The world of payday lending is vast, roughly 12 million borrowers in the U.S. take out loans from these lending operations, reports TechCrunch, often at interest rates that bring new meaning to the word “usury” that leaves already cash-strapped borrowers facing interest rates approaching 600 percent.
No one likes payday lenders and various attempts have been made at regulating them in the last 20 years, with inconsistent levels of success. While loan underwriters are often accused of predatory lending practices, the fact remains that they serve a need in the market. Overpaying for money is a problem, but facing eviction, a loss of transportation or the lack of ability to buy food is a much bigger problem.
That is the problem the startup Activehours is hoping to solve, by taking on cash-strapped consumers in a whole new way. Instead of offering loans at a high interest rate, the Activehours service pays customers for hours they work in advance, without charging any interest on the payments that its clients receive. To use the service, clients simply take a picture of their time sheet and specify how much money they would like to get paid from their coming earnings.
The only payment for the service comes in the form of a service charge which is determined by the users themselves.
The company has received an undisclosed amount of seed funding in a round led by Ribbit Capital and the early stage venture firm Felicis Ventures.
"What we liked about Activehours was it was the first time that someone says people should be paid however they want,” says Meyer “Micky” Malka, Ribbit Capital’s founder. “If a guy wants to get paid after two days of work, or five days of work, or seven days of work, he should just get paid."