Don’t Let Predatory Debt Traps Rob The Holiday Season’s Joy

December 3, 2025

The article examines how modern payday lending has evolved through mobile apps offering Buy Now, Pay Later (BNPL) and Earned Wage Access (EWA) products that trap financially vulnerable consumers in high-cost debt cycles. These digital lenders use deceptive marketing language, claim their products aren't traditional loans, and obscure fees as "tips" while charging triple-digit interest rates that exploit underpaid workers. The Center for Responsible Lending has published research showing these business models deliberately encourage repeat borrowing and disproportionately harm Black and Hispanic consumers who already face credit marketplace disadvantages.

Who is affected

Financially strapped families during the holiday season
Underpaid workers seeking quick cash access
Subprime and deep subprime consumers (who take out most BNPL loans)
Black and Hispanic consumers (who disproportionately use BNPL credit)
Cash-strapped consumers accessing goods and services through installment plans
Borrowers experiencing insufficient funds, overdraft fees, and savings withdrawals

What action is being taken

The Center for Responsible Lending has published a policy brief titled "Nickel and Dimed: How Payday Loan Apps Drain Workers' Pay and How to Stop Them"
At least 20 states are proposing legislation in 2025 to address EWA's growth and consumer concerns (including Arizona, Connecticut, Maryland, Mississippi, Missouri, New York, Oregon, and Washington)
The State of New York's Department of Financial Services is soliciting comments on BNPL
Advocates are calling for strong consumer protection rules

Why it matters

This issue matters because predatory digital lending apps are exploiting vulnerable populations through deceptive practices that create long-term financial harm. These products drain workers' paychecks through high fees and repeat borrowing cycles, making it harder for families to manage basic household expenses. The disproportionate impact on Black and Hispanic consumers exacerbates existing inequalities in the credit marketplace, while the lack of standardized consumer protections leaves borrowers with little recourse when problems arise.

What's next

States need to enforce or adopt strong interest rate caps for all payday loans regardless of how companies market them
Public officials must stop predatory loan apps from breaking the law and exploiting workers
Regulatory bodies should implement strong consumer protection rules, particularly given the vulnerable demographics most affected by these products

Read full article from source: The San Diego Voice & Viewpoint