Earnin Class Action Says App Violates Lending Laws

A class action lawsuit has been filed against Earnin by consumers who allege that the lending service mobile app sidesteps federal regulations through a “linguistic trick,” by calling a payment to use the service a “tip.”    

The plaintiffs note that Earnin claims to provide a payday advance with “no fees, interest, or hidden cost” but the app does not disclose to borrowers that the “tips” equate to a high annual percentage rate (APR).

The Earnin class action lawsuit states that borrowing $100 and paying a $50 “tip” for it, repayable in four days, is 456% APR. In addition, a $5 tip on a $100 advance is reportedly equivalent to 130% APR.

Plaintiff Jared Stark has reportedly used the Earnin app since August 2018 when his family was in the midst of financial uncertainty. During the course of using the Earnin app, his borrowing limits have fluctuated for no reason, he claims.

“He believes that his limit was affected by the amount that he tipped. For example, his limit was once decreased from $350 to $250 in a single pay period, which followed a week when he had declined to pay a tip,” the Earnin class action alleges.

The Earnin class action lawsuit states that the company did not disclose the exact cost of his borrowing though paying “tips” or what APR those tips would equate to. In addition, the plaintiff claims that he has suffered financial injury through his use of the app.

The plaintiff alleges that Earnin gives loans in states where payday borrowing is illegal and thwarts federal lending laws such as the Truth in Lending Act. In addition, the company does not comply with California’s Financing Law and has not registered as a lender, the plaintiff states in his Earnin class action lawsuit.

“Although Earnin offers loans nationwide, moreover, Earnin does not comply with lending laws – and is not registered to act as a lender – in any of the other 50 states where it does business,” the Earnin class action lawsuit claims.

The Earnin class action states that Earnin has around 10 million subscribers and the app has been downloaded more than 12 million times.

The app reportedly works by placing money into the customer’s checking account and it ends when a direct deposit is placed into the account by the borrower’s employer. The plaintiff states that there are no “fees” or “interest” charges, but the company asks the user to pay a “tip” of which the suggested amount is $9 to $14.

The Earnin class action lawsuit alleges that Earnin strongly encourages its customers to tip and will “punish” those who do not.

The mobile app connects to the customer’s bank account information and monitors their account balance, claims the Earnin class action lawsuit.

Additionally, the class action lawsuit claims that Earnin is currently under investigation in 11 states and Puerto Rico for engaging in predatory lending and skirting payday lending laws. In addition, numerous other states are reportedly joining in on the investigation into the company.

Prospective Class Members include: “All persons who used the ‘Earnin’ application to obtain an advance of funds (whether through the standard service or Balance Shield service) and paid a tip for use of the service.”

Have you used the Earnin app? Leave a message in the comments section below.

The plaintiff is represented by by Alison E. Chase, Matthew J. Preusch and Christopher L. Springer of Keller Rohrback LLP.

The Earnin Lender App Class Action Lawsuit is Stark v. Activehours Inc., Case No. 5:19-cv-07553, in the U.S. District Court for the Northern District of California.

UPDATE: The TCA Pay Advance App investigation is now open! Did you get early access to your hard-earned money through an app or program offered by your employer and receive a payday advance loan through a wage advance app? Submit your information here!

Read More Lawsuit & Settlement News:

Whistleblower Awarded $6 Million for Biogen’s Alleged False Claims Act Violations

Apple Can’t Escape MacBook ‘Butterfly’ Keyboards Class Action

Another Zostavax Shingles Lawsuit Joins Growing MDL

Canada Hyundai, Kia Class Action Alleges Engine Defect