Charging 750% interest on payday loans? New York AG Letitia James alleges these companies have.

New York’s attorney general on Monday sued two payday lenders with tens of thousands of customers across the state, including on Long Island, saying the companies had exploited them by charging fees equivalent in some cases to 750% in annual interest rates.

MoneyLion and DailyPay, both based in Manhattan, used "deceptive" advertising to entice hourly workers to take out expensive loans, sometimes pushing them to take out new loans to cover gaps created by their prior loans, New York Attorney General Letitia James’ Office said in a news release.

"Promising New Yorkers financial freedom while pushing them into outrageously expensive loans is downright shameful," James said. "While many New Yorkers are worried about making ends meet, DailyPay and MoneyLion are making tremendous profits by extracting workers’ hard-earned wages."

James' lawsuits, filed separately in state Supreme Court in Manhattan, allege the companies violated state usury laws, committed fraud along with deceptive acts and put out false advertising.

MoneyLion didn't immediately respond Monday to a request for comment.

A DailyPay representative on Monday referred to a federal lawsuit the company filed April 7 against James' office asking a judge to declare its business practices legal. 

Jared DeMatteis, DailyPay's chief legal and strategy officer, said in a news release the same day that James' office would force consumers "to rely on loan sharks or pay higher overdraft and late fees over on-demand pay, a proven safer and cheaper financial alternative. The approach of the Attorney General’s office is misguided and will significantly affect everyday families working to make ends meet."

MoneyLion promises instant access to funds, a 0% interest rate and a fee-free product, according to James’ office. But it charges mandatory fees for all loans where funds are immediately available, which can be as high as $8.99 for a $100 advance scheduled to be repaid in two weeks, according to the allegations.

The company also asks for optional tips on top of its fees and sets a limit of $100 per transaction that forces workers to take out multiple loans with multiple fees, according to James' office. According to James' lawsuit against the company, MoneyLion pushes users "to tip through guilt" with automated messages including one reminding customers: "We're all in this together."

DailyPay contracts with employees’ companies, requiring employers to send their workers’ paychecks directly to the lenders first on payday, according to the state attorney general's office. The company promises interest-free advances and financial benefits but collects fees on about 90% of its loans, according to James' lawsuit allegations.

The lawsuit against DailyPay also alleges the company has violated state wage assignment laws.

Both lawsuits allege the companies' practices constitute illegal lending that violates New York State's usury prohibitions. The litigation seeks to end the companies' lending practices in New York and obtain unspecified restitution for workers, as well as impose civil penalties and costs. 

MoneyLion was also sued by the Consumer Financial Protection Bureau in 2022 for overcharging military families. A federal judge in April dismissed some of the bureau’s claims.