who choose to participate, and depend on their desire to access pay in near-real time, as opposed to choosing free options offered by the program that provide amounts generally the next business day. The OAG suit cites research that indicates a growing cycle of dependency on the convenience of accessing pay on demand has been a result of DailyPay’s efforts to increase usage. The office alleges this is “harmful behavior, telling employees they ‘deserve to be paid every day’” instead of having them wait for sometimes weeks to be paid on a schedule. The OAG particularly accuses DailyPay of falsely claiming that their program should be considered a benefit for employers and employees. But DailyPay cites several company- sponsored surveys of participants by outside groups, who, by large majorities, reported benefitting from access to pay ahead of payday without reverting to a payday loan, suffering from a bank overdraft fee, or even adding to credit card debt. Over the past decade, employers have consistently demonstrated that employees having access to pay ahead of payday stay longer with the employer and that such programs enhance recruitment.
But it is the abuse by users of the program that the Attorney General highlights in her news release on the lawsuit. Choosing to pay for access on a frequent basis can be costly. According to the release, one employee in New York City used the program an average of 4.5 times a week for almost two years, “paying nearly $1,400 in fees.” To Be or Not to Be? These lawsuits are forcing a legal determination: Is EWA to be considered a relatively new financial arrangement that is not a loan and needs its own set of regulatory governance? Or, is EWA a loan, falling under the umbrella of decades-old requirements and policies designed for more conventional arrangements? Maybe there will be a more nuanced position that labels EWA credit but carves out exceptions in the onerous loan-providing requirements. Regardless, EWA providers have been operating under the premise that their services are not loans. The case decisions will help determine whether the business models EWA providers have developed over the years can continue without modifications, and whether employees choosing to be in these programs will still be able to access pay ahead of a scheduled payday with relative ease.
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ISSUE 11 GLOBAL PAYROLL MAGAZINE
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