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.