USA – WASHINGTON TRENDS AND DEVELOPMENTS Contributed by: Blank Rome LLP
Earned wage access products Another area of focus has been earned wage access (EWA) products, which offer a way for employees to access their earned wages before they are scheduled to be paid, have become a popular fintech product in recent years. Prior to Trump’s second term, the CFPB issued various guidance regarding EWA prod - ucts, including a Proposed Interpretive Rule in 2024 suggesting that instant delivery fees on earned wage access products constitute finance charges under the Truth in Lending Act (TILA). However, the current Bureau rescinded this guidance through a December 2025 Advisory Opinion, which clarifies that, in the vast majority of cases, instant disbursement fees are not finance charges under TILA. In response to the absence of regulation of EWA prod - ucts at the federal level, several states have passed laws governing these products, including new laws passed by Indiana and Maryland in 2025. On 1 October 2025, Connecticut enacted a new law which classifies EWA products as small loans subject to licensure, fee caps, and disclosure requirements. Other states, such as Arizona and Montana, have taken the approach of issuing official opinions stating that fully non-recourse, no-interest EWA products are not loans. State AGs have also taken interest in EWA prod - ucts. In April 2025, New York Attorney General Letitia James brought an action against MoneyLion, Inc. and DailyPay, Inc. alleging that they are offering predatory payday loans disguised as EWA products. The suit specifically alleges that the providers utilise deceptive marketing tactics to trick consumers into thinking that they will receive instant access to their earned wages with zero fees, when in reality immediately available loans carry fees as high as USD8.99 for a USD100 advance to be repaid in two weeks. Similarly, several EWA providers have been sued in civil court, with the cases still pending, typically alleging that the products are consumer credit transactions as defined under the TILA and covered under the Military Lending Act (MLA), with any voluntary “tips” or expedited delivery fees treated as finance charges under both statutes. However, these cases are still pending, and each involves fact-specific inquiries regarding whether the fees are required or being imposed by the creditor incident to the transactions and thus subject to dis -
In response to this AI boom, states are beginning to enact laws regulating the use of AI in various contexts, including consumer financial services. For example, the Colorado Artificial Intelligence Act (CAIA) regu - lates “high-risk” AI systems. Among other things, the CAIA requires that developers of such systems, and the “deployers” utilising them, use reasonable care to avoid algorithmic discrimination in connection with any “consequential decisions” related to various sig - nificant aspects of consumer life, including education, health care, housing, and financial and lending servic - es. The CAIA’s passage was met with opposition from AI industry groups, but also concerns from consumer advocates that the law did not go far enough to pro - tect consumers, which resulted in attempts to amend the statute. However, substantive reforms could not be agreed upon, and the resulting compromise was that the CAIA’s effective date was pushed from 1 Feb - Last year, we witnessed a softening in scrutiny of the BaaS market, and we expect this trend to continue in 2026. BaaS partnerships have been foundational to fintech operations. However, in the last few years, particularly under the Biden administration, banks had been pulling back from these partnerships, requiring greater and greater levels of due diligence in order to enter into and operate under these agreements, and banks had generally been backing away from the market. This previous tightening of the BaaS market was almost entirely due to pressure from the banks’ regulators. ruary 2026 to 30 June 2026. Banking as a service (BaaS) However, as described above, the removal of “rep - utational risk” from the federal banking regulators’ supervisory frameworks removes one of the common cudgels often deployed against BaaS partnerships. And, generally, banks in 2025 seemed emboldened by the perceived regulatory environment, and were more willing to venture back into the BaaS market, leading to a substantial uptick in new BaaS partnerships. We expect this trend to continue, with more banks entering the BaaS market, and fintechs finding more potential bank counterparties, decreased due dili - gence and regulatory hurdles, and greater opportuni - ties for partnership and innovation.
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