The Center for Responsible Lending is warning state and federal officials that payday loan apps, often marketed as “earned wage access” products, are trapping consumers in the same cycle of debt as traditional payday loans. In its new report, Nickel and Dimed: How Payday Loan Apps Drain Workers’ Pay and How to Stop Them, the advocacy group urges lawmakers and regulators to close loopholes that allow fintech lenders to operate outside consumer lending laws. The group says these apps, promoted as convenient cash advances, are actually high-cost loans that draw repeatedly from workers’ paychecks and extract triple-digit annualized fees.
The report notes that CRL’s analysis of bank data shows borrowers typically double their loan frequency within a year, with 75% taking a new advance the same day or the day after repayment. Overdrafts also rise 56% after consumers begin using payday loan apps. The group identifies practices like “loan stacking,” in which multiple apps lend against the same paycheck, and the widespread use of “expedite fees” and “tips,” which CRL says mask the true cost of borrowing.
Legislative activity around these products accelerated in 2025, with 15 states introducing bills and six enacting new laws. States such as Indiana, Louisiana, and Utah passed industry-friendly measures with limited consumer protections, while Maryland and Connecticut, both states that had previously eliminated storefront payday lending, adopted new carve-outs allowing app-based lending. CRL argues those laws undermine longstanding rate caps and open the door to predatory practices.
Attorneys general in the District of Columbia and New York have filed lawsuits against EarnIn, DailyPay, and MoneyLion, alleging deceptive and usurious practices. Baltimore also sued MoneyLion this month, calling it a “modern-day payday lender.” Courts have largely sided with borrowers in private class actions, ruling that fees and tips constitute finance charges under federal and state lending laws.
CRL’s recommendations call for reinstating or strengthening 36% APR caps, banning tips, requiring public reporting of transaction data, and prohibiting lenders from making multiple loans against the same wages. The group warns that without stronger state oversight, payday loan apps will continue to operate as debt traps under a digital disguise.
