FinTech News
FTC Files Complaint Against FinTech App Dave
The Federal Trade Commission has announced plans to “take action” against the FinTech cash advance app Dave, accusing the service of deceptive marketing.
About the complaint:
Today, the FTC filed a complaint against the app Dave in U.S. District Court for the Central District of California. In this complaint, the agency accused the service of using misleading marketing and charging undisclosed fees to customers.
First, while Dave advertises instant loans of “up to $500,” the FTC notes that only a small percentage of users qualify for this $500 limit. In reality, the limit for these loans is determined by a number of factors, with many customers seeing lesser amounts. On Dave’s site, a footnote states that the average advance is $170 based on the past six months.
As for the “instant” part of the promise, the FTC also points out that customers are required to pay an “Express Fee” in order to obtain funds quickly. These fees range from $3 to $25 per transfer. Meanwhile, those who don’t select this option will typically wait two to three business days to receive their advance.
Lastly, the FTC takes aim at Dave’s “tipping” practice. According to the agency, consumers are often charged a 15% fee, which the platform describes as a tip. The Trade Commission says that many users are either unaware that they are paying such a fee or that they can opt out of it.
Another issue with the tipping interface, as described by the FTC, involves the platform’s promise to provide healthy meals to children with a portion of the tip proceeds. In the Dave app, it explains that the company will donate a healthy meal to a needy child for each percentage that a customer tips (so a 15% tip results in 15 healthy meals donated). However, the FTC alleges that just 10¢ for each percentage is donated.
From 2022 through the first half of 2024, Dave saw $149 million in revenue from these tips.
What they’re saying:
Announcing the FTC’s actions against Dave, the Bureau of Consumer Protection director Samuel Levine stated, “Dave lured in consumers living paycheck-to-paycheck with false claims of big-dollar advances, then reached into their pockets to give itself a so-called ‘tip. Whether the products are called cash advances, payday loans, or something else, the FTC will take action to protect consumers from unauthorized charges and deceptive claims.”
My thoughts:
This FTC complaint against Dave has some similarities to one that CFPB files against another FinTech loan platform: SoLo Funds. That complaint also involved tipping, alleging that a very small number of borrowers who didn’t offer tips to lenders saw their loans filed. Additionally, the CFPB stated that SoLo Funds made it difficult for consumers to locate the option to disable paying a platform fee, resulting in unexpected charges.
As for this situation, I can definitely see the FTC’s point — although (at least currently) Dave does note that not all users will be offered $500 from the jump. Then again, the added fee for instant transfers and the apparent discrepancy in where the tip goes are concerning.
Personally, I’ll be keeping an eye on this complaint and seeing what impacts it could have on similar offerings that are rampant in the neobanking market these days.
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