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Earned wage access: is it a loan or not?

FILE - In this June 15, 2018, file photo, cash is fanned out from a wallet.
Elise Amendola
AP, File
FILE - In this June 15, 2018, file photo, cash is fanned out from a wallet.

Are payday loans about to make a comeback in Virginia?

A new report from the U.S. Government Accountability Office recommends that the Consumer Financial Protection Bureau answer a really important question. It's about whether or not a new kind of cash advance qualifies as a loan. Earlier this year, Republican Delegate Amanda Batten of James City County introduced a bill in the General Assembly supported by business interests who offer something called "earned wage access."

"The employee could use this service to access the wages that they've earned but not yet been paid during the current pay cycle," Batten said. "So, this is not a loan. These are wages that have already, in fact, been earned."

Jay Speer at the Virginia Poverty Law Center says the idea that this is not a loan is aimed at avoiding the legal responsibility associated with loaning money.

"When somebody advances you money that you then need to repay at a cost; that sure sounds like a loan to me," says Speer.

The GAO report suggests the Consumer Financial Protection Bureau should provide some clarity on this issue: are these things loans or not?

This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.

Michael Pope is an author and journalist who lives in Old Town Alexandria.