On June 10, the Minnesota attorney general (AG) announced that his office had sued an app-based cash advance provider for allegedly violating Minnesota’s payday lending laws by operating as an unlicensed, unregistered consumer small-loan and consumer short-term lender in offering its earned wage advance product. The complaint alleges that the provider issued tens of thousands of small-dollar, short-term advances to Minnesota consumers, with APRs that regularly exceeded 300 percent and, in some cases, exceeded 700 percent, far above the state law APR cap of 50 percent. The complaint further alleges that the provider did not disclose the high rates of borrowing to consumers.

Minnesota law requires consumer small-loan lenders to register and obliges consumer short-term lenders to obtain licenses. Non-compliant loans may be rendered void. The AG asserted that the provider sought to avoid payday lending laws by characterizing its advances as “non-recourse” and “voluntary,” but that the advances were loans because they carried repayment dates, were expected to be paid on those dates, and depended on preauthorized withdrawals from a checking account or debit card.

The complaint also alleges the provider did not inform users during the “normal transaction flow” that repayment was voluntary, did not provide a complete cancellation process within the app, used extension credits to delay repayment, and, at times, denied cancellation and extension requests. The AG seeks injunctive relief, declarations that the loans were void, civil penalties, restitution, disgorgement, monetary relief, costs, and attorney fees.