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using the term “advance” rather than “loan”; requesting “tips” instead of charging “interest”;
and talking of advances being “restored,” not “repaid.”
Regulators in 11 states have taken a more skeptical view. They announced a joint investi-
gation into the payroll-advance category last August, questioning whether these companies’
tips—which users must opt out of—are usurious interest rates in disguise. If an Earnin user
were to tip $9 for a $100 cash advance, as the app had been suggesting in some cases, the ef-
fective APR for the advance could be over 400%, depending on proximity to payday. Regulators
also want Earnin to explain why it made larger loans available to more generous tippers—
undermining the idea of a tip as voluntary. (Dave, which combines tips and subscription
fees, also received a letter of inquiry from regulators, as did a handful of other apps.) Earnin
users, meanwhile, have complained that the company sometimes triggers overdraft fees by
automatically withdrawing repayment from users’ accounts, restarting the very downward
cycle they were trying to escape. Two class action lawsuits against Earnin are pending.
Palaniappan calls Earnin’s tipping model a “pay it forward” innovation, rather than a
legal loophole. “[Users] clearly understand how it works,” he says. Nonetheless, he is taking
a page from the Uber and Airbnb playbooks and recruiting “Earnin Advocates” willing to
speak with elected officials about the benefits of the “community.” The company also sup-
ports legislation in California that would ease restrictions on its business model.

As payroll-advance apps gain traction, employers are taking note. They’re seeking
out startups like Even, which works directly with companies to offer their workers access
to its advance-pay and budgeting and saving features for a flat $8-a-month subscription

per employee. One of its largest partners is
Walmart, which offers its 1.5 million U.S.-
based workers subsidized access to Even.
On the back end, another startup, PayActiv,
helps process Even’s transactions.
Even and PayActiv are part of a group of
early wage access companies that integrate
with employers’ payroll systems. They’ve
found traction in industries such as retail,
hospitality, and telemarketing, where they’re
able to throw low-paid workers an emergency
lifeline that’s superior to payday lending.
But they’re nevertheless arming employers
with a lever for increasing retention without
increasing pay or benefits. Early access to your
paycheck comes in handy, for example, when
your employer downgrades its healthcare
plan to a high-deductible one, as many have
in recent years.
“If you’re living paycheck to paycheck
and all of a sudden your paycheck comes
every day, that doesn’t solve the problem,”
admits Jon Schlossberg, CEO of Even. “It just
speeds up the cycle on which you get stressed
about money.” It’s a situation that workers at
Walmart, which currently pays a starting rate
of $11 an hour, may find familiar.
In the meantime, Dave and Earnin are
also getting closer to employers, particularly
those that fashion themselves as “platforms”
and have suspect track records on matters
of pay and worker protection. Earnin has a
partnership with Uber that encourages driv-
ers to link their Uber accounts to the service
and get wages whenever they need them.
Last year, Dave unveiled a feature called Side
Hustle, which connects users with companies
including Instacart, Lyft, and Rover. The more
Dave users turn to the app for gig work, the
more the company earns in referral revenue.
So far, 600,000 of Dave’s 5.5 million users have
completed Side Hustle applications.
Silicon Valley popularized the idea that
we should “always be hustlin’ ” in pursuit
of our dreams. American workers facing a
less prosperous future than their parents’
generation have gotten the message—or at
least a version of it. “If you really want the
extra income, you’re going to take on any
[job] suggestion. That’s the definition of
being a hustler,” says Naiyesha, a Dave user
who walks dogs and is a licensed massage
therapist in addition to her full-time job as a
personal assistant. “You can never have too
many incomes.”

Payday Lending
The Consumer Financial
Protection Bureau plans to
remove a rule that re-
quires payday lenders
to assess a person’s ability
to repay before
issuing a loan.

Deposit Advance
In 2013, the Treasury sounds
the alarm on deposit
advances: short-term,
high-cost loans in which
banks automatically
deduct repayment as
soon as funds are

Most banks drop deposit
advances as a product,
eliminating a popular form
of short-term credit and
a payday-lending alternative.

The CFPB’s more lenient
approach to payday
lending suggests it will
adopt a similar approach to
early wage access.

Payroll-advance regulation
will likely play out at the
state level, where regulators
police financial services
more aggressively.

Earnin and DailyPay offer
deposit advances under the
label of “early wage access.”



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