. WATERS. Thank you very much. President Trump promised
to reduce the cost of living. Instead, unemployment and grocery
prices are rising, and consumer protections are eroding. Under the
Trump economy, people are being forced to use products like
earned wage access to get early access to their paychecks, and buy
now, pay later loans to buy groceries. Trump called this afford-
ability crisis a hoax, but he knows it is real and now wants to cap
credit card interest rates at 10 percent. Well, President Trump, I
am pleased to know that you are listening. We do not agree on
much of anything, but we do on this, so let us do it. Let us cap
interest rates, but, Mr. President, you are going to need to convince
your Republican colleagues because they will not consider this or
any other bill that would help keep money in consumers’ pockets.
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So, not only am I interested in what the President has proposed,
this interest rate of 10 percent on credit cards. Mr. Steil, do you
believe this cap requires authorization by Congress? Yes? I did not
hear you.
Chairman STEIL. Would the gentlewoman——
Ms. WATERS. I yield.
Chairman STEIL. The gentlewoman would like to yield?
Ms. WATERS. Do you believe the cap requires authorization by
Congress to get the 10-percent cap that the President is advo-
cating?
Chairman STEIL. I would be more than happy to have a broader
dialog as to exactly how we navigate it anytime, Ranking Member.
Ms. WATERS. Well, I want to know whether or not the committee
have plans to move forward with this policy. Maybe some of our
witnesses here today know a little bit more about it. Ms. Reynolds,
are you supportive of 10-percent credit card rate cap?
Ms. REYNOLDS HAND. We are supportive of anything that lowers
the cost of goods and services to consumers. As you mentioned,
loads of things, including the cost of financial services, are high for
consumers right now. I think an important consideration is how
that happens, and if that happens through a transparent process
where we are able to come to the table and land on a workable so-
lution, that is great.
I think one thing I would like to note is about how credit card
rates are set. They are based on risk price, right, lending happens
that way, and so we would be concerned that this 10-percent cap,
if not done correctly, could reduce accessibility of credit cards for
some of the more vulnerable consumers and so, we would support
the basic principle and are looking forward to seeing more details
and working in a bipartisan way.
Ms. WATERS. Well, I am sorry I said ‘‘Ms. Reynolds.’’ It is Ms.
Reynolds Hand. Fintech products like buy now, pay later and
earned wage access, do you believe that they can help families
struggling to make ends meet, especially during this crisis that we
are confronted with?
Ms. REYNOLDS HAND. Yes, they can. We have no objection to
those products. What we have seen is with the introduction of inno-
vation, more consumers have access to liquidity. That is an impor-
tant foundation of American commercial life, and we want healthy
credit that is available to consumers, but there should be some
basic standards that are introduced and guardrails that are intro-
duced with these products. Specifically, we want to ensure that
there is an affordability standard. We got into the last financial cri-
sis, the mortgage crisis, because there was not a real test of con-
sumers’ ability to repay. That deserves consideration with these
kinds of products, especially when you have a significant business
model. You have employer-sponsored EWA. You also have direct-to-
consumer EWA, which is sponsored differently and, in some in-
stances, can be riskier to consumers.
We also want to ensure that all products that look like credit and
act like credit are treated in the same way. If a consumer incurs
a debt and that debt needs to be repaid later in time for a specific
fee or interest is attached, I do not know what else you would call
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that other than credit, and that is what is defined under the Truth
in Lending Act. So, we want that consistency.
Ms. WATERS. Thank you very much. I yield back.
Chairman STEIL. The gentlewoman yields back. The gentleman
from Ohio, Mr. Davidson, who is also the chair of the National Se-
curity, Illicit Finance, and International Financial Institutions Sub-
committee, is recognized for 5 minutes.
Mr. DAVIDSON. Thank you, Chairman. Thank you to all of our
witnesses for joining us today and for your testimony.
One of the great strengths of America’s financial system is the
capacity for innovation. Fintech companies, in particular, have cre-
ated tools that help consumers stretch the paycheck, avoid over-
draft fees, build savings, improve payments, and access financial
services in a way that simply did not exist a decade ago. Earned
wage access is one of the things that we are highlighting today,
and I think all of our witnesses, or really 4 out of the 5 witnesses,
have done a good job describing how this works, why consumers
want it, and I think Chairman Steil, his question, clarified and the
answer clarified why it is not debt, so. I guess that debt is in the
eye of the beholder because Ms. Reynolds Hand thinks that it is
debt, but it seems very clear that you are not obligated to repay
something in the future. You are just paying a fee for a service. I
mean, who is served by treating it as if it is debt? How is this pro-
tecting consumers? Why would they want to categorize it as debt?
Maybe, Ms. Kelley, would you give us an answer about what you
think?
Ms. KELLEY. Yes. We agree that this is not debt, that it is access
to wages that are already earned and we think it is a really impor-
tant choice or option, and that is the hallmark of the fintech indus-
try right now: providing choice and option to consumers who are
best positioned to decide how to utilize those products. I know we
have earned wage companies here who can speak in detail about
what they do, but as an overarching matter, we agree this is not
that.
Chairman STEIL. Mr. Lefton, your take?
Mr. LEFTON. Sure. I think it is absolutely clear that earned wage
access is not credit because it does not have debt, and I think as
I alluded to earlier, a debt requires an obligation to repay. With
earned wage access, as we have stated, it is a nonrecourse product.
So if something happens, whether it is a technological glitch or the
user somehow changes their functions and the company does not
recoup their money, we do not go after the consumer. There is no
risk to the consumer whatsoever. At most, maybe they will be
paused until we figure out how that happened, but there is no risk
to the consumer. There is no debt collection and they do not go to
the credit bureaus, so there is no obligation.
Mr. DAVIDSON. Thank you, and I think it is also essentially the
same whether it is a direct-to-consumer or something that the em-
ployer offers as a service to the employees. I would say, look, the
idea that payroll is deferred into the future and people would like
to get paid is not new. I mean, this is as old as the Bible. You see
stories about people who are paid one denarii for a day’s wages.
There are people that show up late in the day and are giving them
one denarii and they are, ‘‘oh, not fair,’’ right? So, we have had a
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debate about payroll as old as we have written documents, I think
so, but it is nice that we have this service, and I appreciate the
clarification on it.
One of the other things that we have done for a long time is we
have State-regulated banks, and bank fintech partnerships are in-
credibly important to being able to provide access to consumers.
When you think about community banks, a lot of people, that is
where they find accessibility, and a lot of the biggest banks do not
decide to launch massive products. They do not want to test the
market. They want to be fast followers at best. Maybe the cutting
edge is somebody smaller, more nimble and willing to test a prod-
uct that they do not have to necessarily spend as much capital just
testing it or getting into the market. So, we have a regulatory
framework that creates preemption around the country where
banks are regulated. This is the Depository Institutions Deregula-
tion Monetary Control Act, DIDMCA, if I am pronouncing that al-
phabet soup correctly. Essentially, if a bank is based in Ohio, they
are regulated by the regulators in Ohio, but because of preemption,
they can service customers wherever customers want to reach out
to them and access. How is that being reinterpreted and reimag-
ined and why? Ms. Kelley, you got an answer to that?
Ms. KELLEY. Yes, so, and thank you for that question. It is an
important one. As we spoke earlier, uniformity is really critical:
predictability, certainty, uniformity for fintechs and the ability of
a bank to partner with a fintech to make a loan, for example, there
needs to be certainty about which State’s laws apply, and that has
been thrown into question lately. There was a recent decision in
the Tenth Circuit that suggested States could override the law that
would otherwise apply. Again, anything that creates disuniformity
like that does makes it more difficult for innovation to thrive.
Mr. DAVIDSON. Yes, thank you. I will be introducing legislation
in the near future to rebut that ruling and make sure that we
know the law is clear as it has been applied for a long time. I hope
all my colleagues across the aisle will join in it, and I yield back.
Chairman STEIL. The gentleman yields back. The gentleman
from California, the ranking member on the Subcommittee on Cap-
ital Markets, Mr. Sherman, is recognized for 5 minutes.
Mr. SHERMAN. Mr. Chairman, off the topic of this hearing, this
is the first meeting of a subcommittee of Financial Services since
President Trump has begun this unprecedented use of the criminal
justice system to contort it, to militarize it, and to attack the Fed-
eral Reserve, to try to take away its independence and, thereby,
imperil our economy. If you are gullible enough to think that Don-
ald Trump did not order this to happen, you are probably gullible
enough to think that he has been faithful to all three of his wives.
Now, as to this hearing, the basic problem is rent is too high,
groceries are too high, wages are too low, and an awful lot of Amer-
icans do not have a thousand bucks in the bank, and so they have
to turn to all these expensive and complicated systems to get their
hands on a few hundred dollars. We are told that these are not
payday loans. Many payday loan companies call themselves payday
advance. They are functionally equivalent to a payday loan, but the
companies involved do not want to live by the same laws as the
payday lending folks. We are told instead that you are selling an
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asset you already own, so, Mr. Lefton, let us say my pay period be-
gins on February 1. I am 15 minutes into the pay period. I have
been paid for every bit of work I have done for my company, except
for the last 15 minutes. How much can I borrow from your com-
pany?
Mr. LEFTON. So, at Stream, it is——
Mr. SHERMAN. Can I not borrow $500 from your company 15
minutes into the business pay period?
Mr. LEFTON. You can borrow up to 50 percent of your gross
earned wages. We are integrating——
Mr. SHERMAN. Of what I have already earned in 15 minutes, or
what I am going to earn during the pay period?
Mr. LEFTON. No, what you have earned up to that moment in
time.
Mr. SHERMAN. Only what I have earned up to that moment in
time.
Mr. LEFTON. That moment in time.
Mr. SHERMAN. So, you have a company that is there to help me,
but you can only help me significantly on February 14. You cannot
help me on February 1.
Mr. LEFTON. Well, we can help you access any wages you have
already earned in that moment in time. We are integrated with
your employer——
Mr. SHERMAN. Okay.
Mr. LEFTON [continuing]. so we know exact date, time, and at-
tendance of——
Mr. SHERMAN. Okay. I will ask the gentleman sitting next to you.
I got paid on January 31. It is now February 1. I need 500 bucks.
Can I get 500 bucks from your company?
Mr. PALANIAPPAN. No. The only amount that you can take is how
much you have earned up until that point in time. We do not let
you go beyond what you have already earned.
Mr. SHERMAN. So, neither one of you will lend me even a hun-
dred bucks on February 1 if I have been paid on January 31.
Mr. PALANIAPPAN. We are trying to make payroll be more effi-
cient. People should not have to wait after they have worked to get
their pay. That is what we are focused on.
Mr. SHERMAN. Okay. So——
Mr. PALANIAPPAN. We are now trying to help them out if they
need——
[Cross-talking.]
Mr. SHERMAN. Are there firms in your industry, though, that will
advance me 500 bucks as long as I am going to make 500 during
this pay period or during the——
Mr. PALANIAPPAN. Not in the earned wage access product.
Mr. SHERMAN. Okay.
Mr. PALANIAPPAN. There are lending products that will do that.
Mr. SHERMAN. That is an interesting model. Well, I will ask Ms.
Hand. It seems like these companies are direct competition for pay-
day lending. They are doing the same thing. Should they be exempt
from even what many would call the insufficient regulations that
we have on payday lenders?
Ms. REYNOLDS HAND. We think there should be the same regula-
tion in the marketplace for products that are functionally acting in
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the same way. If a consumer is able to receive funds, defer the pay-
ment, and if there are fees or fees that act like interest as they ac-
crue over time, these should be treated the same way.
Mr. SHERMAN. I will point out that people have calculated that
the acceleration fee is 300 or 400 percent APR, which is why I have
said APR is just a crazy way to evaluate the fairness of an advance
or a loan that is just for a few days. I go to my local ATM machine.
I could walk four blocks to my banks. I get my money, well 10 min-
utes sooner, and I pay 2 bucks extra. You figure out the APR, $2
to get my money 20 minutes sooner. The APR is in the tens of
thousands, but we see that 90 percent of the folks that use this sys-
tem are paying the acceleration fee. Should we regard, Ms. Hand,
this as a free service, or is it a service that people are paying the
acceleration fee on?
Ms. REYNOLDS HAND. I mean, what we see in terms of consumer
usage is that consumers do not typically use these as a one-and-
done product. I am happy to follow up in writing. They tend to
stack these loans——
Mr. SHERMAN. Ah.
Ms. REYNOLDS HAND [continuing]. and then functionally, that is
where you see the equivalent of 300 percent or other high APR.
Mr. SHERMAN. Gotcha. I yield back.
Chairman STEIL. The gentleman yields back. The gentleman
from Montana, Mr. Downing, is recognized.
Mr. DOWNING. Well, thank you, Mr. Chair, and thank you to the
witnesses for spending some time with us today.
As a former securities regulator, I have dealt with a lot of issues
in this space with digital assets. I had to deal with ambiguous reg-
ulations that, in some cases, have forced companies to look for off-
shore domiciles in innovating and I think it is incredibly important
that we continue to have innovation here in the United States of
America and do not have that ambiguity that we have in the past
that have made people decide to run their businesses elsewhere
without a reasonable framework. Another thing that was really dif-
ficult for me as a regulator is the ambiguity we got from the Secu-
rities and Exchange Commission (SEC) at the time on how to treat
these and a lot of the enforcement by action rather than having a
framework, which is why I think it is really important, that we
need clarity for digital assets and for artificial intelligence.
So, I am going to start with Professor Zywicki. I represent one
of the most rural districts in the United States. In Montana’s 2nd
Congressional District, we have multiple counties with less than
500 people in them. It is very, very rural. So, how does financial
technology increase access to banking services in areas that have
sparse financial institutions, like in rural areas of Montana?
Mr. ZYWICKI. Thank you for that question because I think the
focus on financial inclusion for rural communities has been really
understudied, and I think it is an area that is really important. It
is an area that has become more important, as I mentioned in my
opening comments, because of regulations like Dodd-Frank and the
like, which have accelerated the concentration of the industry, and
the regulatory costs have led to the disappearance of a lot of rural
banks, small banks, community banks, and the like. Obviously one
solution would be to reform the regulatory system, but I think this
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is the vehicle for that if you are talking about your local bank
closes and now you have to drive 90 minutes to get to a bank in
the next town. Fintech as a means for payments, as a means for
obtaining short-term credit, for all these sorts of things, it is really
the obvious solution for these rural communities that have lost ac-
cess to financial services.
Mr. DOWNING. Thank you very much for your answer. I am going
to move on in the interest of time here. I was an advocate for regu-
latory sandboxes in Montana when I was a regulator. We effec-
tively pushed policy on insurance technology (insurtech), and
fintech was another part of this conversation, giving an opportunity
to try out things that may not exactly fit within a current regu-
latory framework. So, I am going to start with Mr. Palaniappan.
What role can regulatory sandboxes play in allowing fintechs to
test and scale innovative products while maintaining appropriate
consumer protections?
Mr. PALANIAPPAN. I think when a company is at an early stage
in trying to come up with a product that does not exist before, the
existing frameworks and laws usually have not contemplated what
they are trying to do. So, I think you do want to provide the free-
dom for companies to try out new things with the right set of
guardrails. I think there is also another set of startups where I
would put earned wage access where the products are actually at
reasonable scale. There is lots of evidence that it is better off for
consumers, and when it gets to that stage, then you do want to
have clarity so that consumers know that the product will continue
to be available for them and also keeping bad actors out from that
space.
Mr. DOWNING. Thank you. Mr. Lefton, any comments on that?
Mr. LEFTON. Yes, I think that is a great question. I think
sandboxes are critical for providers to work with regulators and fig-
ure out how best to serve the consumer, and I think a great exam-
ple of something like that is Stream was founded 8 years ago in
the U.K. At the time, my founders, basically, came up with the
idea, they knocked on the door of the Financial Conduct Authority,
the FCA, and said we want to do this, how can we work with you
to do this?
Mr. DOWNING. Right.
Mr. LEFTON. They worked hand in hand with the FCA in order
to do this and we brought that mentality over here and have tried
whenever we were given the opportunity, whether it is with State
regulators or the CFPB or being here today, to work to see how
best we can come up with appropriate regulation for the product.
Mr. DOWNING. Thank you. In the interest of time, Ms. Kelley, I
am going to move on to you. I often hear from banks and credit
unions in my district how costly it is to comply with so many regu-
lations. So, how can we ensure that compliance costs for fintech
startups remain proportionate so that innovation is not stifled and
pricing does not prevent these products from reaching the con-
sumers they are intended to serve?
Ms. KELLEY. Yes, thank you for that question. So, I think as we
look to ensure that regulatory burdens do not stifle innovation,
there are a few things we need to stay focused on. First, it is crit-
ical that we regulate activity and outcomes rather than technology.
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The core principle is same regulation. Second, uniformity and clar-
ity are key. It is difficult to run a business and comply. We need
to know exactly what it is we are complying with, and reducing the
number of competing regulations is critical. We think sandboxes
done correctly play a critical role——
Chairman STEIL. The gentlewoman can conclude in written testi-
mony. We appreciate her testimony. Thank you.
Mr. DOWNING. Thank you. I yield.
Chairman STEIL. The gentleman yields back. The gentleman
from Illinois, Mr. Foster, the ranking member on the Financial In-
stitutions Subcommittee, is recognized for 5 minutes.
Mr. FOSTER. Thank you, Mr. Chair, and to our witnesses. Mr.
Palaniappan, I was struck by the data that you mentioned about
how earned wage access produces a better motivated and more pro-
ductive and reliable employee. The question I have is, why did not
the free market competition among payroll providers simply make
this a standard feature of all payroll processing equipment? Was it
just the overhead that Rep. Huizenga mentioned of filling out your
weekly timesheet and the whole rhythm there? Is someone col-
lecting the interest on this effective loan? What is it that prevented
this from just happening naturally? I understand you are trying to
disrupt it, a full-stack payroll provider yourself.
[Laughter.]
Mr. PALANIAPPAN. Yes.
Mr. FOSTER. I presume has this as a feature.
Mr. PALANIAPPAN. So, EarnIn Payroll does do what you described
as the payroll system, but, typically, a payroll company does get in-
terest on the money. The money is pulled from the employer’s ac-
count. It goes into a master trust account. From there, the money
goes into the employee’s account, sometimes sits in the master
trust account for some time, and then we also have to make pay-
ments for tax. Tax is actually not due immediately. Tax is some-
times due quarterly. Sometimes, depending on jurisdiction, it holds
for more time. So, there is some interest that is being made.
Mr. FOSTER. Is that the big——
[Cross-talking.]
Mr. FOSTER. I just wonder——
Mr. PALANIAPPAN. I actually think——
Mr. FOSTER [continuing]. what is your impression of why this did
not happen naturally?
Mr. PALANIAPPAN. I think it is different. I think the way we see
payroll systems is we think there should be two consumers for a
payroll system. There should be the employer and the employee,
and employee first is how we actually have started the company.
Most payroll systems think of the employer as their only customer.
The employer is not the one who says I want the wages to be dis-
bursed immediately. It is the employee who wants that, and so I
think when you are focusing——
Mr. FOSTER. It should be a competitive advantage to an employer
if this is something they are offering.
Mr. PALANIAPPAN. Exactly.
Mr. FOSTER. Right, and so any time I see, like, a failure of the
free market to generate the right answer, I try and understand
what drove that.
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Mr. PALANIAPPAN. EarnIn Payroll does let employees access their
pay when they need it, so they are——
Mr. FOSTER. Oh, yes. No, I understand, and I understand why
you are probably gaining market share. Why did someone not in-
vent this 2 decades ago and have it happened automatically, I
guess. Anyway, if you have any thoughts on this. I do not want to
burn all my time here, but I think it is an interesting question
when we see it.
Now, the big thing that I spend a lot of my time worrying about
is agentic AI because that is going to be disrupting everything.
When Mr. Zywicki, you, the dealer, the car dealer when you can
go into a car dealer and get a car and then so, what happens now
is that you go and you strike a price for the car, and then the car
dealer will try to steer you into some crappy, overpriced loan,
which is a big part of their business model. In the agentic future
that I think many of us dream about is that you are going to have
the Consumer Reports app give you advice and say, okay, yep, all
right. Here, you struck a deal for this car, and then your Consumer
Reports agent will go out on the internet and look and see what
is available for loans, get the low-price loans and say, thank you
very much, Mr. Dealer, there is a better.
Trying to preserve that kind of competition is, I think, what is
going to be the challenge of the next decade in financial services.
The key thing there, it seems to me, is how do you get unconflicted
financial advice to the consumer? Who is it? This is the problem
because when startups come up to me and come into my office and
say, we have this great new personal advisor product. AI advisor,
and then I say, okay, how are you going to monetize that? It al-
ways comes to some variation of, we are going to be just like
Google. We will get everyone to trust us, and then we will abuse
that trust by steering people into crappy, overpriced products. So,
what are the best thoughts out there on getting unconflicted advice
to consumers through their AI apps? Mr. Zywicki, you look like you
have been thinking about this.
Mr. ZYWICKI. I have been thinking about it, but I am not certain
I have a great solution, except, I mean, obviously there has always
been a market. I am sitting next to somebody for Consumer Re-
ports, which has been around for almost a century, for unbiased in-
formation, for subscription-based information and the like, and I
agree with you that agentic AI is really important. Another thing
I would say is dealing with the emerging issues of consumer data
privacy——
Mr. FOSTER. Mm-hmm.
Mr. ZYWICKI [continuing]. and the idea of AI, and the idea of bad
guys, fraudsters having AI and being able to, basically, attack the
way in which we have done consumer data security for years with
our passwords and all that sort of stuff.
Mr. FOSTER. Oh, sure, yes. Yes, when I go through the list of
what government can actually do to help, number one on the list
is get government support for mobile ID, digital driver’s license as
a means of reliably authenticating who you are, proving you are
who you say you are online. Second to that is have the National
Institute of Standards and Technology (NIST) or someone like that
come up with the standards of AI communication.
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Mr. ZYWICKI. Yes.
Mr. FOSTER. This is something that I will be following up, I
think, with you because that is something that would move the ball
forward and get U.S. standards to really be promulgated around
the world.
Mr. ZYWICKI. I would enjoy that dialog. That would be useful.
Chairman STEIL. The gentleman yields back. The gentleman
from Tennessee, Mr. Rose, is recognized for 5 minutes.
Mr. ROSE. Thank you Chairman Steil, and thank you, Ranking
Member Lynch, for holding this important hearing, and thank you
to our witnesses for taking time to be with us. Mr. Lefton, how do
earned wage access products enable consumers to meet their finan-
cial obligations without incurring overdraft and late fees?
Mr. LEFTON. Sure. Thank you. I think that is a great question.
I think it was alluded to before that over a hundred million Ameri-
cans live paycheck to paycheck, and the same number have less
than $400 in savings. EWA enables users to access their already-
earned wages at either no cost or for a low nominal fee, and I think
that is important because it gives them choice. There is competition
now, and that is at a much lower price than the traditional preda-
tory products out there, and every time they use a service like
EWA over a traditional, high-cost product, they are putting more
money in their pocket.
Mr. ROSE. So, it seems to me that one of the risks here is, of
course, once you do this once, if it continues, then you have kind
of accessed that resource and then you are not able to go back to
it. Is the evidence that is what happens in fact, or is there evidence
that consumers tap it, then pay it back, then tap it? How does that
end up working in practice?
Mr. LEFTON. No, I think that is a great question. I think you are
talking about cycle of debt, which EWA, to be clear, has nothing
to do with debt. It is a frequency of pay issue, right? It is a timing
issue, and charging interest, requiring minimum payments, roll-
overs, those are all significant features in a cycle of debt, none of
which are present with EWA. Our data shows that EWA users ac-
tually spend less and save more when they are in control of their
own finances.
Mr. ROSE. Once you collect your wages early, if you will, do you
kind of stay in that cycle and you do that paycheck to paycheck?
Is that the evidence, or does it kind of go and come?
Mr. LEFTON. So, I think it fluctuates. I mean, it really depends
on every user’s situation, right? It depends on their income—how
much they make, where they live, all those kinds of outside factors
that we do not have insight into, but I think it spans the entire
spectrum.
Mr. ROSE. Thank you.
Mr. LEFTON. Sure.
Mr. ROSE. Mr. Palaniappan, how does earned wage access com-
plement existing financial products to benefit consumers?
Mr. PALANIAPPAN. So, earned wage access is an additional tool
for customers, and what it does, it helps them control the timing
of when they get paid. So, instead of being stuck to this rigid bi-
weekly or monthly pay cycle, they can choose when to get their
pay, and they can use that along with other financial products. We
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have a number of financial products as well within our app. We
have automated savings, credit monitoring, and so they all work
well together. Sort of coming to the question on the repeated use,
I think different people use it in different ways. It is used very
often to pay bills and to pay rent. The most common pay cycle in
the U.S. is you are paid every other week. Every bill is monthly.
So, for every bill, 6 times a year, the bill is due before payday. So,
what you can do with earned wage access is access the money
when your bills are due instead of having delayed fees added onto
your bill.
We also see a lot of people who are using this as a way to in-
crease their incomes. So, I did mention the government employee
uses us with his side custom candle business, and he is making
more money on his side business because of that. I spoke with an-
other customer who works at retail. When you work at retail, there
are different types of roles. With one role you are tied to a par-
ticular store location. With another role you are tied to a depart-
ment, like a cosmetics department, and you cover about three dif-
ferent store locations. That role pays more, but when she was of-
fered the higher-paying role, she did not take it because she could
not afford to front the gas money and then wait to get reimbursed,
and so now she uses EarnIn. So, when she got the offer again, she
took it the next time because she knew that with EarnIn, she could
actually afford to front the gas money. EarnIn has helped her stay
employed at a higher-paying job, so it actually makes sense that
she uses it because that is what is keeping her in that job. So, I
think in many cases, you are seeing incomes go up, and incomes
go up because of reasons like this.
Mr. ROSE. I think—Mr. Palaniappan, you may weigh in on this,
and, Mr. Lefton, I think this is the point you were trying to make—
there is a very big difference between earned wage access and pay-
day lending as we know it. Mr. Lefton, weigh in on that. Really
press down on the difference.
Mr. LEFTON. Sure. Absolutely. I think the key differences with
any loan product and earned wage access is there are two compo-
nents to a loan. There is debt and there is interest, and with EWA,
there is neither. I think that is a fundamental difference, that
when we talk about this, people need to understand and realize
that with EWA there is no debt, with EWA there is no interest,
and those two things together are what form a loan.
Mr. ROSE. Thank you. My time has expired. I yield back, Mr.
Chairman.
Mr. ROSE. The gentleman yields back. The gentlewoman from
Massachusetts, Ms. Pressley is now recognized for 5.
Ms. PRESSLEY. Thank you, Mr. Chair. I am certainly glad we are
having today’s hearing to discuss buy now, pay later. While, admit-
tedly, I am old enough to remember the layaway line decades ago
when you did not get the product until you paid for it. We are cer-
tainly living in a different era. Klarna, Affirm, Afterpay, and
PayPal are the four biggest buy now, pay later companies, and they
are everywhere. With a simple press of a button on your phone,
you can access product immediately and pay for it over time. To
me, that does sound like a loan. A person is borrowing lump sum
funds that they will have to pay back over time in the form of an
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installment plan, and if they miss payments, it can go to debt col-
lection, show up on their credit report, and lower their credit score
for years. Ms. Hand, do you agree with my assessment that buy
now, pay later is a loan?
Ms. REYNOLDS HAND. Yes, absolutely. You have, basically, two
models in the marketplace. You have to pay in four or sometimes
six, right? You pay back those four or six payments. There is no
fee. Typically, there is no interest. That might not be a loan under
the definition, and then you have the installment product, right?
These are longer term. Let us just say you are buying an appliance
for $2,500. That would come with actual interest. Let us say the
interest is 24 percent or 36 percent over a 24-month period. A con-
sumer for that product is going to be paying not $2,500 for the
product. The effect of that APR over 24 months is roughly $1,070.
Ms. PRESSLEY. All right then. Ms. Hand, before the Trump Ad-
ministration rescinded guidance, the Consumer Financial Protec-
tion Bureau, and I want to underscore Consumer Protection Finan-
cial Bureau, took important steps to ensure proper treatment of
these loans, like the ability to dispute charges and to obtain re-
funds. What are some of the harms that borrowers face now that
those rights and protections are gone and we have people working
actively to gut and to degrade the work of the CFPB?
Ms. REYNOLDS HAND. Yes, it is quite alarming to see a market-
place evolving, frankly, in a way it should have been for the last
20 years to provide more access to different products to consumers,
at the same time that the consumer protection regulator has shut
down enforcement, examinations of financial institutions are not
happening. This is alarming, and this is not the way a healthy
marketplace is supposed to operate. What this means is the only
ability is perhaps States who are actively looking for patterns and
trying to regulate these products State by State. Regulation should
not be our default. We need strong Federal floors to protect con-
sumers.
Ms. PRESSLEY. Just with a quick ‘‘yes’’ or ‘‘no’’ here as my time
is leaving us, do you think buy now, pay later companies are being
transparent enough to ensure consumers know what they are sign-
ing up for?
Ms. REYNOLDS HAND. They could do better.
Ms. PRESSLEY. Okay. Thank you. Even when buy now, pay later
lenders are operating with transparency and following Truth-in-
Lending laws, we must acknowledge that these fintech innovations
do not get at the root problems. It is wage stagnation that leaves
the young parents unable to keep up with the rising cost of living
for their family. It is corporate greed that prioritizes profits at the
expense of workers that are pulling double shifts. It is Donald
Trump’s fiscally chaotic and irresponsible policies that have re-
duced hiring and increased unemployment and ignored the afford-
ability crisis that is plaguing our country. While fintech may help
stand in the gap, people do not want to just get by. They want to
thrive and prosper and achieve their dreams. So, Congress must
get serious and fight for the people, not the corporations. I yield
back.
Ms. PRESSLEY. The gentlewoman yields back. The gentleman
from South Carolina, Mr. Timmons, is recognized.
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Mr. TIMMONS. Thank you, Mr. Chairman. I want to thank the
witnesses for being here today.
Fintechs are transforming the way Americans interact with fi-
nancial services. Millions of people around the world have already
seen their lives meaningfully improved by digital assets and the
services provided by fintech companies. From expanded access to
capital to faster and more secure money transfers across often au-
thoritarian borders, these technologies are already reshaping the
global financial landscape. I have met with countless innovators
who are building products that meet real consumer demand and
help families better manage their financial lives, particularly those
who have been underserved by the traditional banking system.
This progress, however, depends on getting the policy environment
right. Outdated rules and inconsistent regulatory interpretations
can slow the adoption of beneficial technologies, limit competition,
and drive innovation offshore. True leadership in financial innova-
tion means providing clear, predictable guardrails that promote re-
sponsible innovation here in the United States rather than pushing
it overseas.
Mr. Lefton, what regulatory barriers currently prevent new
fintech companies from going to market in ways that satisfy clear
consumer demand?
Mr. LEFTON. Sure. Thank you for the question. I think some of
the regulatory barriers are the lack of clarity and ambiguity. We
have seen at the State level, while numerous States have passed
pro-EWA legislation, it can be difficult to comply with a patchwork
of regulation, which I think, ultimately, flows down to the con-
sumer, right? Clear regulation, unambiguous regulation, allows
companies, while also protecting consumers, to thrive with innova-
tion. I think one of the greatest examples is while we do provide
EWA, we have also created a savings product for consumers that
is free of charge and many of our consumers, this is their first sav-
ings account. We are paying 5 percent interest into their savings
account, one that they have never had before, and all in the light
of that, we were able to innovate, and I think innovation is deeply
connected with clear regulation.
Mr. TIMMONS. Thank you for that. I will talk about the CFPB
briefly. What steps should the Bureau take to provide clear, more
predictable guidance for fintech firms, particularly smaller or early
stage companies, so that compliance expectations are known before
products are launched rather than enforced after the fact? What do
you think about the CFPB and its role in this?
Mr. LEFTON. Sure. I think the CFPB, and I will only talk about
earned wage access, but I think December 23, just a few weeks ago,
they released their advisory opinion around earned wage access,
and it really resolved the regulatory uncertainty, right? It made it
very clear, and it confirmed what Stream and the entire industry
has been saying for years that EWA is not credit, and that the
nominal fee is not a finance charge. I think that is critical to the
providers in innovating and competing, which, ultimately, leads to
greater products and lower prices for the consumer.
Mr. TIMMONS. It is almost like the last 4 years we were out of
balance, and we got back in balance, and things are moving in the
right direction. Weird. Professor Zywicki, in 2024, the CFPB took
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several actions related to buy now, pay later products, including
applying aspects of the payday lending rule and certain Regulation
Z obligations. In your view, how would these measures have hin-
dered the buy now, pay later market in the United States?
Mr. ZYWICKI. Yes, I think that is a good example of trying to jam
new technologies into an old bucket, into an old hole. I mean, Ms.
Hand herself was just sort of talking about sort of how these prod-
ucts are not exactly like old-fashioned products like credit cards
and that sort of thing. This is a totally different product. If you pay
on time, you do not have interest accruing, but they are talking
about like sort of applying a regulatory framework that now only
fits in perfectly as it has grown up over time to a brand new tech-
nology. I think what they really need to do is start over and think
about what exactly are the challenges of this product for consumers
and create its own framework rather than that blunderbuss of reg-
ulation that would have, I think, killed the product.
Mr. TIMMONS. Thank you, Professor. As you have outlined, there
is real risk that misapplying legacy regulations to innovative prod-
ucts could reduce access and push consumers toward less trans-
parent or less suitable alternatives, and that outcome would under-
mine, rather than advance, consumer protection. I think that we
are moving in the right direction with the CFPB, and we have to
keep up the good work. Thank you, and I will yield back.
Chairman STEIL. The gentleman yields back. The gentleman
from New York, Mr. Torres, is recognized for 5 minutes.
Mr. TORRES. Thank you, Mr. Chair. I am a Bronx boy, so I have
no farming analogies. It has been a while since the Bronx was
farmland.
[Laughter.]
Mr. TORRES. Earned wage access is based on a simple propo-
sition: if you are a worker, you should have the right to access the
money you earn the moment you earn it and the moment you need
it. The notion that you must wait 2 weeks or even a month before
accessing your own earnings should be seen as a scandal. It should
be seen as an anachronism in a world as technologically advanced
as our own. I have constituents who have fallen behind on their
bills despite working full time, who have fallen behind not because
of a lack of earnings, but because of a lack of access to their earn-
ings. A lack of access to one’s earnings puts the most cash-strapped
Americans at risk of falling victims to the abuses of payday lending
and overdrafts. So, in Congress, we have a choice. Either we give
working people safe and immediate access to their own earnings,
or we set them up for financial traps like payday lending. To be
clear, like any financial product, EWA is neither inherently safe
nor inherently dangerous. It is only as good as its design. We in
Congress must ensure that EWA is designed to be a solution to a
problem rather than a problem of its own. Congress should adopt
a regulatory framework that designs EWA to be a free and afford-
able alternative to payday loans or overdrafts.
My first question to the CEO of EarnIn, do you believe, as I do,
that EWA providers should be required by law to offer a free option
to consumers?
Mr. PALANIAPPAN. Yes.
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Mr. TORRES. Now, the EWA industry maintains that EWA is
qualitatively different from credit and, therefore, should be regu-
lated differently. If we accept that premise as true, it then logically
follows that there should be no collections, correct?
Mr. PALANIAPPAN. That is correct.
Mr. TORRES. There should be no charging of interest, correct?
Mr. PALANIAPPAN. That is correct.
Mr. TORRES. There should be no late fees, correct?
Mr. PALANIAPPAN. That is correct.
Mr. TORRES. There should be no wage garnishment, correct?
Mr. PALANIAPPAN. That is correct.
Mr. TORRES. There should be no adverse credit reporting, cor-
rect?
Mr. PALANIAPPAN. That is correct.
Mr. TORRES. Right. No collections, no interest, no late fees, no
wage garnishment, no adverse credit reporting. Simply put, EWA
should function as a free or affordable alternative to payday loans
and overdraft fees, correct?
Mr. PALANIAPPAN. That is correct.
Mr. TORRES. Now, there is a debate surrounding the appropriate-
ness of applying APR to earned wage access. APR is deeply inform-
ative when it comes to long-term products, but when it comes to
something as extremely short term as EWA, does APR inform or
does it misinform? I want to make a point by way of illustration.
Suppose I was to give you a 1-day hundred-dollar loan with a $1
fee. The average person would consider that $1 fee not to be exces-
sive or exploitive. It is $1. What if I were to tell you that $1 fee
translates into an APR of 365 percent, right? Three hundred and
sixty-five percent sounds massive, and so, the trouble with apply-
ing APR to the most short-term product is that annualization can
make even the smallest fees seem massive on paper. A one-dollar
fee can be made to seem massive when presented as an annualized
percentage. Is that a fair point?
Mr. PALANIAPPAN. That is correct.
Mr. TORRES. So, the question for Congress to consider is not
whether there should be disclosure. Of course there should be dis-
closure of all fees, of all costs. What is needed is the right kind of
disclosure: disclosure that informs rather than misinforms, that il-
luminates the truth rather than distorts it. So, consumer protec-
tion, proper disclosure, and innovation should be our policy objec-
tives. I do not know if anyone has any thoughts.
Ms. REYNOLDS HAND. I do.
Mr. TORRES. Yes.
Ms. REYNOLDS HAND. I would agree with everything that you
said. I think an additional standard that applies that is missing in
this space, particularly fintech, is dynamic disclosure: disclosure at
the right time. We have technologies that can deliver funds to con-
sumers instantly. Those disclosures should be delivered instantly,
plainly, simply in an accessible way. The other principle that ap-
plies is protective design or consumer-friendly design. So, one of
the things that we have seen in this space, the products that we
have looked at, is oftentimes those zero-cost options, particularly in
the direct-to-consumer space, are hidden. The defaults are options
where the consumers will pay a fee, even where there is a zero-cost
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option available. So, the technology should be designed in a way,
to your point, where it functions so that there is no cost.
Mr. TORRES. What good is a free option if you are unaware of it?
Ms. REYNOLDS HAND. Sorry?
Mr. TORRES. What good is a free option if you are unaware of it?
Ms. REYNOLDS HAND. Exactly.
Mr. TORRES. Yes, so, and I feel like those are imminently solv-
able problems that I am proud to co-lead the legislation with Con-
gressman Steil. He is more rural than I am, so I am happy to elicit
your feedback.
Ms. REYNOLDS HAND. Thank you.
Mr. TORRES. Yep.
Mr. ZYWICKI. I will just add it warms my heart to hear you talk-
ing about reexamining APR as a way of disclosing products to con-
sumers exactly as you said. We talked about this in——
Mr. TORRES. I am not sure if I said that, but——
Mr. ZYWICKI. Right, but——
Mr. TORRES. Only in the EWA context.
Mr. ZYWICKI. Right, but to compare apples to apples, right, con-
sumers compared to, say, an overdraft or the late fee on a bill, they
look at dollars a lot of times rather than APR.
Chairman STEIL. The gentleman yields back. The gentleman
from North Carolina, Mr. Moore, is recognized for 5 minutes.
Mr. MOORE. Thank you, Mr. Chairman. Financial technology is
transforming how Americans earn, spend, and save their money.
From peer-to-peer payment apps and digital wallets to earned wage
access and installation products, fintech innovations are responding
to real consumer needs for speed and affordability. These products
exist because they fill gaps in the traditional financial system, es-
pecially for consumers who have historically faced limited options
or high costs. With my questions, I will start with Mr. Zywicki. Are
there any particular populations—hourly workers, gig workers,
rural communities—who benefit most from fintech services, and
how are these tools especially helpful to them?
Mr. ZYWICKI. Yes. The evidence on this is abundant at this point
that traditionally underserved communities are the ones who ben-
efit the most from fintech and fintech innovations, whether it is
rural, whether it is young people. BNPL, for example, is used heav-
ily by Gen Z and Millennials. Earned wage access obviously is very
popular and used a lot by hourly workers who often live paycheck
to paycheck. Upper-income people are using these more, especially
BNPL, but, really, the value proposal proposition is for those
groups. Fintech and fintech underwriting, use of alternative data
like cash-flow data as opposed to credit scores and the like, the evi-
dence on that is very clear that increases competition and benefits
people most who are traditionally underserved and where tradi-
tional competition among banks is not very robust, which includes
rural communities, obviously.
Mr. MOORE. Mr. Palaniappan and Mr. Lefton, how have earned
wage access services improved financial stability for workers, and
how are these products helping make everyday expenses more
manageable?
Mr. PALANIAPPAN. Thank you for the question. The first thing
that earned wage access does, which is what most people expect,
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is it helps people pay their bills on time so there are fewer late fees
on bills, there are fewer other expensive fees because they are pay-
ing their bills on time. There are also nonfinancial benefits where
there is less stress. So, I hear from our customers how they are
able to send their children on field trips because they have access
to our product, which they would not have been able to do other-
wise, celebrate birthdays on the right days, go to see a dentist
when the tooth starts aching instead of putting that off to Friday.
I spoke with a customer. She works in healthcare and her daughter
likes to dance. She has to pay for dance classes at the beginning
of every month, and she would not have been able to do that with-
out EarnIn. So, her daughter goes for dance classes and, today,
takes part in dance competitions and can follow her passion for
dance because of EarnIn.
The other benefit that I spoke about in the testimony as well is
that incomes go up. Incomes go up by over 10 percent. From the
EarnIn dataset, a study on over a million customers, incomes went
up by 11-and-a-half percent. That is about $335 per month, and so
we are seeing incomes go up as well when people start using
earned wage access. From our data, we are actually seeing incomes
go up faster than inflation, and so we are seeing wage growth in
real terms as well.
Mr. MOORE. Over what time period have you seen those in-
creases?
Mr. PALANIAPPAN. We have seen wage increases higher than in-
flation over the last 3 years.
Mr. MOORE. Mr. Lefton, did you care to respond as well?
Mr. LEFTON. Sure. Well, first, I agree with everything that was
just said. I think one of the things we need to remember when we
are talking about EWA is that EWA users are not financially illit-
erate. They are just experiencing a frequency-of-pay issue, and so
I think it is important we do not conflate the two, right? Con-
sumers use EWA because they need to be paid on their own
timeline, not because they do not know how to manage their own
money. I think that is a very important distinction. We need to
trust that the user is in the best position to know how and when
to access their wages and manage their money.
Mr. MOORE. One thing that seems to have worked to me at the
State level and otherwise is really to try to bring about innovation.
Like the regulatory sandbox legislation, our State adopted that a
couple of years ago, and it allows financial institutions and tech-
nology firms to test new products under the supervision of regu-
lators. So, I guess just a follow up question to Mr. Zywicki: how can
regulatory sandboxes help regulators better understand new
fintech products before imposing broad rules?
Mr. ZYWICKI. Yes. Briefly, I will just amplify on the EWA ques-
tion some of the points that my colleagues have made here, which
is, I think the best study on this is the Davis study, who, in addi-
tion to finding income goes up, also finds that there are no finan-
cial problems—people do not overdraft more, do any of that sort of
stuff—as opposed to the Connecticut study where they found losing
access to EWA led to a lot more payday, having to sell products,
and that sort of thing. With respect to sandboxes, I think
sandboxes are revolutionary. I think they are super important. The
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ability to get real-time information, tweak products. Even the dis-
crimination-type questions that were being raised, I think could be
addressed very well with regulatory sandboxes to make sure those
products operate the way they should.
Mr. MOORE. Thank you, and my time is up. I did have other
questions for the other witnesses, but I appreciate you all being
here today. With that, I yield back.
Chairman STEIL. The gentleman yields back. The gentlewoman
from Texas, Ms. Garcia, is recognized for 5 minutes.
Ms. GARCIA. Thank you, Mr. Chairman, and thank you to all the
witnesses, and I first want to associate my remarks with the re-
marks of Mr. Torres. I think they were right on point. To the chair-
man, I did not sack potatoes, but I sure as hell picked cotton.
[Laughter.]
Ms. GARCIA. We did not get paid daily. We had to work our asses
off in the hot Texas heat all week until we saw any money Friday
afternoon but it just underscores the point that workers do deserve
to get paid and get paid well, and not under the table, to avoid all
these things, and to make sure that they can have access to their
money when they are needed.
Like Representative Pressley said, I am waiting for the layaway
plan because one of the things my mother used to do at the begin-
ning of the cotton season is take us into town, and we would pick
what we thought we might need for school in September, and then
she would pay weekly until we got to September. Now, if you gain
a little weight, you are in trouble, but that is how it was done, and
some people are still living paycheck to paycheck. According to the
Urban Institute, 52 percent of Americans do not have the money
to cover essential costs, such as housing, food, healthcare,
childcare, transportation, and education. Fifty-two percent. That is
a lot of people, but in my district it is even worse: 74 percent. Let
that sink in.
So, as many of my colleagues mentioned, there is an affordability
crisis. To call it a hoax is just flat a hoax. The American people are
struggling to support themselves and their families day by day,
paycheck to paycheck. That is why many Americans turn to alter-
native income sources that we have been discussing today. How-
ever, as financial technology and these products become more com-
mon, I share my colleagues’ concerns that without consumer protec-
tion, these products will only take more money out of consumers’
pockets.
Ms. Hand, as we discuss how to regulate these products, several
people have said that especially the earned wage access is free. Is
it really free?
Ms. REYNOLDS HAND. There are a variety of different products in
the marketplace. In fact, we have recently looked at 23 different
companies out there, both employer-sponsored and direct-to-con-
sumers. The employer-sponsored products are typically less risky
and, basically, you see what you have heard here today.
Ms. GARCIA. But are they free?
Ms. REYNOLDS HAND. Those products can be free. For more of
the direct-to-consumer products, some of them have free options,
but then they do have fees, so they are effectively not free. Some
of those free options we have seen are hidden, and consumers are
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defaulted into fee structures which may be clear and hidden. The
other thing that I would add is that many consumers are using
these on a weekly basis, so they are effectively stacking fees on a
weekly basis and then their ability to repay over time. So, I would
say that, effectively, these are not free products.
Ms. GARCIA. Okay. Now, what about the buy now, pay later? Is
that free?
Ms. REYNOLDS HAND. There are simple products, pay in 4, where
if a consumer is successful, that is effectively a free service. Then
you go down the installment path where these are loans, they are
structured as such, they have interest, and I think one of the chal-
lenges that we have seen is oftentimes—the consumers and our re-
search support this—they see an advertisement, they go to pay for
something, and they get offered the pay in 4 product. Then they go
through the application, and they end up in an installment loan
product and, oftentimes, are not really aware of the long-term ef-
fects, so it is not free.
Ms. GARCIA. So, do some have the APR as high as was illustrated
by his example? I mean $1 on a hundred dollars does not sound
bad, but once you do the math, the percentage is really high.
Ms. REYNOLDS HAND. Yes. If that one dollar then gets deferred,
you add on late fees. If those apply or the consumer simply does
not have the ability to repay in the time that they have originally
agreed to, that will put a consumer into a fee structure.
Ms. GARCIA. Yep. Just curious, what would you consider a fair
fee for the service? Let us not talk yet about penalties and install-
ment payments later or anything. It seems to me that one of these
products is no more than a high-tech payday loan service.
Chairman STEIL. We will allow the gentlewoman to submit an-
swers in the record.
Ms. GARCIA. I was just beginning to have fun.
[Laughter.]
Ms. GARCIA. Thank you. Thank you to all the witnesses.
Chairman STEIL. We thank the gentlewoman. The gentlewoman
yields back. The gentleman from California, Mr. Liccardo, is recog-
nized for 5 minutes.
Mr. LICCARDO. Thank you, Mr. Chair. I want to thank all the
witnesses for their testimony and, particularly, Mr. Palaniappan—
please forgive me if I just mispronounced your name—but it is good
to have a local company here, and congratulations on the great suc-
cess of your company. I appreciate very much what EarnIn has
done to enable millions of American workers to have more freedom
in their lives. That is very important. I also, by the way, appreciate
Ms. Reynolds Hand’s important observations. I think we have good
players and we have bad players in this industry. Like all indus-
tries, we need transparency. We appreciate those who are trans-
parent, and for those who are not, that is why we need simple, pre-
dictable regulations, so very much appreciate points being made all
around.
I would like to shift gears, though, from EWA to the broader
topic of the hearing and the subcommittee, which is around fintech
regulation and innovation.
Ms. Kelley, I am going to turn to you because I know you rep-
resent a lot of folks in the industry. An awful lot of focus in recent
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weeks and months has been whether or not fintech companies can
get access to the Federal payment rails—FedNow—and other
transmission means, like Fedwire. I think there has been a lot of
discussion, certainly Treasury publicly as well at the Federal Re-
serve. There is now, I think, a request for information from the
Fed. They are looking for feedback about what a skinny account
might look like or a payment account as a, I guess, an option that
would be distinct from a master account. I guess, regardless of
whether the Fed or Congress creates this, clearly there needs to be
some regulation on those fintech companies that would avail them-
selves of this opportunity and there are a lot of ideas from the
Bank Policy Institute (BPI), from Fed, and others about what regu-
lations those companies should be subject to, things like Bank Se-
crecy Act and Know Your Customer (KYC), and anti-money laun-
dering, whether or not they should be prohibited from overdrafting,
from charging interest, et cetera. Do you have some views about
what regulations would be appropriate for us to be thinking about
here?
Ms. KELLEY. Yes, and thank you for the question. It is a particu-
larly dynamic and interesting time to be in this industry, and I
think what you have just described reflects that. So, I would start
by saying in the relationships that exist now between banks and
fintechs where they partner to provide services, there is a holistic
set of regulations. There were interagency guidelines that were re-
leased in 2023 that, effectively, require banks to ensure that their
fintech partners are following the same regulatory requirements
that the banks must follow. So we are operating against that back-
drop. As we look forward and say should these nontraditional bank
fintechs have access to the Federal Reserve, that is a conversation
that has begun with the request for information (RFI) and the con-
versations around the skinny master accounts.
We are in very early days of those conversations, and I know the
industry as a whole is still trying to understand exactly what that
would look like but what is clear is there needs to continue to be
a balance between fostering innovation that we see from nontradi-
tional banks, but ensuring safety and soundness as well. The skin-
ny master accounts is one attempt to strike that balance and,
again, still in the early days.
Mr. LICCARDO. Okay. So, no commitments yet about what conces-
sions industry might make, about what regulations would be sen-
sible for this——
Ms. KELLEY. Yes, I think it is still an open question.
Mr. LICCARDO. Okay. Well, I look forward to continuing to en-
gage with you and with your members to understand what that
might look like.
Ms. KELLEY. Absolutely.
Mr. LICCARDO. I think this is coming at us pretty fast, and we
probably need to understand best how to respond. Regardless, I ap-
preciate the efforts of many fintech companies to innovate in a
space where I think consumers do need more choices, and I appre-
ciate the work that is being done by many of the companies here.
Thank you.
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Chairman STEIL. The gentleman yields back. I would like to
thank all of our members for their questions today, all of our wit-
nesses for your testimony today.
Without objection, all members will have 5 legislative days to
submit additional written questions for the witnesses to the chair.
The questions will be forwarded to the witnesses for their response.
Witnesses will please respond no later than February 17.
[The information referred to can be found in the appendix.]
Chairman STEIL. The hearing stands adjourned.
[Whereupon, at 12:01 p.m., the subcommittee was adjourned.]
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APPENDIX
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120
FSR-FORD-FORD with DISTILLER
Insert offset folio 146 here 63578.146
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121
FSR-FORD-FORD with DISTILLER
Insert offset folio 78 here 63578.078
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122
FSR-FORD-FORD with DISTILLER
Insert offset folio 79 here 63578.079
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123
FSR-FORD-FORD with DISTILLER
Insert offset folio 80 here 63578.080
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124
FSR-FORD-FORD with DISTILLER
Insert offset folio 81 here 63578.081
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125
FSR-FORD-FORD with DISTILLER
Insert offset folio 82 here 63578.082
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126
FSR-FORD-FORD with DISTILLER
Insert offset folio 83 here 63578.083
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127
FSR-FORD-FORD with DISTILLER
Insert offset folio 84 here 63578.084
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128
FSR-FORD-FORD with DISTILLER
Insert offset folio 85 here 63578.085
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129
FSR-FORD-FORD with DISTILLER
Insert offset folio 86 here 63578.086
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130
FSR-FORD-FORD with DISTILLER
Insert offset folio 87 here 63578.087
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131
FSR-FORD-FORD with DISTILLER
Insert offset folio 88 here 63578.088
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132
FSR-FORD-FORD with DISTILLER
Insert offset folio 89 here 63578.089
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133
FSR-FORD-FORD with DISTILLER
Insert offset folio 90 here 63578.090
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134
FSR-FORD-FORD with DISTILLER
Insert offset folio 91 here 63578.091
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135
FSR-FORD-FORD with DISTILLER
Insert offset folio 92 here 63578.092
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136
FSR-FORD-FORD with DISTILLER
Insert offset folio 93 here 63578.093
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137
FSR-FORD-FORD with DISTILLER
Insert offset folio 94 here 63578.094
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138
FSR-FORD-FORD with DISTILLER
Insert offset folio 147 here 63578.147
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139
FSR-FORD-FORD with DISTILLER
Insert offset folio 95 here 63578.095
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140
FSR-FORD-FORD with DISTILLER
Insert offset folio 96 here 63578.096
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141
FSR-FORD-FORD with DISTILLER
Insert offset folio 97 here 63578.097
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142
FSR-FORD-FORD with DISTILLER
Insert offset folio 98 here 63578.098
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143
FSR-FORD-FORD with DISTILLER
Insert offset folio 99 here 63578.099
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144
FSR-FORD-FORD with DISTILLER
Insert offset folio 100 here 63578.100
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145
FSR-FORD-FORD with DISTILLER
Insert offset folio 101 here 63578.101
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146
FSR-FORD-FORD with DISTILLER
Insert offset folio 102 here 63578.102
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147
FSR-FORD-FORD with DISTILLER
Insert offset folio 103 here 63578.103
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148
FSR-FORD-FORD with DISTILLER
Insert offset folio 104 here 63578.104
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149
FSR-FORD-FORD with DISTILLER
Insert offset folio 105 here 63578.105
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150
FSR-FORD-FORD with DISTILLER
Insert offset folio 106 here 63578.106
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151
FSR-FORD-FORD with DISTILLER
Insert offset folio 107 here 63578.107
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152
FSR-FORD-FORD with DISTILLER
Insert offset folio 108 here 63578.108
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153
FSR-FORD-FORD with DISTILLER
Insert offset folio 109 here 63578.109
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154
FSR-FORD-FORD with DISTILLER
Insert offset folio 110 here 63578.110
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155
FSR-FORD-FORD with DISTILLER
Insert offset folio 111 here 63578.111
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156
FSR-FORD-FORD with DISTILLER
Insert offset folio 112 here 63578.112
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157
FSR-FORD-FORD with DISTILLER
Insert offset folio 113 here 63578.113
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158
FSR-FORD-FORD with DISTILLER
Insert offset folio 114 here 63578.114
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159
FSR-FORD-FORD with DISTILLER
Insert offset folio 115 here 63578.115
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160
FSR-FORD-FORD with DISTILLER
Insert offset folio 116 here 63578.116
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161
FSR-FORD-FORD with DISTILLER
Insert offset folio 117 here 63578.117
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162
FSR-FORD-FORD with DISTILLER
Insert offset folio 118 here 63578.118
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163
FSR-FORD-FORD with DISTILLER
Insert offset folio 119 here 63578.119
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164
FSR-FORD-FORD with DISTILLER
Insert offset folio 120 here 63578.120
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165
FSR-FORD-FORD with DISTILLER
Insert offset folio 121 here 63578.121
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166
FSR-FORD-FORD with DISTILLER
Insert offset folio 122 here 63578.122
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167
FSR-FORD-FORD with DISTILLER
Insert offset folio 123 here 63578.123
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168
FSR-FORD-FORD with DISTILLER
Insert offset folio 124 here 63578.124
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169
FSR-FORD-FORD with DISTILLER
Insert offset folio 125 here 63578.125
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170
FSR-FORD-FORD with DISTILLER
Insert offset folio 126 here 63578.126
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171
FSR-FORD-FORD with DISTILLER
Insert offset folio 127 here 63578.127
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172
FSR-FORD-FORD with DISTILLER
Insert offset folio 128 here 63578.128
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173
FSR-FORD-FORD with DISTILLER
Insert offset folio 129 here 63578.129
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174
FSR-FORD-FORD with DISTILLER
Insert offset folio 130 here 63578.130
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175
FSR-FORD-FORD with DISTILLER
Insert offset folio 131 here 63578.131
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176
FSR-FORD-FORD with DISTILLER
Insert offset folio 132 here 63578.132
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177
FSR-FORD-FORD with DISTILLER
Insert offset folio 133 here 63578.133
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178
FSR-FORD-FORD with DISTILLER
Insert offset folio 134 here 63578.134
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179
FSR-FORD-FORD with DISTILLER
Insert offset folio 135 here 63578.135
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180
FSR-FORD-FORD with DISTILLER
Insert offset folio 136 here 63578.136
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181
FSR-FORD-FORD with DISTILLER
Insert offset folio 137 here 63578.137
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182
FSR-FORD-FORD with DISTILLER
Insert offset folio 138 here 63578.138
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183
FSR-FORD-FORD with DISTILLER
Insert offset folio 139 here 63578.139
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184
FSR-FORD-FORD with DISTILLER
Insert offset folio 140 here 63578.140
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185
FSR-FORD-FORD with DISTILLER
Insert offset folio 141 here 63578.141
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186
FSR-FORD-FORD with DISTILLER
Insert offset folio 142 here 63578.142
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187
FSR-FORD-FORD with DISTILLER
Insert offset folio 143 here 63578.143
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188
Æ
FSR-FORD-FORD with DISTILLER
Insert offset folio 144 here 63578.144
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File and source
- File
- CHRG-119hhrg63578.pdf
- Size
- 16,411,141 bytes
- SHA-256
- 7677c63e699948f50dffb6aedf07abaa11749ca09345218bcab62043fc786cd7
- Our copy
- CHRG-119hhrg63578.pdf
- Original
- www.govinfo.gov