Prepayment service can reduce payday loan usage


Americans average $ 50 million in payday loans per year. Each one adds hundreds of dollars to their interest and fees. However, a new service is emerging that allows its users the ability to get a loan against their wages. This could make payday lending more competitive. For more information click here to go on

The benefits of payday loans

Even, a San Francisco-based fintech firm, was in the news late last year, when Walmart, the nation’s largest private employer announced it would start offering Even as a part of its service. Benefits program. In addition to providing tools that allow employees to track their spending and save money, Even offers Instapay, which allows users to advance part of their next paycheck up to 13 days before the day. payroll. Even does not charge any interest since the Even user draws from their already accumulated hours.

Even though it is one the few tech companies that have emerged in recent years, it aims at paying salaries quicker and more frequently to employees. Companies like FlexWage Solutions and Instant Financial offer pay-on-demand, but these services are often tied to a company-issued debit card instead of an employee’s primary bank account.

Payday lending industry

Even founder Jon Schlossberg has publicly stated that part of the company’s mission is to bankrupt the payday lending industry, saying it is exploiting the financially vulnerable. The Associated Press received only his internal usage data. The data shows, at most, that users are less likely not to use the payday loan market after they sign up. of the company.

Schlossberg stated that “you have this whole industry… taking advantage of Americans living paycheck to paycheck, and payday loans are really the predatory,”

For emergencies, money

Payday lenders state that they are helping Americans in financial crisis who cannot afford to repay their loans. They say they lend to the poorest in America, often those most at high risk of not repaying their loan. Criticians say that the rates and fees are prohibitively high and can trap borrowers in a vicious cycle of debt for several months. The Obama administration’s Consumer Financial Protection Bureau attempted to regulate the payday lending sector nationwide. But, under Trump, the office began the process to repeal those regulations.

Even data shows that approximately 28% of its users had taken out a payday advance within the month before signing up. That number drops to below 20% four months after signing up at Even. Even calculated this number by looking at the usage behavior and data of its members from September 2017 to December 2017.

Even users can still use payday loans by linking their bank accounts to this app. The business can then see which transactions are being made by users and if they have the characteristics associated with payday loan transactions.

Schlossberg acknowledged that it is possible for even one payday loan transaction to be missed, especially if a check was used as an alternative to a direct debit from a borrower’s account. Walmart, which is the biggest customer, wasn’t the first to start using the product until December 15, 2017. Schlossberg explained that Instapay is being studied by university researchers. Even payday loans are being considered, with the aim of publishing the results in 2019.

Different features of payday loan

Walmart is the sole company to publicly claim that it uses Even. However a spokesperson from Even stated that Even currently has “more” 10 companies on its list, with 400,000 subscribers. Walmart employees can pay $ 6 per year to access the premium features of Even, which includes Instapay.

Advocates for consumer rights, who have long been critical of payday lending, said that while they are pleased to see payday loans alternatives, they caution against using them.

Scott Astrada, the Center for Responsible Lending’s director of federal advocacy, said “The drop is fascinating and potentially encouraging, but it’s too early for us to draw conclusions.”


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