On April 14, the Attorney General (AG) for the State of New York filed two complaints in the New York State Supreme Court, alleging two earned wage access (EWA) providers violated civil and criminal usury provisions, as well as federal UDAAP provisions under the CFPA.

Complaint Against the Financial Technology Company

The first complaint alleged one EWA company attempted to evade New York’s usury laws by claiming that certain fees and tips are not considered interest. The complaint alleged the company offered small-dollar, short-term, high-cost loans to tens of thousands of New Yorkers. Users provided open-ended authorization for future bank deductions to repay these amounts, typically within 7 to 10 days, making repayment a near certainty.

The AG alleged violations of usurious lending, fraud, deceptive acts, false advertising, and abusive practices. In a typical transaction, a user would pay $56.99 to obtain a ten-day, $50 advance, resulting in an alleged usurious APR of more than 350 percent. The complaint highlighted the company charged interest exceeding New York’s civil usury cap of 16 percent and criminal usury cap of 25 percent annually, that it engaged in fraud by misrepresenting the terms of its advances, and employed deceptive and abusive practices under both state and federal laws.

The AG is seeking to enjoin the defendant from engaging in deceptive and abusive conduct. The AG is also asking the court to award restitution, disgorgement, damages, civil penalties, and other relief.

Complaint Against the Financial Services Company

The second complaint alleged another EWA company violated New York State’s usury laws through its small-dollar, high-cost loans known as “Paycheck Advances.” The complaint described the company’s business model offering hourly workers early access to wages earned but not yet paid. The complaint claimed the lender’s transactions involved workers obtaining advances typically under $100, with fees of $2.99 or $3.49, which resulted in high interest rates. These advances came with fees imposing costs often exceeding 50 percent APR, with some allegedly reaching over 500 percent.

The AG claimed the business model was abusive, relying on employee dependence to repeatedly obtain advances, depleting future paychecks, and fostering reliance on additional loans. Under the plan, workers agreed to have their next paycheck deducted to cover the loan and fees, assigning their wages as collateral, secured by employers’ obligations to pay, which constituted usurious lending.

The AG alleged violations of the wage assignment statute, civil usury limit, and criminal usury limit. The lender was accused of false advertising by claiming the advances are “interest-free” and engaging in deceptive practices likely to mislead consumers. The petition seeks to permanently enjoin the lender from these practices and impose a civil penalty of $5,000 for each violation.