Dive Brief:
- Two earned wage access providers, DailyPay and MoneyLion, asked New York state courts Friday to dismiss complaints filed against them last year by the New York Attorney General’s office. The AG alleged that both firms make illegal loans that constitute abusive lending and violate New York’s usury laws.
- Both motions to dismiss, filed in the separate cases at the New York State Supreme Court, stressed that the services – offering employees early access to their wages – are not loans and therefore can’t be considered usurious. Both companies cited a December advisory opinion from the Consumer Financial Protection Bureau that many EWA products aren’t loans.
- If DailyPay’s motion isn’t granted, it asked the court to convert the “special proceeding” – an expedited lawsuit under state law by which the AG’s office filed its DailyPay complaint – to a plenary action. That change would afford the company discovery rights and a jury trial.
Dive Insight:
Lawyers for MoneyLion argued the lawsuit brought by the office of New York AG Letitia James is out of step with the federal government approach. “At bottom, (the Attorney General) asks this Court to rewrite existing lending laws to regulate a new service that is not a loan,” MoneyLion said.
EWA providers, also known as on-demand pay services, have proliferated in recent years to let workers, mainly hourly employees, tap their earned pay before a scheduled payday.
Each of the cases is being handled by a different state judge after both companies unsuccessfully sought last year to move the complaints to federal court…