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…