MoneyLion, DailyPay Sued By NY Attorney General

New York State sued MoneyLion (NYSE:ML) and DailyPay for pushing New Yorkers into short-term expensive payday loans, New York Attorney General Letitia James said on Monday.

The firms took advantage of tens of thousands of New Yorkers with illegal high-interest loans, the AG said. “Both MoneyLion and DailyPay make paycheck advance loans to hourly workers in exchange for fees and tips, pretending to simply be advancing ‘earned’ wages,” the AG’s office said in a statement. “Due to the short terms of the loans, the fees MoneyLion and DailyPay charge amount to outrageous annual interest rates in the triple digits, frequently up to 750%.”

Furthermore, the office accused both MoneyLion (NYSE:ML) and DailyPay of using “abusive tactics” to push borrowers to take out new loans to cover gaps created by previous loans.

AG James is seeking to end the illegal payday lending practices in New York, obtain restitution for impacted borrowers, and impose civil penalties.

“While many New Yorkers are worried about making ends meet, DailyPay and MoneyLion are making tremendous profits by extracting workers’ hard-earned wages,” James said.

In examples the AG’s office provided, Daily Pay’s most common loan, a seven-day $20 paycheck advance offered for $2.99 reflects an annual interest rate of more than 750%. Meanwhile, more than half of MoneyLion (NYSE:ML) loans have annual interest rates of more than 500%.

Updated at 1:43 PM ET:  DailyPay Chief Legal & Strategy Officer Jared DeMatteis said, “The approach of the Attorney General’s office is misguided and will significantly affect everyday families working to make ends meet.”  The lawsuit preempts a bill pending in New York state legislatures and is an “attempt to take this valuable service away from NY residents,” he added. “Many other states have adopted thoughtful legislation with consumer safeguards, and we support this approach, especially in our home state.”

“DailyPay’s employer-integrated on-demand pay product is not a loan under New York law precisely because there is no obligation for workers to repay DailyPay and no legal or contractual recourse against the worker,” said Loretta E. Lynch, partner at Paul, Weiss, with is representing Daily Pay. She noted that there’s no interest, no advance of future earnings, and no obligations for workers to repay DailyPay.

MoneyLion (ML) didn’t immediately respond to requests for comment.

MoneyLion (ML) stock slipped 0.3% in Monday afternoon trading.