'Earned Wage Advance' - a payday loan by any other name
Costs multiply when consumers try to borrow their way out of a hole
The word about payday loans has gotten around and many consumers now try to steer clear of them. But too often, they run into something called the “Earned Wage Advance” (EWA). It’s basically a payday loan by another name and has just as many strings attached.
A new report from The Center for Responsible Lending (CRL) shows that people who take out these loans experience steep and mounting costs as well as increasing financial stress due to increased use over time. They keep taking out new loans to cover the old ones, in other words, paying fees and interest each time.
This report uses anonymized transactions data from thousands of app users’ bank accounts to track individuals’ borrowing month-by-month over a full year starting from their first loan. The report finds that over the course of a year, payday loan app users on average doubled their borrowing frequency – with rising costs reflecting that – and, over time, they became increasingly likely to borrow from multiple apps at once, doubling or tripling their costs.
These borrowers also paid triple-digit annual interest rates for app-based payday loans that were comparable to rates for storefront payday loans.
“This report shows how payday loan apps trap people in a cycle of reborrowing and debt,” said Christelle Bamona, senior researcher at CRL and co-author of the report. “These loans are exorbitantly priced, often draining low-wage workers of hundreds of dollars in fees annually.”
“The evidence shows these loans pushing people toward dire financial straits rather than tiding them over,” said Lucia Constantine, senior researcher at CRL and co-author of the report. “Borrowers increasingly exhibit signs of financial distress, including escalating use of these loans.”
Key Findings of the Report
Borrowing from payday loan apps escalates over time. On average, users doubled their borrowing frequency within the first year of tracked usage, rising from two to four loans per month.
Simultaneous borrowing across multiple apps increases over time. Most users (53%) borrowed from more than one lender during their first year. The share of payday loan app users who borrowed from multiple apps in a single month more than doubled from 16% in the first month to 38% in month four, and increased to 42% by month twelve.
Heavy users face much higher costs. During the first year of tracked payday loan app usage, heavy users paid $421 in total loan and overdraft fees, almost triple the costs for moderate users and more than six times those of light users.
Payday loan apps come with steep costs. The average APR for observed loans that were repaid in 7 to 14 days was 383%, a rate comparable to a typical storefront payday loan (391%).
Background
While these products are marketed by the industry as “Earned Wage Advances” (or by similar names), the term “payday loan apps” is used throughout the CRL report, because they’re basically the same thing.
CRL analyzed anonymized financial transactions data from January 2021 through May 2025 for over 5,000 low- to moderate-income consumers who use SaverLife, a nonprofit dedicated to using technology to improve financial health, and who have also borrowed from at least one of five direct-to-consumer payday loan apps: Brigit, Cleo, Dave, EarnIn, and FloatMe.
Following individual borrowers month-by-month for a year, starting from the app user’s first loan, researchers tracked the frequency of loans, fees paid for those loans, overdraft fees paid to banks and credit unions, and the number of concurrent apps that users borrowed from.
The report, “Escalating Debt: The Real Impact of Payday Loan Apps Sold as Earned Wage Advances (EWA),” is linked here and above.
Don’t count on the feds
You might think that federal consumer protection agencies would come to the rescue but don’t count on it. The emaciated Consumer Financial Protection Bureau is looking the other way when it comes to enforcing regulations governing payday loans and other high-interest schemes, like EWAs. That means consumers should run, not walk away from the expensive loans.
The CFPB will not prioritize enforcement of payday loan regulations, focusing instead on "pressing threats" to consumers.
Consumer advocates express outrage, claiming this decision allows payday lenders to exploit financially vulnerable individuals.
Reports reveal that payday lenders drained over $2.4 billion from low-income borrowers in fees last year, with many borrowers falling into a cycle of debt.
In its haste to please the financial services industry, the CFPB – now a shadow of its former self – has announced it would stop enforcing Biden-era regulations on payday and car title loans, the super-high-interest loans that trap desperate consumers in a cycle of debt that can be nearly impossible to escape.
“It’s outrageous that the CFPB will not enforce the law that prohibits payday lenders and other 200% APR lenders from continually debiting people’s accounts, subjecting them to multiple NSF and overdraft fees,” said Lauren Saunders, associate director of the National Consumer Law Center.
The bureau also announced it plans to revoke the Buy Now, Pay Later interpretive rule, again igniting backlash from consumer advocates. Along with car title loans, the three lending schemes are considered predatory and are banned in numerous states.