data privacy. this is just over an hour.

[background noises] [inaudible conversations] . >> the chair is authorized to declare a recess at any time. the members of the full committee are authorized to participate in today's hearing it is entitled by now save

more later with the benefits of other emerging cash flow products i now recognize myself for four minutes to give an opening statement. in the last two years the numbers of emerging projects have garnered increased attention of their explosive growth and popularity among consumers as well as by now pay later meant to help manage that cash flow at a lower cost as many traditional alternatives. recent study by mckinsey reports that by now pay later is between eight and $10 billion of revenue it's difficult to shop online without seeing that option by

now pay later attempt popular with employers and employees but they also raise important questions that the use of consumer data and the exploitation around spending patterns in the application of lending lines and the potential for substantial levels of consumer that point of sale or by now pay letter practice can be partnered with the opportunity to purchase products these products most commonly heard in electronics beauty and travel tends to be a younger consumer cohort with a limited number of credit history and do not qualify for traditional credit with the

numbers of merchants offering these services and the customer base is grown exponentially during the pandemic. our companies and proponents argue these would be beneficial because they allow consumer flexibility in the cheaper alternatives from credit cards and consumer advocates and research groups over consumers overextending finances to take on unsustainable levels of debt most by now pay later companies do not assess the ability to retain. additionally most do not report by now pay later transaction history that would be a missed opportunity to help consumers. the lack of exposure raises concerns the paid in full business model that options at

two-week intervals at 0 percent interest has been criticized by some to be specifically designed to evade lending regulations. earned wage access companies to partner with payroll to offer consumers advance is onan earned wages prior to payday they recoup directly from asubsequent paychecks similar to direct to consumer finance companies to have a directum connection with the bank account to monitor cash flow. companies offer advances based on those cash flow patterns and from account balances. overdraft avoidance companies can monetize the membership fees interchange fees and others that monetize voluntary tips they have become popular with those who work paycheck

to paycheck to offer liquidity between paid paydays critics argue the product should be regulated as a loan subject to lending last and consumer advocates of the tipping model in question whether that tip influences what is beingng offered in advance. and with consumer cash flow needs and in response to these questions that you take action against the by now pay later companies legal opinion to classify these the cfpb released a blog post to make routinely where other products before choosing them additionally.

today we have a distinguished panel of witnesses throughout the hearing i d hope to dive deeper into these products to explore the merits and the risks that they raise. the true nature of these products and the implications to engage in unsustainable borrowing patterns like to recognize my friend and ranking member and is now recognized five minutes for his opening statement. which i doubt by now pay later is the concept of credit they didn't create that concept but the focus was one is

innovative going on in the marketplace? so that essential growth and popularity was by now pay later overdraft to exemplified some of the benefits that send tech has brought over the years. today's hearing will assist in the task force just how and why these products are becoming preferred over traditional financing. so until we have a sound understanding we should refrain from implementing burdensomeim regulations is important to recognize without access to credit over the past several years. and then the urgency using the by now pay later has grown

6 percent to 36 percent in 2021. millennial's use by now pay later has more than doubled while gen x has more than triple according to a study in 2020 we have millions of workers have earned wage access programs of the total adjustable market around 45 million with many individuals working. so it seems the employer's are the ones extending credit. lastly in the midst of the pandemic we saw many banks migrate from overdraft fees. such as up-to-the-minute notification and a grace period to repay aat negative balance.

and deriving more benefits ands just a few years ago. and which demographics are more inclined to address the under banked and then i'm confident we can give clarity with the range of witnesses today we must exercise caution before he take regulatory action and showing that the consumers want them. we should stop punishing new products not fitting into regulatory buckets are already bill andlr should clarify with

the current regulatory scheme. and then we should facilitate innovation. does this mean i'm advocating for a completely hands-off approach? certainly not i and the republican and an anarchist but if the products with consumers and hopefully it can lay out the problem and help us find a way to solve it. we are actively legislating rules to the rest to failing to have the problem many times it addresses a problem that is not there and puts a heavy burden on the regulators to see regulation by enforcement which punishes innovation and then the importance of protecting's consumer data as we adopt these technologies that consumer data privacy was

the prime focus anytime we discuss to provide sensitive information we will continue to discuss these topics further as they become more widely adopted and to serve as future hearings and i look forward to the range of issues and i yield back. >> the gentleman yelled back. today theie ranking member i welcome the testimony of our distinguished witnesses and at the brookings institution and from financial technology also the associate director and

then we have the director of california policy and lastly we welcome the ceo and president of the innovative payment association witnesses are invited oral testimony is 25 minutes youer should see a timer in front of youhe somewhere to indicate how much time you have a like to ask you to be mindful of the timer to be respectful of the witnesses and the committee members time there already made a part of the record you are now welcome to offer a five-minute summary of your presentation. >> in morning chairman lynch.

i'm a fellow at the projects i thank you to discuss consumer lending products by technology companies they have to product offerings to put in place and then to reduce cost and prices and for the underserved population. the past 20 years fintech companies to foster broader audiences and expand access to credit they also have the potential to think differently to amplify opportunities for black and other minority communities. the private sector innovations

as well as address and minimum balance requirements to produce the negative impact of volatility. but the by now capabilities so they can comfortably make purchases and spread out payments as they get paid. this is an example. it allows customers to split the cost into smaller payments a without paying any interest or impacting their credit scores the sauce consumers the

ability to construct the way they pay for them and only the ones that they keep and further and fintech companies can help and according to the aarp national survey those age 30 and older was facing the unexpected challenge in the past year finding in 2016 there is no retirement savings at all and those disparities existed by race. to 35% of hispanic families. companies can offer high yield savings account automated savings feature robo and micro investing tools for saving opportunities. to a larger population does

not have a personal credit score wedo black and hispanic people we know black and hispanic people are likely to have lower credit scores traditionally the white people would which means there helping them build savings and byproducts they need but if they can post on access to capitol through racial equity f plan and in addition to be helping meet the needs of small black owned businesses, working with government and provide authentic protectors so laws and regulations are updated, they reflect the change in landscape, and financial services. companies can offer products that bridge the gap between cash and traditional financial services that empower people to participate in a digital economy. they can hire more people of

color particularly blackck peope as we see leaving black neighborhoods and having less access to traditional thinking products if they can meet people where they are in the community looking more intensely with local leaders, mdi and csi. they can partner with those focused on record racial equity we see racial equity disappearing from the banking industry. they can engage with people of color in their communities, in churches, in sororities, reports minority serving institutions to increase financial literacy so these underservedie populations have a better idea of what their products are and what they have to offer. in respect to public policy, they can take increased financial help, increase investments in dfi, they can create auditory financial curriculum for middle and high

schoolers help educate people earlier. give. >> thanknk you. mystically, you're welcome to offer a summation of your testimony. five minutes. >> thank you members of the task force on financial technology for the opportunity to testify before you today. empowering consumers and businesses with greater choice, opportunity and access. my name is penny lee, chief executive officer of the financial technology association, fta. nonprofit trade association representing some of the world's leading technology center financial services. we educate consumers, regulators policymakers such as yourself third-party industry stakeholders on this value on trusted digital financial services and advocate for the modernization of financial regulations, support innovation and promote trn inclusion.

we are in a transition time when technology allows financial services to be more accessible and facilitate faster and easier transaction. consumers and businesses to moderate solutions to manage the pain, secure along, extract expenses and access capitol. if anyone had a meal, medicine or groceries delivered during the pandemic, is likely over financial technology. by using internet problems machine learning automation and other emerging technologies, companies are providing consumers with improved personalized services, greater convenience, increase transparency, reduce costs and broader access to capitol for individuals and businesses. these advances are coming at a critical time for the american economy, premiums remain under bank and underserved and black access to fair credit. that continues to mount, income and wealth inequality continues to grow small businesses seek to

be built from the devastation caused by the covid pandemic. fortunately, tech solutions offer a new paradigm and reshape financial landscape in powerful ways. i will focus remarks on a particular area innovation by now, pay later. global leaders and members of the organization. there is a shift in how consumers, especially millennial's, jonesy millennial's are saving the j money, preferring debit cards, no fees or revolving interest. buy now pay later as an alternative payment allowing for small short-term purchases typically paid in interest-free installments. products are structured to have payment terms that require consumers to pay for purchase and amount of weeks or a few months. this is in contrast to revolving credit and high interest products that may take years to

paydi down, or the true cost ofa purpose purchase and keep consumers in a vicious cycle of debt due to continuous interest charges and rollovers. these products are preferred by consumers for several reasons. they charge b litter or no interest fees on my credit cards which can sometimes cost consumers to 25% of their product purchase value expenses. they are transparent and provide greater cost for consumers, help budget and help manage cash flow and avoid risky products. they are flexible and offer more relief with consumer space and unexpected emergencies. it typically results in repayment over shorter terms. the products areor regulated, subject to key consumer protection laws and regulations including anti- money

laundering, funding, credit reporting, debt collection, privacy, fair treatment of customers and electronic fund transfers. they are subject to protection laws. ourc members are committed to regulatory framework for consumers and actively engaged with financial regulators such c as pursuit. fda appreciates the opportunity to engage with the committee today infuses his ongoing dialogue. innovation including ncl solutions driving competition and s choice for consumers is offering a lower costsu and betr financial outcome. we believe strongly balanced and thoughtful regulation through long-term success to involve stakeholders including providers, consumers and merchants to payment system. look forward to helping informed us. thank you. >> thank you. ms. sanders, you have five minutesor. >> thank you.

thank you for inviting me to testify. i'm here today on behalf of the low income clients of the national law center for economic justice remotely from. we are seeing an explosion of products trying to help people manage gaps between income and expenses. some if wealth is on, can help with consumer's needs but some are designed. >> funding or liquidity provided today to repay later is credit. even chinese tech car, basic consumer protection for credit to ensure its affordable, responsible, transparent and fair. by now pay later products may help consumers manage larger

purchases without long-term debt and high cost credit card. when they operate as promoted, they can be a win-win but multiple loans can be difficult to manage and lead to unaffordable debt load. abuse of probit model may be built strongly consumers. refunds may be difficult to obtain with the item or service finance. access products, payday loans, funds advanced head of payday even if they are generally lower cost and blessed dangerous than traditional loans. most employees rebar every pay period, fees can add up and increase charges for instant access. in the end, low-wage workers may simply be paying to be paid. the trend is for employers and payroll providers to offer free early pay and free early wage access, pay through payroll,

they help manage cash flow. more study is needed. one of the more deceptive innovation forms of credit i've seen is the use of voluntary tips tips model is running and used in access apps, no connection to employers, supposedly overdraft fees, forms of overdraft credit. cash advance features on other apps and platforms like solo funds that appear flow. tips are despised, companies are pushing people into tips, access may be restricted. it's difficult to undo. when caught using one measure, unutterable surface. all the tip models products i listed are balloon payment loans are undoubtedly lead to revolving.

just like the $15 charge on $100 payday loan, they may seem slow but can adddd up with high apr'. natalie, products that claim not to be credit,t they did i equal credit opportunity as we reckon with racism, the impact of new technology, we must not count invasion of fair lending laws. we must keep a close eye on how product evolves. they may not be cost or the ultimate model may be different. recommendations are financing and liquidity products are and should be subject to state funding loans. regulators should closely examine and crackdown on pricing models. all forms of credit should be based on ability to repay those

not unfair, or abusive. sales credit should have the same chargeback rate, reasonable fees the ability to repay and statements on credit card debt. examining providers on these products and regulators should look out for inappropriate use of consumer r data in impact. thank you for inviting me to testify and i look forward to questions. >> thank you. mr. torres, he recognized for fivere minutes for the presentation of yours. >> thank you. good morning, chairman lynch, making member davidson, members of the task force and members of the committee. my name is ruth and i am director of california policy at the center for responsible funding. thank you for the opportunity to testify this hearing. as a latina first-generation, my

immigrant parents have not come to this country equipped with knowledge of the u.s. financial system. i've seen firsthand how easily people can be preyed upon with credit offers make promise financialitre opportunity but cn result in financial harm. as a consumer advocate was worked on policy issues around financial inclusion including predatory inclusion, i know my family experience was not unique. our discussion today is timely. the availability of these products and services, many consumers of household budgets and heightened financial insecurity in the wake of a health crisis with dire economic consequences. more consumers may be looking for financial health after it expires in stimulus payments and.ri mother's offer seemingly low cost or even free reddit, poised to capture this market share but while these products may appear straightforward, consumers and policymakers ask themselves, what is the cap? we need data to understand what they are, prevalence and whether further protections are needed. the testimony i've submitted for the record details are concerned

for products including by now pay later from a third wage access in overdraft avoidance. my oral testimony will focus on by now pay later. in my state of california, financial regulator, department of financial protection intimation discovered by offering these products california consumers,ti certainy now pay later making it legally. enforcement actions against them and required licensing california. because they were licensed from theyir will begin gathering dat. we are awaiting public disclosure but at a d minimum, e know these products have exploded in california. the top six buy now, pay later lenders for nearly 11 million or 91% of the total consumer loan

originated in 2020. if there are problems, their impact will be felt on a wide scale. as described, buy now, pay later users, there are a number of issues in the lending. providers are entering this market and cannot delay their examination to fully understand kethe impact. there signs of missed payment maybe racking up late fees at a high rate. a study found over 1000 users are right, one third report if they've fallen behind in all payments. of those people, over half of the credit scores have been there after. providers will pull credit to determine their ability tola pay they will report his payments to a credit bureau so the products can lead to discredit. as the payday loans, buy now, pay later requires users to have access to a bank account or

credit card. this could lead to problems such as overdraft, not having sufficient funds to cover the payment and inability to paynt other bills. these products are targeting and attracting older people. as they see the credit this can settle young people with debt, starting their journey into adulthood with damaged credit and potential for lifelong negative financial consequences. there's also concern the entire business model rest on friday purchasing items they've not otherwise by. products are algorithmic, we can assume they will be subject to ubinevitable algorithm bias. it's vital subject to regular examination for fair lending ant related concerns. this reinforces the need for consumer financial protection bureau to use its authority to identify and address risks. fish collect data and move toward prevention of these products. thank you for letting me be part of this discussion and i look forward to your questions.

>> thank you, mr. torres. >> not invited to offer a five minute explanation of your testimony you met jeremy lynch, the soffit task force on financial technology, on the president and ceo of innovative -- it's my privilege to appear before you today to share the emerging cash flow products with specific emphasis on the use of burned wage. ipas nonprofit trade association that serves as a leading voice of the electronic payment plan included prepaidea products mobe wallet. the mission is to encourage efficient use ofs electronic payment, cultivate financial inclusion, empower consumers. as we've learned through the pandemic, even the best plan cannot only protect families from unexpected financial disruption.

the federal reserve's 2018 survey of household economics found 40% of american households struggled to come up with $400 pay for an unexpected bill. many consumers have few options should they face unexpected expense betweenn payday and traditional options have proven to be of credit. the u.s. department of labor reports nearly two thirds of u.s. businesses pay their workers on a biweekly semi monthly or monthly schedule which means worker's are in essence, giving employers and interest-free loan a study by the financial health network found 38% respondents reported mismatches between wage income and expenses. during the past ten years, payment innovators have developed new services and products to helpat consumers met these mismatches. one of the most practical affordable options access from pwa. simply put, dwa programs allow

consumers to access their money prior to payday. getting paid daily is not a new concept. includingcans waitstaff, bartenders get paid at the close of the shift. the two former leaders of the consumer financial protection bureau director's and manager didn't agree on much. concrete steps to support dwa. director employers sponsor program in 2017 payday lending role director issued an advisory explaining certain programs are simply not credible. ipa agrees with both manager in maintaining dwa products are not loans or credit products and therefore they should not beth subject to the loans. natural health networks report

in dwa found consumers and financial distress considered title, payday or loans as options. the averagege cost for each transaction ranging from $2.39 to $6.20. the report makes it clear dwa is far less costly for other options. you can be a has grown in popularity because it's safer, cheaper and more efficient alternative to other short-term products on the market. providers do not impact credit ratings and they do not share information to credit reporting bureau. dwa is offered with no recourse and providers have no rights against the user in payments, loss of employment, closed accounts or blocked payments. these are non- recourse transaction whichlo means risk f loss is on the provider. as someone who's been working

since the age of 14, i can easily relate to a retail worker, single-parent or young adult facing financial emergency and lacking easy access to short-term liquidity. at different times in my life, i flopped in the same truth as millions of americans to find themselves unable to pay for utility bills, childcare or unexpected medical expense. treating ew8 as credit would be a mistake in c removing valuable tools and consumer's financial. thank you for the opportunity to present their views on the ipa and i welcome any questions the task force maynd have. >> thank you. i'll recognize myself for five minutes of questions. n questio. this is an interesting dilemma. we often on this committee, especially chairwoman waters and the ranking member talk about banking the un- banked.

so here we have a suite of services or products that you have to admit, they seem to be going not entirely at the cohort we are interested in. but they are going at younger consumers who have a thin credit file, hurt no credit history at all. and so they are sort of going at the problem. but yet, in many respects and i know this is been brought up by ms. torres and saunders that the buy now, pay it later providers do not necessarily share the credit transactions or the credit history with credit rating agencies. and so we do not have all of the data we desire. and ironically data flows so

seamlessly in this industry it's ironic the only data that's not flowing is flowing to the credit agencies that might actually help some of these consumers within credit files. what are we seeing out there? i know a number of you had testimony about the situation and australia were i assume the adoption rate is a little bit more robust. what are the singing terms of defaults, late fees, late payment penalties, what are we seeing in this space? especially compared to the more onerous payday lending products that are out there.

or high interest rate credit cards. miss brody do we have any data on that? >> i do not. >> ms. saunders? >> i set this out in my testimony. one survey done for credit garments at 4% of people who tried buy now pay later in the united kingdom, one bank at 10% of customers made a payment to one of the two large providers that overdrawn their account beyond the amount they were allowed to overdraw. one provider after panel so i had 20% of their revenue from late fees. we do have troubling indications are a number of consumers who are late, who may be struggling. i'm also worried whether some of the providers delay a profit model on those late feet? >> there is a lack of data on

some of these providers. just something you want to add on that any other data that we are getting? >> related to what ms. saunders brought up of those credit karma users, the credit karma survey participants, they did mention they fall behind payment 72% reported they had seen a hit to their credit. which is also pretty concerning rates. >> let me ask then, would it be helpful if you would legislation that would require the by now pay later and alternative financing methods to report their credit history to the credit rating agency? have these consumer patterns. ms. brody? >> i am sorry.

>> ms. torres go ahead i'm sorry. i'm sorry that is a follow-up. we are urging the supervisory powers to collect data, to get a better understanding of what the consumer experience is among all of the users in this product. they are skewing it younger it might be consumers not as familiar with the credit system as other seasoned users might be. >> that is what california is doing? >> so california has licensed them so they are able to take in data. this is the first year we have related to how many, with the volume is. we are not sure what the user experience is which is why were asking to supervise and analyze the data for a better picture of you.

>> any terms of any efforts to get a more granular look at some of the borrowing patterns? >> it definitely supports supervision and data collection. it is worth considering for the they should be reporting to credit bureaus. i think it is a misconception these users do not have credit with a thin score many of them do or could. certainly doctor brody mentioned cash flow underwriting. there are plenty of ways to become eligible for traditional credit. but lending without ability to pay is not the best way to do that. >> okay thank you pretty exhausted my time. >> i started think about this hearing by now, pay later is simply the idea of extending credit. that has been around way before the internet. we think about payment systems

today, can you briefly explain why this is different with payment options that have been around for years may be as far back as the pencil a lot of it is changing the technology were able to facilitate many of these transactions or how these relationships. they put the analogy to the layaway program for it is the difference in alternative method to make payments. unlike the past you would directly to a merchant to be able to sign your contract. you now have the syntax platform that is facilitating from a merchant standpoint and these are products designed for low interest, no fee to have consumers be able to make their payments within their own budgetary needs. it gives the consumer the power. it puts that back into how they want the flexible payment to be able to fit their needs

which they are performing. it is something that is a fundamentally different. it is not a revolving debt situation. it's one they want to satisfy their obligations on a short period of time. >> thank you for that. timing is one of the biggest things and automation. in general there's a third party involved providing the service going to the general store, sign the book by the counter for a solid bet little house on the prairie. the innovation and technology made it so much more accessible. so who is using the products? >> as alluded to it mold millennial's are predominately along with jens e. we sought other generational cohorts as well paid these are individuals right now do not two out of three do not own a credit card with a perforated debit card they prefer to have the control of their own pocketbook with access to the

bank account for that is to its predominately will use a debit card it inflates the overall cost. it gives them certainty it gives and the ability to budget and pay within their own means. usually these are done we pay people every two weeks and it allows them to have that flexibility to meet what their payroll needs are as well. so in the uk people get paid once a month at the pay and three. it's a different model in that sense. the budget these needs in a timeframe in which they preferably. >> thank you for the summary. mr. tate only talked with the earned wage acces >> and then to depositors

online you have internet banking but you still have needs to access the wages can you explain how earned wage access is working and i think if you could mention in your opening statement we are at from the cfpb in their treatment of the earned wage access. >> first have similar backgrounds i was a busboy as my first job and real quick ew

a generally speaking a provider partner with the employer and they should do their due diligence to find the right provider and when they make that service available after they have an agreement it is voluntary they cannot compel an employee to use it generally speaking to fall into the framework it should be no fee for the transaction itself and the calculations are based on the accrued wages of the money you earned up until that point in the pay. , there is no debt collection or recourse there is limited space for the agreements to take place many through the employer are made free where it is low cost some are as hecheap as one dollar and if the

need should arise the employee can then voluntarily participate in the program if the provider makes those funds available. >> towards the rest of the hearing and i yield. >> that chair recognizes the gentleman for five minutes. >> can you use the earned wage access to access on a daily basis that there is a wide variety of programs on the market. >> but it could be in very. >> that the the per transaction could exceed six dollars? >> there are some that do with the financial health network that isal the range. >> . >> i will reclaim my time.

if you are a low-wage worker earning on minimum wage $7.25 per hour then it is 18000 and that see as excessive. does it not you? >> no. if it is yesterday and have a flat tire and need to go to the store not sure why have to wait until friday. >> i have a question. the austrian finance association has a code of conduct that governs matters such as late fees and minimum wage is the american trade association have its own code of conduct? >> we are working and with an active conversations. >> you don't have one yet? >> does the american trade association for access companies have its own code of

conduct quick. >> i am not in your with data trade association. >> is there a trade associationti? >> we represent make you have a code of conduct? >> no we do not. >> what should the minimum age be for a customer who uses by now pay later products? >> i believe they have between 18 through 34 that is using the product right now. >> what about below the age of 18 would you support regulation that requires 18 and older? c >> i will look at the numbers. i will refer toul the members. >> you said we should advocate for thoughtful and balanced. >> the average cohort is between 18 and 35 i would double check with the minimum

one —- members. >> is by now pay later a loan? >> and california and has been designated asif a loan different jurisdictions spent you think it should be classified as alone as a general matter? make it m is a extension of credit and a payment alternative program to pay for in their own time during jurisdictions describe that. >> if i spend your money andd let now and then pay back later, common sense would dictate i am borrowing from you and that you are landing from me. if it looks like a duck and swims in? like a duck then it is probably a duck. if a consumer pays on time and in full by now pay later don't

typically report to credit reporting that they feel that they might report nonpayment is it fair to report one without the other? >> those that are in the space do not report to either side they actively work with credit bureaus right now right now they try to figure out how data collection works traditionally credit bureaus have credit monthly pool for a longer-term loans like mortgages and student loan. >> and went to make sure there are no companies that report? >> there are some. >> is that unfair to do one without the other. >> those that pay on time to regular payment we do think it is the ability to help provide good credit for someone at

play pays consistently. >> thank you said earlier by now pay later leads to more savings there was a survey to suggest that by now pay later shoppers increase spending by more than 40 percent is there a concern have by now pay later products could cause consumers to live beyond their they use it because they know exactly what the cost will be they are not incurring interest fees because it gives them a certainty and 97 percent others using by now pay later do not a gives and that consistency to budget. >> my time is expired.

>> the gentleman from texas. >> thank you very much. thank you for this worthy and insightful hearing providers and their ideas. temr. tate i would like to see if you have an opinion about something that has been an issue. we have had directors presumptively was a positive part of the ability for people to use this. do you have an opinion about this cracks in the success ofha

the model and what you think of it? >> i apologize if you didn't hear the question i should'veli said mr. tate earlier did you hear my question? >> yes sir. >> to answer your question back in 2017 director cordray released the payday rule set aside provisions within the rule of earned wage access products as an alternative and then he later framework or a foundation for these products to thrive and grow. and in the director in michigan advisory opinion expanded on the groundwork that director cordray laid in 2017 and in fact he released aa

rule made a statement is on the website today talking about how these products are a positive thing for people and also i have a quote it also excludes coverage new innovations such as no cost advance or programs to advanced earned wages when offered by employers ormp business partners. and in 2020 director built upon and said to make it clear even if you don't fall within the framework of the advisory opinion, it is said they would take the totality of the circumstantial view of each product and provider to make a determination of their own. just because you are not within the framework does not make you credit. that is together. they did not agree on much they have expanded this product which is very popular.

there are 45 or 55 million users and if you read the financial health networks report, they all talked about how this is significantly less than alternatives that are out there on the market. >> thank you very much this isin the feedback i believe helps the committee to recognize that programs like this actually help people it was intended for that was insightful and i want to thankch you for not only having this hearing that for those who are in the marketplace to have the effectiveness of what we are trying to do to help consumers with the balance but then also make sure the net comes out with the advantage overall for the consumer in this process. thank you very much.

thank you for your performance. i yield back. >> the chair is pleased to recognize the chairwoman for the full committee who has this committee for a very long time the gentle lady california is recognized for five minutes. >> i appreciate the opportunity to share your remarks. earned wage access allows employees to access part of the earned income immediately without having to wait until the end of the pay period. this sounds very similar to a payday loan. so the cfpb under the former director did not agree. may 2020 the cfpb issued an advisory opinion that certain products are not credit in the truth of lending act and the

creative cycle of unsustainable borrowing as employees who should be paid valuable on their own hard earned income in the forced to pay additional fees to access income i fear the underlying problem is the fact that too many employees are not paid a livablebl wage has been developed with the basic business model is less about innovation and more about evasion. do you think it is a priority for the director to we visit the opinion? do you think wage access should be treated as credit and how can you tell us how those users are working class who are affected by the lack for those actions in particular. >> you do think the cfpb

should revisit the opinion issued under director. but under director cordray he was addressing those conventional payday loans and this was a different product. so it was of less significant concern but that credit laws are incredibly important to stop this does creative cycle every borrowing and then to cause fees as a congressman said that could be more of the wage workers pay. >> i yield back spent the chair now recognizes the gentle man from missouri for five minutes. >> thank youou mr. chairman. thank you for your testimony you indicate that.

>> and then the next evening as well. so i have to have a refrigerator. so i go to place for them to sellll me this and then the comments are that it empowers individuals for what they want to do and they can do without or they can borrow money from someplace else or use this method of payment to buy now pay later and then the need

for you indicated 97 percent experience no late fee? >> that is correct space a 97 percent of the people use these products in this method of purchasing and paying in an appropriate manner. t misunderstands that all the abuse going on what percentage of that 3 percent that are late are abused by late fees? >> if i hear your question correctly it is on the revenue 1 model less than 15 percent of revenues are attached to a late fee so this is not a model. this is reoccurring debt. these other products that help consumer have a flexible payment option that has a

clear and definable payment period that they can meet it is in their interest to meet to meet those requirements of that they can use the product over and over again. >> the point is only 3 percent of people experience a late fee so how many of those i'm not condoning those folks. they should not do it may shared find a way to punish them but don't throw the baby out with the bathwater this is a way to allow people to pay for them in a timely manner as they can afford them. >> and to understand the mechanics when somebody does wmiss a payment the account is immediately pause they cannot participate and anymore services and then provided to them again until they rectify or satisfy that original obligation.

it's not something to reward more buying power when you cannot meet the minimum payments it tries to design clear and assignable payment methods accountable to what the pay period might be. >> this is where three paying a debt or buy now pay later situation the responsibility falls on them? >> wero should not penalize the people that try to sell products in that manner and some folks are 97 percent to pay on time and make those agreements appropriately don't seem you are indicating your

association working with the credit bureau that this can be done we do this with utilities i'm on this committee over the last several years we have added these two credit bureau files for people who have reported on and then to get a credit for that and is something we should continue to work on can you elaborate? >> and also to modernize credit bureaus so they can properly assess and analyze the data we are sending them. >> so are you talking about us to legislatively tell people when you implement a program like this you automatically report or are they working with different entities and associations to work you to help the consumers to utilize? >> if they are actively working with credit bureaus so they understand what the data is saying and then to pay $25

every two weeks over the course that means my credit perspective someone and consistently pays on time not occurring late fee on —- incurring late fees and how they can build credit we want to make sure they capture that data correctly is not seen as a negative pool because these are new products coming into the marketplace we went to ensure they understand them properly so they do not do harm to the consumers but with a p positive credit history. >> thank you. i yield back. >> the chair recognizes the gentleman from wisconsin for five minutes. >> we are experiencing a labor crisis you can drive almost

anywhere there are help-wanted signs and down mismatch in our economy with the 10 million jobs available to get workers back to work is something we should spend a lot of time digging into and in particular as a look at the ability of ew aid to alter the labor market, i'm curious of the role the park can play to encourage worker participation in improving employee retention to better connect the work and labor of an individual to the quick payout and think of a bartender as quick access to cash maybe up the nextk drive shaft working friday or saturday night it's hard work we can walk home with money in your pocket.

that it is different if you have the largest companies of the united states you don't have that opportunity to walk out the door to pick up an extra shift to put money in your pocket maybe you have a bill due on monday you have a need for extra cash as people got to do christmas shopping to pick up an extra shift but you maye not have that ability to pull that cash forward to benefit from the labor you did that weekend so maybe knockout christmas shopping on sunday. so talk about how these services are provided to the employee partnerships with the employers and whether or not it has an impact on employee retention? >> i agree with my colleague on the piano when she touched on bringing financial services to people where they are. technology allows us to do that in ways we cannot not conceive of five or ten yearst ago. this is used as a tool and

helps them to manage their money and smooth out income volatility and at the same time it is a dignity and empowerment tool to take more control of their money and allow them to make decisions in real time is something what you come up. which i have certainly experienced the conversationn we have had is with ew aid to keep the consumer in mind and what would you do in those places to give those consumers more tools? >> 's earlier you ask questions. >> and in some cases it is free. so somebody ultimately went off to be the employer so this

is a popular benefit you can see worker or potential employee to think company a does not have in common company be doeso not. so one of the concerns as they leave the job if they are on the work. >> but the employee.

>> there are no be course products. >> there is no risk that they are on the hook? >> so similar to the numbers by now pay later it is 97 percent recovery and that is as well as the financial health network. >> siemens your thinking it is a recourse loan it is an important point you are familiar with the advisory opinion last year that the services can you describe the stance on this. >> if they issue the advisory opinion they are building on the principles laid out to be

set aside by director cordray. if you read the commentary if a layout the framework they also make it clear again to take a totality of this circumstances so i cannot put myself in their shoes i would assume they recognize we are in the marketplace with lots of innovation

and i had recourse and i was treated fairly. so of these low-wage industries is there a conflict? it seems like it is an

employer decision as to which platform they choose to deal with and in the payments are various. i'm just curious is there a danger where the employee is not part off this conversation regarding the terms on which the early wage access might be gained? is there between the employer and the company that will conductors? any views on that? >> i am concerned about companies having a hard time competing. i know that there are some that offer the's programs for

free and they are hard against those employers that would rather have low wage worker pay. >>et . >> and looking at the amount of money that is generated that is diverted from that traditional banking system with the other big players getting involved with the by now pay later space. there seems to be more going on. there is cross-selling the importance of the data, what are the implications with respect to mr. chopra was in from cfpb and he wanted to ask amazon and others about data collection on the financial

services side. are there some issues we should be cognizant never actively investigating with respect to how consumer data is used in this context, ms. saunders? >> absolutely. anytime data is collected it's what they were did approve of some of these models look too good to be true or are they something different from what they appear it's always good to know the real business model. >> are there any limitations how that data is gathered or used in this space? but these data and algorithms how people will pay it does not affect your credit score like a credit card or payday lender. we have to have some type of data but it is not see in your

credit report on seven to ten years like a fico score would. >> the data can be used to push other products onto a consumer who may not have been looking for that in the first place so it's a way to entice the selling products to have more debt that they could not handle that they were looking for in the first place. >> and with that own issue consumer data was settlement of in order. >> any concerns we got with the use of data especially with the big players getting into the space spent my time is expired.

>> i'm glad we get an extra round to ask some questions that cross-selling i love cross-selling i go to amazon because if i like this i might like that that is one of the best uses of data if the information can be protected and kept private and the privacy concerns for the whole economy when the most important things congress can do is pass u the updated privacy law so then i was so encouraged by the last hearing on financial privacy because there is a lot of things on there. so the idea to go back to the cartoon days probably everyone has heard the phrase i'll gladly pay you tuesday for a hamburger today that is the extension of credit.

nobody is making anyone give a hamburger it is just an offer it is a service that is provided. some people go from personally lending a friend at no cost. or i will give you $100 if you give me 110 next week it is a simple fee. but then you formalize it. i did that for a friend or two maybe i just started a business how does somebody get into this business? you have to launch a bank and one of the obligations to protect consumer privacy if you set it up in the space? >> that's not as create easy as creating a burger stand and there are a p lot of players in the space already. it does require you to be inherent to federal law in

state law and the whole host of regulations thatat are there so it would require a tremendous amount of product design for those relationships to have and to have that with merchants and then to build the product to entice consumers to use the product in a responsible manner. is not something you can just turn key overnight so to be very large and sophisticated companies but they are providing that service and that need is now we're all more mobile and digital using the payment system on the click ofe a button talking to merchants and consumers to have both the certainty of when it is occurring and that

would be taken in a responsible manner to have that comfort to know that platform allows them to receive payment for their purchase or for their product it is an ecosystem that is large and can be complex the one that technology is allowing us to have. there are laws that all the businesses would have to be subject to and then that duty of care with the data. potentially they are facing liability for inappropriate use or breach. we should clarify some of the laws so we try to force everything that is innovative p to what is in the past and updating the framework so when you think of that alternative of the remittance systems in america the system is not

built around that that it is permissible. that doesn't mean you are exempt from the know your customer requirements of your internet business but it operates differently in terms of how the payments are due , to whom and whether t information moves or that cashso moves so how would you say you could explain yes we are compliant with some laws that should not be treated as a payday lender, or should you? > we are fundamentally different they have products that are built for people to have a long-term debt cycle and with that revolving debt to pay it is satisfying that obligation in a very short amount of time with low fees and zero interest

. >> and those banks that have been leaving black neighborhoods and i cannot speak to how fintech companies have teams that. >> we don't have enough information to determine if that has racial disparities. >> i don't. i can speak to the banking part of banks leaving have heard neighborhoods and communities but i cannot speak specifically to how fintech companies have helped that i cannot provide particular data at this time.

>> thank you. >> the gentleman back one —- yield back. >> i like to think our witnesses for their testimony today and then for submitting additional questions to the chair and i would just ask the witnesses to respond as promptly as you are able without objection but all would be included for the record all materials should be submitted to the e-mail address provided the hearing is adjourned. thank you. [inaudible conversations] will.

[inaudible conversations] [inaudible conversations] this oo

hours. >> we will hear argument this morning >> we'll hear the argument this morning new york state rifle association. mr. comment? >> mr. chief justice may please the court. the text of the second amendment enshrines a right not just to keep arms that they are them exhaustively surveyed by the court in the heller decision confirms that individual right to carry firearms outside the home for purposes of self-defense that history is so clear that new york nearly contests