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Apps that offer fast cash could soon be regulated in California

The Apple Pay app on an iPhone. (Jenny Kane/AP)
The Apple Pay app on an iPhone. (Jenny Kane/AP)

Apps that offer fast loans to consumers, like Daily Pay and Brigit, have loaned $9.5 billion to consumers through 56 million transactions in 2020, according to the U.S. Treasury Department. But even with that massive cash flow, these apps are not regulated the same way banks are.

Ads promoting apps like this — specifically viral TikTok videos — laud them as easy, simple ways to get access to money quickly without interest or a credit check. But is that true?

No, says Aaron Glantz, investigative editor for The Fuller Project, a global nonprofit newsroom dedicated to reporting on issues impacting women. Glantz reported on California’s efforts to crack down on these money-lending apps with Monica Campbell.

Glantz says that the apps are nothing more than predatory loan practices packaged into a new, fancy app. And they mainly target college-educated women of color and charge high fees to use them.

“If it sounds too good to be true, it probably is,” Glantz says.

5 questions with Aaron Glantz

The ads for these apps make them sound amazing. Why should people be wary?

“Each one of these apps, and there are dozens of them now providing instant cash, has a business proposition to make money off of you. And this particular app called Brigit — they offer a free service. But if you actually want that instant cash that’s featured in the TikTok video, you have to pay a subscription fee of $9.99 a month. Other apps charge lightning-speed fees or instant cash fees, and they say that they have no ‘mandatory fees.’ But if you don’t pay that instant cash fee, you have to wait a few days to get your money. We have $9.5 billion of these loans going out all across America in 2020 — continuing to grow — and they are totally unregulated.”

California’s Consumer Protection Agency found that those fees equate to an average interest rate of more than 330%. Can you break that down?

“If you think about it, you borrow $100 for three days and they charge you a fee of $3.99 or an instant cash fee of $6.99, you’re paying that fee to borrow the money for only a few days.

“That is equivalent to this huge interest rate of more than 300%.”

Many of these companies ask you to add a tip. Why would someone tip them?

“What these companies are betting on is this tipping culture, like, we get in an Uber and we tip the Uber driver. But in this case, the money doesn’t go to a human being — another working person — it goes to the bottom line of the app company.

“The California Financial Protection Agency pointed out in their report that many of these apps make it really hard to set a $0 tip. They don’t advertise that tipping is optional. Some of them got caught disabling some of their services if a borrower doesn’t tip, and some of the consumers that we talked to said that they felt pressured to tip in the interface of the app.”

Some app users feel trapped after using these apps. Melissa Burrola from St. Paul, Minnesota, is one of them. What’s her story?

“Her car broke down. She needed $500 to fix it. Eight months later, she’s still on the apps, still borrowing money, still paying fees. And that’s the real problem that people are facing right now is they don’t have enough money. And when these apps charge you money to move your own money around, you end up farther behind.”

What would be the benefit of regulating these apps the way California is trying to?

“These companies would — if they want to continue operating in California — have to go into one or two lanes. The first lane would be to be treated like any other lender where their interest rates would be capped at 36% or so, and tips would count towards the fee. So you couldn’t have a fee and then a tip on top of it. Alternatively, they could register as payday lenders. They could charge more, but then they would lose the sheen of being an innovative app.”

Julia Corcoran produced and edited this interview for broadcast with Todd Mundt. Grace Griffin adapted it for the web.

This article was originally published on

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