DURHAM, N.C. – Across America but below-the-radar, financial technology companies are using smartphones to issue predatory loans that they deny are loans, lobbying for legal exemptions, and defending against public and private lawsuits for violations of credit laws. To help policymakers and regulators navigate this new landscape, the Center for Responsible Lending (CRL) today released the policy brief “Nickel and Dimed: How Payday Loan Apps Drain Workers’ Pay and How to Stop Them.”
“App-based payday lenders have co-opted the language of financial inclusion in an effort to disguise the ancient grift of exploiting underpaid workers with usurious loans,” said Monica Burks, policy counsel at CRL. “These companies promote a legal fiction that their loans are not loans, pretend the standard measurement for interest rates doesn’t reflect their loans’ costs, and push borrowers to pay fees deceptively called ‘tips.’”
The City of Baltimore earlier this month filed the first-ever lawsuit by a city against a payday loan app while citing the latest CRL research report on these apps in its complaint against the company.
“It is the responsibility of public officials to stop predatory loan apps from breaking the law and from nickel and diming workers. This policy brief highlights ways some states are already doing that and recommends how others can as well,” said Yasmin Farahi, deputy director of state policy at CRL. “To protect consumers, states should enforce – or, where needed, adopt – strong interest rate caps for all payday loans, no matter how companies sell them.”
Background
The brief features a chart (linked separately here) comparing states’ actions and policies on payday loan apps, which the industry markets as "Earned Wage Advance" (EWA) or under similar names.
Under pressure from industry lobbyists, some states in recent years have enacted laws to exempt payday loan apps from interest rate limits and other aspects of credit laws: Arkansas, Connecticut, Indiana, Kansas, Louisiana, Maryland, Missouri, Nevada, South Carolina, Utah and Wisconsin. This brief analyzes the laws that were enacted in 2025. Nine other states had legislation introduced, but not passed, in 2025 to similarly create a loophole in their credit laws for these apps: Arizona, Colorado, Maine, Minnesota, New Mexico, New York, Ohio, Oregon, and Washington.
California's financial regulator requires app-based payday lenders to report data, but the regulator has not committed to publishing annual reports based on this data.