“That’s a mouthful to say: ‘We are a loan but we don’t want to be regulated as a loan,’” said Adam Levitin, a banking law professor at Georgetown University. In particular, they disagreed with Earnin’s claim that it is offering a “nonrecourse liquidity product,” not a loan, because the company has committed not to legally pursue customers who fail to repay the money. “Unless they are actually somehow forcing or tricking people into tipping, I just don’t see that there’s any problem with it.”īut the other two professors questioned Earnin’s defense of its business model. “This doesn’t look like anything I would consider to be a loan,” he said. One of the professors, Todd Zywicki, a law professor at George Mason University, said that Earnin’s legal explanation made sense to him. Wood suggested the names of three banking law professors for NBC News to interview to better understand Earnin’s business model and how it fits into lending regulations. In response to questions from NBC News, Kayla Wood, a company spokeswoman, wrote in an emailed statement that “Because Earnin is the first financial company to be built on the belief that people should be able to choose what to pay for the financial services they need, we expect and welcome conversations with regulators about our business and how the community works.” “They just portray it as being so simple and so easy.” “I definitely didn’t think about the payback time and the interest,” Breale, a student at Georgia Southern University, said. One former Earnin user, Nisha Breale, 21, who lives in Statesboro, Georgia - another state where payday lending is illegal - said she hadn’t fully realized that, when converted to an annual percentage interest rate, what seemed like a small $5 tip on a $100 advance payment (repayable 14 days later) was actually equivalent to a 130 percent APR.

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