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CFPB Ends Special Regulatory Treatment for Payactiv

The Consumer Financial Protection Bureau (CFPB) has ended financial services provider Payactiv’s Sandbox Approval Order for its earned wage access products.

The bureau said Thursday (June 30) it had given the company special regulatory treatment, which deals with its liabilities under federal law, but rescinded that earlier order at Payactiv’s request, as the company prepares to change its fee model.

Based in San Jose, Paycactiv offers “earned wage access” products to employees, contracting with businesses to provide employee-requested transfers of wages that workers have already earned ahead of payday. Payactiv then recoups the amount of each transaction using a payroll deduction from the worker’s subsequent paycheck.

Learn more: CFPB OKs Payactiv As First Earned Wage Access Provider

In December of 2020, the CFPB gave the company a Sandbox Approval Order, granting it temporary safe harbor from liability under the Truth in Lending Act and Regulation Z.

The safe harbor covers the offering of earned wage access products, subject to good faith compliance with the terms of the approval order.

On June 3 of this year, the CFPB said it was considering revoking the order due to public statements by the company “wrongly suggesting a CFPB endorsement of its products,” the agency said.

Last week, Payactiv told the CFPB it was planning to change its earned wage access product fee model. The 2020 approval only applies to the company’s existing products and any changes to the product fee model would require the CFPB to modify its order.

“Payactiv instead requested termination of the order so it could make fee model changes quickly and flexibly,” the bureau said.

See also: CFPB Warns Debt Collectors About Fees

Earlier this week, the CFPB issued an advisory opinion warning debt collectors that most of the “pay-to-pay” fees they charge violate federal law.

These charges, typically described by debt collectors as “convenience fees,” are levied against consumers who want to make a payment in a particular way, such as online or by phone.

But federal law generally bars debt collectors from imposing extra fees that weren’t allowed by the original loan, said CFPB Director Rohit Chopra.

“Today’s advisory opinion shows that these fees are often illegal, and provides a roadmap on the fees that a debt collector can lawfully collect,” he said.

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