D.C. Attorney General Brian L. Schwalb announced that his office has filed a lawsuit against ActiveHours Inc., operating as EarnIn, accusing the app-based payday lender of deceptive practices and providing illegal high-interest loans to more than 20,000 residents of the District.
The lawsuit claims EarnIn misled consumers with false advertising, failed to disclose mandatory fees, and operated without the required lending license, all while charging interest rates that exceed legal limits by over 12 times.
EarnIn promotes its financial product, which they referred to as an “earned wage advance” or “cash out,” as a fee-free, interest-free service that provides instant access to a user’s wages before payday. However, according to the lawsuit, these claims are false.
The company requires consumers to pay a “Lightning Speed” fee of $3.99 to $5.99 per transaction for immediate funds access, effectively transforming the cash advances into high-interest loans. By including these fees in the cost of borrowing, the average annual interest rate for these loans exceeds 300%, far above the District’s 24% cap on interest rates for most loans.
Schwalb called out EarnIn’s practices, describing them as harmful to financially vulnerable residents.
“EarnIn lures in hard-working, cash-strapped workers with the false promise of free instant cash advances and then charges them unlawfully high interest,” he said. “This predatory business model is illegal. Especially at a time when the cost of living is already too high, my office will always have Washingtonians’ backs. Today, we’re suing to hold EarnIn accountable and to put money back in District residents’ pockets where it belongs.”
The lawsuit alleges EarnIn has misled consumers since 2016, conducting over a million transactions with District residents.
The day before the lawsuit was announced, Ram Palaniappan, CEO and founder of EarnIn, took to X (formerly known as Twitter) to tout his company’s success in the nation’s capital.
“All eyes have been on D.C. recently. EarnIn is making a real difference for working Americans there. In 2024 alone, EarnIn has helped D.C. customers avoid on average $781 in overdraft fees,” he said.
However, the attorney general’s suit claims that D.C. residents have been negatively affected by the company’s hidden policies.
Despite its claims of offering a fee-free service, the company allegedly hides the existence of the “Lightning Speed” fees in the fine print, only disclosing them after users sign up and provide personal and financial information. The fact that 90% of EarnIn’s users in the District have paid these fees is proof of the economic hardship many of its borrowers are experiencing, Schwalb noted.
Additionally, EarnIn encourages users to leave optional “tips” set by default between $1 and $14 per transaction, further increasing the effective cost of borrowing.
The complaint also notes EarnIn’s failure to obtain a required lending license to operate in the District, despite its ongoing provision of loans to thousands of local consumers. The violation adds to the allegations of unlawful conduct, which include falsely advertising its services as non-loans and charging fees that drive interest rates well beyond what is allowed under District law.
EarnIn’s business model, which ties repayment to borrowers’ next paychecks, mirrors that of traditional payday lenders. The company withdraws loan amounts, along with fees and any tips, directly from the borrower’s bank account or debit card on payday. The lawsuit argues that these practices perpetuate a cycle of financial strain for already cash-strapped consumers.
The attorney general’s office seeks a permanent injunction to stop EarnIn from violating District law, restitution for affected consumers, civil penalties, and legal costs. Schwalb emphasized the importance of protecting District residents from predatory financial practices.
“EarnIn’s actions hurt some of the most financially vulnerable members of our community,” he stated. “This lawsuit demonstrates our commitment to holding predatory lenders accountable and ensuring fair financial practices in the District.”
Consumers who believe EarnIn’s practices have harmed them are encouraged to contact the attorney general’s office.