CFPB approves Payactiv as a true credit alternative for workers

By Pavithra R

PayActiv, a provider of financial wellness platform for employees, has announced that the company has been approved by the Consumer Financial Protection Bureau confirming that it’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. 

The CFPB Approval Order describes the FinTech’s EWA Program as an “innovative mechanism for allowing consumers to bridge the gap between paychecks;” and also covers both Payactiv’s free and fee-based EWA models. 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 Bureau’s Approval is a “watershed moment. 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,” said Payactiv co-founder and CEO Safwan Shah.

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. The approval follows the Bureau’s November 30, 2020, Advisory Opinion governing fee-free EWA models.

Founded in 2012, PayActiv aims to improve employee financial health. According to company data, the firm currently serves more than 4 mn employees at over 1,000 businesses across retail, business processing services, food services, and over 400 senior living and healthcare businesses. Its clients include Walmart, Ibex Global, Wayfair, and many others.