EarnIn has more than 2.5 million active users
Payday advance app EarnIn is getting sued for charging highinterest ratesandclaiming its cash advances aren't payday loans.
EarnIn attracted customers with false advertising, operated without a lending licenseand charged poorly-disclosed fees and illegally-high interest rates with an average APR of 300%,the DC attorney general allegedTuesday in a lawsuit.
EarnIn, which offers loans based on a percentage of pay that borrowers have earned but not yet received from employers,saidit had more than 2.5 million active users in 2021.
The app charged customers "Lightning Fees," which were writtenin fine print, of $3.99 or $5.99 per transaction for "instant access" to funds that it didn't tell users about when they signed it up and gave personal and financial information, the attorney general said.
EarnIn also asked users to leave a "tip" paid to the company, which defaults to between $1 and $14 per transaction, the attorney general said.
EarnIn lures in hard-working, cash-strapped workers with the false promise of free instant cash advances, and then charges them unlawfully high interest, DC Attorney General Brian L. Schwalb said. This predatory business model is illegal. Especially at a time when the cost of living is already too high."
In response, EarnIn's lawyer told ConsumerAffairs that its"earned wage access" cash advancesbenefitpeople and customers have the choice to access money at no cost within 1-2 business days or can pay a "small fee" to get it sooner.
"The Attorney Generals lawsuit demonstrates a fundamental misunderstanding of how our product works and why so many DC residents benefit from it," saidKarl Racine, counsel to EarnIn anda formerDC attorney general. "[Earned wage access] is about providing workers access to the money theyve already earned, but have yet to receive from their employer no interest, no recourse, and no hidden fees."
Is EarnIn the only payday advance app with these practices?
The app is one of many examples of fintech companies who say they aren't payday loan companies when their model is very similar,said Lauren Saunders, associate director of the National Consumer Law Center.
A payday advance that is repaid on payday is a payday loan, and fintech cash advance apps like EarnIn that call themselves earned wage access are just high-cost lending in disguise," Saunders said.
Clients have also seen overdrafts from banks increase 56% after using payday advance apps and 75% of customers took out at least one advance the same day they made a repayment, according to a 2024 study by the Center for Responsible Lending.
The California government said in 2023 that payday advance apps charge anaverage APR above330% and issue anaverage of 36 loans a year.to customers.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-11-20 21:50:14
