Briefcase: Early Payday Apps

Guest: Jim Hawkins


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Financial technology companies have developed an app that allows employees access to wages they've already earned before their scheduled payday. Often, the app providers advance the funds to the employee and then deduct the amount from the next paycheck. Jim Hawkins is a consumer law scholar with The University of Houston Law Center and explains the benefits of this innovation.

"These earned wage access products are inexpensive," Professor Hawkins said, "which is why they're an extremely attractive alternative to payday loans, the go-to source of credit for many. Payday loans often have interest rates over 400%, but this innovation only cost a few dollars."

But Hawkins says there are the pitfalls. "If an employee gets an advance but then needs all the money from the paycheck on payday, there is really little the employee can do," he said. "You can refuse to repay a payday loan in an emergency, but it is hard to stop deductions from your paycheck."

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