Consumer rights groups in New York and across the country are organizing against payday lenders and paycheck advance apps they said are evading state lending laws.
The Stop Taking Our Pay Coalition includes people from the 21 states and Washington, D.C., where payday loans are banned. In New York, lenders are subject to a 25% interest rate cap but coalition members said some companies are violating the law by arguing their products are not loans.
Maren Hurley-Matz, equal justice works fellow for the advocacy group the New Economy Project, said the companies rely on predatory practices.
“Their business model is fundamentally predicated on repeat borrowing, charging people who are living paycheck to paycheck extremely high fees, pressuring them into tips, and people end up paying hundreds of dollars a year to access their own paycheck,” Hurley-Matz outlined.
Most payday loans carry interest rates of 200% to 400%. Polls show most New Yorkers support crackdowns on the apps.
State lawmakers introduced several bills this year aimed at closing loopholes but none passed. Separately, New York Attorney General Letitia James is suing Daily Pay and Money-Lion for pushing loans onto unsuspecting consumers. The companies have argued their products are vital financial tools.
The coalition is calling attention to proposed federal legislation backed by payday lenders. Congress is considering the Earned Wage Access Consumer Protection Act, which would carve out payday loan apps from liability under federal fair lending laws while stripping away states’ ability to regulate them. Hurley-Matz argued the approach is dangerous and seeks to undermine existing protections.
“The Truth in Lending Act was developed so customers and consumers could clearly understand and compare the cost of credit through a standard APR calculation and mandates that it is disclosed to consumers,” Hurley-Matz pointed out.
The U.S. House Financial Services Committee voted to bring the bill to the House floor for a vote but policy observers said it could face legal challenges since 14 federal courts have rejected payday lenders’ assertions their products are not loans.
Edwin is a reporter and producer in North Tonawanda, New York. He’s previously reported for the Niagara Gazette and the Ithaca Times. Edwin got an early start in radio interning for WBFO-88.7FM, NPR’s Buffalo affiliate. In 2018, he graduated from SUNY Buffalo State College with a B.A. in Journalism, and in 2022, graduated from Syracuse University with an M.S. in Communications.