Opinion: Living paycheck to paycheck is hard enough – let’s not make it worse

New Yorkers across the state are struggling to afford the cost of living. Last year, more than a third of New Yorkers couldn’t make ends meet, including 60% of low-income households and nearly 40% of moderate-income households. A quarter had no emergency savings at all. 

That reality isn’t just squeezing families; it’s also creating an opening for predatory lenders to profit off New Yorkers’ hardship. One of the worst offenders is the so-called “Earned Wage Access” (EWA) industry, which claims to provide workers with access to a portion of their paycheck before payday – but in reality peddles high-cost payday loans that trap workers in cycles of debt.

Backed by Silicon Valley venture capital and Wall Street investors, these “fintech” (financial technology) companies market app-based “no interest” cash advances – but they actually extract profits through hidden fees that push effective interest rates into the triple digits. According to a lawsuit filed by the New York Attorney General Letitia James, one company’s most common loan carries an effective interest rate of 750% APR.

That’s not a financial lifeline. It’s a debt trap. 

We introduced the Stop Taking Our Pay Act, or STOP Act, to rein in this kind of unchecked financial exploitation and protect New Yorkers from a new breed of predatory payday lenders.

Here’s how the scam works. EWA companies push their products on social media, in workplace break rooms and even on the NYC subway, offering small-dollar loans to low-wage workers before payday – often $20, $50, or $100.

To get the loan, workers must give the companies access to their bank account, allowing their apps to track pay cycles and make sure the lender gets repaid first – before workers can pay rent or buy groceries. The result is the classic payday loan debt trap: people get pulled into repeat borrowing, paying more and more just to access their own wages.

The costs snowball quickly. Instead of calling it what it is – interest – EWA companies disguise the cost through an array of deceptive fees, like expedited transfer charges, subscription costs and so-called “tips,” sometimes even misleading workers to think that the tips go to charity.

These companies use these clever tactics because they know what they’re doing is illegal. In New York, it is a felony to charge more than 25% interest on a loan, thanks to our state’s strong usury law. 

Under the Biden administration, the Consumer Financial Protection Bureau began cracking down on the industry’s end-runs around consumer protection laws by proposing a rule affirming that EWA is lending under the federal Truth in Lending Act – the federal law that requires lenders to clearly disclose the true cost of a loan. Courts across the country have agreed.

Now, the Trump administration has taken a hatchet to federal consumer protections, including the CFPB’s work on putting guardrails around EWA companies. It’s critical that New York step up to protect working people. These federal rollbacks have emboldened EWA companies, which are now racing to expand and exploit – pushing deeper into communities already struggling under the weight of New York’s historic affordability crisis, especially communities of color.

James has already sued two industry leaders, DailyPay and MoneyLion, for violating New York’s usury and other consumer protections. But we can’t rely on enforcement alone when an industry’s entire business model is based on evading the law. 

The STOP Act will protect consumers as lenders grow bolder by clarifying that EWA advances are loans and that fees and “tips” must be counted as interest. 

The EWA industry, which exploded during the pandemic and continues to grow rapidly, has extracted well over $500 million from New Yorkers’ paychecks in recent years. Disproportionately harming youth and Black and brown New Yorkers, these apps do not mitigate the affordability crisis; they exacerbate it to line the pockets of their venture capital investors. Albany must tackle the root causes of financial instability – by raising wages and expanding access to mission-driven Community Development Financial Institutions that help people and communities build wealth, not debt.

Cracking down on predatory lenders isn’t just the right policy. It’s also what the people want. A statewide survey found that 88% of New Yorkers, from Monroe County to Maspeth, support bringing Earned Wage Access lenders firmly under our state’s usury cap that mandates the maximum interest rate a lender can charge.

We urge our colleagues in the state Legislature to work with us to pass the STOP Act this session to protect New Yorkers and help workers keep their hard earned money.