Earnin

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EarnIn
FormerlyActiveHours
Industry
Founded2013
FounderRam Palaniappan (CEO)
Headquarters Palo Alto, California
Services Earned wage access
Number of employees
200+ (2021)
Website www.earnin.com

EarnIn is a financial services company that provides earned wage access services. [1] Founded as Activehours in 2013, the app launched in May 2014. [2] [3] The company's business model, which is based on users paying voluntary "tips" to withdraw earned wages ahead of time, has been compared to payday lending services. [4] It expanded its services in 2019 to include negotiating with doctors and hospitals to lower its users' medical bills. [5] In 2020, EarnIn acquired and implemented a new savings feature, Tip Yourself. [6]

Contents

History

The company was founded by Ram Palaniappan in 2013. [7] [2]

The company raised $4.1 million in 2014. [3] At the time, some questioned whether the business model was viable since tipping was voluntary. [3] The company partnered with Uber and Sears to allow its drivers to cash out after a shift. [8] [9]

By 2017, the company had raised $65 million in funding. [9] And in December 2018, it raised an additional $125 million. [10] It rebranded from Activehours to Earnin in November 2017. [10]

In April 2019, the New York State Department of Financial Services investigated whether the company's "tipping" system skirted New York State lending laws regulating payday lending. [11] [4] An article in the New York Post said that members who do not leave tips may have their monthly maximum restricted, which may trigger interest rate disclosure laws. [12] New York State subpoenaed information from the company, including a calculation of annual percentage rates if tips were measured as fees or interest. [4] In 2019, there were also consumer complaints about glitches sometimes resulting in delays in fund transfers. [4] On March 25, 2021, a federal court granted final approval for the class action settlement in Perks v. Activehours, Inc. (d/b/a EarnIn). [13]

In May 2019, the company began offering its users a service to negotiate for a reduction in outstanding doctor or hospital bills. The company will also negotiate installment payments for outstanding medical bills if it can. [5] The service is offered without a fee and members are asked to leave a voluntary tip for good service. [14]

In 2019, EarnIn acquired Chicago-based company, Tip Yourself. In May 2020, EarnIn integrated the service into their own app. Tip Yourself is a tool that provides members with "Tip Jars" that they can set up for specific savings goals such as “a trip, home improvement projects or a rainy day fund.” [6]

In April 2020, during the COVID-19 pandemic, the company created a new feature giving workers access to their earned wages while remote working. [15]

In January 2023, the company rebranded from Earnin to EarnIn.

Consumer Protection Investigations and Lawsuits

In November 2024, the Attorney General for the District of Columbia filed a lawsuit against EarnIn, alleging that the company deceptively marketed its earned wage advance services. [8] The complaint claims that EarnIn misrepresented its "Cash Out" product as fee-free and interest-free, while in reality, consumers were required to pay optional "Lightning Speed" fees to access funds instantly. These fees allegedly resulted in effective annual percentage rates (APRs) exceeding 300%, far above the District’s 24% interest cap. The lawsuit also alleges that EarnIn operated without a lending license.

In August 2024, a class action lawsuit was filed in the United States District Court for the Northern District of California against EarnIn (operating as Activehours, Inc.). [7] The plaintiffs allege that the company’s tipping and fee model violates Georgia’s Payday Lending Act and the federal Truth in Lending Act (TILA). The complaint asserts that users were routinely charged fees and tips that resulted in APRs averaging 284%.

Previously, in March 2021, a federal court granted final approval of a $12.5 million settlement in a class action lawsuit against EarnIn, in which plaintiffs claimed that the company’s practices led to overdraft fees on their bank accounts. [13]

In August 2024, a class-action lawsuit was filed in the U.S. District Court for the Northern District of California against EarnIn. The plaintiffs alleged that the company's optional fees and tips constituted hidden interest payments, violating Georgia's Payday Loan Act and the federal Truth in Lending Act (TILA). The complaint highlighted that EarnIn's fees and tips led to APRs averaging 284%. [16]

In September 2024, a class-action lawsuit titled Orubo v. Activehours, Inc. was filed in the U.S. District Court for the Northern District of California. The plaintiffs alleged that EarnIn's optional fees and tips constituted hidden interest payments, violating Georgia's Payday Loan Act and the federal Truth in Lending Act (TILA). The complaint highlighted that EarnIn's fees and tips led to APRs averaging 284%. [17]

In April 2019, the New York State Department of Financial Services launched an investigation into EarnIn's tipping model to determine whether it violated state lending laws regulating payday lending. The investigation focused on whether the company's "tips" and "Lightning Speed" fees constituted interest charges that exceeded state usury limits.

Data Breaches and Privacy Concerns

EarnIn has faced multiple data security issues. In June 2024, the company confirmed that customer information may have been affected in a broader cybersecurity incident involving its banking partner, Evolve Bank & Trust. [15] In a separate investigation, a law firm began reviewing claims of unauthorized access and inadequate data protections. [18] Additionally, a 2019 breach reportedly allowed third-party access to sensitive financial data, sparking criticism of the company’s internal security protocols. [19]

Employment and Whistleblower Litigation

In 2024, a wrongful termination lawsuit was filed in Vermont Civil Court by a former EarnIn employee alleging retaliation after reporting months of harassment and threats by users of the platform. [20] According to the complaint, the employee had submitted numerous reports to internal management and HR without meaningful response. The plaintiff was allegedly terminated shortly after notifying law enforcement and federal agencies, including the FBI and Vermont Attorney General's Office. The suit remains active as of early 2025.

In 2024, another employment-related lawsuit (Castro v. Activehours, Inc.) was filed in California state court, alleging wrongful termination after bringing concerns over data leaks and security and privacy. [21] The suit remains active as of early 2025.

Services

EarnIn’s main service, Cash Out, allows users to access earned wages which they have not yet been paid. The company also allows users to connect their app to a debit card, as well as a savings tool. EarnIn also offers Health Aid, a service that looks for lower payment options on medical bills. [22]

Users asked to leave a "voluntary tip" for each transaction. However, users who do not tip may have monthly maximum restricted, and the company was investigated by the New York State Department of Financial Services for possibly breaking the state's payday lender laws. [11] The app suggests multiple tip levels for every transaction. [18] Tips are capped at about 15% of the daily maximum. [9] [19] After a member's scheduled wages are deposited in their bank account by their employer, the company automatically withdraws the wages and the tip. [23] [4]

References

  1. ↑ Debter, Lauren. "Want To Cash In On Your Paycheck Before Payday? There's An App For That". Forbes. Retrieved 2020-11-11.
  2. 1 2 Carrns, Ann (2014-05-22). "Getting Your Wages, Before Payday (Published 2014)". The New York Times. ISSN   0362-4331 . Retrieved 2020-11-11.
  3. 1 2 3 "The Next Big Thing You Missed: Startup Offers Payday Advances Without the Pesky Loan-Sharking". Wired. ISSN   1059-1028 . Retrieved 2020-11-11.
  4. 1 2 3 4 5 "A payday lender in disguise? New York investigates the Earnin app". American Banker. 2019-04-04. Retrieved 2020-11-11.
  5. 1 2 Rubin, Ben Fox. "You can hire this startup -- for free -- to negotiate down your medical bills". CNET. Retrieved 2020-11-11.
  6. 1 2 "Earnin Unveils Tip Yourself - A New Way to Build Savings in the Earnin App". www.yahoo.com. Retrieved 2020-11-11.
  7. 1 2 Valle, Gaby Del (2019-05-22). "How a Silicon Valley startup is trying to rebrand payday loans". Vox. Retrieved 2020-11-11.
  8. 1 2 "Activehours, which makes every day a payday, just raised $22 million in Series A funding". TechCrunch. Retrieved 2020-11-11.
  9. 1 2 3 "Activehours raises $39 million for its new take on cash advances". TechCrunch. Retrieved 2020-11-11.
  10. 1 2 "Earnin raises $125M to help workers track and cash out wages in real time". TechCrunch. Retrieved 2020-11-11.
  11. 1 2 Dugan, Kevin (2019-03-28). "Cash-advance app Earnin gets subpoenaed by NY regulator: source". New York Post. Retrieved 2021-04-07.
  12. ↑ Dugan, Kevin (2019-03-22). "Popular cash advance app Earnin operating in payday loan 'gray area,' critics claim". New York Post. Retrieved 2020-11-11.
  13. 1 2 "Perks et al v. Activehours, Inc., No. 5:2019cv05543 - Document 63 (N.D. Cal. 2021)". Justia . March 25, 2021.
  14. ↑ Reader, Ruth (2019-05-22). "This company wants to help you lower your medical bills (some catches may apply)". Fast Company. Retrieved 2020-11-11.
  15. 1 2 "Earnin Offers New Feature for Remote Workers". Associated Press (Press release). April 30, 2020.
  16. ↑ Rosenblum, Taylor Gess, Carlin McCrory, Caleb Rosenberg, Jeremy (2024-08-22). "Class Action Alleging Usurious Fees and Tips Filed Against FinTech Provider of Earned Wage Access Services". Consumer Financial Services Law Monitor. Retrieved 2025-03-31.{{cite web}}: CS1 maint: multiple names: authors list (link)
  17. ↑ Rosenblum, Taylor Gess, Carlin McCrory, Caleb Rosenberg, Jeremy (2024-08-22). "Class Action Alleging Usurious Fees and Tips Filed Against FinTech Provider of Earned Wage Access Services". Consumer Financial Services Law Monitor. Retrieved 2025-03-31.{{cite web}}: CS1 maint: multiple names: authors list (link)
  18. 1 2 Weisbaum, Herb (2014-08-03). "New app offers access to your pay as you earn it". CNBC. Retrieved 2020-11-11.
  19. 1 2 "The Rise of Digital Tipping — From Music to Your Own Paycheck". OZY. 2019-05-08. Retrieved 2020-11-11.
  20. ↑ "Register of Actions". portal.vtcourts.gov. Retrieved 2025-03-31.
  21. ↑ "Case 24STCV32469 Kelvin Evelio Castro Vs Activehours, Inc., Et Al. - Trellis: Legal Intelligence + Judicial Analytics". Trellis.Law. Retrieved 2025-03-31.
  22. ↑ "Earnin App Review: What You Need to Know". Credit.com. 2020-01-28. Retrieved 2020-11-11.
  23. ↑ "How the Pay What You Want Model Can Work For You". www.bizjournals.com. Archived from the original on 2021-04-21. Retrieved 2020-11-11.
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