DailyPay Sues NY AG to Counter On-Demand Pay Restrictions

Earned wage access company DailyPay has sued New York Attorney General Letitia James.

The company’s suit, filed Monday (April 7), is aimed at stopping what DailyPay says is an attempt by James to block on-demand pay via New York’s usury laws. Those laws, the company said in a news release provided to PYMNTS, do not apply to its business.

“It’s disappointing that the Attorney General’s office decided to preempt the bill pending in the state legislature and attempt to take this valuable service away from NY residents,” said Jared DeMatteis, DailyPay’s chief legal and strategy officer.

“The actions taken by the Attorney General’s office suggest that it prefers consumers to rely on loan sharks or pay higher overdraft and late fees over on-demand pay, a proven safer and cheaper financial alternative,” added DeMatteis. “The approach of the Attorney General’s office is misguided and will significantly affect everyday families working to make ends meet.”

PYMNTS has contacted James’ office for comment but has not yet gotten a reply.

DailyPay’s suit comes amid various efforts around the country to regulate the earned wage access (EWA) industry. As PYMNTS has written, although these services do not charge traditional interest rates like payday loans, the imposition of monthly membership fees, bank transfer fees and charges for instant access or same-day deposit has led to a debate and calls for more scrutiny.

A number of states have enacted laws to create financial services oversight for earned wage access service providers. Among them is Utah, whose EWA law is less than two weeks old.

“This bill ensures transparency, consumer protections and fair practices in the growing earned wage access industry while setting up a registration and enforcement system to prevent abuse,” Rep. A. Cory Maloy, the bill’s chief sponsor, said on his website last month.

Research by PYMNTS Intelligence has found that the option for on-demand disbursements holds particular appeal in the current economy, where around two-thirds of Americans live paycheck to paycheck. Roughly 83% of consumers want to have more frequent pay schedules, going beyond the bounds of the traditional biweekly pay schedules that have existed for decades. Three-quarters of gig economy workers said that they want to be paid more often.

“On the employer side of the equation, nearly half of businesses said they must contend with staffing shortages. Against that backdrop, offering payroll instantly and on-demand can be a competitive advantage,” PYMNTS wrote last year. “PYMNTS found that 75% of millennials said earned wage access availability would influence their acceptance of a job offer. Additionally, 96% of corporates that offered earned wage access said their employees liked it and the offering helped attract talent.”