Payactiv’s recent approval order from the CFPB follows the Bureau’s November 30, 2020 Advisory Opinion discussing EWA programs more generally. In that Opinion, the CFPB confirmed that there is uncertainty about the application of TILA and Regulation Z to all EWA programs, writing that: “The Bureau understands that there is uncertainty about the application of Regulation Z to EWA programs….The Bureau itself has acknowledged that there is uncertainty concerning the conditions under which EWA programs involve an offer of “credit” under Regulation Z.” The Advisory Opinion went on to state that EWA programs meeting seven general criteria (including being payroll deduction-based) would not be considered “credit.”
Employers should be wary of any provider who claims its EWA programs are not subject to the CFPB or the Advisory Opinion, especially any provider claiming it “does not require any form of employee payback.” Don’t be fooled by the spin: all EWA providers naturally require some form of payment to settle the EWA transaction. The Advisory Opinion indicates a clear preference for models that recoup such EWA funds through payroll deduction.
Indeed, the same provider claiming it “does not require any form of employee payback” says just the opposite in its terms and conditions, noting it “will keep” the corresponding EWA amounts after it holds the employee’s entire paycheck in a captive account – i.e. the provider requires the employee to pay back the EWA amount. Those same terms and conditions also require the employee to authorize bank account debits from his or her personal bank account, a practice that same provider now calls “dangerous and strongly disfavored.”
Absent such approval, providers that (1) solicit or accept “tips”, (2) recoup EWA through account debits, or (3) require employees to direct deposit their wages into an FBO account (accounts controlled by the EWA provider) do not comply with the CFPB’s guidance.
For more detailed information on the only EWA model with an approval order from the CFPB, check out our Compliance Handbook, “Compliance First.”
Please note that the CFPB Approval Order relates only to Payactiv’s Payroll Deduction EWA Programs and not to all Payactiv products or services. The Approval Order is a public document, and may be reviewed here.
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