The New York State Attorney General’s Office has filed lawsuits against two leading earned wage access (EWA) companies, DailyPay and MoneyLion, accusing them of engaging in illegal, deceptive, and abusive lending practices that allegedly exploit low-income workers.
Attorney General Letitia James announced the legal action on Monday, April 14, alleging that both companies are effectively operating payday loan schemes under the guise of wage access services. The lawsuits claim that the fees associated with their services can amount to annual interest rates as high as 750%, far exceeding legal limits.
“While many New Yorkers are worried about making ends meet, DailyPay and MoneyLion are making tremendous profits by extracting workers’ hard-earned wages,” James said in a press release. “I’m suing DailyPay and MoneyLion because New Yorkers deserve to keep the money they earn, not have it taken by predatory lenders.”
Allegations of Misleading Practices
According to the Attorney General’s Office, the companies allegedly pressured users into taking repeated advances to cover shortfalls created by earlier ones—a practice that mirrors traditional payday loan cycles known to trap borrowers in high-cost debt.
The state is seeking to end the companies’ payday lending practices, secure restitution for affected consumers, and impose civil penalties and legal costs.
DailyPay Pushes Back
In response, DailyPay revealed it had filed a preemptive lawsuit on April 7 seeking declaratory relief to stop the Attorney General’s Office from restricting its services.
The company maintains that its earned wage access model is not a loan and therefore not subject to New York’s usury laws.
“Many other states have adopted thoughtful legislation with consumer safeguards, and we support this approach, especially in our home state,” said Jared DeMatteis, Chief Legal and Strategy Officer at DailyPay. “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 has yet to publicly respond to the allegations or the lawsuit.
Growing Scrutiny of Earned Wage Access Services
The lawsuits come at a time when several U.S. states are tightening oversight on earned wage access providers. These services, which allow employees to access a portion of their wages before payday, have drawn scrutiny from regulators who worry they may function like unregulated payday loans, especially when providers charge fees that mimic interest rates.
As of March 2024, multiple states had enacted legislation to bring these providers under formal financial services regulatory frameworks, incorporating consumer protections to prevent the type of alleged abuse cited in the New York lawsuits.
