On April 7, DailyPay, LLC, an employer-integrated earned wage access (EWA) provider, filed a lawsuit against New York Attorney General Letitia James, seeking declaratory relief to prevent the enforcement of state and federal laws that the company argues do not apply to its business model. The case, filed in the U.S. District Court for the Southern District of New York, centers on the classification of DailyPay’s on-demand pay (ODP) product, which allows workers to access their earned wages before the traditional payday.
The core of the dispute lies in the New York Office of Attorney General’s (NY OAG) assertion that DailyPay’s ODP product constitutes a loan, thereby subjecting it to state usury laws. According to the complaint, on January 22, 2025, the NY OAG issued a “Five-Day Notice” under New York Executive Law § 63(12) and Articles 22-A and 23-A of the New York General Business Law, asserting that DailyPay’s product is a loan that violates state usury laws and wage assignment laws by charging interest beyond the statutory limit. However, DailyPay contends that its product is not a loan under New York law, as it does not involve the advancement of future earnings or the imposition of an obligation to repay.
DailyPay argues that its ODP product is fundamentally different from a loan in several critical ways. First, the company does not check the creditworthiness of workers or report any information to credit bureaus. Second, there is no credit application or underwriting process required for employees to access their earned pay. Third, there is no interest or other charges based on the amount of the transfer or the length of time between the transfer and payroll. Finally, DailyPay does not engage in any debt collection against employees.
The company also emphasizes that its product is structured with consumers’ interests in mind. DailyPay does not “estimate” the employee’s earnings. Instead, it allows the employee to access a portion of the real earnings the employee has already earned based on the real-time information DailyPay receives through the employer’s payroll system. Employees can access their earned pay at no cost through an ACH transfer, or they can opt for an expedited transfer for a flat fee of $3.49. The transfer to the employee is settled through the employer’s payroll process, rather than by debiting the employee’s bank account. Thus, the transfer does not create a debt obligation to DailyPay and the worker has no repayment obligation. DailyPay also has no recourse against the employee, which means that, in the event that an employer fails to make payroll, DailyPay has no legal or contractual right to obtain repayment from the employee and does not engage in debt collection against the employee.
DailyPay’s lawsuit seeks a declaratory judgment that its ODP product is not a loan under New York law and does not violate federal and state laws. The company argues that the OAG’s threatened enforcement action is based on a flawed legal theory and that the laws cited by the OAG do not apply to its business model.
The outcome of this case could have significant implications for the earned wage access industry, particularly as legislatures and regulators at both the federal and state levels continue to review and consider appropriate regulatory frameworks for these products.