EarnIn app sued for misleading 20,000 DC consumers with false "no interest" claims

D.C. Attorney General Brian L. Schwalb filed a lawsuit against the fintech app EarnIn on Tuesday for "deceptive marketing" and providing "illegal" high-interest loans to more than 20,000 DC consumers.

The four-pronged lawsuit takes aim at the app for allegations of false advertising, poorly disclosed fees, charging illegally high interest rates, and operating with a leading license.

The Office of the Attorney General (OAG) claims that the app is deceiving consumers by offering "instant access" to an advance on their paycheck with "no mandatory fees" and "no interest" — when in reality, EarnIn is offering short-term loans at unlawfully high interest rates.

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Users must pay a "Lightning Speed" fee to obtain their "cash advances." On average, this fee costs lenders an average interest rate of over 300% , according to the OAG. The District's interest rate cap is 24%.

In addition to the fees, the app asks users to leave a "tip" for EarnIn, which defaults to amounts set to pay between $1 and $14 per transaction.

The OAG's lawsuit claims that not only are the app's interest rates illegally high, but EarnIn also misled consumers about their existence. Ads on YouTube, Snapchat, radio, TV, Facebook, Instagram, and TikTok say that there are "no fees" and "no interest." The ads also refer to the loans as "cash advances" when in fact, the OAG defines them as loans.

The OAG suit goes on to say that EarnIn does not inform users about their "Lightning Speed" fees until after they sign up and give the app their personal and financial information.

EarnIn was founded as ActiveHours Inc. in 2013 by CEO Ram Palaniappan. The company is based in Palo Alto, California. They do not have the lending license required to operate in D.C., according to the OAG.

"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 residents' pockets where it belongs."

The OAG is seeking to stop EarnIn from operating in the district, as well as to pay restitution and civil penalties.