National Consumer Law Center
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New Report Exposes the Unfair, Deceptive and Abusive Practices of Earned Wage Payday Lenders
Financial exploitation is unfortunately nothing new, but the methods used to extract money from people struggling paycheck to paycheck are constantly changing. A new report from the National Consumer Law Center (NCLC) delves into the latest face of payday loans – so-called “earned wage access” products.
Picking Workers’ Pockets: Unfair, Deceptive and Abusive Practices by Earned Wage Payday Lenders explores the tactics that earned wage payday lenders use to collect disproportionately high fees and trap consumers in a cycle of borrowing – just as traditional payday lenders do. While most of the debate around this new form of payday loan app has centered on whether the products are loans (they are), unfair, deceptive and abusive practices are unlawful no matter what kind of label they carry.
“Earned wage payday loans exploit low-income workers and are designed to extract high fees from those who can least afford them,” said Patrick Crotty, senior attorney at the National Consumer Law Center. “The earned wage payday loan industry is rife with unfair, deceptive and abusive practices. Enforcement authorities should address those practices, and legislators should reject exemptions from interest rate caps and other consumer protection laws.”
- Recent public enforcement actions by state attorneys general, the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), and the City of Baltimore cited practices of earned wage payday lenders that are allegedly in violation of laws against unfair, deceptive or abusive acts or practices (UDAP). These practices include:
- Disclosing 0% APR, “no interest” or “interest free” for costly loans when up to 90% of users pay fees that frequently add up to $300 or more a year and as much as $1400 over two years;
Promoting “instant” or “fast loans” while hiding high “expedite” fees that far exceed the cost of instant delivery and that almost all borrowers pay; and - Dark patterns that are unfair or abusive tricks to coerce purportedly voluntary “tips” and “donations,” including adding “tips” automatically with complicated, obscure and time-consuming interfaces to remove them, repeat requests for “tips,” and implied threats of consequences for borrowers who do not tip.