Bureau issues trial licenses for ‘sandbox’ products

(Jan. 8, 2021) A “dual-feature credit card” and a program allowing employees access to their earned but unpaid wages prior to payday got the green light late last week for limited time under two “compliance assistance sandbox” (CAS) approval orders issued by the CFPB.

The dual usage credit card order, according to the bureau, would allow Synchrony Federal Savings Bank of Stamford, Conn., to issue a lower-rate card on secured use to consumers with limited or damaged credit history. After 12 months, according to CFPB, eligible accountholders would be allowed to “graduate” to unsecured use via the card.

The bureau said the card is designed to be a tool for those accountholders to establish or reestablish a favorable credit history. The order is good for three years, according to the agency.

The terms of both secured use and unsecured use will be disclosed at the opening of the dual-feature credit card account,” the bureau said in a release. “The terms will then be redisclosed with the opportunity to opt-in to unsecured use.”

The second order would allow PayActiv, a San Jose, Calif.-based firm that provides payment services to companies, to make available to its clients “earned wage access” (EWA) products.

Under the program, according to the application from PayActiv for the order and made public by CFPB, Payactiv provides an EWA payment to an employee for the sale of the future receivable in that portion of the employee’s earned wages, referred to as a factored future received wage payment (FFRWP). “Payactiv purchases an employee’s right to the receivable and assumes the risk associated with non-receipt of that receivable,” the application states.

The application also notes that the agreement with employees (which they must sign in order to participate in the program) confirms that the transaction does not constitute an extension of credit, or create a debt, and is not an assignment of wages.

The order is good for two years, CFPB noted.

According to the bureau, a CAS approval offers an entity confronting “regulatory uncertainty” a safe harbor from liability under specified legal provisions. The bureau said the entities are offered the safe harbor for specified conduct that CFPB finds compliant with those legal provisions, subject to good faith compliance with the terms of the approval. The CAS Policy implements the existing safe harbor approval mechanisms provided under the Electronic Fund Transfer Act, the Equal Credit Opportunity Act, or the Truth in Lending Act, the bureau noted.

Consumer Financial Protection Bureau Issues Approval Order to Facilitate the Use of Dual Usage Credit Cards

Consumer Financial Protection Bureau Issues an Approval Order to Facilitate Employee Access to Earned but Unpaid Wages