US Files Civil Enforcement Action Against Fintech App Dave and Its CEO

The U.S. Justice Department and the Federal Trade Commission (FTC) have filed a civil enforcement action against financial technology company Dave Inc. and its CEO, Jason Wilk, alleging violations of federal law. The complaint, filed on Monday, accuses the company of luring users to its personal finance app by advertising cash advances of up to $500 that many never receive.

The complaint, which amends and replaces an earlier complaint filed by the FTC in November, seeks unspecified amounts of consumer redress and monetary civil penalties from the defendants, as well as a permanent injunction to prohibit them from engaging in future violations. The government alleges that Dave misled consumers by deceptively advertising its cash advances, charging hidden fees, misrepresenting how Dave uses customers' tips, and charging recurring monthly fees without providing a simple mechanism to cancel them.

Dave Inc. provides a suite of financial products and services through its financial services platform, including a budgeting tool, a short-term liquidity alternative, a job application portal, and paid surveys. The company also offers Dave Banking, a digital checking and demand deposit account. Dave was founded in 2015 and is headquartered in Los Angeles, California.

The complaint alleges that Dave rarely offers consumers anywhere near the advertised $500, often not offering any cash advance at all. The company is accused of charging hidden fees for services such as ExtraCash, which allows members to advance funds to their account through the automated clearing house network and avoid a fee. Dave is also accused of misrepresenting how it uses customers' tips, claiming that the tips go directly to the member, when in fact, the company keeps a portion of the tips for itself.

The complaint further alleges that Dave charges recurring monthly fees for its services without providing a simple mechanism for customers to cancel them. This practice is said to make it difficult for customers to stop the charges, leading to unwanted and unexpected fees.

Dave Inc. has been the subject of regulatory scrutiny in the past. In 2021, the company was fined $3 million by the Consumer Financial Protection Bureau (CFPB) for deceptive marketing practices and failing to provide refunds to customers who were charged fees but did not receive the advertised cash advances.

The alleged deceptive advertising practices by Dave Inc. have significant implications for consumer trust and the broader fintech industry. If the allegations are proven true, Dave Inc. and its CEO could face substantial financial and reputational consequences, including civil penalties, legal fees, loss of revenue, damage to brand image, increased regulatory scrutiny, and potential loss of partnerships and collaborations.

The outcome of this case could also influence future regulatory oversight and enforcement actions against fintech companies. The case highlights the importance of accurate and transparent advertising, clear fee structures, and providing customers with accessible cancellation options. Fintech companies should take note of these potential areas of focus and ensure they are in compliance with relevant regulations and best practices to maintain consumer trust and foster a healthy and sustainable industry.