WASHINGTON, DC – The Center for Responsible Lending (CRL) today released “A Loan Shark in Your Pocket: The Perils of Earned Wage Advance,” a report on the fast-growing market for cash advance apps and how these loans harm consumers. The report features a dataset of transactions showing rates of reborrowing, loan stacking, and overdraft fees experienced by people borrowing from a cash advance app like Earnin or Dave -- or from a combination of these lenders. The report is accompanied by infographic one-pagers showing data nationally and for several states.
“By offering predatory credit with just a few taps on your cell phone, cash advance apps are a loan shark in your pocket. This report shows many cash advance app borrowers are trapped in a cycle of debt like that experienced by payday loan borrowers,” said Candice Wang, senior researcher at CRL. “Cash advance app companies issue loans with triple-digit annual interest rates in nearly every corner of America – even where those rates are illegally high – inflicting financial pain on a growing number of consumers.”
Key findings of the report:
- Many cash advance app borrowers are trapped in a debt cycle and the heaviest users drive the business model. Repeat use of advances is common and high-frequency users accounted for 38% of users and 86% of advances. Many users borrowed from multiple apps simultaneously. Nearly half of all borrowers had used multiple companies in the same month.
- App use is associated with increased overdraft fees and payday loan use. For users with overdraft fees or payday loans, the majority saw the number of times they used these high-cost products increase after taking out an advance for the first time.
- Consumers across states are experiencing similar harms. The eighteen states we analyzed had similar patterns of repeat borrowing, overdraft use, and loan stacking.
Background
CRL received anonymized financial transactions data dating from January 2021 through June 2024 from a panel of low- to moderate-income consumers affiliated with SaverLife, a nonprofit dedicated to using technology to improve financial health. CRL matched over 214,000 advances to nearly 6,000 unique users across twenty cash advance apps: direct-to-consumer lenders Albert Instant, Brigit, Cleo, Dave, Earnin, Empower, FloatMe, Klover, MoneyLion, and Varo Advance, as well as employer-integrated lenders Branch, DailyPay, One@Work (formerly Even), PayActiv, Rain, Tapcheck, Immediate, Instant Financial, Wagestream, and ZayZoon.
All new and just-updated materials released today:
- New Report: “A Loan Shark in Your Pocket: The Perils of Earned Wage Advance”
- New Infographic one-pagers: national and state-level
- Updated brief: “Paying to be Paid: Consumer Protections Needed for Earned Wage Advances and Other Fintech Cash Advances”
- Updated one-page primer: “Earned Wage Advance: States Should Regulate as Credit, Protect Consumers”
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Press Contact: matthew.kravitz@responsiblelending.org