A New Kind of Payday Loan

Andy Spears
3 min readJan 31, 2021

The California Department of Financial Protection and Innovation (DFPI) signed memorandums of understanding (MOUs) with five earned wage access companies, the department reports.

The companies provide early access to consumer paychecks by way of an advance on expected pay. Companies such as Earnin and Even are two of the five players in this space. The other three involved in the California MOUs are Brigit, Payactiv, and Branch.

These companies use access to data on an individual’s pay to provide access to money ahead of the formal payday. The transaction takes place via an app. There is typically a small fee for the service, also deducted from the user’s paycheck when payday actually arrives.

According to the California’s DFPI:

The MOUs pave a path so earned wage access companies can continue operating in California, in advance of possible registration under the California Consumer Financial Protection Law, which took effect this year and defines the companies as newly covered financial services. The companies, which give consumers advances on earnings before pay days, have agreed to deliver quarterly reports beginning April 2021 on several metrics intended to provide the department with a better understanding of the products and services being offered and the risk and benefits to California consumers.

Also referred to as on-demand pay, earned wage access companies give employees access to wages they have earned but haven’t yet received through their employer…

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Andy Spears
Andy Spears

Written by Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .

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