DailyPay has filed a lawsuit against New York Attorney General Letitia James regarding the application of usury laws to the earned wage access industry.
DailyPay enables users to access their wages prior to payday for a fee of $3.49. The company reports that more than five million employees utilize its services, resulting in over $40 million in savings for users.
Although DailyPay and similar companies do not impose interest rates, there is increasing regulatory scrutiny over potential fee structures in the sector.
In response to the New York case, Jared DeMatteis, Chief Legal and Strategy Officer at DailyPay, expressed disappointment that the Attorney General’s office moved to intervene ahead of a bill in the state legislature. He stated, “It’s disappointing that the Attorney General’s office decided to preempt the bill pending in the state legislature and attempt to take this valuable service away from NY residents.”
DeMatteis further added, “The actions taken by the Attorney General’s office suggest that it prefers consumers to rely on loan sharks or pay higher overdraft and late fees over on-demand pay, a proven safer and cheaper financial alternative. The approach of the Attorney General’s office is misguided and will significantly affect everyday families working to make ends meet.”
In a demonstration of growth within the market, Rain, an employer-integrated earned wage access and financial wellness app, has successfully raised $75 million in Series B equity funding. Since its launch in 2019, Rain has onboarded over 2.5 million employees and has distributed more than $2 billion in earned wages. The company previously announced a $116 million Series A funding round in March 2023, which included $66 million in equity and $50 million in debt, marking the largest deal in HR technology history.