MoneyLion Accused of Misleading Customers in Baltimore Lawsuit
The city of Baltimore accused FinTech MoneyLion of misleading consumers.
In a lawsuit filed Monday (Oct. 6), the city alleged the company violated Baltimore’s consumer protection ordinance “by misleading and manipulating consumers into taking out high-cost, high-frequency, small-amount, short-term loans known as Instacash advances,” according to a Monday press release.
“MoneyLion has preyed on Baltimoreans, trapping our most vulnerable residents in borrowing cycles that made it harder and harder for them to pay bills and put food on the table,” Baltimore Mayor Brandon M. Scott said in the release. “Not only is that wrong, it’s illegal. We’re committed to holding MoneyLion accountable, as we’ve done for other big corporations trying to take advantage of our residents.”
MoneyLion did not reply to PYMNTS’ request for comment.
The lawsuit accused MoneyLion of operating as a “modern-day payday lender,” as it “markets itself as an ‘earned wage advance’ provider and an alternative to payday lenders,” the release said.
While the company markets its Instacash advances as “zero interest” loan offerings, the program includes fees and tips that can add up to more than 10 times the maximum annual percentage rate allowed for consumer loans in Maryland, according to the release. As consumers borrow small amounts of $25 to $100 at a time, the costs begin to add up.
“As these costs add up, borrowers have less money available to pay for utility bills, rent and food,” the release said. “When these consumers do not have enough for utility bills, rent or food, they take out more Instacash advances, and the cycle begins anew.”
Baltimore City Solicitor Ebony M. Thompson said in the release that the suit is necessary at a time when the federal government is “abdicating its responsibilities to consumers,” leaving states and localities to “pick up the slack.”
Meanwhile, the future of the Consumer Financial Protection Bureau remains in flux amid a more relaxed attitude toward regulation in Washington.
“As the agency itself has been walking back, or outright canceling, its own rulemaking, there’s a flurry of activity at the state level where lawmakers and attorneys general are, in effect, stepping in for the bureau, levying lawsuits and legislation that treads ground typically covered by the consumer-focused watchdog,” PYMNTS reported June 10. “For the providers, the state-by-state level actions mean there’s an increasingly fragmented regulatory terrain to navigate.”
MoneyLion was also sued earlier this year in New York state, with the state’s attorney general accusing the company of abusive lending practices.
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