Payday loan apps take hundreds of dollars a year from people struggling to make ends meet. The apps exacerbate affordability problems, leaving people with depleted paychecks, trapped in a vicious cycle of reborrowing, and facing manipulations that multiply fees:
- 90% of earned wage payday loans have fees. Apps drive workers into paying fees by making free options slow, inconvenient, and difficult to access.
- DailyPay promotes “tremendous benefits to the employer … all for a price tag of $0 to the business” but boasts to investors about the $300+ a year it extracts from low-wage workers. One worker paid almost $1,400 on 450 loans over two years.
- 80% of DailyPay’s most recent revenue comes from workers who took out over 100 loans a year. Nearly half of all fees are paid by workers who, on average, take out a loan every other day.
- One in five MoneyLion borrowers regularly incurs fees and tips totaling $57 a month.
- MoneyLion limits loan size to $100 or less, forcing workers to take out multiple loans within minutes, with multiple fees, to get instant access to the advertised $500. MoneyLion planned interface changes to push the average loan down to $50 to increase the tip proportion.
- EarnIn required users to make 14 additional clicks and suffer through 17 messages about why they need to tip in order to get an advance without a fee.
- Overdrafts and payday loans increase for most people after they start using payday loan apps, and loan stacking is common.
Annual percentage rate limits or low, comprehensive monthly fee caps are the only way to prevent exploding, unaffordable fees. Yet Congress is considering a bill to exempt payday loan apps from Military Lending Act’s 36% rate cap for service members and to preempt state payday loan rate caps and laws. The bill would substitute only disclosures and vague, weak protections that do nothing to prevent exploding costs. States are considering similar bills. Beyond the high costs workers are already paying, these bills are dangerous because:
- Traditional payday lenders could become “earned wage access” as long as the consumer “represents” that they have earned wages.
- Freed from the Military Lending Act, state limits and the APR disclosures that apply to high-fee loans, fees could escalate even higher.
Congress Should Oppose a National Payday Loan Law.
State Lawmakers Should Reject Bills That Make Workers to Pay to be Paid.
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