The Consumer Financial Protection Bureau today issued a groundbreaking approval order (Approval) confirming that Payactiv's Earned Wage Access (EWA) Program is not credit and therefore is exempt from the federal Truth in Lending Act (TILA) and Regulation Z rules governing creditors.
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 says Payactiv's EWA Program is an "innovative mechanism for…consumers to bridge the gap between paychecks"
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."
The Bureau's Approval is a "watershed moment," says Payactiv co-founder and CEO Safwan Shah. "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 CFPB issued Payactiv's Approval pursuant to the CFPB's Compliance Assistance Sandbox (CAS), which was established in 2019 through the CFPB's Office of Innovation. According to the CFPB, the CAS helps "regulated entitles better understand conditions of regulatory uncertainty, and how Federal consumer financial law applies to specific aspects of particular products and services."
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, however, the CFPB has now addressed—and 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.