Earnin, Say What’s Your Price? Nas-backed Earnin Comes Under Investigation

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Question MarksEarnin, the self-proclaimed alternative to payday loans, is part of a new online lending category that is under investigation in eleven states and Puerto Rico for its similarities to payday loans. With such loans being banned in sixteen states, the app-based personal loans company has drawn the attention of various regulators after it was suggested that its lending model potentially shares a similar APR with payday loans.

Backed by rapper Nas (only as of June and on undisclosed terms), the company came under fire after it was reported that in a meeting its founder and CEO, Ram Palaniappan, discussed hiring a private investigator to look into the past of a New York Post journalist that was writing about them.

Operating under a ‘tipping’ system, Earnin profits from the loans it provides by suggesting that customers give a voluntary tip when repaying their loans. The default amount is $9 per $100 taken, but people have paid up to $14 per $100, this being the limit one can tip.

According to the New York Post, these tips can lead to APRs of over 400% for an individual advance. Uncertainty looms over Earnin’s model as the phrasing of ‘tipping’ confuses whether or not this can be classified as a loan fee. Say what’s your price? Borrowers may not be aware that their tip could put the loan’s cost on par with costly payday loans.

Earnin relies on analytics gathered from customers’ phones, with the company knowing how much users are paid per hour as well as knowing how long they were at work via their location, Earnin can accurately predict incoming wages.

In a company statement, Earnin said that its system “is a brand new model, so we expect, and welcome questions from regulators like the New York Department of Financial Services.” Since this announcement, Earnin no longer suggests a tip to users in New York and Nas has yet to comment on the situation.

Last modified: September 17, 2019
Brendan Garrett

Category: Online Lending, Regulation


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