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Federal Trade Commission (FTC) Announce On Tuesday it will take action against online cash app and neobank Dave, which it says used “deceptive marketing to deceive consumers”. At issue is how Dave marketed a $500 cash advance to consumers that he rarely offered, and the “quick fees” he charged if customers wanted their money immediately.
The FTC alleged that the service was misleading because Dave’s marketing implied that its cash advances would be “instant,” using terms like “immediately” to describe them, without disclosing the fees incurred until after the consumer completed the sign-up process and submitted them. Dave access their bank account.
The fees ranged from $3 to $25, the complaint stated. If the user chooses not to pay the fee, they will have to wait two to three business days for the standard transfer process, the complaint says. What’s more, the FTC says, Dave was sometimes charged surprise fees, which it described as a “tip.” The user interface is designed to make it difficult for users to spot or avoid fees, leading consumers to feel defrauded, according to the FTC.
This latest issue is another example of “dark patterns” — or manipulative design practices — that companies use to direct users to take actions that benefit their own goals, not consumers. Examples of the type of behavior the FTC now wants to punish include things like automatically checking boxes when users sign up, or showing larger buttons for actions the company wants users to take.
According to a recent study by the agency, the majority of subscription apps and websites use dark patterns to deceive consumers.
In Dave’s case, consumers were shown images of a cartoon baby surrounded by food and messages such as “10 Healthy Meals,” “15 Healthy Meals,” or “20 Healthy Meals,” implying that the tip would go toward providing meals to people in need. . However, the FTC says that only 10 cents of each “tip” is donated and the company keeps the rest. In other words, tipping doesn’t actually tip a full meal, let alone 10 to 20 meals. The complaint also says that when consumers tried to lower their tip, they would see an image of food being taken from the child until they were left with an empty plate.
According to SEC filings, Dave received more than $149 million in revenue from tips from 2022 through the first six months of 2024, the FTC said.
Another problem is that Dave charges a monthly membership fee of $1 that is deducted directly from customers’ bank accounts. But when users discovered the charges, they couldn’t easily cancel them, according to the complaint. The FTC says some tried to delete their accounts to escape the fees and were still charged.
The complete complaint It includes several screenshots of Dave’s tough methods, which the FTC says violate Section 5(a) of the FTC Act and the Restoring Online Shoppers’ Confidence Act (ROSCA). The agency is seeking an injunction to prevent Dave from continuing his conduct, and may also seek a monetary award or other relief at the court’s discretion.
In response to the complaint, Dave said he was “disappointed” that the FTC chose to file suit.
“The FTC asserts numerous untrue allegations regarding Dave’s disclosures and how the company obtained approval for fees associated with our products,” a company statement said. “For the avoidance of doubt, Dave’s ability to charge subscription fees, optional tips, and express fees is not in question. We believe this case is another example of regulatory overreach by the FTC, and we intend to defend ourselves vigorously. We take compliance and customer transparency seriously and believe We always act within the law We remain focused on serving our members who love and depend on our products.
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