Amazon just expanded a risky fintech product to more warehouse workers
The CFPB has suggested it will soon crack down on earned-wage access products.
Amazon announced pay raises and the rollout of new benefit programs to warehouse employees Wednesday. But one of those products may pose increased risks to the company’s most precarious workers: the expanded rollout of Amazon’s Anytime Pay Program.
The program, first announced in October 2020, allows employees to access a portion of their checks in advance of a regular pay date. Such products are typically referred to as “earned-wage access” and position themselves as a lower-fee and thus less predatory alternative to payday loans. Amazon is using Wisely, a product offered by payroll company ADP, for the service.
Employees load their wages in advance onto a Visa debit card and are then able to use that card wherever Visa cards are accepted, or can withdraw cash at some ATMs. When Amazon first rolled out the program to some workers, those workers could obtain up to 50% of their paycheck in advance. Now, more workers have access to the program, and can cash out on 70% of their paycheck in advance by transferring funds to their Wisely Pay Visa card.
The benefits for low-wage workers are obvious: Having access to wages in advance of payday can be helpful in handling unexpected expenses, particularly when an employee lives paycheck to paycheck. And, as has been well-covered, most Amazon warehouse workers don’t make enough money to have ample emergency savings, despite the company’s campaigning about a livable minimum wage and Wednesday’s pay increase.
But earned-wage access products also carry risks for consumers. The products are not currently regulated as loans, due to a Trump-era CFPB advisory opinion that carved out a special exemption for earned-wage access should providers fit certain criteria, like not charging fees. Wisely claims to offer earned-wage access “at no cost,” so it fits these requirements and hence is exempt from regulatory disclosures required of credit cards or payday loans.
However, the fine print of Wisely’s terms and conditions say there are some fees associated with the card: They just aren’t mandatory charges. The company charges $5.95 should customers want to load an additional $20 to $500 out of their own checking account onto the cards, for example, and says that fees may be charged at certain ATMs where the card is used. It then says that users should log in to their account to see a list of other applicable fees.
Consumer groups asked the CFPB to review its oversight of these types of products last fall, because they fear fees could harm consumers who aren’t expecting them. The CFPB also revoked a special regulatory exemption for Payactiv to experiment with earned-wage access products, signaling the agency will soon tighten regulations on these types of products.
ADP's partner bank, Fifth Third Bank, has run into trouble with the CFPB before. The bureau sued Fifth Third in 2020 for automatically enrolling customers in products they did not consent to and opening unauthorized accounts. According to a press release, this was implicitly encouraged because employees of the bank were subject to ambitious sales goals.
ADP and Fifth Third Bank did not respond to requests for comment.
Protocol link: https://www.protocol.com/bulletins/amazon-earned-wage-access-adp