Earnin, a new online lending app touted as an alternative to payday lenders, may be giving false hope to those experiencing a shortfall. The app functions more like a cash advance, instead of a loan. However, instead of requiring users to incur a fee in addition to the original amount, Earnin “innocuously” asks users to pay back a “tip,” which is how the company makes its money.

Initially, the “ask” may seem harmless. However, by the time desperate users catch on, they are in the midst of a zero-sum game: the lender continues to amass profits, and the user can now afford to borrow and repay less.

Typical payday lenders provide customers with a small loan, then add high financing charges, before deducting the combined total from the user’s bank account on payday. According to an article by Atlantic news, payday lending is no longer allowed in many states, making services like Earnin and InstaCash the alternative. Earnin is seductive in that it does not demand a credit check or finance changes, and promises not to work with collections agencies to compel a user to pay. However, a user can be charged up to a whopping 400 percent on a loan.

While Earnin is not regulated, it has certainly found a way to regulate its customers. Users are obligated to provide private details, such as bank account information, location, and even their work schedules, to prove they are working and prevent them from borrowing more than their earnings.

Given all of the sacrifices for such few rewards, one wonders why users would surrender personal information and repay funds at such high rates. The answer is simple: for those who live from paycheck to paycheck, without financial resources and viable credit, the options are limited.

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