Unfortunately, Earnin users can wind up incurring hefty bank charges because Earnin’s service links to their bank account. Plaintiffs claim that Earnin falsely assures they will not incur such charges. As for privacy, forget it!
In September 2019, plaintiffs Mary Perks and Stanley Alexander filed a lawsuit against Activehours—the company that developed Earnin. They argued that the company failed to explain to prospective users how they could get charged with overdraft fees or insufficient funds fees.
According to their class action lawsuit filed in the US District Court Northern District of California, thousands of customers were “deceived into signing up for Earnin’s app-based payday loan services—and paying "tips" to Earnin for such loans—by the company’s misrepresentations and omissions, in marketing materials, regarding the true operation and risks of the service. These risks include the real and repeated risk of multiple insufficient funds fees or overdraft fees imposed by banks as a result of automated Earnin transfers from consumers’ checking accounts.”
The lawsuit describes how this can happen in the following scenario:
A young adult lives paycheck to paycheck and struggles to make ends meet between pay periods. To pay her bills on time, she uses a service that advances $50 from her next paycheck, which the service will withdraw when her paycheck is deposited later that week. She pays a $5 “tip” for the service. A few days later, the young adult’s paycheck is deposited and the service withdraws the $50 plus the $5 “tip” from her account, even though it knows that her account has insufficient funds to cover the deduction and the account will incur a fee. Consequently, the young adult’s bank charges her account a $35 overdraft fee. Ultimately, the young adult paid $40—the $35 bank fee plus the $5 “tip”—to access $50 of her earnings a few days early.
Another lawsuit was filed in November 2019. Jared Stark claimed the company tried to evade state and federal lending laws "through a linguistic trick" — meaning the cost of its advances were framed not as fees or interest but as "tips."
"Semantics aside, Earnin is in the business of loaning money," user Jared Stark claimed in his lawsuit. "The Earnin app is set to demand from users a default 'tip,' but that tip usually equates to a very high interest annual percentage rate." Stark
agreed to voluntarily dismiss his own suit due to this proposed class action settlement.
What is Earnin?
This ‘service’ is like a payday loan company, which allows consumers to borrow cash before their actual payday. You provide Earnin with your bank information and Earnin takes money directly from your account. Earnin is likely used by people who live paycheck to paycheck and it encourages borrowing ($100 at a time and maximum $500 per pay period) before getting paid by your employer.
This is how Earnin markets itself:
"Earnin has become one of the largest app-based payday lending services.
- See how the Earnin app sends money straight to your bank account, without having to get your boss involved.
- Share details about where you bank.
- Tell us where you work.
- Earnin uses your location to note how long you’re at work.
- When you tap Cash Out, Earnin sends your earnings straight to your bank account. Your job pays you as usual, and Earnin deducts the amount you cashed out."
No doubt Earnin has become popular during the pandemic as more and more people have lost their job—although you need to be employed and a work address is required, Earnin isn’t necessarily calling your employer to confirm that you still have a job. Further, you are ineligible if you work from home or remotely online.
Rather than charging fees or interest, Earnin makes money from its customers by “tips”.
READ MORE EXCESSIVE OVERDRAFT FEE LEGAL NEWS
Plaintiffs shouldn’t “count their chickens before they’re hatched”.
We say “theoretical’ settlement because Earnin users added that one of the risks they would face at trial is that "even if plaintiffs were to prevail on their claims, Earnin may not be able to pay the resulting judgment" because of "the COVID-19 pandemic's impact on Earnin's business model — an impact that remains ongoing for the foreseeable future."