New York Attorney General Letitia James has filed lawsuits against payday lending companies MoneyLion Inc. and DailyPay, Inc., accusing them of offering illegal, high-interest loans to workers, as reported today. The two companies are alleged to have exploited tens of thousands of New Yorkers by advancing wages to hourly workers at exorbitant interest rates that, effectively, can reach as high as 750 percent annually. In a statement obtained by the Attorney General’s office, James claims, “Promising New Yorkers financial freedom while pushing them into outrageously expensive loans is downright shameful. These are payday loans by another name.”
According to the Attorney General’s press release, the payday lending operations involved small paycheck advances, with workers typically receiving less than $100, which they would repay along with additional fees and tips. These transactions, which span seven to ten days, endorse annualized interest rates between 200 and 350 percent on average. In one identified instance, a $20 paycheck advance from DailyPay, offered for a fee of $2.99 for a week, equates to an annual interest rate of over 750 percent.
The investigation alleges that the two companies advertised deceptively, with MoneyLion promoting a zero percent interest rate and fee-free loans, while in fact charging mandatory fees on instant loans, which can equate to a 234 percent annual interest rate for a $100 advance. Advertising tactics also included the suggestion of tips over and above fees, and repeat loans were encouraged due to artificial limits imposed on transaction amounts. Similarly, DailyPay has been accused of partnering with employers to directly receive workers’ paychecks, ensuring it is repaid before workers see their money, despite promises of interest-free advances and financial benefits.
These practices have led to extortionate costs for workers, many of whom find themselves in a cycle of repeated borrowing to simply make ends meet. A worker from Washington Heights, they took out more than 450 loans from DailyPay in less than two years, averaging more than 4.5 loans per week and accumulating nearly $1,400 in fees. In Syracuse, another worker paid fees on nearly every one of the 500 loans they took with DailyPay, effectively paying an average of $2 to DailyPay every single day for nearly two years, as detailed by the same press release.
The lawsuits seek to terminate MoneyLion and DailyPay’s payday lending practices in New York, calling for restitution for the impacted workers and the imposition of civil penalties and costs. The Assistant Attorney General Chris Filburn, with support from the Consumer Frauds and Protection Bureau, is handling the suits. The accused practices of these companies have been labeled as illegal and deceptive, violating New York’s usury prohibitions and wage assignment laws. James’s actions aim to protect workers from predatory lending and ensure that financial products in the market are fair and lawful.
