FTC Sues Fintech Dave for Misleading Marketing and Hidden Fees

Snapshot: The Federal Trade Commission (FTC) has sued fintech company Dave, alleging deceptive marketing practices and unauthorized charges. Dave, which markets itself as a cash advance app offering up to $500 in loans, allegedly rarely disbursed the promised amounts and charged consumers hidden fees disguised as “tips.” According to the FTC, the app’s interface misled users into tipping by making it difficult to opt out, while also collecting a $1 monthly membership fee without consent.

A controversial feature of Dave’s app promoted charitable donations linked to tips, using emotionally manipulative visuals like a child with an empty plate when donations were reduced. The FTC claims the promised donations were exaggerated, with only a fraction of the tip amount going to charity.

Dave generated $149 million in revenue from tips between 2022 and mid-2024, even as many users reported feeling “cheated” or “scammed.” The lawsuit follows similar regulatory scrutiny of tip-based fintech models, as seen with SoLo Funds earlier this year. Despite the allegations, Dave reported $92.5 million in Q3 revenue and expressed confidence in its legal defenses.

CEO Jason Wilk emphasized Dave’s commitment to transparency and compliance, dismissing the FTC’s case as regulatory overreach. However, the FTC alleges that Dave’s practices violate both the FTC Act and the Restore Online Shoppers’ Confidence Act, potentially exposing the company to significant penalties.

The lawsuit shines a light on the broader issue of fintech companies using unconventional fee structures, with regulators increasingly scrutinizing consumer consent and transparency in financial apps.

Key Quote: “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 Bureau of Consumer Protection, FTC

Full story: BANKING DIVE