The Earned Wage Access (EWA) Program from US-based Payactiv is not credit and therefore is exempt from the federal Truth in Lending Act (TILA) and Regulation Z rules governing creditors.
So has ruled the Consumer Financial Protection Bureau in an industry-watched development.
Specifically, the Approval notes that a Payactiv EWA user does not create a debt because “the accrued cash value of an employee’s earned but unpaid wages is the employee’s own money.” The Approval is specific to Payactiv and is the first of its kind from the Bureau. The Payactiv EWA Program is the only model approved by the CFPB.
The Approval describes Payactiv’s EWA Program as an “innovative mechanism for allowing consumers to bridge the gap between paychecks” and confirms that it “differs in kind from products the Bureau would generally consider to be credit.” The Bureau notes that “Payactiv recovers corresponding EWA amounts via employer-facilitated payroll deductions,” and does not “seek repayment from an employee directly or through a payment authorization from the employee’s account.” The Approval covers both Payactiv’s free and fee-based EWA models, calling Payactiv’s standard $1 fee “nominal” and “de minimis.”
Payactiv co-founder and CEO Safwan Shah said: “We are very proud that the CFPB has recognized this important innovation and validated Payactiv’s pioneering work in creating low or no-cost employer-sponsored access to earned wages. Employers can take comfort in knowing that Payactiv continues to be the leader in responsible EWA for employees.”
The Payactiv Approval follows the Bureau’s November 30, 2020, Advisory Opinion governing fee-free EWA models. In that Advisory Opinion, the CFPB stated that all EWA providers face regulatory uncertainty, leading the Bureau to issue general guidance to the industry.
With the Payactiv Approval, the CFPB has now approved a specific EWA model for the first time. Payactiv is the only EWA provider to have secured such a company-specific approval from the nation’s consumer financial watchdog.
Payactiv is the EWA provider to Walmart.