CFPB pulls plug on ‘earned wage access’ sandbox program after firm seeks fee changes

Approval for a so-called “earned wage access” program was rescinded Thursday by the federal consumer financial protection agency after the firm that developed the program requested the rescission to make changes to its fee model, the agency said.

The Consumer Financial Protection Bureau (CFPB) said it issued the termination – effective immediately – of a “Sandbox Approval Order” for the program developed by the firm Payactiv. Under the “earned wage access” program, CFPB said, Payactiv contracts with employers to provide worker-requested transfers of wages that an employee has already earned prior to payday. Payactiv then recoups the amount of each transaction through a payroll deduction from the employee’s next paycheck.

The bureau said the sandbox order was awarded to Payactiv in December 2020 giving the firm special regulatory treatment for its program. That provided the company with a temporary safe harbor from liability under the Truth in Lending Act and Regulation Z. The temporary safe harbor was for offering and providing certain earned wage access products, subject to good faith compliance with the terms of the approval order.

That was until early this month, the bureau said. On June 3, the CFPB said it told Payactiv that was considering terminating the approval order following “certain public statements” the company made, allegedly wrongly suggesting the bureau’s endorsement of its products.

Later this month (on June 21), Payactiv told the CFPB that it was planning to modify its earned wage access product fee model.

“The 2020 approval order only applies to the company’s existing products and any changes to the product fee model would require modification to the order,” CFPB said. “Payactiv instead requested termination of the order so it could make fee model changes quickly and flexibly.”

The agency added that it has received requests for clarification regarding its advisory opinion on “earned wage access” products; and that it plans to issue further guidance soon to “provide greater clarity concerning the application of the definition of ‘credit’ under the Truth in Lending Act and Regulation Z.”

CFPB Rescinds Special Regulatory Treatment for Payactiv