Colorado AG Sues EWA Fintech, Alleging Unlawful Lending
The Colorado Attorney General alleges a California-based earned wage access provider is operating an unlicensed, high-cost lending program in violation of state consumer credit and protection laws.
Colorado's Attorney General and its top consumer credit regulator have sued a California-based financial technology company, alleging its earned wage access (EWA) product is a disguised high-cost loan that violates state law. The complaint, filed in state court, argues that the product functions as a loan because consumers must pre-authorize debits, cannot easily revoke that authorization, and are encouraged to pay "tips" that act as undisclosed finance charges.
The lawsuit is a major development in the burgeoning EWA market, which often operates in a gray area of state lending laws. For fintech firms, their financial institution partners, and employers offering these products, this action highlights significant regulatory risk. A ruling that EWA products are loans subject to state licensing, disclosure, and usury laws could reshape the industry's business model. Counsel should monitor this case for its potential to set a precedent in Colorado and to inspire similar enforcement actions by other state regulators examining the EWA space.