The New York attorney general has initiated a lawsuit against DailyPay and MoneyLion, claiming that the earned wage access providers are charging workers fees that equate to interest rates as high as 750%.
Attorney General Letitia James asserts that these companies are misleading consumers by portraying their services as simple wage advances while actually exploiting tens of thousands of New Yorkers with what she describes as “illegal high-interest loans.” According to her, workers typically use these services for small paycheck advances of less than $100, which they repay along with additional fees and tips within seven to ten days, resulting in exorbitant annualized interest rates.
For instance, a common loan product from DailyPay—a seven-day, $20 paycheck advance for a fee of $2.99—effectively carries an annual interest rate exceeding 750%. James commented, “Promising New Yorkers financial freedom while pushing them into outrageously expensive loans is downright shameful. These are payday loans by another name.”
Earlier this month, DailyPay filed a lawsuit against James in an attempt to halt the case. Chief Legal and Strategy Officer Jared DeMatteis stated, “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 attorney general is also accusing the companies of deceptive advertising practices. MoneyLion markets itself as offering instant access to funds with a zero percent interest rate and no fees. However, in practice, it imposes mandatory fees on all immediate loan disbursements.
Additionally, MoneyLion requests “tips” and sets transaction limits at $100, forcing workers to take out multiple loans and incur recurring fees to access the $500 prominently advertised. James noted that one New York worker reportedly took out over 450 loans from DailyPay in less than two years, averaging more than 4.5 loans per week and incurring nearly $1,400 in fees.
The lawsuit contends that these practices are illegal and deceptive, violating New York’s longstanding usury laws. The case against DailyPay also claims that the company has breached New York’s wage assignment laws.
MoneyLion is currently in the process of being acquired by tech group Gen Digital in a $1 billion cash transaction.