CFPB terminates Payactiv’s sandbox approval order

The Consumer Financial Protection Bureau has rescinded an order that granted Payactiv regulatory leeway to experiment with earned wage access products after the two sides differed over the way the products were described to the public.

The CFPB granted Payactiv, a financial services company based in San Jose, California, a so-called sandbox approval order in December 2020. This special regulatory treatment provided the company with temporary exemption from liability under the Truth in Lending Act and Regulation Z — federal consumer financial laws that require the disclosure of consumer credit terms and costs.

The CFPB informed Payactiv on June 3 that it was considering terminating the approval order in light of public statements the company made wrongly suggesting CFPB endorsement of its EWA products. The agency announced the termination in a press release Thursday.

“Payactiv has worked cooperatively with the bureau to ensure that our description of the approval order aligned with the bureau’s concerns about avoiding any implication of endorsement. As a result of those discussions, we modified our descriptions early last year to state that Payactiv had an ‘approval order from CFPB’ in lieu of describing Payactiv as ‘CFPB-approved,’” according to a press release from Payactiv. 

In the end, Payactiv requested on June 21 that the order be terminated. The 2020 order only applied to Payactiv’s existing products, and changes to the fee model for its current products would have required modifications to the order itself. By seeking the termination of its participation in the sandbox program, Payactiv says it enabled itself to make product changes effectively and flexibly without waiting for the CFPB’s review.

“Timely access to earned wages is the safest way for millions of American workers to meet livelihood needs without fees and penalties from other liquidity options. With additional zero cost EWA options, the bar has been raised again for the emerging EWA industry,” Safwan Shah, co-founder and chief executive, said in Payactiv’s release. “To rapidly offer these additional zero-cost options, we opted to withdraw from the company-specific 2020 CFPB approval order.”