FTC accuses L.A. cash app Dave of charging hidden fees

The Federal Trade Commission has accused Los Angeles cash app Dave Inc. of misleading its financially vulnerable customers about fees it charges and the amount of money it gives out.

In a federal lawsuit filed Tuesday in Los Angeles, the agency alleges that although Dave advertises it offers $500 advances “instantly,” only a “miniscule” number of customers receive close to that amount. It also says customers are unaware they must pay a fee to get immediate cash, or else wait several days, and that the app charges a default “tip” of 15% that many customers don’t know they are paying.

The lawsuit, which includes additional allegations of wrongdoing, seeks a permanent injunction to prevent future violations of FTC regulations and a 2010 law that regulates online commerce.

“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,’” Samuel Levine, director of the agency’s Bureau of Consumer Protection, said in a statement.

Dave founder and Chief Executive Jason Wilk declined to comment, but the company issued a statement disputing the allegations. It said it intended to “vigorously defend” itself and that none of the allegations in the lawsuit, if proved, would prevent the app from charging the fees or “optional tips,” but instead were about issues around “consumer disclosures and consent.”

The lawsuit was approved by a bipartisan 4-1 vote of the FTC, with Republican Commissioner Andrew Ferguson joining Chair Lina Khan and the two other Democrats on the board voting in its favor. Khan is widely expected to be replaced under the new Trump administration.

Khan, who has pursued an aggressive antitrust agenda, has been a divisive figure among politicians and business elites. Among critics calling for her ouster was billionaire Mark Cuban, an early Dave investor, who feared Khan might break up big Silicon Valley tech companies. He later pulled back some of those comments.

Consumer advocates have worried that a second Trump administration would give short shrift to financial protection laws. During Trump’s first term, another federal body, the Consumer Financial Protection Bureau, weakened proposed regulations targeting payday lenders.

Lauren Saunders, associate director of the National Consumer Law Center, said the future work of the CFPB would be dictated by a new administrator under Trump; but because the FTC is governed by commissioners with staggered seven-year terms, change could come slowly.

“They will be able to appoint the chair and appoint new members, but it might take a little time,” she said.

The lawsuit was the first time the agency has targeted the practice of “tipping,” which other cash advance apps such as MoneyLion also employ.

However, it filed two similar lawsuits against the cash apps Brigit and FloatMe, accusing them of promising large advances for free and then charging fees for immediate access to the money. Both companies settled with the agency, agreeing to change their practices and refund customers.

The Consumer Financial Protection Bureau has targeted tips charged by companies that typically partner with employers to give workers access to money prior to payday. Earlier this year it proposed a regulation that would include certain tips and expedited delivery fees in the total disclosed finance charges on such advances.

Dave, in a July news release, said it would not be subject to the new rules given how its advances are structured. The National Consumer Law Center has called on the CFPB to broaden the proposed regulations to include all forms of cash advances made by direct-to-consumer financial technology companies.

The lawsuit against Dave accuses the company of charging “express fees” of $3 to $25 and misleading customers into giving the default tip of 15% through a deceptive interface on the app that links tips to “healthy meals” for children in need — when only a fraction of the tips goes to charity.

It also accuses the company of charging a $1 monthly fee and making it extremely difficult for customers to stop the charge.

The Dave statement said the company was in the midst of “good-faith negotiations” over the allegations when the agency decided to instead file the lawsuit.

The company, which went public in 2022, has seen sales grow from $205 million that year to $259 million last year. It said Tuesday that it expects third-quarter revenue to hit $92.5 million, a 41% increase over the same period last year, while turning a small profit.

Shares of Dave, which have risen more than 700% since last year, rose 22% to $45.87 on Wednesday.