Why Debt Collection Has No Place at Earnin

When you cash out with Earnin, our product designers and developers have worked to make the process as simple and painless as possible. You use the app, the money you cashed out gets transferred to your bank account, and on payday Earnin debits the amount you cashed out from your bank. However, what if that debit doesn’t go through correctly? Do you owe Earnin money, and will Earnin send debt collectors after you if you don’t fix the issue?

It may work that way with other financial companies, but not with Earnin. If Earnin attempts a debit and it doesn’t work, all that happens is that your account will go on hold and you’ll get an email asking you to solve the problem before you cash out again. There is no effect on your credit scores, and we don’t report you to your bank or to debt collectors. There’s a few reasons why Earnin operates this way, which we want to go over.

The first reason is because Earnin tries to consider the people using our tools. We care about our community, and we don’t want the errors that might cause an Earnin payday debit to fail to spiral into big problems for our community members. With 78% of American workers already living paycheck to paycheck at least some of the time¹, it’s hard enough to make your finances work. We don’t want to cause more problems for people, we want to help fix them. The second reason is because Earnin isn’t a loan product. Earnin lets people access money they’ve already worked for, not money that they will earn in the future.

Third, Earnin is trying to build a different financial system, one that works for people. Part of that is rejecting parts of the old system that cause people harm, like high-interest payday loans, credit discrimination, and of course debt collection. We believe the current financial system is broken, and that extends to the way debt collection works. 

In the current debt collection industry, creditors package together past due accounts and sell them in bundles. Debt buyers bid on the rights to own those bundles of debt, on average paying 4.5 cents for every $1 of debt they buy², and then either try to collect the debt themselves or hire another company to do it for them. This turns people’s financial crises into commodities to be bought, sold, and profited from. Also, this debt trade makes it difficult for people to figure out who owns their debt, as well as whether debt notices they receive are truly legitimate.

Additionally, the debt collection process pits powerful collection departments and firms against people who are often economically vulnerable, creating situations with a high potential for abuse. If a debt collector’s actions cross the line from fair treatment into harassment³, their customer’s options to defend themselves are limited, as in most cases studies show that a person in debt is likely to have fewer legal resources than a professional debt collection office⁴.

The Consumer Financial Protection Bureau estimates that, after the 2008 financial crisis, 30 million Americans wound up with one or more debts in collection, for amounts that averaged about $1,400 per person⁵. Today, despite a growing economy, that number has more than doubled. Economic policy think tank The Urban Institute estimates that as many as 71 million American adults had a debt in collections in 2017⁶. That’s over one quarter of the entire U.S. adult population.

Too many people know the stress and shame that come with being pursued by debt collectors, which is why Earnin is dedicated to being a resource for reducing debt. One of our latest tools, Health Aid, is designed to assist people with medical debt by negotiating their bills for them. For our core product, Cash Out, we receive comments and reviews from community members saying that Earnin is helping them get control of their debt.

Earnin is working to make life easier for everyday Americans. Enabling debt collection is not a part of that goal.