Attorney General Schwalb Sues “Pay Advance” Company EarnIn for Deceiving More Than 20,000 DC Borrowers

Attorney General Brian L. Schwalb today filed a lawsuit against ActiveHours Inc., doing business as EarnIn, an app-based lender, for deceptively marketing and providing illegal high-interest loans to more than 20,000 DC consumers.

The Office of the Attorney General (OAG) alleges that EarnIn violated District law by falsely claiming that its so-called "earned wage advance" product-which it calls a "cash out"-is not a loan and can be accessed instantly with "no mandatory fees" and "no interest." In reality, EarnIn's "cash out" is a loan and a consumer must pay a "Lightning Speed" fee to obtain the funds immediately. EarnIn advances the loan and then secures repayment on the borrower's next payday by withdrawing the amount of the loan, plus the "Lightning Speed" fee and any other charges, from the borrower's bank account or debit card. As a result of the "Lightning Speed" fee alone, the average interest rate on an EarnIn instant "cash out" is over 300%-more than 12 times the District's 24% interest rate cap. Moreover, although it acts as a lender, EarnIn has been operating in the District without the required lending license.

"EarnIn lures in hard-working, cash-strapped workers with the false promise of free instant cash advances, and then charges them unlawfully high interest," said Attorney General Schwalb. "This predatory business model is illegal. Especially at a time when the cost of living is already too high, my office will always have Washingtonians' backs. Today we're suing to hold EarnIn accountable and to put money back in District resident's pockets where it belongs."

EarnIn is a fintech company that offers loans based on a percentage of pay that borrowers have earned but not yet received from their employers. These loans are known as "earned wage advances." EarnIn promises consumers "instant access" to their pay-but the company is not affiliated with employers and does not actually have access to workers' wages. While EarnIn promotes itself as an alternative to payday lending, it employs a similar model, providing short-term loans at high interest rates and requiring repayment on a borrower's next payday.

Since 2016, more than 20,000 DC consumers have engaged in more than a million transactions with EarnIn. OAG's lawsuit alleges that EarnIn violates DC law by:

• Luring consumers with false claims and false advertising: EarnIn advertises widely, including on YouTube, Snapchat, radio, TV, Facebook, Instagram and TikTok. The company draws consumers in by promising that they can instantly access their earned wages with "no fees" and "no interest," and that these cash "advances" are not loans, when in fact there are fees for instant access and the advances are loans.
  
• Charging poorly disclosed fees: EarnIn requires users to pay "Lightning Speed" fees (currently $3.99 or $5.99 per transaction) for the "instant" access to funds that it promises. The existence of these fees is buried in the fine print, and EarnIn does not inform users about the amount of the fees until after they sign up, provide a substantial amount of personal and financial information, and attempt to get the promised instant cash. Demonstrating their need for immediate cash, about 90% of EarnIn's DC users have paid "Lightning Speed" fees. On top of fees, users are also asked to leave a "tip" that is paid to EarnIn, with default amounts set between $1 and $14 per transaction.
  
• Charging illegally high interest rates: The District, like most states, protects residents from predatory lenders by prohibiting lenders from charging exploitative interest rates. The District's interest rate cap for most loans is 24%. Because borrowers must pay "Lightning Speed" fees to obtain the instant loans they seek, those fees are a cost of obtaining credit that are included in the calculation of the interest rate. With those fees, and given the size of most cash advance loans, the interest rate on Earnin's instant loans averages more than 300%.
  
• Operating without a required lending license: DC regulations require lenders to obtain licenses to operate in DC. However, EarnIn has provided loans to thousands of DC consumers without a license.

With this lawsuit, OAG is seeking a permanent injunction to stop EarnIn from violating DC law, as well as restitution, civil penalties, and costs.

A copy of OAG's lawsuit against EarnIn is available here.

This matter was handled by Wendy Weinberg, Senior Assistant Attorney General, and Adam Teitelbaum, Director of the Office of Consumer Protection.

OAG's Efforts to Combat Predatory Lending

OAG has become a national leader in holding predatory lenders and fintech firms accountable for harming consumers and borrowers, including addressing illegal "rent-a-bank" schemes. In May 2023, Attorney General Schwalb secured a significant settlement with SoLo Funds, an online fintech lender that deceived consumers about the true cost of the loans on its platform and facilitated loans with an average APR of 500%. In July 2023, OAG announced a settlement securing comprehensive financial relief for hundreds of DC consumers who were deceived by fintech platform EasyPay. Previously, OAG secured millions of dollars for thousands of DC consumers who were victimized by predatory lenders, including Elevate Credit, Inc. and Opportunity Financial, LLC.

Resources for District Residents

To report unfair business practices, scams, or fraud, you can contact OAG by:

• Submitting a consumer complaint online at: https://oag.dc.gov/consumer-protection/submit-consumer-complaint
• Calling the OAG Consumer Protection Hotline at (202) 442-9828
• Emailing [email protected]

Visit OAG's website to learn more about the office's work to protect DC consumers.

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