In recent years, earned wage access (EWA) has grown in popularity as a way for employees to receive wages on-demand. But in a stunning blow to the community of EWA providers who debit, the Consumer Financial Protection Bureau (CFPB) released an advisory opinion on Nov. 30, 2020, explicitly excluding debiting practices from safe harbor. Instead, it validated the employer-based, non-recourse approach that companies like DailyPay have pioneered and championed for years.

The CFPB This follow-up order from December 30, 2020 was requested by a specific provider (PayActiv) that was at risk of being deemed noncompliant with the CFPB’s initial advisory opinion on earned wage access. Under CFPB policy, providers can request clarity on specific points in the face of regulatory uncertainty. Per the Bureau’s 11/30/2020 opinion identifying specific at-risk models that might be considered extenders of credit, such a provider had requested a review of their at-risk set of facts.

EWA vendors getting a “no-credit safe harbor” for themselves can come at the expense of employer wage and hour compliance for wage deductions. Employers using wage deductions for on-demand pay transfers are at risk of violating wage and hour states, Department of Labor rules, and other rules and regulations. This is one of the key reasons DailyPay has warned about the use of this practice.

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