Texas Bill Would Enable Earned Wage Access Products to Evade Consumer Protections, Become a New Form of Predatory Payday Lending

AUSTIN, Texas—A new report details a harmful pattern of problems related to Earned Wage Access (EWA) products, which allow borrowers to access their wages before payday. Yet, the Texas Legislature is considering a bill that would exempt these companies from existing consumer protection laws in Texas. 

Texas Appleseed’s new report, Skimming Fees From Texans’ Paychecks: Is Earned Wage Access Becoming The Next Generation of Payday Lending?, details a problem of hidden fees, coercive tipping tactics, unregulated access to people’s wages, and other concerns for consumers related to EWA products. The report concludes that these products need guardrails to keep from sinking borrowers into cycles of debt, similar to those caused by payday loans. 

“Emerging EWA companies have successfully evaded existing consumer lending protections to date, and the Legislature is poised to enshrine this dangerous loophole in law,” said Ann Baddour, the director of Texas Appleseed’s Fair Financial Services Project. “House Bill 2043 would empower bad actors in this industry to engage in unethical high-cost lending to the detriment of low-income Texans and members of the military who use their products to try to make ends meet.”

Texas Appleseed reviewed and analyzed over 900 complaints, covering four EWA companies, submitted to the Better Business Bureau and the Consumer Financial Protection Bureau from January 2022 to December 2024. Top consumer concerns include poor customer service, billing and balance errors, and delays in receiving paychecks on time. The report highlights five major concerns of EWA companies currently operating in Texas.

• EWA companies often solicit numerous, uncapped fees, including monthly subscription or membership fees, instant transfer fees, and tips. The free version that many companies advertise is slow, ineffective, and rarely used. 
• EWA companies that take full control of a borrower’s entire paycheck are not subject to important requirements to hold them accountable for protecting the borrower’s wages or paying them the correct amount on time. Customers could lose their money as a result of adverse events at the EWA company, face delayed receipt of pay, and get shorted or otherwise paid the wrong amount with no business accountability.
• EWA companies often use manipulative tactics that mislead borrowers about the actual cost of the cash advance and that coerce people into tipping and paying other fees. For example, one EWA app displays a tip screen with an image of a hungry child; as the user decreases their tip percentage, the food on the child’s plate disappears. The company donates only 10 cents for each tip percentage to support meals. 
• EWA companies often cause borrowers to incur overdraft fees due to debiting their bank account for repayment of the cash advance before payday or withdrawing the incorrect amount. If a borrower does not have sufficient funds in their bank account when it is time for the cash advance to be repaid, there are no limitations on how many times an EWA company can attempt to debit a borrower’s bank account, triggering multiple overdraft fees. Research shows that 66% of Texas EWA borrowers who struggled with overdrafts saw their overdrafts increase after their initial advance. 
• EWA companies take money out of local economies by inducing customers to deposit wages on company-sponsored debit cards at out-of-state banks and gift cards instead of cash wages. This is particularly harmful for rural parts of Texas, where small community banks rely on deposits from the local area to sustain their operations.

“Our analysis found that the EWA industry harbors a dangerous environment for consumers, who are often deceived about the product’s cost and reliability,” said Briana Gordley, Senior Policy Analyst for Texas Appleseed’s Fair Financial Services Project. “The Legislature should strengthen regulations to ensure that EWAs operate responsibly as tools to help consumers in a financial pinch, not sink them deeper into debt.”

The simplest approach is to regulate these cash advance products as loans. If these products are instead carved out of state lending and other consumer protection laws, as some other states have done, meaningful protections that accompany a state regulatory framework must include:

• Establishing reasonable maximum total monthly charges for advances, including all voluntary and required charges, such as a $10 all-in monthly cap for all charges; and
• Adopting appropriate requirements to ensure people’s wages are protected and clearly separated from company assets, that they get their wages on time and in the right amount, and that people have the right to access their wages, at no extra charge, in cash and in the account of their choice.

Additional guardrails that would be beneficial to include:

• Prohibiting tipping, which is a questionable practice in financial services, or mandating that any default “tip” or any optional payment amount be clearly set at $0, as well as prohibiting manipulative and repeated prompts to coerce tipping;
• Ensuring prompt refund of any overdraft fees caused by early withdrawal of payments by the Earned Wage Access provider before a paycheck is deposited into an account or through delays in deposit of earned but unpaid wages by the Earned Wage Access provider; and
• Ensuring that Earned Wage Access companies provide the same cost benefits to customers no matter the depository account or debit card that they use to receive funds.

About Texas Appleseed
As one of the most trusted resources for data-driven policy analysis and solutions, Texas Appleseed advocates at the state and local level for fair, just, and equitable laws. Our work has shaped hundreds of laws and positively affected millions of Texans by breaking down barriers through transformative policy solutions. Visit www.TexasAppleseed.org for more information.

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