New York’s Bold Action Against Illegal FinTech Payday Lending: A Game-Changer for Consumer Protection

New York Attorney General Letitia James has taken decisive action against FinTech companies MoneyLion and DailyPay, alleging they exploit hourly workers with illegal, high-interest payday loans. This legal move aims to protect vulnerable employees throughout the state by halting these companies’ operations, providing restitution to affected workers, and imposing penalties for misleading lending practices disguised as early wage access solutions.

Overview of the Lawsuits Against MoneyLion and DailyPay

The lawsuits filed by Attorney General James assert that both MoneyLion and DailyPay misrepresent their services. They promote themselves as offering fee-based wage advances, but in reality, they provide short-term loans with effective annual interest rates that can exceed 500%, and in some cases, even reach 750%. These high rates are typically tied to small advances—usually under $100—accompanied by mandatory fees and solicited tips, all to be repaid within a week or two.

Statements from Attorney General Letitia James

Attorney General James emphasized the severity of these practices, stating, “Promising New Yorkers financial freedom while pushing them into outrageously expensive loans is downright shameful. These are payday loans by another name.” She added, “While many New Yorkers are worried about making ends meet, DailyPay and MoneyLion are making tremendous profits by extracting workers’ hard-earned wages. I’m suing DailyPay and MoneyLion because New Yorkers deserve to keep the money they earn, not have it taken by predatory lenders.”

Details of MoneyLion’s Lending Practices

MoneyLion claims to offer “zero percent interest” loans and “instant access” to cash advances. However, they impose mandatory fees of up to $8.99 for a $100 advance, resulting in an annual interest rate of 234%. Additionally, the company encourages users to provide tips and restricts access to $100 per transaction, which often leads borrowers to repeatedly seek loans to reach the $500 advertised.

Allegations Against DailyPay

DailyPay is accused of employing deceptive practices, such as directly partnering with employers to intercept employee paychecks. This arrangement allows DailyPay to deduct repayments before workers even receive their wages, often leaving them with little to nothing. Although DailyPay markets its advances as interest-free, it reportedly charges fees on 90% of its transactions. The platform even uses borrower dependency as a selling point to investors, claiming it can extract hundreds of dollars annually from each user.

Impact on Individuals

The lawsuits illustrate the profound impact these practices have had on individuals. For instance:

• One worker took over 450 loans from DailyPay in less than two years, incurring nearly $1,400 in fees.
• Another individual borrowed from DailyPay nearly every day for two years, resulting in close to 500 loans.

Legal Violations and Enforcement

Attorney General James argues that these lending practices violate New York’s usury laws and, in DailyPay’s case, wage assignment statutes. The lawsuits represent a significant effort to combat the growing trend of predatory lending through FinTech platforms.

Supporting Legal Team

The legal proceedings are being managed by Assistant Attorney General Chris Filburn from the Consumer Frauds and Protection Bureau. He is supported by data scientist Akram Hasanov and data analyst Casey Marescot. The bureau chief, Jane M. Azia, and deputy bureau chief, Laura J. Levine, oversee the case, with additional supervision from chief deputy attorney general Chris D’Angelo and first deputy attorney general Jennifer Levy.

For more information on financial regulations and consumer protection, visit New York Consumer Protection or learn more about Consumer Financial Protection Bureau initiatives.