Attorney General Letitia James filed lawsuits Monday against two payday lending companies accused of exploiting tens of thousands of New Yorkers through illegal, high-interest paycheck advance schemes. The companies, MoneyLion Inc. and DailyPay, Inc., allegedly pushed workers into cycles of debt with deceptive marketing and abusive loan practices.
The lawsuits claim the companies disguised high-cost payday loans as earned wage advances while collecting outrageous fees — in some cases generating annual interest rates as high as 750 percent.
“Promising New Yorkers financial freedom while pushing them into outrageously expensive loans is downright shameful. These are payday loans by another name,” said Attorney General James. “New Yorkers deserve to keep the money they earn, not have it taken by predatory lenders.”
According to the suits, both companies offer short-term advances, typically under $100, and require repayment in under two weeks. Fees and “tips” imposed by the lenders inflate effective interest rates well beyond legal limits. DailyPay’s most common $20 loan with a $2.99 fee carries an annualized rate of over 750 percent. More than half of MoneyLion’s loans reportedly exceed 500 percent annual interest.
In one extreme case, a Washington Heights resident took out more than 450 loans from DailyPay in under two years, paying nearly $1,400 in fees. Another Syracuse worker paid daily fees on almost 500 loans over the same period.
MoneyLion also allegedly pressures users to leave tips and forces repeated borrowing by capping loan amounts at $100, despite advertising $500 advances. DailyPay is accused of requiring employers to reroute paychecks through its system, allowing it to deduct loan payments before workers receive their wages — a practice that may violate state wage assignment laws.
The lawsuits seek to shut down both companies’ practices in New York, recover restitution for impacted workers, and impose civil penalties. The cases are being handled by the Attorney General’s Consumer Frauds and Protection Bureau, with support from the Research and Analytics Department.
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