New York Attorney General Letitia James has initiated legal action against payday lenders MoneyLion Inc. and DailyPay, Inc. The companies are accused of exploiting New Yorkers with illegal high-interest loans. Reportedly, these lenders provide paycheck advance loans to workers, charging fees that translate into annual interest rates reaching up to 750 percent. Attorney General James aims to halt these practices, seeking restitution and imposing civil penalties.
According to James, "Promising New Yorkers financial freedom while pushing them into outrageously expensive loans is downright shameful. These are payday loans by another name."
MoneyLion and DailyPay allegedly use deceptive tactics to lure workers into these loans. These loans typically involve a small advance, often less than $100, which is repaid along with fees and tips within a week or ten days. The resulting interest rates range from 200 to 350 percent or more. A common example cited is a $20 advance from DailyPay, incurring an annual interest rate of over 750 percent.
James contends that MoneyLion misleads consumers with promises of instant access to funds and offers that appear interest-free. In reality, it charges significant fees, sometimes up to $8.99 for a $100 advance payable in two weeks, calculated at an annual interest rate of 234 percent. MoneyLion also seeks additional "tips" from users, and restricts loan amounts to $100 to compel repeated borrowing and fee collections.
DailyPay reportedly engages in similar practices, requiring employers to remit workers' wages to the lender first, allowing deduction of all fees before passing the remainder to the employee. The lawsuit claims DailyPay earns fees on nearly 90 percent of loans, despite promoting them as interest-free advances. Usage examples include a worker taking over 450 loans in two years, incurring substantial fees, and another paying fees almost daily for a similar period.
The lawsuit alleges that these practices violate New York’s usury and wage assignment laws, with Attorney General James seeking to terminate these lending practices, ensure restitution, and impose penalties.
The case is handled by Assistant Attorney General Chris Filburn and supported by the Research and Analytics Department. The Consumer Frauds and Protection Bureau, led by Bureau Chief Jane M. Azia, along with additional legal leadership, oversees these proceedings.
###