The Federal Trade Commission is taking action against online cash advance app Dave for allegedly using misleading marketing to deceive consumers about the amount of its cash advances, charging consumers undisclosed fees, and charging so-called “tips” to consumers without their consent.
Dave describes the consumers it targets as being “financially vulnerable” or “financially coping,” including those whose spending exceeds their income, who have minimal savings, and who overdraft their bank accounts frequently.
“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,’” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “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.”
Dave’s advertising is dominated by claims that consumers can receive “up to $500” by using Dave, and that they can do so “instantly.” According to the FTC’s complaint, though, Dave’s service failed to live up to its promises.
The complaint charges that despite making these claims in a variety of advertisements, Dave offered advances of $500 only a tiny percentage of the time. One consumer cited in the complaint said Dave “[c]laims you can borrow up to 500.00 dollars. But, I only was able to get 25.00. Not very helpful.” Another consumer who filed a complaint about Dave said they “got 2 small cash advances and paid them OFF ON TIME. They kept promising 500 for the past month and NEVER delivered. I Uninstalled this useless app from this useless company.” The complaint notes that Dave has made similar claims pushing its highest advance amount for years.
Despite promising “instant” or “on the spot” access to advances, Dave requires users to pay an “Express Fee” to get instant access to that money that is not disclosed until after the sign-up process is complete and the user has given Dave access to their bank account, according to the complaint. This fee ranges from $3 to $25, and consumers who do not pay the fee have to wait two to three business days to receive their advance.
Dave’s undisclosed charges go beyond this Express Fee, though, according to the complaint. Consumers who take advances from Dave are often charged a surprise fee of 15% of their advance that’s described by Dave as a “tip.” Many consumers are either unaware that Dave is charging them or unaware that there is any way to avoid being charged. One consumer cited in the complaint said, “The interface is set up to trick you into giving the tip. . . I feel cheated/scammed by this whole process.”
In addition, consumers are shown a screen featuring a cartoon of a small child surrounded by food, and the options for “10 Healthy Meals,” “15 Healthy Meals,” and “20 Healthy Meals,” representing that, based on the consumer’s payment of a “tip,” Dave will provide meals to people in need.
Dave’s interface leads consumers to believe that, for every percentage of tip they are giving, Dave is donating an actual healthy meal to a needy child. But, according to the complaint, Dave donates just 10 cents for each percentage in “tip” the consumer clicks on and keeps the rest of the “tip” amount. Dave’s donation does not pay for the food required to actually provide a meal. Consumers who discover they can leave a lower tip and attempt to do so see food taken away from a cartoon child until the image of the child is finally replaced by an image of an empty plate.
In public filings with the Securities and Exchange Commission, Dave reported receiving more than $149 million in revenue from these so-called “tips” alone from 2022 through just the first six months of 2024.
In addition to the “tip” fee, the complaint also alleges that Dave failed to clearly and conspicuously disclose that it charges consumers a $1 monthly “membership fee” debited directly from consumers’ bank accounts. When consumers discover the fee is being deducted from their account, the steps to cancel it are not clear or easy to follow, according to the complaint. In the words of one consumer cited in the complaint: “I’ve tried leaving, but they literally will not let me go. I had to fight with them to delete my account, and I kept getting charged the membership fee… LEAVE ME ALONE. I HATE DAVE.”
The complaint charges that Dave’s conduct violates the FTC Act and the Restore Online Shoppers’ Confidence Act.
The Commission vote authorizing the staff to file the complaint was 4-1, with Commissioner Melissa Holyoak voting no. The complaint was filed in the U.S. District Court for the Central District of California.
NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
The staff attorneys on this matter are Daniel Hanks and Jason Sanders of the FTC’s Bureau of Consumer Protection.