Baltimore Sues Fintech Company Over Alleged Predatory Lending Practices

The City of Baltimore has filed a lawsuit against MoneyLion Technologies Inc., alleging that the company operates a digital-age payday lending scheme that preys on vulnerable residents and traps them in cycles of debt. The suit, brought forth by Mayor Brandon M. Scott and the Mayor and City Council of Baltimore, with representation from the Baltimore City Department of Law and Berger Montague, claims MoneyLion has violated the City’s Consumer Protection Ordinance through misleading marketing and exorbitant interest charges on its “Instacash Advances.”

The lawsuit contends that MoneyLion, despite marketing itself as a provider of “earned wage advances” and an alternative to traditional payday lenders, functions much like a predatory lender. The company’s promotional materials highlight instant access to “zero interest” loans. However, the complaint details that these Instacash Advances accrue significant fees and mandatory “tips” that, when combined, result in annual percentage rates (APRs) that far exceed the 33% maximum allowed for consumer loans in Maryland. These costs are allegedly obscured or misrepresented to consumers, and the practice of soliciting “tips” is seen as a manipulation tactic to further inflate charges.

According to the legal filing, these practices contribute to a cycle of debt for consumers. Individuals borrowing small amounts, such as $25, $50, or $100, can accumulate substantial costs owed to MoneyLion. This depletion of available funds can leave borrowers struggling to cover essential expenses like rent, utility bills, and food. Consequently, consumers may be compelled to take out additional Instacash Advances to meet their basic needs, perpetuating a recurring financial burden. Research cited in the lawsuit suggests that users of such apps, including MoneyLion, experience an increase in overdraft fees after taking out their initial loan. Furthermore, a significant portion of users, nearly three-quarters, reportedly take out more than one advance within a two-week period.

The City of Baltimore’s action aims to hold MoneyLion accountable for what it describes as exploitative conduct toward financially precarious residents. The lawsuit seeks to protect consumers from these alleged misleading tactics and prevent further harm to the City’s most vulnerable populations.

Article by Mel Anara, based upon information from the City of Baltimore

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