Source · Select Committees · Public Accounts Committee
Recommendation 28
28
Employer Salary Advance Schemes (ESAS, or salary advance schemes) are not regulated by the Financial...
Conclusion
Employer Salary Advance Schemes (ESAS, or salary advance schemes) are not regulated by the Financial Conduct Authority (FCA). These salary advance schemes link an employer payroll process to an employee smartphone app to offer advances of accrued earnings from a finance provider before payday. They do not usually involve the provision of credit or other credit-related regulated activities. In July 2020 the FCA published a statement setting out its views on the benefits and risks of salary advance schemes and how to mitigate these risks. In February 2021, the FCA published a report by Chris Woolard that recommended that scheme providers and employers develop a code of good practice for salary advance schemes. The FCA also told the National Audit Office in July 2021 that it planned no further interventions for the sector.29
Government Response
Acknowledged
HM Government
Acknowledged
5.2 Unsecured consumer credit is regulated under a legislative framework. Where consumer detriment is identified, the government is able to extend the perimeter of that framework to ensure that there is appropriate consumer protection. For example, the government is currently looking to extend regulation to cover interest-free credit agreements under 12 months and repayable in 12 or fewer payments. However, salary advance schemes generally operate entirely outside of credit regulation as the early payment of accrued wages does not usually involve the provision of credit. The government has also not seen substantive evidence of consumer detriment arising from the use of salary advance schemes. It has instead observed that these schemes can provide a useful tool to help people manage their finances, for example meeting unexpected costs or helping to manage the payment of larger one-off purchases. The government’s assessment is therefore that these schemes do not merit regulation, which would impose costs on the providers and would likely be reflected in the costs to consumers. 5.3 The government understands that firms offering salary advance schemes are developing an industry code of practice. The government welcomes this development and, alongside the FCA, is engaging with the industry as the code develops and will consider if any further interventions are needed in the event of any signs of consumer detriment.