Fintech High-flyer DAVE faces FTC and DoJ complaint as stock soars 1000% in 2024
2min read Dave Inc. (DAVE), a neobank and fintech company specializing in short-term cash advances and personal finance tools, is facing a lawsuit from the Federal Trade Commission (FTC) and the Department of Justice (DOJ) over alleged consumer protection violations. The amended complaint, filed on December 30, 2024, accuses Dave and its CEO, Jason Wilk, of deceptive practices, including hidden fees, misleading advertising, and unclear cancellation mechanisms for recurring charges. Specifically, the lawsuit alleges that Dave rarely provides the advertised "up to $500" cash advances and charges undisclosed express fees for instant access. Additionally, the company is accused of misrepresenting how user tips are used, claiming they fund meals for children, while most of the tips are retained by the company.
Dave has denied the allegations, calling the lawsuit an example of government overreach and emphasizing its commitment to compliance and transparency. The company highlighted recent changes to its fee structure, which eliminated optional tips and express fees for its ExtraCash product, aiming to simplify pricing and enhance customer satisfaction. Dave expects full implementation of the new fee structure by early 2025, signaling a proactive effort to address regulatory concerns.
Founded in 2017, Dave has grown rapidly by targeting financially underserved Americans who struggle with day-to-day expenses. The company's app provides fast access to short-term loans of up to $500 without overdraft or minimum balance fees, along with other services such as spending accounts, budgeting tools, and gig economy connections. This business model has allowed Dave to attract more than 11 million members, with 2.4 million monthly transacting users as of its latest quarter.
Dave has experienced remarkable financial growth in 2024, with Q3 revenue reaching $92.5 million, a 41% year-over-year increase, and four consecutive quarters of accelerating revenue growth. The company has raised its full-year revenue guidance to $340–$343 million, exceeding consensus expectations of $327 million. This growth has fueled a dramatic 1,067% increase in its stock price year-to-date, as investors respond positively to its strong financial performance and potential for further expansion.
Analysts see a bright future for Dave despite its legal challenges. Benchmark analyst Mark Palmer highlighted the company's long runway for growth, noting that its 11.6 million members represent only about 7% of the 180 million Americans who could benefit from its services. Palmer also emphasized the potential for cross-selling additional financial products, including credit products, to its existing customer base. His Buy rating and price target of $119 suggest further upside potential for the stock.
However, the legal issues with the FTC and DOJ could introduce risks for Dave, particularly if financial penalties or operational restrictions are imposed. The lawsuit's focus on hidden fees and misleading marketing practices could also impact consumer trust and future growth. That said, the company's proactive changes to its fee structure and its emphasis on compliance may help mitigate these risks.
Overall, Dave’s strong revenue growth and innovative approach to personal finance position it as a leader in the fintech space. While the lawsuit presents a near-term challenge, analysts remain optimistic about the company's long-term prospects, driven by its ability to scale its business and address the needs of underserved consumers. With a Strong Buy consensus from seven analysts, Dave continues to attract investor interest, although its recent surge in stock price leaves limited near-term upside based on current targets.
In summary, Dave Inc. stands at a crossroads, balancing robust growth and market potential with heightened regulatory scrutiny. The outcome of the FTC and DOJ lawsuit will be a key factor to watch in 2025, as the company seeks to maintain its momentum while addressing concerns about its business practices. Investors remain bullish, betting on its ability to overcome these challenges and capitalize on its expanding market opportunities.