The lawsuit involving the two companies claims that their activities represent illegal and deceptive conduct, as well as improper lending practices that violate New York usury regulations. Additionally, the state aims to terminate DailyPay and MoneyLion’s lending practices in New York and to secure restitution for customers, together with civil penalties.
The Attorney General filed the lawsuits individually on 14 April 2025 in the New York State Unified Court System, with them being relatively similar. However, they include several differences between DailyPay and MoneyLion’s business models, with an increased emphasis on tips imposed by the latter, which is a fintech company delivering a consumer finance app, Embedded Finance, and media services. Additionally, the Attorney General’s lawsuits report that both companies leveraged misleading advertising. When it comes to MoneyLion, the lawsuit stated that the company pressures its Instacash users to leave tips, with customers agreeing to pay a tip on approximately 40% of paycheck advances, leaving an average of USD 4.10. On the other hand, the Attorney General mentioned that DailyPay’s business model is improper due to it cultivating a subset of employees who depend on the ability to regularly and repeatedly secure paycheck advances for fees, thus minimising their future paychecks and forcing them to access more loans.
Furthermore, commenting on the legal action took against the company, DailyPay’s officials mentioned in a press release that New York’s usury laws cannot be applied to their company’s services, as it does not offer loans. It is also underlined that DailyPay offers no-cost or low-cost financial tools.
Similar to other states, New York is also taking into consideration legislation regarding earned wage access companies. Providers have also pushed for industry-friendly laws concerning the services at the national and state levels, mostly pleading for oversight that does not consider their services loans, as lending laws would be applicable. New York’s pending bill is set to licence and regulate earned wage access providers.
Just a week before this announcement, DailyPay took legal action against the Attorney General, requesting declaratory relief to prevent the enforcement of state and federal laws, arguing that they should not apply to its business model. Filed in the US District Court for the Southern District of New York, the case focuses on the classification of the company’s on-demand pay product, with the dispute centring on the Attorney General’s claim that DailyPay’s services constitute a loan, thus being subject to state usury laws. The company’s lawsuit sought a declaratory judgment that its product was not a loan under New York legislation and did not go against federal and state regulations.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now