New York Attorney General Letitia James has sued payday lenders MoneyLion Inc. (MoneyLion) and DailyPay, Inc. (DailyPay) for taking advantage of tens of thousands of New Yorkers with illegal high-interest loans that violate New York usury laws. The Attorney General's office alleges that both MoneyLion and DailyPay make paycheck advance loans to hourly workers in exchange for fees and tips, pretending to simply be advancing “earned” wages. 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%. Both payday lenders also engage in abusive tactics that push workers to frequently take out new loans to cover gaps created by their prior loans. With these lawsuits, Attorney General James is seeking to stop MoneyLion and DailyPay’s illegal payday lending practices in New York, obtain restitution for thousands of impacted workers, and impose civil penalties.
In a typical transaction with DailyPay or MoneyLion, a worker receives a small amount in advance of their paycheck (usually less than $100) and repays that amount, plus fees and tips, in 7-10 days. The result is an extremely high annualized interest rate ranging between 200-350% on average, but rates for these short-term loans can reach much higher. For example, DailyPay’s most common loan, a seven-day $20 paycheck advance offered for $2.99 actually reflects an annual interest rate of over 750%. Over half of all MoneyLion loans impose annual interest rates above 500%.
Attorney General James also alleges that both companies employ deceptive advertising to entice workers into taking out their exploitative loans. MoneyLion promises instant access to funds, 0% interest rate, and a fee-free product. Actually, it charges mandatory fees for all loans where funds are immediately available, which can be as high as $8.99 for a $100 advance scheduled to be repaid in two weeks from when the loan is issued. This reflects an annual interest rate of 234%. To extract even more money from its customers, MoneyLion asks for tips on top of its fees and establishes an artificial limit of $100 per transaction that forcing workers to take out repeat loans and pay repeat fees just to receive the $500 they are promised in MoneyLion’s advertisements.
It is alleged that DailyPay engages in similar fraudulent and deceptive practices. It contracts with employees’ companies, requiring employers to send their workers’ paychecks directly to the lenders first on payday, which allows it to deduct all amounts it is owed before passing on any remaining balance to employees. While it promises workers interest-free advances and financial benefits, DailyPay collects fees on about 90% of its loans.
DailyPay filed a federal lawsuit last week against AG Letitia James, seeking to block the state’s action.
Read the April 14, 2025 NY State Attorney General press release.
