The Consumer Financial Protection Bureau (CFPB) recently followed up its Advisory Opinion on EWA programs with a groundbreaking Approval Order specific to Payactiv. The Approval Order confirms Payactiv’s EWA Programs are an “innovative” solution that provide working people with a non-credit alternative to costly low dollar loans and overdraft fees. Payactiv is the only EWA provider to have achieved such an approval from the nation’s leading consumer financial regulator, and the only provider specifically exempt from federal lending laws. Other EWA providers face regulatory uncertainty and legal exposure absent such an exemption.
DailyPay, an EWA provider lacking approval or exemption from the CFPB, has gone to great lengths to distance itself from the CFPB’s statements, and has made a number of dubious claims in blog posts and even a press release. Let’s fact-check them here:
TRUE OR FALSE? This claim is probably FALSE. This statement refers to the CFPB’s general Advisory Opinion on EWA. The premise of DailyPay’s claim—that it does not require employee payback—is simply illogical. All EWA providers must recoup EWA funds on or after payday. DailyPay is no exception. In fact, every DailyPay user must agree to deposit his or her entire paycheck into a bank account issued by DailyPay, at which point DailyPay keeps EWA funds and fees directly from the employee’s wage proceeds—this sure sounds like payback to us! On top of that, DailyPay also requires users to authorize an ACH account debit from the user’s linked bank account to correct any “errors” in DailyPay’s effort to collect.
The CFPB’s Advisory Opinion states such practices are not approved: “EWA programs where a provider obtains any authorization to transfer funds from a consumer’s account, including both electronic payment authorizations and checks and including authorizations that the provider may not actually utilize, do not meet the requirements….” Not only is this model not approved by the CFPB, it might well be considered “credit” or a wage assignment under federal and state laws.
Consider this complaint by a DailyPay customer to the CFPB: “In [DailyPay’s] terms of service in section 2 it says if my employer short changed dailypay (see my comment in above), i wont owe them a cent and yet here we are, They kept insisting i owed them money, so just to get this borderline illegal harassment over with, i paid it off, and the account is still deactivated, still!”
Or this one, from an unhappy DailyPay customer to the Better Business Bureau: “I DID NOT AUTHORIZE 864.00! My terms were for 114.00 per paycheck! I WOULD LIKE FOR MY OVERDRAFT FEES TO BE REIMBURSED IN THE AMOUNT OF $170.00 THIS COMPANY HAS UNFAIR PRACTICES AND SHOULD BE CLOSED. … I WILL RALLY AROUND THIS TO BOYCOTT BY SCREAMING THE UNFAIR PRACTICES TO EVERYONE INCLUDING MY EMPLOYER.”
TRUE OR FALSE? This claim is FALSE. DailyPay has no basis for speculating on Payactiv’s motives for working with the CFPB. The truth is that Payactiv had the confidence to subject its model for regulatory review, while DailyPay has not done so. Now there is one EWA Program that is CFPB-approved—the others are not. The CFPB’s Approval gives Payactiv clients the confidence that they have selected the compliance gold standard. So why does DailyPay not do the same thing? Consumers and employers have a right to know which financial products are fair, transparent and safe. Is DailyPay concerned that its complicated and onerous EWA program would not pass regulatory muster? Can DailyPay obtain regulatory approval like Payactiv did? There’s only one way to find out…
TRUE OR FALSE? This claim is FALSE. State law permits deductions from an employee’s wages so long as the deduction is authorized in writing and is for the employee’s benefit. Payactiv’s model easily fits these requirements. Instead of focusing on Payactiv’s model, perhaps DailyPay should be more concerned with state laws banning wage assignments – i.e. where an employee assigns future wages as collateral for another obligation. DailyPay requires employees to commit in advance to a direct deposit of their entire paycheck into a forced “FBO” account (which DailyPay controls).
The bottom line: Payactiv has long been the fairest, most transparent, lowest cost EWA solution in the industry. And now, it’s CFPB-approved as well. Indeed, Payactiv has ZERO unresolved complaints on BBB, where other competitors have over 40.
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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