A lender determines this amount under applicable state law
The advance is made only against the accrued cash value of any wages the employee has earned up to the date of the advance
1. The advance is made by an employer, as defined in the Fair Labor Standards Act, 29 U.S.C. 203(d), or by the employer’s business partner (e.g., a company that provides payroll card services or accounting services to the employer, or a company that provides consumer financial products and services as part of the employer’s benefits program such that the company would have information regarding the employee’s accrued wages).
3. The amount advanced must not exceed the employee’s accrued wages. Accrued wages are unpaid wages that the employee is entitled to receive for work performed for the employer in the event of separation. Comment 1041.3(d)(7)(i)-1.
4. Before funds are advanced, the entity advancing the funds warrants all of the following to the employee (as part of the contract between the parties and on behalf of itself and any business partners):
- The consumer (i.e., the employee) will not be payday loans near me Dayton OH required to pay any charges or fees in connection with the advance (other than a charge for participating in the wage advance program);
- The entity and its business partners do not have any legal or contractual claim or remedy against the consumer based on the consumer’s failure to repay. This provision does not prevent the entity from obtaining a one-time authorization to seek repayment from the consumer’s account. Comment 1041.3(d)(7)(ii)(B)-1;
- With respect to the amounts advanced, the entity and its business partners will not engage in any debt collection activities if the advance is not directly deducted from the consumer’s wages or otherwise repaid on the scheduled due date;
- The entity and its business partners will not place the amount advanced as debt with a third party or sell it as debt to a third party; and
- The entity and its business partners will not report information to a consumer reporting agency concerning the amount advanced.
Additionally, a wage advance or other transaction is not covered under the Payday Lending Rule unless it constitutes credit under the Rule. Thus, a wage advance that is not credit is not subject to the Payday Lending Rule. For this purpose, “credit” means the right to defer payment of debt or to incur debt and defer payment.
In order for a loan to satisfy the exclusion for wage advance program loans, the entity making the advance must warrant that the consumer (i.e., the employee) will not be required to pay any charges or fees in connection with the advance, other than a charge for participating in the wage advance program. Thus, only a fee for participating in the program may be charged. The exclusion will not apply if any other fee, such as a per advance fee, is charged in connection with the advance.
No. The Payday Lending Rule can apply regardless of whether a loan is a vehicle title loan or a loan commonly identified as a payday loan. To determine whether a loan is subject to the Payday Lending Rule, one should carefully review the coverage criteria, the exclusions, and the exemptions set forth in the Rule.
More information on what loans are covered by the Payday Lending Rule is available in Payday Lending Rule Covered Loans Questions 1 through 11 and in Section 2 of the Small Entity Compliance Guide
No. Short-term loans and longer-term balloon-payment loans can each be covered loans regardless of the cost of credit. 12 CFR §1041.3(b)(1), (2). To determine whether a loan is subject to the Payday Lending Rule, one should carefully review the coverage criteria, the exclusions, and the exemptions set forth in the Rule.