b'FintechIn 2020, Goodwin continued to monitor and analyzeCFPB Issues Advisory Opinion on Earned Wage developments in the Fintech industry. The COVID-19Access Programs pandemic expedited the shift from traditional, In November, the CFPB issued an advisory opinion in-person banking and financial services to an online,regarding certain earned wage access (EWA) products. cashlesssociety.Generally, EWA products offer an option for employees to meet short-term liquidity needs by receiving an advance on earned but unpaid wages, thereby avoiding Key Trends higher cost alternatives such as traditional payday or In 2020, many Fintech companies continued leveraginginstallment loans. The CFPBs advisory opinion lists their existing technology and quickly adapted toseven criteria that an EWA program must meet in order the shifting financial landscape. Historically, Fintechto qualify as a Covered EWA Program exempt from companies were able to obtain their first bank chartersRegulation Z, including that the program provider in 2020. However, as Fintech companies sustainedcontracts with the employer to provide the benefit to or surpassed the industry expansion seen in previousemployees, the provider does not advance more than years, federal and state regulators have tried to keepthe accrued cash value of wages earned at any given up. The result has been a series of new and proposedpoint in time, the employee receiving the benefit incurs rules and regulations, as well as guidelines, aimed atno charges and makes no payments (including fees), regulating this ever-evolving industry that continues toand the program provider does not assess the credit grow in importance.risk of the employee. Even EWA programs that do not meet the exclusion for a Covered EWA Program need not comply with Regulation Z, however, if the program 2020 Highlights is structured in such a way that it does not meet the definition of crediti.e., if no finance charge applies Guidanceto the transaction or the funds will be repaid in four or fewer installments. Fair Lending and AI Guidance In its Fair Lending Report released in April, the CFPBLaws, Rules and Regulationsstated it is monitoring artificial intelligence (AI), and moreCalifornias Mini-CFPB specifically, machine learning, a subset of AI for fairIn January, three new California consumer finance lending and credit access issues. The CFPB specificallylaws that have the potential to significantly affect identified the issue of how complex AI models addressFintech companies became effectivethe California the adverse action notice requirements in the ECOAConsumer Financial Protection Law (CCFPL), Debt and the FCRA, which require creditors to explain toCollection Licensing Law (DCLL), and Student Loan consumers the main reason or reasons for a denial ofBorrower Bill of Rights. The CCFPL expands the scope credit or other adverse action. The Fair Lending Reportof the Department of Business Oversights current notes that, while there may be questions about howpowers and will rename the Department of Business institutions can comply with the adverse action noticeOversight as the DFPI. The DCLL now requires, in requirements if AI decisions are based on complexrelevant part, that persons engaged in the collection of interrelationships, the CFPB expects that more methodsconsumer debts obtain a license from the DFPI. Finally, of accurately explaining complex AI decisions willthe Student Loan Borrower Bill of Rights gives the DFPI emerge. Thus, institutions, including Fintechs, shouldbroader authority to regulate student loan servicers. continue to develop tools to enhance the explainabilityWith respect to the new DFPI, which has been of AI and facilitate use of AI for credit underwriting that isdubbed a mini-CFPB, the DFPI will have jurisdiction compliant with adverse action notice requirements. 20'