A New Kind of Payday Loan Shark?

Consumer Advocates Warn of Perils of Early Wage Access Products

The ability for an employee to access wages early can be a way to manage unexpected expenses without expensive credit, bank fees, or a payday loan. However, consumer advocates say early wage access (EWA) products can carry high costs and act in ways that are similar to payday loans.

Lynne Marek in Payments Dive reports:

Payactiv, PayDaily, and Even Responsible Finance are among the biggest companies that have sprung up over the past decade to offer employees access to their wages before payday. While these companies provide the service through employers, some companies offer a variation directly to employees.

The issue has taken on more importance as workers increasingly use earned wage access (EWA) services. U.S. households tapped such services nearly 56 million times last year for about $9.5 billion in pay under such employer-based programs, according to estimates from research firm Aite-Novarica. In addition, millions more have downloaded apps that provide cash advances on their pay without employer participation, the firm said in a February report on the trend.

A Warning

The services “are just a kinder version of payday loans,” National Consumer Law Center (NCLC) Associate Director Lauren Saunders said.

In fact, Saunders testified before a House Financial Services Committee Task Force…