Originally posted at: www.americanbanker.com
By Victoria Finkle
At first glance, FlexWage Solutions is selling something that looks a lot like a payday loan.
But founder Frank Dombroski says he has built a more customer-friendly alternative to those much-criticized products and one that will even benefit from regulators’ increasing scrutiny of the payday lending industry.
His startup, founded in late 2009, has developed a payroll card with an unusual feature: It allows employees to access wages they have earned before the end of their employer’s pay period for a flat fee of $3 to $5 per transaction. People can essentially use FlexWage cards to get part of their paycheck ahead of time — but they are paying for early access to earned funds and are not taking out a loan against future earnings, which Dombroski says has insulated his company from regulatory scrutiny.
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“Unanimously, [regulators] do not view us as a lender. They’re interested and enthusiastic about what we’re doing,” [Dombroski] says, adding that FlexWage has spoken with the Consumer Financial Protection Bureau, the Treasury Department, and state banking regulators.
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Dombroski says that his existing clients are hoping that the FlexWage cards could help reduce turnover, a critical problem in many industries with hourly wage workers.
[Employee] turnover “is one of the key reasons that our early adopters have chosen to roll the product out. They believe it will drive satisfaction and retention,” [Dombroski] says.