FlexWage Spotlighted as an Alternative to Payday Loans

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.

. . .

“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.

. . .

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.