    [House Hearing, 119 Congress]
    [From the U.S. Government Publishing Office]

                       DELIVERING FOR AMERICAN CONSUMERS:
                        A REVIEW OF FINTECH INNOVATIONS
                                AND REGULATIONS
    =======================================================================

                                    HEARING

                                   BEFORE THE

                    SUBCOMMITTEE ON DIGITAL ASSETS, FINANCIAL
                     TECHNOLOGY, AND ARTIFICIAL INTELLIGENCE

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES
                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED NINETEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                JANUARY 13, 2026

                                   __________

                               Serial No. 119-50

           Printed for the use of the Committee on Financial Services

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                www.govinfo.gov

                                  __________

                      U.S. GOVERNMENT PUBLIISHING OFFICE
    63-578 PDF               WASHINGTON : 2026
    =======================================================================

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        FRENCH HILL, Arkansas, Chairman

    BILL HUIZENGA, Michigan, Vice        MAXINE WATERS, California, Ranking
        Chairman                             Member
    FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice
    PETE SESSIONS, Texas                     Ranking Member
    ANN WAGNER, Missouri                 NYDIA M. VELAZQUEZ, New York
    ANDY BARR, Kentucky                  BRAD SHERMAN, California
    ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York
    TOM EMMER, Minnesota                 DAVID SCOTT, Georgia
    BARRY LOUDERMILK, Georgia            STEPHEN F. LYNCH, Massachusetts
    WARREN DAVIDSON, Ohio                AL GREEN, Texas
    JOHN W. ROSE, Tennessee              EMANUEL CLEAVER, Missouri
    BRYAN STEIL, Wisconsin               JAMES A. HIMES, Connecticut
    WILLIAM R. TIMMONS, IV, South        BILL FOSTER, Illinois
        Carolina                         JOYCE BEATTY, Ohio
    MARLIN STUTZMAN, Indiana             JUAN VARGAS, California
    RALPH NORMAN, South Carolina         JOSH GOTTHEIMER, New Jersey
    DANIEL MEUSER, Pennsylvania          VICENTE GONZALEZ, Texas
    YOUNG KIM, California                SEAN CASTEN, Illinois
    BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts
    ANDREW R. GARBARINO, New York        RASHIDA TLAIB, Michigan
    SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
    MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia
    MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado
    MONICA DE LA CRUZ, Texas             CLEO FIELDS, Louisiana
    ANDREW OGLES, Tennessee              JANELLE BYNUM, Oregon
    ZACHARY NUNN, Iowa                   SAM LICCARDO, California
    LISA McCLAIN, Michigan
    MARIA SALAZAR, Florida
    TROY DOWNING, Montana
    MIKE HARIDOPOLOS, Florida
    TIM MOORE, North Carolina

                          Ben Johnson, Staff Director

                                     ------

     SUBCOMMITTEE ON DIGITAL ASSETS, FINANCIAL TECHNOLOGY, AND ARTIFICIAL
                                  INTELLIGENCE

                        BRYAN STEIL, Wisconsin, Chairman

    TOM EMMER, Minnesota, Vice Chairman  STEPHEN F. LYNCH, Massachusetts,
    BILL HUIZENGA, Michigan                  Ranking Member
    WARREN DAVIDSON, Ohio                BRAD SHERMAN, California
    JOHN W. ROSE, Tennessee              BILL FOSTER, Illinois
    WILLIAM R. TIMMONS, IV, South        JOSH GOTTHEIMER, New Jersey
        Carolina                         AYANNA PRESSLEY, Massachusetts
    MARLIN STUTZMAN, Indiana             RITCHIE TORRES, New York
    BYRON DONALDS, Florida               SYLVIA R. GARCIA, Texas
    ZACHARY NUNN, Iowa                   BRITTANY PETTERSEN, Colorado
    TROY DOWNING, Montana                SAM LICCARDO, California
    MIKE HARIDOPOLOS, Florida
    TIM MOORE, North Carolina

                            C  O  N  T  E  N  T  S

                                  ----------

                           Tuesday, January 13, 2026
                               OPENING STATEMENTS

                                                                       Page
    Hon. Bryan Steil, Chairman of the Subcommittee on Digital Assets,
      Financial Technology and Inclusion, a U.S. Representative from
      Wisconsin......................................................     1
    Hon. Stephen Lynch, Ranking Member of the Subcommittee on Digital
      Assets, Financial Technology and Inclusion, a U.S.
      Representative from Massachusetts..............................     2

                                   STATEMENTS

    Hon. French Hill, Chairman of the Committee on Financial
      Services, a U.S. Representative from Arkansas..................     4

                                   WITNESSES

    Ms. Jodie Kelley, Chief Executive Officer, Electronic
      Transactions Association (ETA).................................     4
        Prepared Statement...........................................     7
    Mr. Kevin Lefton, Global General Counsel, Stream.................    24
        Prepared Statement...........................................    26
    Mr. Ram Palaniappan, Founder and Chief Executive Officer, EarnIn.    30
        Prepared Statement...........................................    32
    Mr. Todd Zywicki, Law Professor, George Mason University Antonin
      Scalia Law School..............................................    40
        Prepared Statement...........................................    42
    Ms. Delicia Reynolds Hand, Senior Director, Digital Marketplace,
      Consumer Reports...............................................    73
        Prepared Statement...........................................    75

                                    APPENDIX

                       MATERIALS SUBMITTED FOR THE RECORD

    Hon. Bryan Steil:
        Chamber of Progress60112.....................................
        National Asian/Pacific Islander American Chamber of Commerce
          and Entrepreneurship (National ACE)........................   114
        Labor Council for Latin American Advancement (LCLAA).........   117
        UnidosUS Action Fund.........................................   119
    Maxine Waters:
        America's Credit Unions......................................   121
        National Multifamily Housing Council (NMHC), the National
          Apartment Association (NAA), and the Real Estate Technology
          and Transformation Center (RETTC)..........................   123
        Center for Responsible Lending (CRL).........................   126
    Hon. Bryan Steil and Hon. Maxine Waters:
        U.S. Black Chambers, Inc. (USBC).............................   135

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Written responses to questions for the record from Representative
      Bryan Steil
        Mr. Kevin Lefton.............................................   138

                                  LEGISLATION

    H.R. ------, the Earned Wage Access Consumer Protection Act......   141
    H.R. ------, the Fostering the Use of Technology to Uphold
      Regulatory Effectiveness in Supervision (FUTURES) Act..........   156
    H.R. ------, the Financial Services Innovation Act of 2026.......   164
    H.R. ------, the Model Risk Management Modernization Act.........   182

                       DELIVERING FOR AMERICAN CONSUMERS:
                        A REVIEW OF FINTECH INNOVATIONS
                                AND REGULATIONS

                                  ----------

                           Tuesday, January 13, 2026

                 U.S. House of Representatives,
             Subcommittee on Digital Assets, Financial
                                            Technology,
                           and Artificial Intelligence,
                               Committee on Financial Services,
                                                        Washington, DC.

        The subcommittee met, pursuant to notice, at 10:08 a.m., in
    room 2128, Rayburn House Office Building, Hon. Bryan Steil
    [chairman of the subcommittee] presiding.
        Present: Representatives Steil, Hill, Huizenga, Davidson,
    Rose, Timmons, Downing, Haridopolos, Moore, Lynch, Waters,
    Sherman, Foster, Pressley, Torres, Garcia, and Liccardo.
        Chairman Steil. The Subcommittee on Digital Assets,
    Financial Technology, and Artificial Intelligence will come to
    order.
        Without objection, the chair is authorized to declare a
    recess of the committee at any time.
        Today's hearing is titled, ``Delivering for American
    Consumers: A Review of FinTech Innovations and Regulations.''
        Without objection, all members will have 5 legislative days
    within which to submit additional material for the chair for
    inclusion in the record.
        Chairman Steil. I now recognize myself for 4 minutes for an
    opening statement.

        OPENING STATEMENT OF HON. BRYAN STEIL, CHAIRMAN OF THE
       SUBCOMMITTEE ON DIGITAL ASSETS, FINANCIAL TECHNOLOGY AND
            INCLUSION, A U.S. REPRESENTATIVE FROM WISCONSIN

        Technology continues to revolutionize our financial system,
    from payments to newer applications, like earned wage access.
    Digitalization, cryptography, and artificial intelligence give
    consumers faster, cheaper payment, flexible access to earned
    income, and new ways to manage everyday purchases. These
    innovations have the potential to improve Americans' financial
    well-being by making their day-to-day finances more practical,
    predictable, and affordable.
        Historically, workers were paid when they earned wages, yet
    today, many workers in our economy go home without their
    earnings. Holding an employee's pay until the end of a payroll
    cycle is a relatively modern practice. Earned wage access helps
    restore this link between work and pay by allowing workers the
    flexibility to access their wages as they earn them. This
    flexibility can help families deal with unexpected expenses,
    from medical bills to car repairs, or simply pay recurring
    bills timelier. By providing timely access to earned income,
    Earned Wage Access (EWA) can help Americans achieve their
    financial goals and help businesses improve worker
    satisfaction, retention, and overall productivity.
        Importantly, innovations, like EWA and buy now, pay later
    options, often coexist and intertwine with traditional
    financial institutions. Banks and other lenders are vital
    partners with financial technology (fintech), providing
    liquidity and credit as well as access to infrastructure like
    payment rails. These partnerships provide more efficiency and
    options for consumers and create new products to enhance
    competition. Our financial institutions can also benefit from
    partnering with fintech companies by enhancing their offerings
    and allowing small and community institutions to deploy
    cutting-edge tools.
        As we explore the benefits of fintech innovation, we must
    make sure that our regulatory framework is fit for purpose. A
    well-functioning framework for fintech should focus on risks
    posed by specific activities, not the identity or business
    model of the provider. Fintech products that meet consumer
    demand and improve Americans financial lives should have clear,
    practical legal pathways for operation and strong consumer
    protections. By supporting thoughtful and balanced regulation,
    we can encourage innovation while ensuring consumer protection
    and promoting financial well-being for American households and
    businesses alike. Today's hearing will inform these efforts,
    and I thank our witnesses for their upcoming testimony.
        I will now recognize the ranking member of the
    subcommittee, Mr. Lynch, for 4 minutes for an opening
    statement.

    OPENING STATEMENT OF HON. STEPHEN LYNCH, RANKING MEMBER OF THE
       SUBCOMMITTEE ON DIGITAL ASSETS, FINANCIAL TECHNOLOGY AND
          INCLUSION, A U.S. REPRESENTATIVE FROM MASSACHUSETTS

        Mr. Lynch. Thank you very much, Mr. Chairman. I also would
    like to thank our witnesses for your willingness to come
    forward and help the committee with its work. This hearing
    continues our committee's work to examine fintech innovation,
    including the use of fintech liquidity products, such as buy
    now, pay later services and earned wage access. This is an area
    of great promise and potential to overcome preexisting barriers
    and to expand economic opportunity if we include proper
    guardrails that assure necessary consumer protections. This
    hearing continues our work, and these products present an
    attractive source of capital liquidity to help people meet
    short term needs. However, some consumer advocates and other
    stakeholders have pointed to multiple consumer protection
    concerns associated with fintech business models that
    incorporate hidden fees, lack meaningful underwriting and are
    not subject to adequate oversight, and they may target
    vulnerable consumers with deceptive claims about credit
    building.
        With the use of these products surging since the beginning
    of the coronavirus disease 2019 (COVID-19) pandemic, our
    committee's work on this issue has become increasingly vital to
    ensure that the proper oversight and adequate consumer
    protections are in place. As ranking member of this
    subcommittee, I participated in multiple hearings to examine
    the proliferation of fintech-powered earned wage access
    services that enable employees to receive a cash advance on
    their paycheck prior to payday, often at an inflated fee or at
    the cost of a voluntary so-called tip. Whether offered through
    an employer or through a direct-to-consumer provider, this on-
    demand pay market has grown rapidly with employers and
    providers now advancing billions of dollars in wages to
    millions of employees annually.
        As reported by the Harvard Kennedy School in a recent study
    on the proliferation of earned wage access products, 40 percent
    of the people who have access to an earned wage access
    application through their employer use it at least once a week.
    Over 75 percent of respondents indicated that they were using
    their money to pay for regular bills rather than emergency
    expenses, with one typical user noting, ``It just turned into a
    cycle of always taking money out.'' Moreover, the rush fees,
    tipping options, and other hidden charges associated with
    certain business models--not all--collectively amounted to an
    estimated annual percentage rate of more than 300 percent in
    some cases. Similarly, a growing number of consumers are now
    relying on buy now, pay later services to make ends meet. With
    Federal Reserve data indicating that nearly a hundred million
    Americans used buy now, pay later at least in 2025. These
    services, which allow consumers to pay for purchases over
    multiple partial payments, are now widely available at checkout
    both online and in person, where a customer can opt into
    services and receive approval in minutes without a hard credit
    check.
        Despite purporting to offer free services, some buy now,
    pay later loans, especially longer-term loans, can ultimately
    be more costly than using a traditional credit card. The
    Federal Reserve reports that nearly one-fourth of buy now, pay
    later users did not make payments on time and faced later fees.
    Considering the proliferation of buy now, pay later, earned
    wage access, and other fintech liquidity products, the consumer
    protection and enforcement mission of the Consumer Financial
    Protection Bureau is more important than ever.
        Unfortunately, President Trump does not agree. The Trump
    Administration has undertaken unprecedented and unlawful
    efforts to dismantle the very agency that should be protecting
    consumers against fraud and exploitation in this very area,
    including the issuance of cease work orders that halted
    virtually all Consumer Financial Protection Bureau (CFPB)
    enforcement supervision and enforcement functions, the
    abandonment of dozens of pending enforcement cases, and the
    attempted termination of about 90 percent of CFPB Agency staff.
    I urge my colleagues to defend the CFPB in the face of these
    attacks. It will help with the innovation that we all desire to
    see in this wage space. Thank you, Mr. Chairman, and I yield
    back the balance of my time.
        Chairman Steil. The gentleman yields back. I now recognize
    the chairman of the full committee, Mr. Hill, for 1 minute for
    an opening statement.

      STATEMENT OF HON. FRENCH HILL, CHAIRMAN OF THE COMMITTEE ON
        FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM ARKANSAS

        Chairman Hill. Thank you, Chairman Steil, for your great
    leadership of our subcommittee. This hearing is really deeply
    personal for me. For the past 4 decades as a former community
    banker and investor, I have seen how technology has expanded
    across banking, sharpened competition, and broadened choices
    for consumers and financial products. Earlier, as a payment
    system innovator, I witnessed banks' strong demand for modern
    tools and how meeting that demand delivered real benefits for
    our customers across the board. This committee has long
    championed innovation and responsible partnership between
    traditional financial institutions and technology companies.
    That commitment is now more important than ever. We should
    encourage regulators to foster those partnerships, unlock
    innovation, and reduce unnecessary regulatory burdens. I look
    forward to the discussion today on how we can work together to
    promote innovation, strengthen competition, and expand consumer
    choice. Thank you Mr. Chairman, and I yield back.
        Chairman Steil. The gentleman yields back. Today, we
    welcome the testimony of Jodie Kelley, chief financial officer
    of the Electronic Transactions Association; Mr. Kevin Lefton,
    global general counsel at Stream; Mr. Ram Palaniappan, founder
    and chief executive of EarnIt; Todd Zywicki, law professor at
    George Mason University at the Antonin Scalia School of Law;
    and Delicia Reynolds Hand, senior director of digital
    marketplace at Consumer Reports. We thank each of you for
    taking the time to be here. Each of you will be recognized for
    5 minutes to give an oral presentation of your testimony.
        Without objection, your written statements will be made
    part of the record.
        Ms. Kelley, you are now recognized for 5 minutes for your
    oral remarks.

    STATEMENT OF JODIE KELLEY, CHIEF EXECUTIVE OFFICER, ELECTRONIC
                        TRANSACTIONS ASSOCIATION

        Ms. Kelley. Thank you. Chairman Hill, Chairman Steil,
    Ranking Member Lynch, and members of the subcommittee, thank
    you for the opportunity to testify today. My name is Jodie
    Kelley, and I am the chief executive officer of the Electronic
    Transactions Association, or ETA, the leading trade association
    representing the global payments industry. Our members, from
    banks and networks to fintech innovators, process more than $57
    trillion in transactions annually and power commerce for
    millions of American consumers and businesses. Today, I would
    like to make three points. First, digital payments are
    essential national infrastructure, delivering enormous value to
    consumers and small businesses. Second, this innovation already
    operates within a robust regulatory framework. Third, targeted
    Federal leadership, especially on fraud and artificial
    intelligence, can strengthen that framework without slowing
    innovation.
        Payments have evolved from cash and checks into a secure
    digital ecosystem that underpins daily economic life. Payments
    are how Americans get paid, pay bills, run businesses, and
    manage emergencies. Digital payments enhance affordability by
    expanding consumers' effective spending power. Credit cards,
    buy now, pay later options, and cash back rewards help families
    manage unexpected expenses and smooth cash-flow. In 2024 alone,
    consumers received more than $43 billion in cash back rewards.
    Those are real dollars returned to real household budgets. For
    small businesses, digital payments are now table stakes.
    Entrepreneurs can start businesses with a smartphone and accept
    payments instantly. Embedded payments integrated directly into
    business software allow small firms to manage sales, payroll
    taxes, and compliance all in one place.
        Businesses that accept digital payments see sales increase
    by 8 to 10 percent, and the efficiency gains are significant.
    In 2024, faster checkout and back office automation saved small
    businesses an estimated 806 million labor hours and generated
    $34 billion in incremental sales. At the national level, the
    payments ecosystem contributes more than $350 billion annually
    to gross domestic product (GDP) and directly supports
    approximately 2 million U.S. jobs: high-quality, good-paying
    jobs across every State.
        The industry continues to evolve through mobile wallets,
    peer-to-peer payments, embedded finance, and AI-driven fraud
    prevention. Artificial intelligence is now central to payment
    security. AI systems detect sophisticated fraud in real time,
    often before consumers are harmed, while reducing false
    declines and improving customer experience. Looking ahead,
    agentic commerce, where AI agents transact on behalf of
    consumers and business, offers real promise, but trust,
    authorization, and accountability must remain foundational.
        Now, this payments innovation does not occur in a
    regulatory vacuum. Payments providers operate under a
    comprehensive framework of Federal and State laws covering
    consumer protection, anti-money laundering sanctions, privacy,
    cybersecurity, operational resilience, and licensing. In
    addition, the industry has developed strong self-regulatory
    standards, including Payment Card Industry Data Security
    Standard (PCI DSS), Europay, Mastercard, and Visa (EMV)
    specifications, and network-level rules. This activity-based
    approach has protected consumers while allowing innovation to
    flourish.
        While new legislation is largely unnecessary, two areas do
    stand out for Federal leadership. The first is fraud and scams.
    Fraudsters increasingly rely on social engineering and AI-
    driven deception. The payments industry invests billions of
    dollars annually to combat fraud, but payments are often the
    final step in scams that begin elsewhere on social media,
    through text messages, or over the phone. ETA supports enhanced
    cross-sector collaboration and legislation, like the bipartisan
    Taskforce for Recognizing and Averting Payment Scams (TRAPS)
    Act, to disrupt scams at their source. The second area is
    artificial intelligence. AI in payments is already governed by
    Federal consumer protection and safety and soundness rules.
    However, a growing patchwork of State AI laws threatens to
    fragment national payment systems. ETA urges Congress to
    establish a uniform, risk-based, technology-neutral AI
    framework that builds on existing laws.
        The digital payments industry delivers extraordinary
    benefits to American consumers, small businesses, and the
    broader economy. We look forward to working with Congress to
    help ensure payments innovation continues to deliver secure,
    affordable, and innovative financial services. Thank you, and I
    look forward to your questions.

        [The prepared statement of Ms. Kelley follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Steil. The gentlewoman yields back. Mr. Lefton is
    recognized for 5 minutes.

       STATEMENT OF KEVIN LEFTON, GLOBAL GENERAL COUNSEL, STREAM

        Mr. Lefton. Thank you. Chairman Steil, Ranking Member
    Lynch, and distinguished members of the committee, thank you
    for your time today and for the invitation to speak about
    earned wage access and its importance to consumers everywhere.
    My name is Kevin Lefton, and I am the global general counsel of
    Stream. In this capacity, I oversee the legal and regulatory
    functions for our organization. Stream is an employer-
    integrated, earned wage access provider operating across the
    United States, United Kingdom, EU, and Canada. In addition to
    EWA, we provide a comprehensive suite of financial well-being
    resources designed to enhance the financial health of our
    users.
        Stream, alongside many of our industry peers, remains a
    staunch advocate for thoughtful regulation that prioritizes
    consumer protection. We stand as an important non-credit
    alternative to the high-cost products that trap consumers in a
    cycle of debt. It is a fundamental premise of my testimony
    today that EWA services do not constitute credit, are not
    loans, and should not be regulated as such. EWA is a critical
    tool for frontline and hourly workers in all industries,
    including healthcare, hospitality, manufacturing, education,
    and many others. By allowing employees to access wages they
    have already earned but have not yet been paid due to
    traditional biweekly or monthly payroll cycles, EWA provides a
    low-to no-cost alternative to the high interest rates and high-
    cost fees of other financial products.
        We cannot talk about EWA without talking about the
    essential consumer-focused benefits and consumer protections of
    EWA's benefits and protections that are absent in credit and
    other high-cost products. EWA lacks all the hallmarks of
    traditional credit and loan products. Specifically with Stream,
    there is always a free option to use our service, and the
    nominal fee for instant access should a consumer choose to use
    that feature is typically lower than a standard automated
    teller machine (ATM) withdrawal fee. There is no interest.
    There is no underwriting. We do not pull credit reports or base
    access to EWA services on creditworthiness. There is no debt
    collection. We do not report to the credit bureaus or engage in
    collection activity of any kind. The service is truly
    nonrecourse, and no debt is ever incurred. If there is ever an
    issue, Stream does not go after the consumer. We do not sue
    them, and we do not report them to debt collections.
        The arguments that are often presented against earned wage
    access are flawed because they conflate a nonrecourse financial
    wellness tool with a high-cost lending product. Labeling EWA as
    credit ignores the basic reality that workers are simply
    accessing capital they have already earned. Applying a
    traditional credit framework, like an interest rate, to a non-
    credit product is misleading and, ultimately, harmful to the
    millions of hardworking Americans who simply want the option of
    having access to their own wages so that they can manage their
    own money when they see fit. Applying a traditional credit
    framework, like an annual percentage rate (APR), to a flat,
    nominal, transparent fee is also misleading and creates a false
    protection that would effectively ban a low-cost or free
    service. These arguments do not protect consumers. They limit
    consumer options and force them back toward the very high-
    interest and high-cost fees that EWA was designed to eliminate.
        A lot has been written about EWA, and there is a lot of
    misleading information out there, but here are the key
    takeaways I would like to leave you with about EWA. EWA is
    either free or has a nominal fee. There is no interest. There
    is no debt collection. There is no underwriting. EWA is a
    nonrecourse service, and, most importantly, there is nothing
    wrong with allowing American consumers to decide how and when
    they can access their money through a product and service they
    want and like. EWA represents a shift toward a more equitable
    financial system for hourly and frontline workers, allowing
    them to better plan for the future and manage life's
    emergencies with dignity. We urge this committee to support a
    framework that recognizes EWA as a critical non-debt solution
    for the American worker.
        Thank you for your time and I look forward to your
    questions.

        [The prepared statement of Mr. Lefton follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Steil. Thank you. Mr. Palaniappan, you are now
    recognized for 5 minutes.
        [No response.]
        Chairman Steil. You may you want to check your microphone.
        Mr. Palaniappan. Better now? Okay.

       STATEMENT OF RAM PALANIAPPAN, FOUNDER AND CHIEF EXECUTIVE
                            OFFICER, EARNIN

        Mr. Palaniappan. Thank you. Chairman Steil, Ranking Member
    Lynch, and members of the subcommittee, thank you for the
    opportunity to testify today. My name is Ram Palaniappan. I am
    the founder and CEO of EarnIn, and I am honored to return and
    contribute to the discussion on how financial innovation can
    improve the lives of American consumers. Paying bills and
    managing expenses is top of mind for people every day.
    Innovation helps with that by making pay more timely and
    efficient. Innovations last only if they actually make people's
    lives better and earned wage access is an example of such
    innovation. Its use is growing because of the real impact that
    it has on people's lives. EarnIn started as an earned wage
    access company and now also offers a modern payroll platform
    that is used by over 10,000 companies, along with consumer
    tools that make the way people experience their pay better.
    Today, about 1 percent of the people in the U.S. who get a
    paycheck use EarnIn to access all or part of their pay.
        The idea for EarnIn started when I was working at another
    company. I heard that some of my employees were struggling
    between paychecks. That surprised me because they were paid
    well. I spoke with one of them. She said she needed money the
    next day, and could not wait until the following Friday, which
    was payday. She had already worked the hours, she had earned
    the money, but payday was still days away. The issue was not
    how much she earned; it was when she got her pay. I could not
    get the payroll system to pay up for the hours that she had
    already worked, so I gave her the money that she had already
    earned, and we settled it when payroll ran, and I continued
    helping many other of my employees the same way, just as
    happens with many other small businesses. What began as a one-
    time solution has become a reliable way for people to pay their
    bills on time and avoid expensive fees. EarnIn started with the
    simple idea that people should have access to the money that
    they have already earned when they want it, not when payroll
    decides.
        Today, most employees are paid digitally, but these digital
    dollars move more slowly than any other digital product. You
    work every day, and then you are paid once in 2 weeks or maybe
    once a month. Just imagine if other digital products worked the
    same way. If your phone said type your text messages every day
    and it would send them out every 2 weeks, you would not use
    that, but that is how payroll still works today. The biweekly
    or monthly pay cycle is a relic of an outdated era that is
    holding back the benefits of efficiency and today's technology
    from the people who need it the most. By shortening the work-
    to-pay gap, EarnIn helps people manage everyday expenses, like
    groceries, rent, utility and transportation. We are proud to do
    this in a way that puts the worker first without mandatory
    fees, interest, or credit checks.
        Multiple independent research studies have confirmed that
    workers are better off when they have access to their pay when
    they need it. A study by researchers at the University of
    Oregon on over a million EarnIn customers found a sustained
    monthly increase of 11-and-a-half percent in incomes. That is
    about $335 on average. Users work more shifts, miss work less,
    and manage their finances better. Another study from University
    of California, Los Angeles (UCLA) on a dataset from a different
    provider found similar results. Incomes went up over 10
    percent. Liquidity acts as upward mobility with reduced
    overdrafts and no debt cycles.
        Behind the data are millions of real people. One customer,
    a government employee, has a side business making custom
    candles. He used to wait until payday once he received an order
    to buy his supplies. Now he uses EarnIn, and as soon as he
    receives an order, he buys his supplies. That has let him do
    more orders a month and increased his income. Another EarnIn
    customer, Rae, a Southern California mother and retail
    supervisor who is undergoing cancer treatment, shared that on
    some days she feels better than others. Payday does not always
    align with when she is feeling better, but EarnIn gives her the
    flexibility and peace of mind, allowing her to take her
    daughter out on good days without being restricted by paycheck
    timing.
        Earned wage access can be delivered in different ways,
    including through employer-integrated programs or directly to
    workers. The direct-to-consumer model means employees can
    access the benefits wherever they work. Today, EarnIn serves
    over 2 million customers, including many in public service,
    healthcare, education, and small businesses across the country.
    Notably, about 1 percent of House staffers use EarnIn.
        I appreciate Chair Steil and Representative Torres for
    their bipartisan leadership to establish a clear Federal
    framework for earned wage access, and I look forward to
    continued collaboration in expanding access to these
    innovations to workers anywhere. I am happy to answer
    questions. Thank you.

        [The prepared statement of Mr. Palaniappan follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Steil. Thank you very much. Mr. Zywicki, you are
    now recognized for 5 minutes.

     STATEMENT OF TODD ZYWICKI, LAW PROFESSOR, ANTONIN SCALIA LAW
                    SCHOOL, GEORGE MASON UNIVERSITY

        Mr. Zywicki. Thank you. Chairman Hill, Chairman Steil,
    Ranking Member Lynch, and members of the subcommittee, I am
    Todd Zywicki. I am the George Mason University Foundation
    Professor of Law at Antonin Scalia Law School, the former chair
    of the CFPB Task Force on Federal Consumer Law, and co-founder
    and co-director of the Institute for Consumer Financial Choice
    at the Scalia Law School.
        The modern American consumer finance system is really a
    miracle if you think about it. You can walk into a car
    dealership today and walk out an hour later with a car. I mean,
    just think about how transformative that has been for the
    world. As Ms. Kelley mentioned, we can make payments anywhere
    in the world 24 hours a day--day, night, online, in person--
    anywhere in the world. As Congressman Lynch mentioned in his
    opening statement, I think very notably, just think about the
    way in which access to innovation and financial services helped
    us to deal with the disruptions of the COVID pandemic and the
    ability of people to bank online, pay online, do all these
    sorts of things, as well as the alternative underwriting models
    that were developed for data when people were not getting paid
    and the like.
        Above all, it is really democratized access to financial
    services. Innovation, more than anything, has been a vehicle
    for including people who traditionally have been underincluded
    by the traditional finance system, and how did this happen?
    Choice, competition, innovation is, basically, what has
    happened: new entry, often obstructed, often blocked by old
    incumbents, but new innovative technologies. Thinking back to
    the development of the Fair Isaac Corporation (FICO) score and
    the introduction of computers, which reduced discrimination,
    which opened competition. Think about even the telephone and
    the way in which telephones allowed credit cards to be marketed
    across State law. Think about payments. Just think about the
    way in which technology enabled us to go from knuckle busters
    on credit card processing to always on instant verification at
    a checkout, and most recently, of course, the development of
    the internet.
        Some of these innovations were really just developments of
    a better way of delivering an older product, such as buy now,
    pay later (BNPL), which replaces old installment loans, or EWA
    as we have heard about, which helps consumers or employees get
    money from their employers. Sometimes they are totally new,
    such as alternative data and underwriting systems and some of
    the payment systems we see today. Regardless of what they are,
    one thing they have in common is they must have a regulatory
    regime that supports innovation and that does not block it.
        An obvious point is that the regulation must reflect the
    technology, as we said, whether it is the Supreme Court's
    decision, the Marquette decision, that allowed credit cards to
    be marketed across State lines more effectively, whether it was
    debt collection rules that dealt with the telephone and the
    fact that you could then make phone calls across State lines,
    but second, it always also requires the right jurisdiction to
    deal with things. We went from a period of local credit to a
    period of national credit driven by department stores and the
    like, to what we have today, which is nowhere and everywhere
    via the internet. We have to have the right jurisdictional
    bodies acting on a lot of these things.
        So, we saw in the 1960s and 1970s, as the consumer finance
    system became more national, we saw more national laws dealing
    with Equal Credit Opportunity Act (ECOA), dealing with debt
    collection and the like. The products that are the focus of
    today's hearing are a good example. These are products that are
    offered on the internet. They do not bear any relationship to
    local jurisdictional boundaries and the like, and so thinking
    about sophisticated and appropriate places for the Federal
    Government to regulate and to, even when necessary, preempt
    State laws, I think that are important.
        I am very pleased with a lot of the innovations and reforms
    in the regulatory framework of the past few years, whether it
    was the recent decision by the Office of the Comptroller of the
    Currency (OCC) to recognize national trust banks for fintech
    firms, whether it was the CFPB's actions with respect to some
    of the regulations that they did, the decision of the CFPB to
    keep the 1033 rule and reframe it in a way that is more useful.
    I think there is a lot more that could be done, and I think a
    lot of the legislation that is the subject of this hearing
    moves in the right direction in terms of opening up
    competition, national markets in a more resilient in more
    responsive, technologically based regulation.
        In conclusion, history teaches that consumers do best when
    we recognize their ability to plan their own finances and we
    give them choice, competition, and the ability to plan their
    own lives, and not substitute the judgment of bureaucrats for
    American families. Thank you.

        [The prepared statement of Mr. Zywicki follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Steil. Thank you very much. Ms. Reynolds Hand, you
    are now recognized for 5 minutes.

     STATEMENT OF DELICIA REYNOLDS HAND, SENIOR DIRECTOR, DIGITAL
                     MARKETPLACE, CONSUMER REPORTS

        Ms. Reynolds Hand. Thank you. Chairman Hill, Chairman
    Steil, Ranking Member Lynch, and distinguished members of the
    subcommittee, thank you for the opportunity to testify today.
    My name is Delicia Reynolds Hand, and I am the senior director
    of the Digital Marketplace at Consumer Reports. There, I lead
    our work ensuring digital financial products work for
    consumers, not against them. Before Consumer Reports, I spent
    nearly a decade at the CFPB.
        This hearing asks an important question--is fintech
    delivering for American consumers--and I would like to make
    three points. First is affordability. Affordability is key for
    consumers. Americans are stretched thin. Groceries and rent
    cost more, and credit card rates are near historic highs. In
    this environment, consumers will turn to products like buy now,
    pay later and earned wage access to manage cash-flow. This in
    itself is not a problem. The problem is when they cannot easily
    see what they are paying, they cannot compare options, and debt
    stacks invisibly across providers. The CFPB's own recent data
    point on buy now, pay later shows that BNPL usage continues to
    grow. Consumers are now taking an average of six loans per year
    from a single provider, up 11 percent, and that is just one
    lender. Many consumers use multiple providers, creating
    obligations that do not appear on traditional credit reports.
    Simple guardrails, such as cost disclosure, lets people compare
    options, and other guardrails against debt stacking allow
    consumers to avoid invisible overextension. These are not anti-
    innovation. They are baseline requirements for a market that
    works.
        On earned wage access, we are glad to see the draft
    legislation before you contains real protections, like a no-
    cost option, disclosure rules, prohibition on late fees.
    However, we are concerned that the bill also categorically
    excludes EWA from credit law and preempts State authority.
    Under the Truth in Lending Act, credit is defined as ``the
    right to defer payment of debt or incur debt and defer its
    payment.'' If it works like credit, we should regulate it like
    credit, and by that measure, EWA is credit.
        Second, consumers need accountability, especially for new
    innovation like AI. AI is no longer emerging in financial
    services. It is embedded. It is approving loans, freezing
    accounts, flagging fraud, as mentioned, determining who gets
    access to products at what price. These systems operate at
    machine speed, and if something goes wrong, accountability
    moves slowly, if it moves at all. Consumer Reports recently
    surveyed over 4,000 Americans on AI in financial services.
    Three-quarters are concerned that AI could lead to unfair
    treatment. When consumers encounter AI, many also report
    negative experiences. Fifty-seven percent do not believe
    current laws adequately protect them.
        Consumers should have the ability to opt out independent
    audits, a simple way to appeal, and public reporting on
    accuracy and bias testing; in other words, transparency,
    accountability, and human review. The subcommittee is
    considering the Financial Services Innovation Act, which would
    create sandboxes allowing companies to seek waivers from
    existing consumer protection rules, not just for AI, but for
    any financial innovation, and that just gets the burden wrong.
    Consumer harm during a test period is still harm, and the
    consumer whose account is frozen or wrongfully denied credit
    does not care whether it happened in a sandbox.
        Last, enforcement. I spent nearly a decade at the CFPB. I
    have seen what happens when we have an Agency that is active
    and mandating and holding its mandate to hold institutions
    accountable, and we are seeing what is happening when that
    capacity is dismantled. The CFPB has lost the majority of its
    enforcement capacity. Staff have been let go. Examinations have
    stopped. The Agency Congress created to be the cop on the beat
    is being hollowed out, and at the same time, this subcommittee
    is considering important legislation that would expand fintech
    activity and waive existing protections. That is a practical
    problem, not a solution. Who will supervise compliance with the
    EWA bill's disclosure requirements if no one is there to do it?
    Who investigates when AI systems malfunction at scale? The
    bills before you assume a functioning regulator from a consumer
    protection standpoint, and assumption no longer holds.
        So, the question today is not whether fintech innovation
    should continue. It absolutely should, but the question is
    whether consumer protections scale alongside with it, or
    whether consumers remain the shock absorbers for risk. We are
    ready to work with the subcommittee. We have tested the
    products' surveyed consumers, and I appreciate the opportunity
    to be here and welcome your questions. Thank you.

        [The prepared statement of Ms. Reynolds Hand follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Steil. Thank you very much. The gentlewoman yields
    back. We will turn now to member questions. I will recognize
    myself for 5 minutes for questions.
        Mr. Palaniappan, we are at a transformational stage here.
    EWA gives individuals access to the wages they earned. If you
    and I, a hundred years ago, were hired to carry sacks of
    potatoes at Ms. Kelley's farm, we worked our tails off all day
    long, we would expect to have been paid at the end of our day's
    work. Large enterprise resource planning (ERP) systems came in
    and made it very difficult to pay people every day. Now many
    people get paid every 2 weeks, some people every month. It
    makes it hard to meet the bills and so, one of the questions
    becomes, how do we regulate this new space under earned wage
    access where individuals are receiving access to the wages that
    they have already earned?
        Attached to this hearing is my discussion draft, the Earned
    Wage Access Consumer Protections Act, where we start to dig
    into this, making sure that there is a no-cost option, full
    disclosures for individuals taking advantage of EWA products
    and so, one of the questions is, is this credit? Do we need a
    new regulatory framework? We just heard Ms. Reynolds Hand
    suggest that this is credit and should be regulated like
    credit, but if we were carrying sacks of potatoes at Ms.
    Kelley's farm, we would expect to get that money at the end of
    the day, and it sure does not sound like credit. It sounds like
    I am getting access to the money that I earned. So, I come to
    you, Mr. Palaniappan. Can you walk me through the distinctions
    that you see between EWA products and credit under the Truth in
    Lending act in Reg Z?
        Mr. Palaniappan. Sure. So, like you said, what earned wage
    access does is it changes the timing of when somebody receives
    their pay, which is different than a credit product where you
    are giving somebody money and I think calling it what it is
    not, calling it credit actually confuses the customer because
    with the credit product, they expect interest to accrue. They
    expect there to be a repayment date. They expect that there
    will be penalties if it does not get paid. They expect that
    there will be collections. They expect that it is going to
    affect their credit report. None of those happen with earned
    wage access, and so calling it credit actually will confuse the
    customer. In terms of the legal aspects of credit, I think
    Kevin, who is an attorney, might actually be better positioned
    to talk about how it is different to credit.
        Mr. Lefton. Sure. Thank you. I think that is an important
    question and probably one of the most important questions of
    today. The Truth in Lending Act (TILA) and Reg Z apply to
    consumer credit that is subject to a finance charge, and EWA is
    not consumer credit, and I will explain, and the flat fee is
    not a finance charge. The CFPB recently stated in its December
    23 advisory opinion that EWA is not credit because no debt is
    incurred. You must have a debt to have credit, and a debt is an
    obligation to repay.
        Chairman Steil. Should we think of that as a distinction
    between employer-sponsored EWA and direct-to-consumer EWA?
        Mr. Lefton. No.
        Chairman Steil. That is part of the conversation that we
    are hearing.
        Mr. Lefton. No, I think that is a great question, but no
    debt is no debt. So, if there is no obligation to repay on the
    direct-to-consumer and there is no obligation to repay on the
    employer-integrated, I think it is the same. I think the
    fundamental question is, is there an obligation to repay, and
    the answer is no for EWA because it is a nonrecourse product.
        Chairman Steil. So, Mr. Zywicki, I am going to come to you
    and kind of continue to pull on this same string. One of the
    challenges that we face are these new and innovative products
    are not always fitting neatly into the regulatory framework
    that, really, has not been updated since the 1970s, and so this
    is new technology that was not around and available now over 50
    years ago. What are some of the principles that you think we
    should be looking at to strike the right balance in this
    innovative space?
        Mr. Zywicki. Exactly right. I think that frames it
    correctly, which is, obviously, it needs to be, as I said in my
    remarks, responsive to the current technology. It needs to be
    responsive to the right jurisdictional boundaries. Our laws are
    really set up in a paper-based world back in the 1970s, and,
    finally, I think we really need to tailor it to who consumers
    are, where they are, and how they get information. Nowadays,
    people do things on the phone, not with great big stacks of
    paper, and so in terms of getting the right disclosures at the
    right times so that consumers can understand them on these
    products, I think those are the principles we should look like;
    take a consumer-focused approach to how they get information.
        Chairman Steil. Should it be risk focused, should it be
    activity focused, or should it be how the business purports the
    business model itself? What is the best way for us to be
    thinking that through?
        Mr. Zywicki. I think the best way to think about it is how
    do we empower consumers to find the products that they want as
    easily as possible. One of the things about EWA and BNPL is
    they are pretty simple products usually, and consumers can
    generally understand them, but I would say what we want to
    think about is how do consumers take in the information, how do
    they use the products, and focus on from the consumer
    perspective.
        Chairman Steil. Thank you very much. I think we have some
    really innovative space here and appreciate your testimony. I
    yield back.
        I will now recognize the ranking member, the gentleman from
    Massachusetts, Mr. Lynch, for 5 minutes.
        Mr. Lynch. Thank you very much, Mr. Chairman. First of all,
    I want to recognize a couple of my dear, dear colleagues and
    friends in the audience, Congressman Lacy Clay from Missouri
    and Congressman Ed Perlmutter from Colorado, two outstanding
    Members of Congress when they were here, and they are missed,
    and good to see that they are gainfully employed.
        [Laughter.]
        Mr. Lynch. Just turning to the issue of earned wage access,
    so before coming to Congress, I was an iron worker for about 20
    years, worked in the construction industry, mostly building
    high-rise office towers, that type of thing. The way it worked
    in the construction industry is we would work Monday through
    Friday, and then the following Wednesday, we would get a
    paycheck. So, by the time payday rolled around at the end of
    the day on the following Wednesday, we had loaned the company 8
    days of labor. So, we floated, basically, providing credit to
    our employer, and life does not work that way. It did not work
    that way back then, and it does not work that way today. Back
    then, you had to ask for what they called a drag. A drag was an
    advance on your money, so it is the similar model here, but it
    was much less fair and transparent back in the day, so there is
    definitely the need for this, right? We need innovation, as
    several of our witnesses have pointed out. Mr. Zywicki and
    others have said we can expand opportunity, we can expand bank
    access if we do this properly. I do want to just acknowledge
    what Ms. Reynolds Hand has pointed out, that if we do not do
    this properly we allow this innovation to come in a way that we
    actually encourage, or let me put it this way: We unfairly
    require companies that are doing the right thing to compete
    with bad actors if there is no regulation, you know. We just
    know human nature, and we may put people in a bad situation,
    especially because of the demographics.
        Ms. Reynolds the recent bipartisan working group that we
    had here on artificial intelligence that I co-chaired with
    Chairman Hill specifically examined the impact of AI algorithms
    that target certain customers based on certain characteristics,
    including protected characteristics. Given the importance of
    consumer data feeding AI, there is a concern that some of these
    companies may use algorithms in BNPL buy now, pay later, and
    earned wage access products that feed off consumer datasets
    that violate their privacy and may be impermissible for other
    reasons. Can you talk about do we have any transparency or any
    visibility on how these firms are using those datasets, how
    they were acquiring them?
        Ms. Reynolds Hand. Sure. Absolutely. Over the last several
    years, Consumer Reports has evaluated, we have reviewed
    policies, and actually dug into the fintech apps, various
    kinds--buy now, pay later, peer-to-peer (P2P) apps, digital
    wallets, crypto wallets, for example--to examine how consumers
    use them, what they do. To your point, all across the board,
    even basic banking apps, more data is collected than is needed.
    That data is then passed on and sold and used. Consumers are
    upmarketed. It also allows the companies to strategically
    understand what consumers are willing to pay and what they are
    not willing to pay, and prices can be set using this data that
    they gather from consumers. We do see multiple use. Consumers
    do not have control over their data. These apps are typically
    set to a default that is obscured, hard to find, and so it can
    have a disparate impact on communities of color, poor
    communities, and other consumers.
        Mr. Lynch. Okay. Thank you. My time is going to expire, but
    I would just ask you if you might be able to share with the
    committee in writing ways that we might mitigate the potential
    bias used against certain populations, especially the 40
    percent of BNPL users who are Black or Hispanic organic, as
    identified by the Federal Reserve Bank of Philadelphia. Thank
    you. I yield back.
        Chairman Steil. The gentleman yields back. The vice chair
    of the full committee, the gentleman from Michigan, Mr.
    Huizenga, is recognized.
        Mr. Huizenga. Mr. Chairman, I find myself in an odd
    position agreeing with Mr. Lynch on a couple of things: one,
    acknowledging our colleagues, Mr. Lacy Clay, Mr. Perlmutter. I
    am not sure I would have used ``outstanding''----
        [Laughter.]
        Mr. Huizenga [continuing]. but they are very good friends
    and great colleagues to have worked with across the aisle, both
    of them, and I do appreciate that. It is interesting, Mr.
    Lynch's work as an iron worker. My family, the small company
    that I own, is in construction as well. It is seasonal, and I
    can tell you we go through that payroll process every week. We
    have chosen as employers to pay every week because I do not
    want to disadvantage my guys. I can tell you, I am speculating
    here a little bit, but I am pretty sure that Henry, Cole,
    Larry, and a couple of the other guys would be really excited
    about being able to have access to their cash daily after they
    put in a 10-or an 11-hour workday in a gravel pit, and,
    frankly, they deserve it.
        Now, the realities are, is by the time they finish up at
    5:30-6 on a Friday, we got to go get the hours, figure that
    out, get that into our payroll processor, and by the time that
    the checks are cut--we still are old school--they can choose to
    whether they want to have direct deposit or not, but we are
    still sending checks in the mail to some of these guys, and
    sign the check and they finally get it on Thursday. Amen.
    Hallelujah. Let us actually pay for people's work in a timely
    manner as we possibly can.
        So, I am going to start with Ms. Kelley here, and I want to
    touch on the transmitter licensing which I know you mentioned
    in your testimony. Currently, there exists a patchwork of State
    licensing regimes, and so it is kind of a quick two-part
    question here. First, what difficulties do you--do startups
    face when trying to develop or scale a new payment system, and
    second, what is the cost and complexity of complying with
    varying jurisdictional frameworks?
        Ms. Kelley. Yes, Congressman, thank you for that question.
    It is an important one. When you think about fintech startups
    and what it takes for them to get in market and operate,
    uniformity is so important, and the example you provide is one
    where there is incredible disuniformity. You have a small
    startup trying to get into business in 49 different
    jurisdictions with 49 different licensing requirements. We know
    that is expensive, we know it costs literally millions of
    dollars, and we know it takes a long time, as much as 2 years,
    and that is a death knell for a small business trying to get up
    and running. Then, of course, if they do manage to get up and
    running, there are 49 different compliance regimes they have to
    apply with.
        Mr. Huizenga. Well, that is okay. We will just have the
    Huizenga Gravel Company compliance department take care of
    that. Oh, wait a minute, that is me.
        Ms. Kelley. Well, that is exactly right. Small businesses
    have to focus on their business.
        Mr. Huizenga. Yes.
        Ms. Kelley. They do not have an army of compliance
    professionals and others who can help us navigate that
    patchwork, so it is an excellent example of a real-world
    problem that startups and businesses have.
        Mr. Huizenga. It is better than Mr. Steil and me carrying
    your sack of potatoes on the metaphorical farm.
        Ms. Kelley. Exactly.
        [Laughter.]
        Mr. Huizenga. All right. Mr. Zywicki, good to see you again
    as well. What role do nonbank firms play in partnering with
    fintechs, and how do these relationships help drive innovation
    that might not otherwise occur within traditional banking
    system? We are seeing this all the time, right? I mean, you
    certainly did at CFPB.
        Mr. Zywicki. Yes, thank you for that. It is really
    remarkable. Banks do some things pretty well, but banks do not
    always do innovation that well, especially smaller banks.
        Mr. Huizenga. Their regulators tend not to like that.
        Mr. Zywicki. Yes, their regulators often are not friends of
    innovation, but especially small banks. I think one of the
    things we are seeing is that a lot of fintechs are partnering
    with small banks, which I think are strengthening the dual
    banking system. A lot of these are State banks, smaller banks
    and so, what I think we are seeing is, especially in a
    regulatory environment where, for various reasons, including
    regulation, we are getting more and more consolidation and
    concentration in the banking system. I think the way in which
    fintechs are strengthening the ability of small banks to
    compete with big banks, they are often more nimble, they are
    more responsive, and that sort of thing. That is really been an
    engineer. Big banks innovate as well, but I think the ability
    of fintechs to partner with small banks has been a huge part of
    this story.
        Mr. Huizenga. Okay. I have 30 seconds left, and, sorry,
    with a name like Huizenga, I am not trying to be disrespectful
    when I mispronounce Palaniappan, right? Close-ish? Let me move
    to you on the remaining time. What elements of your current
    financial institution regulatory framework may be inappropriate
    for startups? I may have to take that in written form, but
    maybe briefly.
        Chairman Steil. Why do we not ask the gentleman to provide
    that in written form, cognizant of the time?
        Mr. Huizenga. I yield back. Thank you.
        Chairman Steil. Thank you.
        Chairman Steil. The gentleman yields back. I will now
    recognize the gentlewoman from California, the ranking member
    of the full committee, Ms. Waters, for 5 minutes.
        Ms. Waters. Thank you very much. President Trump promised
    to reduce the cost of living. Instead, unemployment and grocery
    prices are rising, and consumer protections are eroding. Under
    the Trump economy, people are being forced to use products like
    earned wage access to get early access to their paychecks, and
    buy now, pay later loans to buy groceries. Trump called this
    affordability crisis a hoax, but he knows it is real and now
    wants to cap credit card interest rates at 10 percent. Well,
    President Trump, I am pleased to know that you are listening.
    We do not agree on much of anything, but we do on this, so let
    us do it. Let us cap interest rates, but, Mr. President, you
    are going to need to convince your Republican colleagues
    because they will not consider this or any other bill that
    would help keep money in consumers' pockets.
        So, not only am I interested in what the President has
    proposed, this interest rate of 10 percent on credit cards. Mr.
    Steil, do you believe this cap requires authorization by
    Congress? Yes? I did not hear you.
        Chairman Steil. Would the gentlewoman----
        Ms. Waters. I yield.
        Chairman Steil. The gentlewoman would like to yield?
        Ms. Waters. Do you believe the cap requires authorization
    by Congress to get the 10-percent cap that the President is
    advocating?
        Chairman Steil. I would be more than happy to have a
    broader dialog as to exactly how we navigate it anytime,
    Ranking Member.
        Ms. Waters. Well, I want to know whether or not the
    committee have plans to move forward with this policy. Maybe
    some of our witnesses here today know a little bit more about
    it. Ms. Reynolds, are you supportive of 10-percent credit card
    rate cap?
        Ms. Reynolds Hand. We are supportive of anything that
    lowers the cost of goods and services to consumers. As you
    mentioned, loads of things, including the cost of financial
    services, are high for consumers right now. I think an
    important consideration is how that happens, and if that
    happens through a transparent process where we are able to come
    to the table and land on a workable solution, that is great.
        I think one thing I would like to note is about how credit
    card rates are set. They are based on risk price, right,
    lending happens that way, and so we would be concerned that
    this 10-percent cap, if not done correctly, could reduce
    accessibility of credit cards for some of the more vulnerable
    consumers and so, we would support the basic principle and are
    looking forward to seeing more details and working in a
    bipartisan way.
        Ms. Waters. Well, I am sorry I said ``Ms. Reynolds.'' It is
    Ms. Reynolds Hand. Fintech products like buy now, pay later and
    earned wage access, do you believe that they can help families
    struggling to make ends meet, especially during this crisis
    that we are confronted with?
        Ms. Reynolds Hand. Yes, they can. We have no objection to
    those products. What we have seen is with the introduction of
    innovation, more consumers have access to liquidity. That is an
    important foundation of American commercial life, and we want
    healthy credit that is available to consumers, but there should
    be some basic standards that are introduced and guardrails that
    are introduced with these products. Specifically, we want to
    ensure that there is an affordability standard. We got into the
    last financial crisis, the mortgage crisis, because there was
    not a real test of consumers' ability to repay. That deserves
    consideration with these kinds of products, especially when you
    have a significant business model. You have employer-sponsored
    EWA. You also have direct-to-consumer EWA, which is sponsored
    differently and, in some instances, can be riskier to
    consumers.
        We also want to ensure that all products that look like
    credit and act like credit are treated in the same way. If a
    consumer incurs a debt and that debt needs to be repaid later
    in time for a specific fee or interest is attached, I do not
    know what else you would call that other than credit, and that
    is what is defined under the Truth in Lending Act. So, we want
    that consistency.
        Ms. Waters. Thank you very much. I yield back.
        Chairman Steil. The gentlewoman yields back. The gentleman
    from Ohio, Mr. Davidson, who is also the chair of the National
    Security, Illicit Finance, and International Financial
    Institutions Subcommittee, is recognized for 5 minutes.
        Mr. Davidson. Thank you, Chairman. Thank you to all of our
    witnesses for joining us today and for your testimony.
        One of the great strengths of America's financial system is
    the capacity for innovation. Fintech companies, in particular,
    have created tools that help consumers stretch the paycheck,
    avoid overdraft fees, build savings, improve payments, and
    access financial services in a way that simply did not exist a
    decade ago. Earned wage access is one of the things that we are
    highlighting today, and I think all of our witnesses, or really
    4 out of the 5 witnesses, have done a good job describing how
    this works, why consumers want it, and I think Chairman Steil,
    his question, clarified and the answer clarified why it is not
    debt, so. I guess that debt is in the eye of the beholder
    because Ms. Reynolds Hand thinks that it is debt, but it seems
    very clear that you are not obligated to repay something in the
    future. You are just paying a fee for a service. I mean, who is
    served by treating it as if it is debt? How is this protecting
    consumers? Why would they want to categorize it as debt? Maybe,
    Ms. Kelley, would you give us an answer about what you think?
        Ms. Kelley. Yes. We agree that this is not debt, that it is
    access to wages that are already earned and we think it is a
    really important choice or option, and that is the hallmark of
    the fintech industry right now: providing choice and option to
    consumers who are best positioned to decide how to utilize
    those products. I know we have earned wage companies here who
    can speak in detail about what they do, but as an overarching
    matter, we agree this is not that.
        Chairman Steil. Mr. Lefton, your take?
        Mr. Lefton. Sure. I think it is absolutely clear that
    earned wage access is not credit because it does not have debt,
    and I think as I alluded to earlier, a debt requires an
    obligation to repay. With earned wage access, as we have
    stated, it is a nonrecourse product. So if something happens,
    whether it is a technological glitch or the user somehow
    changes their functions and the company does not recoup their
    money, we do not go after the consumer. There is no risk to the
    consumer whatsoever. At most, maybe they will be paused until
    we figure out how that happened, but there is no risk to the
    consumer. There is no debt collection and they do not go to the
    credit bureaus, so there is no obligation.
        Mr. Davidson. Thank you, and I think it is also essentially
    the same whether it is a direct-to-consumer or something that
    the employer offers as a service to the employees. I would say,
    look, the idea that payroll is deferred into the future and
    people would like to get paid is not new. I mean, this is as
    old as the Bible. You see stories about people who are paid one
    denarii for a day's wages. There are people that show up late
    in the day and are giving them one denarii and they are, ``oh,
    not fair,'' right? So, we have had a debate about payroll as
    old as we have written documents, I think so, but it is nice
    that we have this service, and I appreciate the clarification
    on it.
        One of the other things that we have done for a long time
    is we have State-regulated banks, and bank fintech partnerships
    are incredibly important to being able to provide access to
    consumers. When you think about community banks, a lot of
    people, that is where they find accessibility, and a lot of the
    biggest banks do not decide to launch massive products. They do
    not want to test the market. They want to be fast followers at
    best. Maybe the cutting edge is somebody smaller, more nimble
    and willing to test a product that they do not have to
    necessarily spend as much capital just testing it or getting
    into the market. So, we have a regulatory framework that
    creates preemption around the country where banks are
    regulated. This is the Depository Institutions Deregulation
    Monetary Control Act, DIDMCA, if I am pronouncing that alphabet
    soup correctly. Essentially, if a bank is based in Ohio, they
    are regulated by the regulators in Ohio, but because of
    preemption, they can service customers wherever customers want
    to reach out to them and access. How is that being
    reinterpreted and reimagined and why? Ms. Kelley, you got an
    answer to that?
        Ms. Kelley. Yes, so, and thank you for that question. It is
    an important one. As we spoke earlier, uniformity is really
    critical: predictability, certainty, uniformity for fintechs
    and the ability of a bank to partner with a fintech to make a
    loan, for example, there needs to be certainty about which
    State's laws apply, and that has been thrown into question
    lately. There was a recent decision in the Tenth Circuit that
    suggested States could override the law that would otherwise
    apply. Again, anything that creates disuniformity like that
    does makes it more difficult for innovation to thrive.
        Mr. Davidson. Yes, thank you. I will be introducing
    legislation in the near future to rebut that ruling and make
    sure that we know the law is clear as it has been applied for a
    long time. I hope all my colleagues across the aisle will join
    in it, and I yield back.
        Chairman Steil. The gentleman yields back. The gentleman
    from California, the ranking member on the Subcommittee on
    Capital Markets, Mr. Sherman, is recognized for 5 minutes.
        Mr. Sherman. Mr. Chairman, off the topic of this hearing,
    this is the first meeting of a subcommittee of Financial
    Services since President Trump has begun this unprecedented use
    of the criminal justice system to contort it, to militarize it,
    and to attack the Federal Reserve, to try to take away its
    independence and, thereby, imperil our economy. If you are
    gullible enough to think that Donald Trump did not order this
    to happen, you are probably gullible enough to think that he
    has been faithful to all three of his wives.
        Now, as to this hearing, the basic problem is rent is too
    high, groceries are too high, wages are too low, and an awful
    lot of Americans do not have a thousand bucks in the bank, and
    so they have to turn to all these expensive and complicated
    systems to get their hands on a few hundred dollars. We are
    told that these are not payday loans. Many payday loan
    companies call themselves payday advance. They are functionally
    equivalent to a payday loan, but the companies involved do not
    want to live by the same laws as the payday lending folks. We
    are told instead that you are selling an asset you already own,
    so, Mr. Lefton, let us say my pay period begins on February 1.
    I am 15 minutes into the pay period. I have been paid for every
    bit of work I have done for my company, except for the last 15
    minutes. How much can I borrow from your company?
        Mr. Lefton. So, at Stream, it is----
        Mr. Sherman. Can I not borrow $500 from your company 15
    minutes into the business pay period?
        Mr. Lefton. You can borrow up to 50 percent of your gross
    earned wages. We are integrating----
        Mr. Sherman. Of what I have already earned in 15 minutes,
    or what I am going to earn during the pay period?
        Mr. Lefton. No, what you have earned up to that moment in
    time.
        Mr. Sherman. Only what I have earned up to that moment in
    time.
        Mr. Lefton. That moment in time.
        Mr. Sherman. So, you have a company that is there to help
    me, but you can only help me significantly on February 14. You
    cannot help me on February 1.
        Mr. Lefton. Well, we can help you access any wages you have
    already earned in that moment in time. We are integrated with
    your employer----
        Mr. Sherman. Okay.
        Mr. Lefton [continuing]. so we know exact date, time, and
    attendance of----
        Mr. Sherman. Okay. I will ask the gentleman sitting next to
    you. I got paid on January 31. It is now February 1. I need 500
    bucks. Can I get 500 bucks from your company?
        Mr. Palaniappan. No. The only amount that you can take is
    how much you have earned up until that point in time. We do not
    let you go beyond what you have already earned.
        Mr. Sherman. So, neither one of you will lend me even a
    hundred bucks on February 1 if I have been paid on January 31.
        Mr. Palaniappan. We are trying to make payroll be more
    efficient. People should not have to wait after they have
    worked to get their pay. That is what we are focused on.
        Mr. Sherman. Okay. So----
        Mr. Palaniappan. We are now trying to help them out if they
    need----
        [Cross-talking.]
        Mr. Sherman. Are there firms in your industry, though, that
    will advance me 500 bucks as long as I am going to make 500
    during this pay period or during the----
        Mr. Palaniappan. Not in the earned wage access product.
        Mr. Sherman. Okay.
        Mr. Palaniappan. There are lending products that will do
    that.
        Mr. Sherman. That is an interesting model. Well, I will ask
    Ms. Hand. It seems like these companies are direct competition
    for payday lending. They are doing the same thing. Should they
    be exempt from even what many would call the insufficient
    regulations that we have on payday lenders?
        Ms. Reynolds Hand. We think there should be the same
    regulation in the marketplace for products that are
    functionally acting in the same way. If a consumer is able to
    receive funds, defer the payment, and if there are fees or fees
    that act like interest as they accrue over time, these should
    be treated the same way.
        Mr. Sherman. I will point out that people have calculated
    that the acceleration fee is 300 or 400 percent APR, which is
    why I have said APR is just a crazy way to evaluate the
    fairness of an advance or a loan that is just for a few days. I
    go to my local ATM machine. I could walk four blocks to my
    banks. I get my money, well 10 minutes sooner, and I pay 2
    bucks extra. You figure out the APR, $2 to get my money 20
    minutes sooner. The APR is in the tens of thousands, but we see
    that 90 percent of the folks that use this system are paying
    the acceleration fee. Should we regard, Ms. Hand, this as a
    free service, or is it a service that people are paying the
    acceleration fee on?
        Ms. Reynolds Hand. I mean, what we see in terms of consumer
    usage is that consumers do not typically use these as a one-
    and-done product. I am happy to follow up in writing. They tend
    to stack these loans----
        Mr. Sherman. Ah.
        Ms. Reynolds Hand [continuing]. and then functionally, that
    is where you see the equivalent of 300 percent or other high
    APR.
        Mr. Sherman. Gotcha. I yield back.
        Chairman Steil. The gentleman yields back. The gentleman
    from Montana, Mr. Downing, is recognized.
        Mr. Downing. Well, thank you, Mr. Chair, and thank you to
    the witnesses for spending some time with us today.
        As a former securities regulator, I have dealt with a lot
    of issues in this space with digital assets. I had to deal with
    ambiguous regulations that, in some cases, have forced
    companies to look for offshore domiciles in innovating and I
    think it is incredibly important that we continue to have
    innovation here in the United States of America and do not have
    that ambiguity that we have in the past that have made people
    decide to run their businesses elsewhere without a reasonable
    framework. Another thing that was really difficult for me as a
    regulator is the ambiguity we got from the Securities and
    Exchange Commission (SEC) at the time on how to treat these and
    a lot of the enforcement by action rather than having a
    framework, which is why I think it is really important, that we
    need clarity for digital assets and for artificial
    intelligence.
        So, I am going to start with Professor Zywicki. I represent
    one of the most rural districts in the United States. In
    Montana's 2nd Congressional District, we have multiple counties
    with less than 500 people in them. It is very, very rural. So,
    how does financial technology increase access to banking
    services in areas that have sparse financial institutions, like
    in rural areas of Montana?
        Mr. Zywicki. Thank you for that question because I think
    the focus on financial inclusion for rural communities has been
    really understudied, and I think it is an area that is really
    important. It is an area that has become more important, as I
    mentioned in my opening comments, because of regulations like
    Dodd-Frank and the like, which have accelerated the
    concentration of the industry, and the regulatory costs have
    led to the disappearance of a lot of rural banks, small banks,
    community banks, and the like. Obviously one solution would be
    to reform the regulatory system, but I think this is the
    vehicle for that if you are talking about your local bank
    closes and now you have to drive 90 minutes to get to a bank in
    the next town. Fintech as a means for payments, as a means for
    obtaining short-term credit, for all these sorts of things, it
    is really the obvious solution for these rural communities that
    have lost access to financial services.
        Mr. Downing. Thank you very much for your answer. I am
    going to move on in the interest of time here. I was an
    advocate for regulatory sandboxes in Montana when I was a
    regulator. We effectively pushed policy on insurance technology
    (insurtech), and fintech was another part of this conversation,
    giving an opportunity to try out things that may not exactly
    fit within a current regulatory framework. So, I am going to
    start with Mr. Palaniappan. What role can regulatory sandboxes
    play in allowing fintechs to test and scale innovative products
    while maintaining appropriate consumer protections?
        Mr. Palaniappan. I think when a company is at an early
    stage in trying to come up with a product that does not exist
    before, the existing frameworks and laws usually have not
    contemplated what they are trying to do. So, I think you do
    want to provide the freedom for companies to try out new things
    with the right set of guardrails. I think there is also another
    set of startups where I would put earned wage access where the
    products are actually at reasonable scale. There is lots of
    evidence that it is better off for consumers, and when it gets
    to that stage, then you do want to have clarity so that
    consumers know that the product will continue to be available
    for them and also keeping bad actors out from that space.
        Mr. Downing. Thank you. Mr. Lefton, any comments on that?
        Mr. Lefton. Yes, I think that is a great question. I think
    sandboxes are critical for providers to work with regulators
    and figure out how best to serve the consumer, and I think a
    great example of something like that is Stream was founded 8
    years ago in the U.K. At the time, my founders, basically, came
    up with the idea, they knocked on the door of the Financial
    Conduct Authority, the FCA, and said we want to do this, how
    can we work with you to do this?
        Mr. Downing. Right.
        Mr. Lefton. They worked hand in hand with the FCA in order
    to do this and we brought that mentality over here and have
    tried whenever we were given the opportunity, whether it is
    with State regulators or the CFPB or being here today, to work
    to see how best we can come up with appropriate regulation for
    the product.
        Mr. Downing. Thank you. In the interest of time, Ms.
    Kelley, I am going to move on to you. I often hear from banks
    and credit unions in my district how costly it is to comply
    with so many regulations. So, how can we ensure that compliance
    costs for fintech startups remain proportionate so that
    innovation is not stifled and pricing does not prevent these
    products from reaching the consumers they are intended to
    serve?
        Ms. Kelley. Yes, thank you for that question. So, I think
    as we look to ensure that regulatory burdens do not stifle
    innovation, there are a few things we need to stay focused on.
    First, it is critical that we regulate activity and outcomes
    rather than technology. The core principle is same regulation.
    Second, uniformity and clarity are key. It is difficult to run
    a business and comply. We need to know exactly what it is we
    are complying with, and reducing the number of competing
    regulations is critical. We think sandboxes done correctly play
    a critical role----
        Chairman Steil. The gentlewoman can conclude in written
    testimony. We appreciate her testimony. Thank you.
        Mr. Downing. Thank you. I yield.
        Chairman Steil. The gentleman yields back. The gentleman
    from Illinois, Mr. Foster, the ranking member on the Financial
    Institutions Subcommittee, is recognized for 5 minutes.
        Mr. Foster. Thank you, Mr. Chair, and to our witnesses. Mr.
    Palaniappan, I was struck by the data that you mentioned about
    how earned wage access produces a better motivated and more
    productive and reliable employee. The question I have is, why
    did not the free market competition among payroll providers
    simply make this a standard feature of all payroll processing
    equipment? Was it just the overhead that Rep. Huizenga
    mentioned of filling out your weekly timesheet and the whole
    rhythm there? Is someone collecting the interest on this
    effective loan? What is it that prevented this from just
    happening naturally? I understand you are trying to disrupt it,
    a full-stack payroll provider yourself.
        [Laughter.]
        Mr. Palaniappan. Yes.
        Mr. Foster. I presume has this as a feature.
        Mr. Palaniappan. So, EarnIn Payroll does do what you
    described as the payroll system, but, typically, a payroll
    company does get interest on the money. The money is pulled
    from the employer's account. It goes into a master trust
    account. From there, the money goes into the employee's
    account, sometimes sits in the master trust account for some
    time, and then we also have to make payments for tax. Tax is
    actually not due immediately. Tax is sometimes due quarterly.
    Sometimes, depending on jurisdiction, it holds for more time.
    So, there is some interest that is being made.
        Mr. Foster. Is that the big----
        [Cross-talking.]
        Mr. Foster. I just wonder----
        Mr. Palaniappan. I actually think----
        Mr. Foster [continuing]. what is your impression of why
    this did not happen naturally?
        Mr. Palaniappan. I think it is different. I think the way
    we see payroll systems is we think there should be two
    consumers for a payroll system. There should be the employer
    and the employee, and employee first is how we actually have
    started the company. Most payroll systems think of the employer
    as their only customer. The employer is not the one who says I
    want the wages to be disbursed immediately. It is the employee
    who wants that, and so I think when you are focusing----
        Mr. Foster. It should be a competitive advantage to an
    employer if this is something they are offering.
        Mr. Palaniappan. Exactly.
        Mr. Foster. Right, and so any time I see, like, a failure
    of the free market to generate the right answer, I try and
    understand what drove that.
        Mr. Palaniappan. EarnIn Payroll does let employees access
    their pay when they need it, so they are----
        Mr. Foster. Oh, yes. No, I understand, and I understand why
    you are probably gaining market share. Why did someone not
    invent this 2 decades ago and have it happened automatically, I
    guess. Anyway, if you have any thoughts on this. I do not want
    to burn all my time here, but I think it is an interesting
    question when we see it.
        Now, the big thing that I spend a lot of my time worrying
    about is agentic AI because that is going to be disrupting
    everything. When Mr. Zywicki, you, the dealer, the car dealer
    when you can go into a car dealer and get a car and then so,
    what happens now is that you go and you strike a price for the
    car, and then the car dealer will try to steer you into some
    crappy, overpriced loan, which is a big part of their business
    model. In the agentic future that I think many of us dream
    about is that you are going to have the Consumer Reports app
    give you advice and say, okay, yep, all right. Here, you struck
    a deal for this car, and then your Consumer Reports agent will
    go out on the internet and look and see what is available for
    loans, get the low-price loans and say, thank you very much,
    Mr. Dealer, there is a better.
        Trying to preserve that kind of competition is, I think,
    what is going to be the challenge of the next decade in
    financial services. The key thing there, it seems to me, is how
    do you get unconflicted financial advice to the consumer? Who
    is it? This is the problem because when startups come up to me
    and come into my office and say, we have this great new
    personal advisor product. AI advisor, and then I say, okay, how
    are you going to monetize that? It always comes to some
    variation of, we are going to be just like Google. We will get
    everyone to trust us, and then we will abuse that trust by
    steering people into crappy, overpriced products. So, what are
    the best thoughts out there on getting unconflicted advice to
    consumers through their AI apps? Mr. Zywicki, you look like you
    have been thinking about this.
        Mr. Zywicki. I have been thinking about it, but I am not
    certain I have a great solution, except, I mean, obviously
    there has always been a market. I am sitting next to somebody
    for Consumer Reports, which has been around for almost a
    century, for unbiased information, for subscription-based
    information and the like, and I agree with you that agentic AI
    is really important. Another thing I would say is dealing with
    the emerging issues of consumer data privacy----
        Mr. Foster. Mm-hmm.
        Mr. Zywicki [continuing]. and the idea of AI, and the idea
    of bad guys, fraudsters having AI and being able to, basically,
    attack the way in which we have done consumer data security for
    years with our passwords and all that sort of stuff.
        Mr. Foster. Oh, sure, yes. Yes, when I go through the list
    of what government can actually do to help, number one on the
    list is get government support for mobile ID, digital driver's
    license as a means of reliably authenticating who you are,
    proving you are who you say you are online. Second to that is
    have the National Institute of Standards and Technology (NIST)
    or someone like that come up with the standards of AI
    communication.
        Mr. Zywicki. Yes.
        Mr. Foster. This is something that I will be following up,
    I think, with you because that is something that would move the
    ball forward and get U.S. standards to really be promulgated
    around the world.
        Mr. Zywicki. I would enjoy that dialog. That would be
    useful.
        Chairman Steil. The gentleman yields back. The gentleman
    from Tennessee, Mr. Rose, is recognized for 5 minutes.
        Mr. Rose. Thank you Chairman Steil, and thank you, Ranking
    Member Lynch, for holding this important hearing, and thank you
    to our witnesses for taking time to be with us. Mr. Lefton, how
    do earned wage access products enable consumers to meet their
    financial obligations without incurring overdraft and late
    fees?
        Mr. Lefton. Sure. Thank you. I think that is a great
    question. I think it was alluded to before that over a hundred
    million Americans live paycheck to paycheck, and the same
    number have less than $400 in savings. EWA enables users to
    access their already-earned wages at either no cost or for a
    low nominal fee, and I think that is important because it gives
    them choice. There is competition now, and that is at a much
    lower price than the traditional predatory products out there,
    and every time they use a service like EWA over a traditional,
    high-cost product, they are putting more money in their pocket.
        Mr. Rose. So, it seems to me that one of the risks here is,
    of course, once you do this once, if it continues, then you
    have kind of accessed that resource and then you are not able
    to go back to it. Is the evidence that is what happens in fact,
    or is there evidence that consumers tap it, then pay it back,
    then tap it? How does that end up working in practice?
        Mr. Lefton. No, I think that is a great question. I think
    you are talking about cycle of debt, which EWA, to be clear,
    has nothing to do with debt. It is a frequency of pay issue,
    right? It is a timing issue, and charging interest, requiring
    minimum payments, rollovers, those are all significant features
    in a cycle of debt, none of which are present with EWA. Our
    data shows that EWA users actually spend less and save more
    when they are in control of their own finances.
        Mr. Rose. Once you collect your wages early, if you will,
    do you kind of stay in that cycle and you do that paycheck to
    paycheck? Is that the evidence, or does it kind of go and come?
        Mr. Lefton. So, I think it fluctuates. I mean, it really
    depends on every user's situation, right? It depends on their
    income--how much they make, where they live, all those kinds of
    outside factors that we do not have insight into, but I think
    it spans the entire spectrum.
        Mr. Rose. Thank you.
        Mr. Lefton. Sure.
        Mr. Rose. Mr. Palaniappan, how does earned wage access
    complement existing financial products to benefit consumers?
        Mr. Palaniappan. So, earned wage access is an additional
    tool for customers, and what it does, it helps them control the
    timing of when they get paid. So, instead of being stuck to
    this rigid biweekly or monthly pay cycle, they can choose when
    to get their pay, and they can use that along with other
    financial products. We have a number of financial products as
    well within our app. We have automated savings, credit
    monitoring, and so they all work well together. Sort of coming
    to the question on the repeated use, I think different people
    use it in different ways. It is used very often to pay bills
    and to pay rent. The most common pay cycle in the U.S. is you
    are paid every other week. Every bill is monthly. So, for every
    bill, 6 times a year, the bill is due before payday. So, what
    you can do with earned wage access is access the money when
    your bills are due instead of having delayed fees added onto
    your bill.
        We also see a lot of people who are using this as a way to
    increase their incomes. So, I did mention the government
    employee uses us with his side custom candle business, and he
    is making more money on his side business because of that. I
    spoke with another customer who works at retail. When you work
    at retail, there are different types of roles. With one role
    you are tied to a particular store location. With another role
    you are tied to a department, like a cosmetics department, and
    you cover about three different store locations. That role pays
    more, but when she was offered the higher-paying role, she did
    not take it because she could not afford to front the gas money
    and then wait to get reimbursed, and so now she uses EarnIn.
    So, when she got the offer again, she took it the next time
    because she knew that with EarnIn, she could actually afford to
    front the gas money. EarnIn has helped her stay employed at a
    higher-paying job, so it actually makes sense that she uses it
    because that is what is keeping her in that job. So, I think in
    many cases, you are seeing incomes go up, and incomes go up
    because of reasons like this.
        Mr. Rose. I think--Mr. Palaniappan, you may weigh in on
    this, and, Mr. Lefton, I think this is the point you were
    trying to make--there is a very big difference between earned
    wage access and payday lending as we know it. Mr. Lefton, weigh
    in on that. Really press down on the difference.
        Mr. Lefton. Sure. Absolutely. I think the key differences
    with any loan product and earned wage access is there are two
    components to a loan. There is debt and there is interest, and
    with EWA, there is neither. I think that is a fundamental
    difference, that when we talk about this, people need to
    understand and realize that with EWA there is no debt, with EWA
    there is no interest, and those two things together are what
    form a loan.
        Mr. Rose. Thank you. My time has expired. I yield back, Mr.
    Chairman.
        Mr. Rose. The gentleman yields back. The gentlewoman from
    Massachusetts, Ms. Pressley is now recognized for 5.
        Ms. Pressley. Thank you, Mr. Chair. I am certainly glad we
    are having today's hearing to discuss buy now, pay later.
    While, admittedly, I am old enough to remember the layaway line
    decades ago when you did not get the product until you paid for
    it. We are certainly living in a different era. Klarna, Affirm,
    Afterpay, and PayPal are the four biggest buy now, pay later
    companies, and they are everywhere. With a simple press of a
    button on your phone, you can access product immediately and
    pay for it over time. To me, that does sound like a loan. A
    person is borrowing lump sum funds that they will have to pay
    back over time in the form of an installment plan, and if they
    miss payments, it can go to debt collection, show up on their
    credit report, and lower their credit score for years. Ms.
    Hand, do you agree with my assessment that buy now, pay later
    is a loan?
        Ms. Reynolds Hand. Yes, absolutely. You have, basically,
    two models in the marketplace. You have to pay in four or
    sometimes six, right? You pay back those four or six payments.
    There is no fee. Typically, there is no interest. That might
    not be a loan under the definition, and then you have the
    installment product, right? These are longer term. Let us just
    say you are buying an appliance for $2,500. That would come
    with actual interest. Let us say the interest is 24 percent or
    36 percent over a 24-month period. A consumer for that product
    is going to be paying not $2,500 for the product. The effect of
    that APR over 24 months is roughly $1,070.
        Ms. Pressley. All right then. Ms. Hand, before the Trump
    Administration rescinded guidance, the Consumer Financial
    Protection Bureau, and I want to underscore Consumer Protection
    Financial Bureau, took important steps to ensure proper
    treatment of these loans, like the ability to dispute charges
    and to obtain refunds. What are some of the harms that
    borrowers face now that those rights and protections are gone
    and we have people working actively to gut and to degrade the
    work of the CFPB?
        Ms. Reynolds Hand. Yes, it is quite alarming to see a
    marketplace evolving, frankly, in a way it should have been for
    the last 20 years to provide more access to different products
    to consumers, at the same time that the consumer protection
    regulator has shut down enforcement, examinations of financial
    institutions are not happening. This is alarming, and this is
    not the way a healthy marketplace is supposed to operate. What
    this means is the only ability is perhaps States who are
    actively looking for patterns and trying to regulate these
    products State by State. Regulation should not be our default.
    We need strong Federal floors to protect consumers.
        Ms. Pressley. Just with a quick ``yes'' or ``no'' here as
    my time is leaving us, do you think buy now, pay later
    companies are being transparent enough to ensure consumers know
    what they are signing up for?
        Ms. Reynolds Hand. They could do better.
        Ms. Pressley. Okay. Thank you. Even when buy now, pay later
    lenders are operating with transparency and following Truth-in-
    Lending laws, we must acknowledge that these fintech
    innovations do not get at the root problems. It is wage
    stagnation that leaves the young parents unable to keep up with
    the rising cost of living for their family. It is corporate
    greed that prioritizes profits at the expense of workers that
    are pulling double shifts. It is Donald Trump's fiscally
    chaotic and irresponsible policies that have reduced hiring and
    increased unemployment and ignored the affordability crisis
    that is plaguing our country. While fintech may help stand in
    the gap, people do not want to just get by. They want to thrive
    and prosper and achieve their dreams. So, Congress must get
    serious and fight for the people, not the corporations. I yield
    back.
        Ms. Pressley. The gentlewoman yields back. The gentleman
    from South Carolina, Mr. Timmons, is recognized.
        Mr. Timmons. Thank you, Mr. Chairman. I want to thank the
    witnesses for being here today.
        Fintechs are transforming the way Americans interact with
    financial services. Millions of people around the world have
    already seen their lives meaningfully improved by digital
    assets and the services provided by fintech companies. From
    expanded access to capital to faster and more secure money
    transfers across often authoritarian borders, these
    technologies are already reshaping the global financial
    landscape. I have met with countless innovators who are
    building products that meet real consumer demand and help
    families better manage their financial lives, particularly
    those who have been underserved by the traditional banking
    system. This progress, however, depends on getting the policy
    environment right. Outdated rules and inconsistent regulatory
    interpretations can slow the adoption of beneficial
    technologies, limit competition, and drive innovation offshore.
    True leadership in financial innovation means providing clear,
    predictable guardrails that promote responsible innovation here
    in the United States rather than pushing it overseas.
        Mr. Lefton, what regulatory barriers currently prevent new
    fintech companies from going to market in ways that satisfy
    clear consumer demand?
        Mr. Lefton. Sure. Thank you for the question. I think some
    of the regulatory barriers are the lack of clarity and
    ambiguity. We have seen at the State level, while numerous
    States have passed pro-EWA legislation, it can be difficult to
    comply with a patchwork of regulation, which I think,
    ultimately, flows down to the consumer, right? Clear
    regulation, unambiguous regulation, allows companies, while
    also protecting consumers, to thrive with innovation. I think
    one of the greatest examples is while we do provide EWA, we
    have also created a savings product for consumers that is free
    of charge and many of our consumers, this is their first
    savings account. We are paying 5 percent interest into their
    savings account, one that they have never had before, and all
    in the light of that, we were able to innovate, and I think
    innovation is deeply connected with clear regulation.
        Mr. Timmons. Thank you for that. I will talk about the CFPB
    briefly. What steps should the Bureau take to provide clear,
    more predictable guidance for fintech firms, particularly
    smaller or early stage companies, so that compliance
    expectations are known before products are launched rather than
    enforced after the fact? What do you think about the CFPB and
    its role in this?
        Mr. Lefton. Sure. I think the CFPB, and I will only talk
    about earned wage access, but I think December 23, just a few
    weeks ago, they released their advisory opinion around earned
    wage access, and it really resolved the regulatory uncertainty,
    right? It made it very clear, and it confirmed what Stream and
    the entire industry has been saying for years that EWA is not
    credit, and that the nominal fee is not a finance charge. I
    think that is critical to the providers in innovating and
    competing, which, ultimately, leads to greater products and
    lower prices for the consumer.
        Mr. Timmons. It is almost like the last 4 years we were out
    of balance, and we got back in balance, and things are moving
    in the right direction. Weird. Professor Zywicki, in 2024, the
    CFPB took several actions related to buy now, pay later
    products, including applying aspects of the payday lending rule
    and certain Regulation Z obligations. In your view, how would
    these measures have hindered the buy now, pay later market in
    the United States?
        Mr. Zywicki. Yes, I think that is a good example of trying
    to jam new technologies into an old bucket, into an old hole. I
    mean, Ms. Hand herself was just sort of talking about sort of
    how these products are not exactly like old-fashioned products
    like credit cards and that sort of thing. This is a totally
    different product. If you pay on time, you do not have interest
    accruing, but they are talking about like sort of applying a
    regulatory framework that now only fits in perfectly as it has
    grown up over time to a brand new technology. I think what they
    really need to do is start over and think about what exactly
    are the challenges of this product for consumers and create its
    own framework rather than that blunderbuss of regulation that
    would have, I think, killed the product.
        Mr. Timmons. Thank you, Professor. As you have outlined,
    there is real risk that misapplying legacy regulations to
    innovative products could reduce access and push consumers
    toward less transparent or less suitable alternatives, and that
    outcome would undermine, rather than advance, consumer
    protection. I think that we are moving in the right direction
    with the CFPB, and we have to keep up the good work. Thank you,
    and I will yield back.
        Chairman Steil. The gentleman yields back. The gentleman
    from New York, Mr. Torres, is recognized for 5 minutes.
        Mr. Torres. Thank you, Mr. Chair. I am a Bronx boy, so I
    have no farming analogies. It has been a while since the Bronx
    was farmland.
        [Laughter.]
        Mr. Torres. Earned wage access is based on a simple
    proposition: if you are a worker, you should have the right to
    access the money you earn the moment you earn it and the moment
    you need it. The notion that you must wait 2 weeks or even a
    month before accessing your own earnings should be seen as a
    scandal. It should be seen as an anachronism in a world as
    technologically advanced as our own. I have constituents who
    have fallen behind on their bills despite working full time,
    who have fallen behind not because of a lack of earnings, but
    because of a lack of access to their earnings. A lack of access
    to one's earnings puts the most cash-strapped Americans at risk
    of falling victims to the abuses of payday lending and
    overdrafts. So, in Congress, we have a choice. Either we give
    working people safe and immediate access to their own earnings,
    or we set them up for financial traps like payday lending. To
    be clear, like any financial product, EWA is neither inherently
    safe nor inherently dangerous. It is only as good as its
    design. We in Congress must ensure that EWA is designed to be a
    solution to a problem rather than a problem of its own.
    Congress should adopt a regulatory framework that designs EWA
    to be a free and affordable alternative to payday loans or
    overdrafts.
        My first question to the CEO of EarnIn, do you believe, as
    I do, that EWA providers should be required by law to offer a
    free option to consumers?
        Mr. Palaniappan. Yes.
        Mr. Torres. Now, the EWA industry maintains that EWA is
    qualitatively different from credit and, therefore, should be
    regulated differently. If we accept that premise as true, it
    then logically follows that there should be no collections,
    correct?
        Mr. Palaniappan. That is correct.
        Mr. Torres. There should be no charging of interest,
    correct?
        Mr. Palaniappan. That is correct.
        Mr. Torres. There should be no late fees, correct?
        Mr. Palaniappan. That is correct.
        Mr. Torres. There should be no wage garnishment, correct?
        Mr. Palaniappan. That is correct.
        Mr. Torres. There should be no adverse credit reporting,
    correct?
        Mr. Palaniappan. That is correct.
        Mr. Torres. Right. No collections, no interest, no late
    fees, no wage garnishment, no adverse credit reporting. Simply
    put, EWA should function as a free or affordable alternative to
    payday loans and overdraft fees, correct?
        Mr. Palaniappan. That is correct.
        Mr. Torres. Now, there is a debate surrounding the
    appropriateness of applying APR to earned wage access. APR is
    deeply informative when it comes to long-term products, but
    when it comes to something as extremely short term as EWA, does
    APR inform or does it misinform? I want to make a point by way
    of illustration. Suppose I was to give you a 1-day hundred-
    dollar loan with a $1 fee. The average person would consider
    that $1 fee not to be excessive or exploitive. It is $1. What
    if I were to tell you that $1 fee translates into an APR of 365
    percent, right? Three hundred and sixty-five percent sounds
    massive, and so, the trouble with applying APR to the most
    short-term product is that annualization can make even the
    smallest fees seem massive on paper. A one-dollar fee can be
    made to seem massive when presented as an annualized
    percentage. Is that a fair point?
        Mr. Palaniappan. That is correct.
        Mr. Torres. So, the question for Congress to consider is
    not whether there should be disclosure. Of course there should
    be disclosure of all fees, of all costs. What is needed is the
    right kind of disclosure: disclosure that informs rather than
    misinforms, that illuminates the truth rather than distorts it.
    So, consumer protection, proper disclosure, and innovation
    should be our policy objectives. I do not know if anyone has
    any thoughts.
        Ms. Reynolds Hand. I do.
        Mr. Torres. Yes.
        Ms. Reynolds Hand. I would agree with everything that you
    said. I think an additional standard that applies that is
    missing in this space, particularly fintech, is dynamic
    disclosure: disclosure at the right time. We have technologies
    that can deliver funds to consumers instantly. Those
    disclosures should be delivered instantly, plainly, simply in
    an accessible way. The other principle that applies is
    protective design or consumer-friendly design. So, one of the
    things that we have seen in this space, the products that we
    have looked at, is oftentimes those zero-cost options,
    particularly in the direct-to-consumer space, are hidden. The
    defaults are options where the consumers will pay a fee, even
    where there is a zero-cost option available. So, the technology
    should be designed in a way, to your point, where it functions
    so that there is no cost.
        Mr. Torres. What good is a free option if you are unaware
    of it?
        Ms. Reynolds Hand. Sorry?
        Mr. Torres. What good is a free option if you are unaware
    of it?
        Ms. Reynolds Hand. Exactly.
        Mr. Torres. Yes, so, and I feel like those are imminently
    solvable problems that I am proud to co-lead the legislation
    with Congressman Steil. He is more rural than I am, so I am
    happy to elicit your feedback.
        Ms. Reynolds Hand. Thank you.
        Mr. Torres. Yep.
        Mr. Zywicki. I will just add it warms my heart to hear you
    talking about reexamining APR as a way of disclosing products
    to consumers exactly as you said. We talked about this in----
        Mr. Torres. I am not sure if I said that, but----
        Mr. Zywicki. Right, but----
        Mr. Torres. Only in the EWA context.
        Mr. Zywicki. Right, but to compare apples to apples, right,
    consumers compared to, say, an overdraft or the late fee on a
    bill, they look at dollars a lot of times rather than APR.
        Chairman Steil. The gentleman yields back. The gentleman
    from North Carolina, Mr. Moore, is recognized for 5 minutes.
        Mr. Moore. Thank you, Mr. Chairman. Financial technology is
    transforming how Americans earn, spend, and save their money.
    From peer-to-peer payment apps and digital wallets to earned
    wage access and installation products, fintech innovations are
    responding to real consumer needs for speed and affordability.
    These products exist because they fill gaps in the traditional
    financial system, especially for consumers who have
    historically faced limited options or high costs. With my
    questions, I will start with Mr. Zywicki. Are there any
    particular populations--hourly workers, gig workers, rural
    communities--who benefit most from fintech services, and how
    are these tools especially helpful to them?
        Mr. Zywicki. Yes. The evidence on this is abundant at this
    point that traditionally underserved communities are the ones
    who benefit the most from fintech and fintech innovations,
    whether it is rural, whether it is young people. BNPL, for
    example, is used heavily by Gen Z and Millennials. Earned wage
    access obviously is very popular and used a lot by hourly
    workers who often live paycheck to paycheck. Upper-income
    people are using these more, especially BNPL, but, really, the
    value proposal proposition is for those groups. Fintech and
    fintech underwriting, use of alternative data like cash-flow
    data as opposed to credit scores and the like, the evidence on
    that is very clear that increases competition and benefits
    people most who are traditionally underserved and where
    traditional competition among banks is not very robust, which
    includes rural communities, obviously.
        Mr. Moore. Mr. Palaniappan and Mr. Lefton, how have earned
    wage access services improved financial stability for workers,
    and how are these products helping make everyday expenses more
    manageable?
        Mr. Palaniappan. Thank you for the question. The first
    thing that earned wage access does, which is what most people
    expect, is it helps people pay their bills on time so there are
    fewer late fees on bills, there are fewer other expensive fees
    because they are paying their bills on time. There are also
    nonfinancial benefits where there is less stress. So, I hear
    from our customers how they are able to send their children on
    field trips because they have access to our product, which they
    would not have been able to do otherwise, celebrate birthdays
    on the right days, go to see a dentist when the tooth starts
    aching instead of putting that off to Friday. I spoke with a
    customer. She works in healthcare and her daughter likes to
    dance. She has to pay for dance classes at the beginning of
    every month, and she would not have been able to do that
    without EarnIn. So, her daughter goes for dance classes and,
    today, takes part in dance competitions and can follow her
    passion for dance because of EarnIn.
        The other benefit that I spoke about in the testimony as
    well is that incomes go up. Incomes go up by over 10 percent.
    From the EarnIn dataset, a study on over a million customers,
    incomes went up by 11-and-a-half percent. That is about $335
    per month, and so we are seeing incomes go up as well when
    people start using earned wage access. From our data, we are
    actually seeing incomes go up faster than inflation, and so we
    are seeing wage growth in real terms as well.
        Mr. Moore. Over what time period have you seen those
    increases?
        Mr. Palaniappan. We have seen wage increases higher than
    inflation over the last 3 years.
        Mr. Moore. Mr. Lefton, did you care to respond as well?
        Mr. Lefton. Sure. Well, first, I agree with everything that
    was just said. I think one of the things we need to remember
    when we are talking about EWA is that EWA users are not
    financially illiterate. They are just experiencing a frequency-
    of-pay issue, and so I think it is important we do not conflate
    the two, right? Consumers use EWA because they need to be paid
    on their own timeline, not because they do not know how to
    manage their own money. I think that is a very important
    distinction. We need to trust that the user is in the best
    position to know how and when to access their wages and manage
    their money.
        Mr. Moore. One thing that seems to have worked to me at the
    State level and otherwise is really to try to bring about
    innovation. Like the regulatory sandbox legislation, our State
    adopted that a couple of years ago, and it allows financial
    institutions and technology firms to test new products under
    the supervision of regulators. So, I guess just a follow up
    question to Mr. Zywicki: how can regulatory sandboxes help
    regulators better understand new fintech products before
    imposing broad rules?
        Mr. Zywicki. Yes. Briefly, I will just amplify on the EWA
    question some of the points that my colleagues have made here,
    which is, I think the best study on this is the Davis study,
    who, in addition to finding income goes up, also finds that
    there are no financial problems--people do not overdraft more,
    do any of that sort of stuff--as opposed to the Connecticut
    study where they found losing access to EWA led to a lot more
    payday, having to sell products, and that sort of thing. With
    respect to sandboxes, I think sandboxes are revolutionary. I
    think they are super important. The ability to get real-time
    information, tweak products. Even the discrimination-type
    questions that were being raised, I think could be addressed
    very well with regulatory sandboxes to make sure those products
    operate the way they should.
        Mr. Moore. Thank you, and my time is up. I did have other
    questions for the other witnesses, but I appreciate you all
    being here today. With that, I yield back.
        Chairman Steil. The gentleman yields back. The gentlewoman
    from Texas, Ms. Garcia, is recognized for 5 minutes.
        Ms. Garcia. Thank you, Mr. Chairman, and thank you to all
    the witnesses, and I first want to associate my remarks with
    the remarks of Mr. Torres. I think they were right on point. To
    the chairman, I did not sack potatoes, but I sure as hell
    picked cotton.
        [Laughter.]
        Ms. Garcia. We did not get paid daily. We had to work our
    asses off in the hot Texas heat all week until we saw any money
    Friday afternoon but it just underscores the point that workers
    do deserve to get paid and get paid well, and not under the
    table, to avoid all these things, and to make sure that they
    can have access to their money when they are needed.
        Like Representative Pressley said, I am waiting for the
    layaway plan because one of the things my mother used to do at
    the beginning of the cotton season is take us into town, and we
    would pick what we thought we might need for school in
    September, and then she would pay weekly until we got to
    September. Now, if you gain a little weight, you are in
    trouble, but that is how it was done, and some people are still
    living paycheck to paycheck. According to the Urban Institute,
    52 percent of Americans do not have the money to cover
    essential costs, such as housing, food, healthcare, childcare,
    transportation, and education. Fifty-two percent. That is a lot
    of people, but in my district it is even worse: 74 percent. Let
    that sink in.
        So, as many of my colleagues mentioned, there is an
    affordability crisis. To call it a hoax is just flat a hoax.
    The American people are struggling to support themselves and
    their families day by day, paycheck to paycheck. That is why
    many Americans turn to alternative income sources that we have
    been discussing today. However, as financial technology and
    these products become more common, I share my colleagues'
    concerns that without consumer protection, these products will
    only take more money out of consumers' pockets.
        Ms. Hand, as we discuss how to regulate these products,
    several people have said that especially the earned wage access
    is free. Is it really free?
        Ms. Reynolds Hand. There are a variety of different
    products in the marketplace. In fact, we have recently looked
    at 23 different companies out there, both employer-sponsored
    and direct-to-consumers. The employer-sponsored products are
    typically less risky and, basically, you see what you have
    heard here today.
        Ms. Garcia. But are they free?
        Ms. Reynolds Hand. Those products can be free. For more of
    the direct-to-consumer products, some of them have free
    options, but then they do have fees, so they are effectively
    not free. Some of those free options we have seen are hidden,
    and consumers are defaulted into fee structures which may be
    clear and hidden. The other thing that I would add is that many
    consumers are using these on a weekly basis, so they are
    effectively stacking fees on a weekly basis and then their
    ability to repay over time. So, I would say that, effectively,
    these are not free products.
        Ms. Garcia. Okay. Now, what about the buy now, pay later?
    Is that free?
        Ms. Reynolds Hand. There are simple products, pay in 4,
    where if a consumer is successful, that is effectively a free
    service. Then you go down the installment path where these are
    loans, they are structured as such, they have interest, and I
    think one of the challenges that we have seen is oftentimes--
    the consumers and our research support this--they see an
    advertisement, they go to pay for something, and they get
    offered the pay in 4 product. Then they go through the
    application, and they end up in an installment loan product
    and, oftentimes, are not really aware of the long-term effects,
    so it is not free.
        Ms. Garcia. So, do some have the APR as high as was
    illustrated by his example? I mean $1 on a hundred dollars does
    not sound bad, but once you do the math, the percentage is
    really high.
        Ms. Reynolds Hand. Yes. If that one dollar then gets
    deferred, you add on late fees. If those apply or the consumer
    simply does not have the ability to repay in the time that they
    have originally agreed to, that will put a consumer into a fee
    structure.
        Ms. Garcia. Yep. Just curious, what would you consider a
    fair fee for the service? Let us not talk yet about penalties
    and installment payments later or anything. It seems to me that
    one of these products is no more than a high-tech payday loan
    service.
        Chairman Steil. We will allow the gentlewoman to submit
    answers in the record.
        Ms. Garcia. I was just beginning to have fun.
        [Laughter.]
        Ms. Garcia. Thank you. Thank you to all the witnesses.
        Chairman Steil. We thank the gentlewoman. The gentlewoman
    yields back. The gentleman from California, Mr. Liccardo, is
    recognized for 5 minutes.
        Mr. Liccardo. Thank you, Mr. Chair. I want to thank all the
    witnesses for their testimony and, particularly, Mr.
    Palaniappan--please forgive me if I just mispronounced your
    name--but it is good to have a local company here, and
    congratulations on the great success of your company. I
    appreciate very much what EarnIn has done to enable millions of
    American workers to have more freedom in their lives. That is
    very important. I also, by the way, appreciate Ms. Reynolds
    Hand's important observations. I think we have good players and
    we have bad players in this industry. Like all industries, we
    need transparency. We appreciate those who are transparent, and
    for those who are not, that is why we need simple, predictable
    regulations, so very much appreciate points being made all
    around.
        I would like to shift gears, though, from EWA to the
    broader topic of the hearing and the subcommittee, which is
    around fintech regulation and innovation.
        Ms. Kelley, I am going to turn to you because I know you
    represent a lot of folks in the industry. An awful lot of focus
    in recent weeks and months has been whether or not fintech
    companies can get access to the Federal payment rails--FedNow--
    and other transmission means, like Fedwire. I think there has
    been a lot of discussion, certainly Treasury publicly as well
    at the Federal Reserve. There is now, I think, a request for
    information from the Fed. They are looking for feedback about
    what a skinny account might look like or a payment account as
    a, I guess, an option that would be distinct from a master
    account. I guess, regardless of whether the Fed or Congress
    creates this, clearly there needs to be some regulation on
    those fintech companies that would avail themselves of this
    opportunity and there are a lot of ideas from the Bank Policy
    Institute (BPI), from Fed, and others about what regulations
    those companies should be subject to, things like Bank Secrecy
    Act and Know Your Customer (KYC), and anti-money laundering,
    whether or not they should be prohibited from overdrafting,
    from charging interest, et cetera. Do you have some views about
    what regulations would be appropriate for us to be thinking
    about here?
        Ms. Kelley. Yes, and thank you for the question. It is a
    particularly dynamic and interesting time to be in this
    industry, and I think what you have just described reflects
    that. So, I would start by saying in the relationships that
    exist now between banks and fintechs where they partner to
    provide services, there is a holistic set of regulations. There
    were interagency guidelines that were released in 2023 that,
    effectively, require banks to ensure that their fintech
    partners are following the same regulatory requirements that
    the banks must follow. So we are operating against that
    backdrop. As we look forward and say should these
    nontraditional bank fintechs have access to the Federal
    Reserve, that is a conversation that has begun with the request
    for information (RFI) and the conversations around the skinny
    master accounts.
        We are in very early days of those conversations, and I
    know the industry as a whole is still trying to understand
    exactly what that would look like but what is clear is there
    needs to continue to be a balance between fostering innovation
    that we see from nontraditional banks, but ensuring safety and
    soundness as well. The skinny master accounts is one attempt to
    strike that balance and, again, still in the early days.
        Mr. Liccardo. Okay. So, no commitments yet about what
    concessions industry might make, about what regulations would
    be sensible for this----
        Ms. Kelley. Yes, I think it is still an open question.
        Mr. Liccardo. Okay. Well, I look forward to continuing to
    engage with you and with your members to understand what that
    might look like.
        Ms. Kelley. Absolutely.
        Mr. Liccardo. I think this is coming at us pretty fast, and
    we probably need to understand best how to respond. Regardless,
    I appreciate the efforts of many fintech companies to innovate
    in a space where I think consumers do need more choices, and I
    appreciate the work that is being done by many of the companies
    here. Thank you.
        Chairman Steil. The gentleman yields back. I would like to
    thank all of our members for their questions today, all of our
    witnesses for your testimony today.
        Without objection, all members will have 5 legislative days
    to submit additional written questions for the witnesses to the
    chair. The questions will be forwarded to the witnesses for
    their response. Witnesses will please respond no later than
    February 17.

        [The information referred to can be found in the appendix.]

        Chairman Steil. The hearing stands adjourned.

        [Whereupon, at 12:01 p.m., the subcommittee was adjourned.]

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