DailyPay has sued New York Attorney General Letitia James over efforts to apply usury laws to the earned wage access sector.
DailyPay allows users to access their wages before payday for a $3.49 fee. The firm says more than five million employees have access to its services and it has saved users over $40 million.
While the company and others in the sector do not charge interest rates, regulators have been looking to increase oversight amid concerns about fees.
Speaking about the New York case, Jared DeMatteis, chief legal and strategy officer, DailyPay, says: "It’s disappointing that the Attorney General’s office decided to preempt the bill pending in the state legislature and attempt to take this valuable service away from NY residents."
He continues: "The actions taken by the Attorney General’s office suggest that it prefers consumers to rely on loan sharks or pay higher overdraft and late fees over on-demand pay, a proven safer and cheaper financial alternative. The approach of the Attorney General’s office is misguided and will significantly affect everyday families working to make ends meet."
Reflecting growth in the market, Rain, the employer-integrated earned wage access and financial wellness app, has raised $75 million in Series B equity funding.
Since launching in 2019, Rain has onboarded over 2.5 million employees and distributed over $2 billion in earned wages. Rain announced its $116 million Series A funding round in March 2023 ($66 million equity and $50 million in debt), which was the largest in HR tech history.