On December 30, 2020, the CFPB issued a follow-up order in response to its November 30, 2020 EWA advisory opinion, which provides guidance on certain earned wage access (EWA) programs. AS a matter of fact, the Consumer Financial Protection Bureau on Dec. 30 issued two compliance assistance sandboxes: one for dual usage credit cards and another for employee access to earned but unpaid wages. CFPB compliance sandboxes provide a safe harbor for banks to test products or services that have been approved by the bureau.
One of the Earned Wage Access providers (Payactiv) received a compliance sandbox for its program that facilitates employee-requested transfers of wages that an employee has already earned, capped at no more than 60% of the accrued cash value of the earned wages.
Under the CFPB policy, EWA providers had the right to request clarity on specific points that deal with regulatory uncertainty. Because the Bureau’s November 30 opinion identified specific at-risk models that might be considered extenders of credit, this provider requested a review of their at-risk set of facts. This was the reason PayActiv requested this follow-up order, because it was at risk of being deemed non-compliant with the CFPB’s initial advisory opinion on earned wage access.
The opinion does not grant any approval of the specific model itself. In fact, the CFPB follow-up order states that the “Approval Order does not constitute the Bureau’s endorsement of the PayActiv EWA Program or any other product or service offered or provided by PayActiv.”
DailyPay has never required any form of employee payback, debiting or payroll deduction that would implicate the extension of credit. The November CFPB opinion and the December CFPB EWA Approval Order were narrow issuances of guidance, to provide clarity around which practices of other providers are problematic. Particularly, the December order notes that wage deduction programs still face restrictions and prohibitions under state wage and hour laws. The safe harbor under the order excludes this key risk. Providers with wage deduction methods can expose their partner employers to this and other legal risks, and are not covered for these risks under the November opinion or the December order. Furthermore, employers relying on wage deduction-based programs must now contend with additional restrictions and concerns regarding this practice.