The MoneyLion suit is part of a broader pattern of local and state governments stepping up their regulatory activity as the Trump Administration rolls back federal financial services regulation.
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The City of Baltimore has sued 12-year-old fintech MoneyLion, accusing it of deceptive and unfair practices related to its cash advances to consumers. The city alleges that MoneyLion charges interest at annual percentage rates (APRs) that regularly exceed 350%, or more than ten times Maryland’s legal cap of 33%. Among other claims, Baltimore also accuses the New York company of aggressively encouraging its customers to provide tips and falsely claiming its cash advances aren’t loans.
The MoneyLion suit is part of a broader trend: As the Trump Administration has dramatically rolled back federal financial regulation and slashed the staffing and activities of the Consumer Financial Protection Bureau, state and local regulators have been filling the void by stepping up their regulatory enforcement.
“With the federal government now abdicating its responsibilities to consumers, states and localities must pick up the slack,” Baltimore City Solicitor Ebony Thompson said in a press release yesterday. In April, New York Attorney General Letitia James also filed a lawsuit against MoneyLion and earned wage access company DailyPay, alleging similar violations.
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Legal clashes over the small digital loans and tip-based business models pioneered by fintechs have been going on for years. In 2019, a class action lawsuit was filed against Earnin related to its tip requests. In November 2024, D.C. Attorney General Brian Schwalb sued the company, alleging it makes illegal, high-interest loans without a lending license. That case was dismissed after the court said it hadn’t been determined that Earnin’s advances were loans.
MoneyLion, which was acquired by cyber security software company Gen Digital earlier this year for about $1 billion, didn’t respond to Forbes’ request for comment. In addition to providing financial products directly to consumers, the fintech makes money by embedding its financial products into other companies’ websites, apps and services.
Baltimore’s lawsuit against MoneyLion explains how the lender’s fees can add up to charges that vastly exceed the state’s annual interest rate ceiling of 33%. For instant access to cash advances of up to $100, MoneyLion charges one-time fees ranging from $0.49 to $8.99. (Customers can get the advance for free if they’re willing to wait one to five business days.) And it suggests customers provide a tip of $5, by default. So if someone takes out a $50 instant advance from MoneyLion and provides a $2 tip on top of the $4.99 one-time fee, he or she is paying the equivalent of a 350% APR. Taking out a $25 instant loan and paying a $5 tip on top of the required $3.99 fee would lead to a stunning 900% APR.
The suit also accuses MoneyLion of digitally badgering its customers to provide a tip, though the lender’s pricing page says the tips are completely optional. For instance, if a customer applying for an advance in the MoneyLion app changes the suggested tip to $0, a screen appears that says, “Are you sure? Tips help ensure that we can keep offering 0% APR Instacash advances to you.” And if a user didn’t provide a tip for one advance and begins to apply for another, a separate screen reminds the person in large font, “Looks like we didn’t get a tip last time!”
MoneyLion has said its advances aren’t loans and advertises them as having no interest charges and 0% APR, but the City of Baltimore calls those claims false and misleading. It alleges that, since the advances are loans and MoneyLion doesn’t have a lending license in Maryland, it’s offering them illegally. And it takes issue with other MoneyLion disclosures. For example, MoneyLion advertises “up to $500 cash advance,” but the limit per advance is actually $100. Customers need to take out five separate advances to reach the $500 limit, each of which comes with its own potential one-time fee and suggested tip.
The city’s lawsuit is requesting penalties including that MoneyLion return its Instacash fees and tips to Baltimore consumers and that it make more disclosures on (and more accurately describe) its cash advances.
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