New York Sues DailyPay and MoneyLion, Alleging Abusive Lending Practices

The New York State Attorney General sued earned wage access providers DailyPay and MoneyLion on Monday (April 14), accusing them of illegal and deceptive conduct and abusive lending practices.

The lawsuits allege that the companies’ services are payday loans and that the fees the companies charge on these short-term loans can amount to annual interest rates of as much as 750%, according to a Monday press release.

They also allege that the lenders use abusive tactics to push borrowers to take out new loans to cover gaps created by earlier ones, per the release.

“While many New Yorkers are worried about making ends meet, DailyPay and MoneyLion are making tremendous profits by extracting workers’ hard-earned wages,” New York Attorney General Letitia James said in the release. “I’m suing DailyPay and MoneyLion because New Yorkers deserve to keep the money they earn, not have it taken by predatory lenders.”

Reached by PYMNTS, DailyPay pointed to the company’s April 7 press release announcing that it filed a lawsuit seeking declaratory relief against the New York State Attorney General to prevent the attorney general from blocking its service.

The company said in the release that while the attorney general is attempting to shut down earned wage access under state usury laws, these laws do not apply to DailyPay’s service because it is not a loan.

“Many other states have adopted thoughtful legislation with consumer safeguards, and we support this approach, especially in our home state,” DailyPay Chief Legal and Strategy Officer Jared DeMatteis said in the release. “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.”

MoneyLion did not immediately reply to PYMNTS’ request for comment.

The New York State Attorney General’s lawsuits aim to end the companies’ payday lending practices in the state, obtain restitution for borrowers, and impose civil penalties and costs, according to its Monday press release.

A number of states have enacted laws to create financial services oversight for earned wage access service providers, PYMNTS reported in March 2024.

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