The Minnesota Attorney General filed a lawsuit on June 10 against an earned wage access provider, alleging its “Instant Cash” product broke state lending laws.
The complaint centres on allegations that the company operated as an unlicensed and unregistered lender in violation of the Minnesota Consumer Small Loan Act and Consumer Short-Term Loan Act.
The Attorney General argues the company disguised what were effectively loans by marketing its product as a non-recourse, voluntary earned wage advance.
Despite that characterisation, the complaint alleges consumers were assigned repayment dates and required to preauthorise repayment directly from their bank accounts.
The AG further alleges that consumers faced significant barriers when attempting to cancel or delay repayment, undermining claims the product was truly voluntary.
Annual percentage rates on the advances regularly exceeded 300%, according to the complaint, and in some instances surpassed 700%, far above Minnesota’s 50% statutory cap.
The company is also accused of assessing express delivery and subscription fees that pushed borrowing costs well beyond what state law permits, while failing to provide legally required disclosures.
A key element of the case is the allegation that the company provided no in-app mechanism for consumers to revoke preauthorised repayment, further supporting the AG’s argument that the advances functioned as conventional loans.
The Attorney General is seeking injunctive relief, declarations that the allegedly unlawful loans are void, civil penalties, restitution, disgorgement, attorneys’ fees, and other monetary and equitable relief.
The lawsuit reflects a broader trend of regulatory scrutiny around earned wage access products, which have faced increasing examination at both the federal and state levels throughout recent years.
Regulators and legal analysts have noted that the central question in many of these cases is whether earned wage access products should be characterised as loans under applicable consumer protection statutes.
Businesses operating in this space are being urged to evaluate their products against state lending definitions and review their licensing, fee structures, disclosure practices, and repayment mechanisms for compliance.
The case serves as a significant warning to fintech firms offering similar products that state attorneys general are prepared to pursue enforcement action where they believe consumer lending laws are being circumvented.