Payday loan apps issue small, short-term loans that are typically repaid on the consumer’s next payday either directly from a bank account or as a payroll deduction.1 Lenders market these loans as a means for workers to make ends meet between paychecks. In reality, workers who are already living paycheck-to-paycheck may find themselves pulled into a cycle of reborrowing that depletes their net earnings and further erodes their financial stability.
States should regulate these loans as credit and require compliance with consumer protections that prevent the predatory cycle of reborrowing commonly associated with storefront payday loans.
1 These products are sometimes called Earned Wage Advance, Early Wage Access, or EWA but few merit this name. This brief calls them payday loan apps given essential characteristics shared with payday loans obtained from physical storefronts.