Dive Brief:

• The City of Baltimore has filed a lawsuit against New York-based fintech MoneyLion, alleging the company misled and manipulated consumers into taking out small-dollar, short-term loans known as Instacash Advances, which come with high fees. 
• “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 a Monday news 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.”
• The fintech is owned by Gen Digital – the parent company of cybersecurity brands Norton, LifeLock and Avast – which didn’t immediately respond to a request for comment. 

Dive Insight:

MoneyLion, founded in 2013, operates a consumer finance app and an embedded finance platform, and counts about 14 million customers, according to its website. 

In their complaint, filed Oct. 1, Baltimore officials allege MoneyLion violated the city’s consumer protection ordinance and hit consumers with exorbitant interest charges “that trap some of the City's most financially precarious residents in an exploitative cycle of debt.”

City officials accuse MoneyLion of operating as a “modern-day payday lender,” marketing itself as an earned wage access provider offering customers quick access to “zero interest” loans through its Instacash Advances. 

But fees and “tips” that come with those advances amount to more than 10 times the maximum annual percentage rate Maryland permits on consumer loans, which is 33%, the city said. And the fintech misrepresents some of the fees as tips, the city alleges.

Such tactics, Baltimore officials contend, lead to a cycle of debt for consumers, who rack up fees owed to MoneyLion, leading them to take out more advances with the company to pay bills or buy food.

In April, New York Attorney General Letitia James sued MoneyLion and earned wage access provider DailyPay, alleging the two made “illegal, high-interest loans” to tens of thousands of customers, and fees amounted to “outrageous annual interest rates in the triple digits.” 

With a far less active Consumer Financial Protection Bureau under the Trump administration, states and cities have been expected to pick up the mantle, which Baltimore Solicitor Ebony M. Thompson alluded to Monday. 

“Actions like these are unfortunately necessary to protect consumers from bad corporate conduct,” Thompson said in the release. “With the federal government now abdicating its responsibilities to consumers, states and localities must pick up the slack.”

The Biden-era CFPB sued MoneyLion in 2022, accusing the company of violating the Military Lending Act by charging service members and their families illegal and excessive fees. That case remains ongoing, even as the bureau has dropped other cases, such as that against Navy Federal regarding overdraft fees. 

MoneyLion was acquired this year by Gen Digital for about $1 billion.