Nearly 200 consumer groups warn that proposed legislation would gut protections against predatory payday loan apps
The bill would hide true borrowing costs and exempt lenders from military protection laws
Apps like DailyPay and MoneyLion have already trapped workers in cycles of debt with fees averaging over 800% APR
In an announcement this week, nearly 200 labor, consumer, and civil rights organizations issued a stark warning: legislation expected to be reintroduced soon would supercharge predatory payday lending through smartphone apps.
What's happening in Congress
The proposed bill, modeled after last year's H.R. 7428, would declare that payday loan apps "are not credit." This seemingly technical change would gut basic consumer protections that currently help you understand what you're really paying.
Here's how the legislation would harm you, consumer advocates say:
Hide the true cost of borrowing by removing requirements to show Annual Percentage Rate (APR)
Exempt payday loan apps from Military Lending Act protections, including cost caps and arbitration bans
Encourage a business model where you must pay fees just to access your own earned wages
Help states dismantle existing safeguards against predatory payday loans
The apps are already causing trouble
Real-world evidence shows these apps are trapping workers in debt cycles right now, the consumer coalition said:
- DailyPay pushed users into smaller, more frequent loans to maximize fees, averaging over $300 in revenue per worker annually. One worker took out 450 loans in under two years, paying nearly $1,400 in fees.
- MoneyLion advertised "0% APR" but nearly nine out of ten advances carried fees averaging over 800% APR once all costs were included.
Research from the Center for Responsible Lending found that overdraft fees increased 56% on average after people began using these apps.
Here are self-defense recommendations from the consumer groups
Contact your representatives in Congress immediately to oppose this legislation — use the House and Senate websites to find their contact information
Avoid payday loan apps entirely, even those claiming "0% APR" or "earned wage access"
If you need emergency cash, consider credit union emergency loans, employer assistance programs, or borrowing from family first
Calculate the true cost of any loan by asking for the APR — if they won't provide it, walk away
Build an emergency fund, even $25 at a time, to avoid needing these predatory products
Share this information with military family members and friends who may be especially targeted