Fintech 2025

USA Trends and Developments Contributed by: Donald J. Mosher, Kara A. Kuchar, Melissa G.R. Goldstein, Jessica Romano and Adam J. Barazani, Schulte Roth & Zabel LLP

Evolving Regulatory Landscape for BNPL, EWA, and Merchant Cash Advances The rapid growth of financial products such as BNPL, EWA, and merchant cash advances (MCAs) continues to redefine the fintech space, but regulators are increasingly stepping in to address concerns about consumer protection, transparency, and compliance. BNPL services, offering consumers the ability to split purchases into instalment payments, have faced mounting criticism over insufficient disclosures and their potential to encourage over-indebtedness. Late fees, interest accruals, and a lack of clear repay - ment terms prompted calls to extend consumer protections for credit cards users to users of BNPL products, and the CFPB took action in 2024 to do so. With a mounting sentiment to shutter the CFPB under Trump 2.0, the CFPB’s steps to provide greater consumer protections for BNPL products are at risk of elimination. In 2024, the Federal Trade Commission (FTC) also targeted misleading advertising and unfair business practices involving short-term lend - ing products. FloatMe settled with the FTC for USD3 million following allegations that it misled consumers with promises of “free money” while engaging in discriminatory cash advance prac - tices. And, more recently, the FTC charged Dave, a fintech focused on short-term cash advances, for allegedly deceiving consumers about cash advance amounts, charging undisclosed fees, and imposing hidden “tips” . With many expect - ing a pro-business FTC under Trump 2.0, the enforcement focus on cash advance providers may wane. EWA products, which allow employees early access to wages, face a similarly complex regu - latory landscape. While some states treat EWA offerings as payroll advances, others classify them as credit products subject to lending laws.

This state-level divergence has created compli - ance challenges for EWA providers, particularly as legislative activity around EWA continues to grow. Several states have already enacted laws imposing disclosure and licensing requirements on EWA providers, with Connecticut taking a stricter approach by classifying EWA as small- dollar credit and enforcing a usury cap, which has prompted some providers to exit the state. Meanwhile, several other states, including New York, have pending legislation that could further shape the regulatory landscape. New York’s lat - est bill, for instance, proposes a cost cap to be determined by the state regulator but notably exempts EWA from the state’s general usury lim - its. This highlights the ongoing divide between states that impose traditional lending restrictions on EWA and those that carve it out from usury laws, reflecting broader policy debates over whether EWA should be regulated as credit or an employer-based benefit. At the federal lev - el, regulatory uncertainty increased earlier this year when the CFPB rescinded its 2020 advisory opinion that clarified certain EWA programmes would not be considered credit. Whether such rescission will have any meaningful impact on EWA programmes at the federal level under the Trump administration remains unclear. MCAs, meanwhile, are seeing increased scru - tiny as regulators and courts question their classification as purchases of future receivables rather than loans. This distinction has historically allowed MCA providers to operate outside of a licensing and regulatory framework, though new state-level disclosure requirements for commer - cial financing aim to improve transparency for small businesses. Further, the recent USD1.065 billion settlement (which included USD534 million in debt relief for small businesses) by Yellowstone Capital with the New York State Attorney General (NYAG) highlights the growing

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