On April 14, New York Attorney General Letitia James filed lawsuits against two earned-wage access service companies. Attorney General James accused the companies, which allow consumers to obtain small-dollar advances on upcoming paychecks for a fee, of offering illegal payday loans that violate New York’s usury laws. These lawsuits come in the wake of the complaint one of the companies had already filed against the state of New York, asking for declaratory judgment that its advances were not loans or predatory transactions.
One of the companies assesses a $4.99 transaction fee per advance payment, plus a potential tip that the company purportedly pressures consumers to leave on top of the fee. Attorney General James alleges that most consumers are paying almost $57 dollars for a ten-day $50 advance, and that the fee and tip constitute interest of almost 350% APR.
Attorney General James accused the other company of offering seven-day $20 advances for $2.99, “reflect[ing] an APR above 750%.” She also accused this company of requiring customers to have employers pay the company directly, only passing along the remainder to the customer once it deducts its principal and fees.
Both companies were also accused of deceptive marketing, with the Attorney General claiming that they “entice” customers into taking on predatory loans, and in the case of the second company, pressure employers to pay the employee’s income directly to the company in order to repay the advance.
In both cases, Attorney General James is seeking a permanent injunction against the companies, as well as restitution and damages to the consumers, disgorgement of all profits, civil money penalties under federal law, and a civil penalty under state law of $5,000 for each alleged predatory loan.
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