Baltimore Sues MoneyLion: Predatory Paycheck Loans
By Darius Spearman (africanelements)
Support African Elements at patreon.com/africanelements and hear recent news in a single playlist. Additionally, you can gain early access to ad-free video content.
The city of Baltimore has launched a legal battle against MoneyLion, a financial technology company (baltimorecity.gov). The lawsuit, filed on October 6, 2025, accuses the firm of running a “digital-age payday lending scheme” designed to trap residents in debt. Mayor Brandon M. Scott announced the action, highlighting how MoneyLion’s practices prey on the city’s most vulnerable people, many of whom are Black workers struggling to make ends meet (afro.com). Baltimore’s move is more than just a response to a modern app. It is the latest fight in a long war against predatory lending that has drained wealth from Black communities for centuries.
The lawsuit alleges that MoneyLion’s “Instacash Advances” are deceptively marketed as zero-interest loans (baltimorecity.gov). The city argues that hidden fees and aggressively encouraged “tips” push the real cost of these loans far beyond Maryland’s legal limits (baltimorecity.gov). These practices create a devastating cycle of debt for people who are already financially squeezed (afro.com). This fight in Baltimore thus echoes a historical struggle for economic justice against systems that offer financial access only on the most exploitative terms.
A Centuries-Old Hustle: The Roots of Predatory Lending
The core issue in the lawsuit is a practice known as usury. Usury is the illegal action of lending money at unreasonably high rates of interest (investopedia.com). This practice is not new; it has been condemned and regulated for thousands of years by everyone from ancient Babylonian kings to English queens (historyworkshop.org.uk). Early American colonies set their own limits, capping interest rates around 8% in the 18th century, a standard most states followed after 1776 (americanbar.org). These laws were meant to protect borrowers from being exploited when they were in desperate need of cash. Consequently, these protections have been a constant target for those looking to profit from financial hardship.
Despite these early laws, a shadow lending market always found a way to thrive. In the early 1900s, “salary lenders” offered short-term loans with annual percentage rates (APRs) that soared from 120% to 500% (stjohns.edu). During the Great Depression, notorious “loan sharks” charged even more, with interest rates sometimes hitting 1000% (upenn.edu). These lenders used intimidation and wage garnishment to collect their debts, operating outside the law to prey on the financially vulnerable. Therefore, the tactics may have changed over the decades, but the fundamental business model of profiting from desperation has remained the same.
How Deregulation Unleashed the Payday Loan Beast
The modern payday loan industry exploded in the 1980s, thanks to a significant shift in federal policy. Two key events blew the doors open for high-interest lenders. First, the 1978 Supreme Court decision in Marquette National Bank v. First of Omaha Service Corp. allowed national banks to “export” the interest rate laws of their home state to borrowers anywhere in the country (prospect.org). This meant a bank in a state with no interest rate caps could offer loans with sky-high rates to people in states with strict consumer protection laws. It created a massive loophole in state-level usury protections.
Soon after, the federal government passed the Depository Institutions Deregulation and Monetary Control Act of 1980 (prospect.org). This act extended the principle from the Marquette case to other types of lenders, effectively dismantling many state usury caps that had protected consumers for generations. These changes created the perfect environment for the payday loan industry to flourish, first in storefronts and later online (cashlady.com). With regulations weakened, lenders could now legally charge triple-digit APRs, turning short-term financial struggles into long-term debt traps for millions. Furthermore, this deregulation set the stage for the digital platforms we see today.
Reasons Borrowers Use Payday Loans
- 48.5%: Everyday Expenses
- 15.8%: Emergency Auto Expenses
- 13.0%: Emergency Medical Costs
- 22.7%: Other
The Predatory Playbook: Targeting Black Communities
Historically, Black communities have been the primary targets of predatory lenders (aclu.org). This targeting is a direct result of systemic financial exclusion. For decades, a discriminatory practice called redlining prevented Black families from accessing fair credit and financial services. Redlining is when banks and other institutions deny services, like mortgages, to residents of certain areas based on their race (aclu.org). These policies, which began with federal housing maps in the 1930s, starved Black neighborhoods of investment and created “bank deserts” (nih.gov). Bank deserts are communities that lack access to traditional banking services, leaving residents with few options besides high-cost alternatives like check cashers and payday lenders (nih.gov).
This historical exclusion paved the way for what is known as “predatory inclusion” (aeaweb.org). This academic term describes how marginalized groups are offered access to credit, but on exploitative and harmful terms (aeaweb.org). Instead of building wealth, these products are designed to extract it. The statistics paint a clear picture of this reality. African American neighborhoods have three times as many payday lending stores per capita as white neighborhoods, even when accounting for other economic factors (elsevierpure.com). As a result, Black households are more than twice as likely to use payday loans as white households (responsiblelending.org).
MoneyLion’s “Instacash”: A Digital-Age Payday Loan?
Baltimore’s lawsuit claims MoneyLion uses a modern, digital version of this old playbook (baltimorecity.gov). The company markets its “Instacash Advances” as a “zero-interest” solution, but the city alleges this is deceptive (bergermontague.com). The lawsuit, filed under Baltimore’s Consumer Protection Ordinance, argues that mandatory fees and aggressively solicited “tips” are just interest by another name (baltimorebrew.com). Baltimore’s ordinance gives the city the power to investigate and sue businesses for unfair or deceptive practices, which is exactly what it is doing here (baltimorebrew.com). These hidden costs can cause the Annual Percentage Rate (APR) to skyrocket.
The APR is the true cost of a loan, including interest and fees, expressed as a yearly rate (investopedia.com). For short-term loans, even a small fee can lead to an enormous APR. For example, a $100 loan due in two weeks with a $15 fee has an effective APR of nearly 400% (pew.org). Baltimore’s lawsuit alleges that MoneyLion’s fees and tips result in APRs exceeding 350%, more than ten times Maryland’s legal cap of 33% (baltimorecity.gov). By disguising these costs, critics say companies like MoneyLion trap borrowers in a cycle where they must take out new advances just to cover basic needs, making their financial situations worse. Eventually, this cycle deepens the very poverty it claims to alleviate.
The Payday Loan Debt Trap by the Numbers
Filling the Void: Why Cities Are Stepping Up
Baltimore City Solicitor Ebony Thompson noted that cities and states must act because the federal government is “abdicating its responsibilities to consumers” (afro.com). This statement refers to a pattern of deregulation and weakened enforcement at the federal level. The Consumer Financial Protection Bureau (CFPB), an agency created after the 2008 financial crisis to protect consumers, has been criticized for rolling back rules aimed at payday lenders under certain administrations (debthammer.org). This lack of federal oversight has created a regulatory void, leaving vulnerable consumers exposed to predatory products.
This is where organizations like the Center for Responsible Lending (CRL) have become so important. The CRL is a national non-profit that researches and fights predatory lending practices to protect consumers (responsiblelending.org). Their research quantifies the massive scale of wealth extraction from these loans. In a single year, over 20 million predatory loans totaling nearly $8.6 billion drained more than $2.4 billion in fees from low-income borrowers (responsiblelending.org). When federal protections are weakened, the responsibility to stop this drain falls to local governments like Baltimore, which are using their own laws to fight back. In essence, the city is picking up the slack to protect its own people.
Seeking Justice and Building Alternatives
Through its lawsuit, Baltimore aims to force MoneyLion to provide refunds to affected residents and to secure stricter regulations on these financial apps (afro.com). When advocates call for “stricter regulations,” they are typically pushing for several key changes. These include imposing lower caps on APRs, requiring absolute transparency about all fees, and banning practices that are designed to trap people in debt, such as automatic loan rollovers. Stronger enforcement and tougher penalties for violations are also part of the goal. These measures are designed to make the lending market fairer and less exploitative for everyone.
The fight against predatory lending also involves building better alternatives. For residents in bank deserts, safer options do exist. Community Development Financial Institutions (CDFIs) are mission-driven organizations that provide fair financial services to underserved communities. Credit unions, which are non-profit and owned by their members, also offer loans with much lower interest rates than payday lenders. Additionally, many local non-profits and government programs provide small-dollar loans and financial counseling to help people manage emergencies without falling into a debt trap. Therefore, creating a just financial system requires not only stopping predatory practices but also investing in these community-based solutions that build wealth instead of draining it.
Racial Disparities in Payday Lending
About the Author
Darius Spearman is a professor of Black Studies at San Diego City College, where he has been teaching for over 20 years. He is the founder of African Elements, a media platform dedicated to providing educational resources on the history and culture of the African diaspora. Through his work, Spearman aims to empower and educate by bringing historical context to contemporary issues affecting the Black community.
