Cash advance apps like Dave and EarnIn have charged New York consumers more than $500 million in hidden fees and “tips” since 2019, a new report estimates — allowing the loan platforms to thrive despite New York’s strict limits on consumer interest rates.
The report from the New Economy Project concludes that borrowers in New York City account for nearly half of that amount, with an estimated $217 million siphoned from their paychecks during that period. It cites the company’s use of “deceptive” processing and expedition fees, even prompts to tip lenders, that inflate costs and trap borrowers into debt.
These payday loan apps provide high-cost, short-term loans — some as small as $25 — and automatically deduct repayment from the borrower’s next paycheck.
The findings by the New Economy Project, which published the report on Thursday, are based on a 2024 analysis of industry data from the Consumer Financial Protection Bureau, applied to New York State’s working-age population, and focuses on direct-to-consumer cash advance platforms.
President Donald Trump is in the process of dismantling the bureau, which was formed in response to the late-2000s financial crisis.
While many of those same companies claim their advances are free and are not loans at all, the NEP writes, the CFPB determined last year that their cash advances are loans subject to federal lending laws.
In New York, charging more than 25% annual percentage rate (APR) on a loan is a felony. But estimates from California’s top financial regulator determined that the fees and other charges imposed by the cash-advance or “Earned Wage Access” apps on borrowers amount to effective average interest rates of 330% APR.
In its report, the NEP makes the case that the companies sidestep New York’s usury laws by charging users hidden fees for immediate access to their money, among other costs.
“We’re one of 20 states that has a strong usury law, and in states where they don’t have strong usury laws, you see this kind of massive wealth extraction particularly from low-income communities,” said Andy Morrison, associate director of the New Economy Project. “So we’re just seeing this same thing, it’s just morphed into this tech version.”
Paycheck or cash advance apps have exploded in popularity in recent years, primarily among borrowers earning less than $50,000 annually. A representative of EarnIn, one of the largest payday loan apps, told lawmakers at a state Assembly meeting last year that the company had 80,000 users in New York alone in 2023.
The companies lure in borrowers with allegedly “fee-free” loans but use other means to profit from consumers, Morrison said, either by hitting them with costly expedite charges before payday or by charging monthly subscription fees on top of loan charges.
Some companies even prompt borrowers to “tip” their lender or employer, increasing costs for consumers.
As a result of these practices, a majority of the New York borrowers surveyed by NEP described being trapped in an “impossible cycle” of debt.
Deshawn, a user from the South Bronx who asked that his last name not be published, said he’s used “all of them” to pay for necessities like groceries and meals. He has slowly stopped using them, but still has an outstanding $300 debt from EarnIn on a $100 loan that had a two-week repayment period; the outstanding payment includes a $50 fee he paid to expedite the cash, he said.
“I feel like they get you to sign up for their services because you’re not aware of the different things that they charge on the back end,” he said about the EWA services, which he called “cash advance scams.”
Efforts in New York to regulate the financial technology industry, or fintech, have stalled. A bill introduced earlier this year by Queens Assemblymember Steven Raga that would strengthen state usury laws and prevent fintech companies and loan sharks from charging exorbitant rates only has nine co-sponsors. Meanwhile the chairman of the chamber’s banks committee, Assemblymember Clyde Vanel of Queens, re-introduced legislation this year that advocates say would carve out payday loan apps from state usury laws entirely.
Adrienne Harris, the state’s top financial regulator, has deep ties to the fintech sector and deregulation efforts. Between 2020 and 2021, Harris worked as an advisor to Brigit, a payday loan app that was subpoenaed in 2019 by the state Department of Financial Services — the agency she now leads — over concerns that the interest rates on its loans violated state anti-usury laws, New York Focus reported. Efforts by progressive lawmakers to thwart her 2022 nomination failed.
Assemblymember Clyde Vanel at a rally in Queens, Oct. 17, 2021. He has introduced legislation that advocates say would carve out payday loan apps from state usury laws. Credit: Ron Adar/Shutterstock
The DFS under previous leaders has taken a more aggressive approach towards the fintech sector. When federal banking regulators sought to override state usury laws on behalf of the industry during the first Trump administration, then-DFS superintendent Maria Vullo sued and won.
In 2019, Vullo’s successor, Linda Lacewell, announced the agency was leading a multi-state effort to probe the payday loan app industry, but that report was quietly shelved and its findings never made public, Morrison said.
“If you go to the Department of Financial Services’ website, it has a whole page about how payday loans are illegal in New York, and the Department of Financial Services has in the past been very aggressive in going after illegal online payday lending,” Morrison said. “So it really raises a question for us as to why not now, given that the department did open an investigation in 2019 into the industry and we New Yorkers never heard the results of that investigation.”
A spokesperson for the Department of Financial Services did not answer questions about the New Economy Project’s findings and said the agency cannot comment on potential or ongoing investigations.
Representatives for Vanel and Raga did not respond to requests for comment.
The head of the trade group representing the fintech industry insisted that EWA’s are not loans and should not be regulated as such — and said the products provide an alternative to payday loans.
“Responsible earned wage access is not a loan, has none of the characteristics of loan, and should not be treated or regulated as such,” said Phil Goldfeder, CEO of the American Fintech Council and a former Assembly member from Queens. “Responsible earned wage access is utilized by millions of American workers and serves as a safe, transparent, affordable and important alternative to high-cost predatory and payday loans.”
“The misguided views and recommendations promulgated by those who clearly do not understand earned wage access products are fruit from a poisoned tree and not in the best interest of consumers,” he added.
On Wednesday, NEP and more than two dozen labor unions, credit unions and advocate organizations sent a joint letter
to Gov. Kathy Hochul urging her to direct DFS to enforce usury laws against payday loan apps and to partner with state Attorney General Letitia James to rein in the industry, among other recommendations.
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