The CFPB said it has terminated a sandbox deal that gave earned wage access provider Payactiv “temporary safe harbor from liability” under key lending regulations.
The CFPB granted Payactiv “special regulatory treatment” in December 2020 to offer “earned wage access” products that would allow employees to obtain wages they already earned before payday.
Payactiv gets paid back through a payroll deduction from the employee’s next paycheck. The company makes money through fees.
The CFPB said it had informed Payactiv early this month that it was “considering terminating the approval order in light of certain public statements the company made wrongly suggesting a CFPB endorsement of its products.”
The company requested that the CFPB end the sandbox order after notifying the agency that it planned to modify its product fee model, the CFPB said.
The move underlined the CFPB’s increasingly critical view of sandbox deals that the agency said “proved to be ineffective.”
Safwan Shah, Payactiv's founder and CEO, is credited with coining the term "earned wage access," which has been criticized by consumer advocates as being potentially predatory, especially when it comes to workers who don’t make much money.
Shah has argued that it benefits ordinary workers, citing a dieting principle: "The less you are paid, the more frequently you should be paid," he told Protocol in a 2021 interview. "If you're going to eat 500 calories, don't eat them in one sitting. Spread them throughout the day."
Correction: This story has been updated to correct the spelling of Payactiv's name. This story was updated June 30, 2022.
Climate TRACE's data show emissions at the facility-level.Image: Climate TRACE