On December 30, 2020, the CFPB issued its first-ever Approval Order under its “compliance assistance sandbox,” a program that allows companies like Payactiv to obtain clarity in areas of regulatory uncertainty. This is a legally binding order from the nation’s consumer financial watchdog confirming that the Payactiv Earned Wage Access (EWA) programs as described in the Order and Payactiv’s CAS Application are not “credit” under TILA and Regulation Z.
We believe the Approval Order is a watershed moment for EWA and Payactiv. The Approval Order is the first and only such approval for an EWA provider and only applies to Payactiv.
In other words, you can pat yourself on the back for choosing on behalf of your valued employees the only EWA provider with an approval order from the CFPB.
No debt. “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.’”
True earned wage access. 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.”
Nominal fees. The CFPB noted the fact that Payactiv has a free option under its Access Freedom model, and ruled that the $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.”
Non-recourse. 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.” The focus on Payactiv’s unique payroll-deduction model validates our view that this is the most consumer friendly, fairest, and safest way to do EWA.
No underwriting. “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.”
EWA users are earners, not borrowers. The Approval Order expressly recognizes that “the accrued cash value of an employee’s earned but unpaid wages is the employee’s own money.”
Last but not least, the CFPB called Payactiv an “innovative mechanism for allowing consumers to bridge the gap between paychecks; [the] potential to provide consumers with a lower-cost alternative to traditional payday loans, other high-cost credit products, and overdraft fees; and its availability to unbanked or underbanked consumers or consumers with poor, limited, or no credit history.”
For all the challenges that 2020 delivered, you can begin 2021 knowing you have changed lives for the better.
We thank you for choosing us….
We thank you for helping your employees….
And we wish you the best of all possible success in 2021.
Check out the press release, for the biggest story about earned wage access to date.
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.