Some cash advance apps push customers to pay a “tip” to the app to be able to access their funds. The term “tip” is effectively a way for apps to disguise fees, said Yasmin Farahi, deputy director of state policy and senior policy council at the Center for Responsible Lending. Consumers often don’t know that these fees are optional and cannot figure out how to opt out of them, she added.
Employer-backed early wage services don’t ask for tips, but they may begin to if regulators allow it in the future, Andrew Kushner, policy counsel at the Center for Responsible Lending, told Vox.
The fees can push low-wage workers into a vicious cycle of reborrowing. “Any time there’s a fee involved in that — even a small one — that’s going to add up. And at the end of the day, all you’ve done is added more fees to your budget rather than have any greater ability to handle expenses,” Saunders said. “For low-wage workers, even a few dollars are a meal.”