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ISSUE 3
“As the technological ability to provide money earned to employees before the scheduled payday developed in the last decade, proponents of EWA promoted the benefits.” Two Schools of Thought on EWA Status As the technological ability to provide money earned to employees before the scheduled payday developed in the last decade, proponents of EWA promoted the benefits. EWA advocates say it is a new financial tool and not a loan because it is based on the employee’s accrued earnings, money that already is the employee’s but simply has not been disbursed. Most businesses facilitating EWA work with employers to collect real-time data on earnings so they can present to employees amounts that could be made available. Like popular personal money transfer applications, many providers charge a fee for near-instant transfers, but, if the employee can wait a business day or so, or use a preferred debit card, there often is no transaction charge. Popularity for EWA rose because users saw an increased ability to pay bills or needed expenses that arise
unexpectedly before a scheduled payday, allowing them to avoid using predatory short-term payday loans that can have interest rates exceeding 500%, exorbitant bank fees for insufficient funds, and running up credit card debt. Several research studies confirm that a large majority of users who previously relied on costly payday loans no longer had to; those suffering bank overdraft charges and other fees saw them reduced or eliminated. Many programs tout micro-saving opportunities and provide personal finance resources designed to move workers out of a cycle of debt. Advocates of EWA also point to the increasing popularity of the programs among the growing digital-savvy work population. Since payments can be made almost instantly, sometimes with small fees, workers ask why pay cannot be accessed in the same manner. Employees voluntarily signing up do not experience the hassle of applying “Providers currently disclose fee amounts in dollars. Should the CFPB proposal get finalized, it would mean more burden in providing conversions to interest when presenting the costs under the law.”
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