On August 8, the U.S. District Court for the District of Maryland issued an opinion partially granting an earned wage access (EWA) provider's motion to dismiss that challenged whether the company operated as an unlicensed lender in violation of the Maryland Consumer Loan Law (MCLL), charged unlawful fees, and failed to comply with disclosure obligations under the Truth in Lending Act (TILA). Plaintiffs also alleged the company violated the Maryland Consumer Protection Act's (MCPA) prohibition on unfair or deceptive trade practices with respect to extensions of credit.
In its opinion, the court allowed certain state and federal lending claims to continue while dismissing the MCPA count. The rulings broke down as follows:
- Fees and tips were treated as potential financing charges under the MCLL. Plaintiffs' allegations that "lightning speed" fees and user tips functioned as compensation for credit were sufficient to survive dismissal under MCLL.
- TILA claims survived. The court determined that plaintiffs sufficiently alleged that the product could constitute "credit" under TILA, and accordingly that associated fees and tips could be finance charges requiring disclosure.
- Consumer protection claims were dismissed.The court held that plaintiffs had not alleged reliance on any misrepresentation, which is required to state a private claim under the MCPA.
Putting It Into Practice: The opinion highlights the unsettled compliance landscape for EWA providers in Maryland, even after the state enacted a comprehensive framework for such products earlier this year (previously discussed here). Despite the new statute, challenges still persist and underscores the need for companies to align their fee structures, repayment practices, and disclosures with not only the new EWA-specific requirements but also existing lending statutes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
