Consumer Financial Protection Bureau Credit Stance Has Broad Specialty Finance Implications

6 minute read | December.11.2020

The Consumer Financial Protection Bureau issued an advisory opinion at the end of November that could compel specialty-finance companies — including those offering income-share agreements, litigation funding, merchant cash advances and earned wage access products — to take a fresh look at whether their products are in fact subject to certain federal consumer protection laws.

While the CFPB's Nov. 30 opinion is designed only to clarify which earned wage access plans fall outside Regulation Z's definition of "credit," it also more generally establishes an analytical framework potentially applicable to a host of alternative financial products — products that federal and state regulators until this point have generally not considered loans, and therefore, not subject to laws and regulations governing licensing, pricing and disclosures.

Originally published in Law360; reprinted with permission.