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CFPB EWA Approval Order

On 12/30/2020, the CFPB issued a follow-up order in response to its advisory opinion on Earned Wage Access from a month earlier, which provides guidance on certain earned wage access (EWA) programs (sometimes known as on-demand pay programs). In a stunning blow to the community of EWA providers who debit, the CFPB explicitly excluded debiting practices from the safe harbor. Instead, it validated the employer-based, non-recourse approach pioneered and championed for years by DailyPay.

Key Highlight #1: Utilizing debiting as a form of EWA payback is likely to be considered an extension of credit.

The CFPB approval order specifies a narrow set of circumstances in which the certain EWA providers would be perceived as not issuing loans. A specific provider (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. …

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Let’s start from the past: payroll hasn’t changed in centuries. Since the beginning of time, payroll has always revolved around the employer. Employers have always been the ones to decide when to pay their employees.

During World War II, to prevent the inflation the U.S. had seen after World I, FDR requested that employers switch to a biweekly pay schedule. This was done to limit the cash Americans had at any point in time, to curb inflation. And employers chose to do the patriotic thing and so they moved to biweekly pay.

With all that behind us, why should hard-working Americans today wait until a designated payday to access the money they had already earned? Let’s face it — life happens between paydays. Everything from an unexpected medical bill to rent to vacation money might be needed in that timeframe. Arbitrary decisions as to when to pay don’t work for most employees. Those employees then seek highly inferior alternatives, like overdraft fees, to address the gaps caused by that system’s failure. …


Jason Lee

Jason Lee is a fintech entrepreneur and the Founder and CEO of DailyPay the current market leader in the on-demand pay software sector

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