A proposed class action lawsuit has been filed in the U.S. District Court for the Northern District of California against EarnIn, a FinTech provider of Earned Wage Access services, alleging that its optional fees and tips constitute hidden interest payments. The complaint claims that EarnIn’s practices violate Georgia’s Payday Loan Act and the federal Truth in Lending Act (TILA).

According to the complaint, EarnIn advertises its product as a way for consumers to access wages before payday, allowing users to receive up to $100 in advances each day and up to $750 per pay period. EarnIn currently offers a standard advance, which is deposited into a bank account within a few days, and an expedited advance, which is deposited within a few minutes. To obtain an expedited advance, users must pay a “lightning speed fee,” which ranges from $1.99 to $3.99. Additionally, before users can obtain an advance, there is a screen that enables the consumer to pay a “tip,” with a default “tip” selected. To avoid paying a tip, the consumer may change the tip amount to zero.

The plaintiffs argue that the expedited funding fees and tips should be considered interest. According to the complaint, these fees yield annual percentage rates (APRs) averaging 284%.

Key Allegations:

• Promise to Repay: According to the plaintiffs, EarnIn “requires its advances to be repaid” on the consumer’s next payday and ensures repayment by requiring the consumer to: 1) link a bank account to the EarnIn app; 2) authorize EarnIn to automatically debit the account on payday; and 3) have an employer that pays the consumer regularly. Although the contracts provided that EarnIn had limited means of recourse against consumers, the contracts did not warrant “that there is no obligation to repay.”
• Excessive Fees and Hidden Interest: The plaintiffs claim that EarnIn’s fees and tips are essentially hidden interest payments, resulting in APRs that are significantly higher than those of traditional small-dollar lenders. For instance, one plaintiff allegedly received a $100 advance and paid a $3.99 expedited deposit fee, which — if the fee were interest —translated to an APR of over 145%.
• Violation of the Georgia Payday Loan Act: The complaint asserts that EarnIn’s product violates Georgia law, which prohibits making loans of $3,000 or less without proper licensing. According to the plaintiffs, EarnIn is neither a bank nor licensed under any Georgia statute.
• Violation of TILA: The plaintiffs also allege that EarnIn’s transactions were covered by TILA but EarnIn failed to provide TILA disclosures, including the “amount financed,” “finance charge,” “annual percentage rate,” and “total of payments.”

The plaintiffs are seeking several forms of relief, including treble damages; restitution for any principal, interest, fees, or other charges paid; a declaration that the loans were void ab initio; and an order preventing EarnIn from attempting to collect its cash advances.