Legally it matters. And ProsperPay’s earned wage access (EWA) is set up to ensure employers are legally compliant while keeping your employees out of the clutches of predatory lenders. Here are some of the fundamental differences between EWA and payday loans you need to know:
Earned vs anticipated: EWA payouts are a draw on wages the employee has already worked for and accrued, whereas a payday loan is a short-term loan of unearned, future money. Furthermore ProsperPay limits payouts to 50% of earned wages to ensure applicable taxes and any other deductions are adequately covered.
Interest: EWA doesn’t charge interest on payouts, our business model is based on the employer providing EWA as a cost-effective employee benefit, and just a nominal $2 transaction fee covered by the employee. This compares to payday loans that typically carry extreme interest rates in the triple-digits.
Credit checks and Recourse: EWA requires no credit check, no formal underwriting, and is non-recourse (meaning failure to pay back an advance only blocks future use of the app, rather than triggering debt collection or legal action). Payday loans require credit evaluation or proof of income and lead to formal debt obligations that can damage a person’s credit score if unpaid.
Payroll Integration: ProsperPay’s EWA integrates directly into the employer’s payroll and timekeeping system to ensure only earned wages can be paid out. This maintains integrity in the entire system. Payday loans operate independently of the employer through external lenders.
We are across the Canadian federal and provincial employment legislation to ensure employers are completely compliant and can confidently offer ProsperPay’s EWA to their employees.
Beyond the legal constrasts, the intention of ProsperPay’s EWA is financial wellness - less stress, more control – and is actively interested in keeping employees out of the debt spiral.