Payactiv is the unquestioned compliance gold standard in earned wage access (EWA). On December 30, 2020, Payactiv became the only EWA provider to receive a formal Approval Order by the Consumer Financial Protection Bureau (CFPB) confirming that its EWA program is a non-credit product exempt from the federal Truth in Lending Act (TILA) and Regulation Z lending requirements.
The CFPB’s Approval Order only applies to Payactiv—and Payactiv is the only EWA provider to have achieved such an order. In its Approval Order to Payactiv, the CFPB makes several key findings supporting its conclusion that Payactiv’s EWA Programs do not involve credit:
- Payactiv EWA is not a debt. The CFPB states that “Payactiv EWA Transactions do not provide employees with ‘the right to defer payment of debt or to incur debt and defer its payment’ because the Payactiv EWA Program does not implicate a ‘debt.’” Without such an underlying debt, the Payactiv EWA Program does not involve “credit” as that term is defined in federal law. This ruling is a first for the EWA industry and is unique to Payactiv.
- True earned wage access. The Approval Order confirms that the Payactiv EWA Program “facilitates employees’ access to wages they have already earned, and to which they are already entitled, and thus functionally operates like an employer that pays its employees earlier than the scheduled payday.” Fundamentally, the CFPB recognized, “the accrued cash value of an employee’s earned but unpaid wages is the employee’s own money.”
- Nominal fees. The CFPB praised the fact that Payactiv has a free option under its Access Freedom model—which provides free EWA with the Payactiv Card—and the Approval Order also rules that Payactiv’s $1 non-recurring Access Choice fee is “nominal” and “de minimis,” demonstrating that “Payactiv is not taking on the type of credit risk characteristic of a typical credit transaction.” In fact, Payactiv’s fees are the lowest in the industry, further underscoring our commitment to consumer fairness.
- Payroll-based, with no recourse against the employee. The Approval Order recognizes that “there is no independent obligation to repay” a Payactiv EWA transaction, since “Payactiv recovers corresponding EWA amounts via employer-facilitated payroll deductions and will never seek repayment from an employee directly or through a payment authorization from the employee’s account.”
- No underwriting. The Approval Order points out that employees accessing the cash value of their earned wages are not applying for credit or asking Payactiv to make a risk-based decision: “Payactiv does not directly or indirectly assess an employee’s credit risk . . . just as underwriting is not used by an employer to issue a paycheck to an employee.” This is especially important because it shows that employees are earners, not borrowers.
- Other providers are not exempt. Other EWA providers that have not received an Approval Order or do not comply with the CFPB’s Advisory Opinion on EWA cannot claim such an exemption under TILA, and face regulatory uncertainty and potential exposure.
- Payactiv EWA is an important innovation and an alternative to credit. The CFPB’s Approval Order to Payactiv highlights the benefits of providing faster access to earned wages, citing Payactiv’s “innovative mechanism for allowing consumers to bridge the gap between paychecks,” which can “provide consumers with a lower-cost alternative to traditional payday loans, other high-cost credit products, and overdraft fees” and is available “to unbanked or underbanked consumers or consumers with poor, limited, or no credit history.”
Please note that the CFPB Approval Order relates only to the described 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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