EarnIn May Earn a Court Date for Illegal High-Interest Loans
Tips and fees raise borrower costs, lead to triple-digit interest rates
An earned wage access (EWA) lender is facing a potential class action lawsuit in North Carolina as plaintiffs allege the company’s loans skirt the law - operating without a license and charging effective interest rates in the triple digits.
EarnIn is the subject of the suit, which may land the company in court soon.
According to the suit filed by three current and previous North Carolina residents, EarnIn's cash advance product purportedly provides an instant source of money consumers can use to pay time-sensitive obligations or cover surprise expenses ahead of receiving paychecks from employers, but EarnIn customers are often hit with fees and tips they must pay before advances are issued or received.
The suit alleges EarnIn generates money with charges labeled "lightning speed fees" and "tips." Despite being called "voluntary," these fees and tips are applied to the majority of transactions, the suit alleges.
If users do not pay the lightning speed fees, which range from $1.99 to $5.99, they cannot obtain the advertised version of EarnIn's cash advance product, the suit claims. Additionally, EarnIn deceives users into believing tips are mandatory charges and makes them difficult to avoid, the suit alleges.
California has issued rules to rein in EWA lenders. These lenders offer loans directly through an employee’s paycheck - essentially advancing funds that have been earned and that are automatically repaid out of a borrower’s earnings at the next pay period.
When exploring the product, California found:
High interest rates. The data in California suggests that earned wage access products can carry an effective APR of 330% — that’s with or without the encouraged “tips” some products use.
Repeat use. According to California’s study, the average EWA user took ~8.5 advances per quarter; assuming a bi-weekly or semi-monthly pay schedule, which are most common in the US, that would mean a “typical” user took 1–2 advances per pay cycle.
The North Carolina case seems to echo these concerns. Specifically, the fees alleged in the case amount to effective APR interest of 104%. It’s noteworthy, too, that EarnIn faces legal trouble in other jurisdictions:
EarnIn is also facing suits in other courts for its alleged misconduct. In November, D.C. Attorney General Brian Schwalb accused EarnIn of violating the D.C. Consumer Protection Procedures Act. And consumers in Georgia accused EarnIn in August of violating Georgia's Payday Loan Act and the federal Truth In Lending Act with financial offerings that come at "an unbelievably high cost" for consumers.
Ya gotta "like" corporations who try and pretend that making their own customers who have no cash of their own feel guilty so they pay even more in tips disguised as fees! It earns them a court date!
Is the N Carolina AG working this case or just three residents with their own attorney? Jeff Jackson seems like the type that would take this on. I hope so anyway, I donated to his campaign and don’t even live in N Carolina.