The Federal Trade Commission (FTC) announcing and will take action against online cash app and neobank Dave, which it says used “deceptive marketing to mislead consumers.” At issue is how Dave marketed $500 cash advances to consumers that it rarely offered, and the “express fee” it charged if customers wanted their money right away.
The FTC claimed the service was deceptive because Dave's marketing implied that its cash advances would be "instant," using terminology like "on the spot" to describe them, without disclosing the fees involved until the consumer completed the sign-up process and gave consent and Dave accessed their bank account.
The fees ranged from $3 to $25, according to the complaint. If the user opted not to pay the fee, they would have to wait two to three business days for the standard transfer to go through, according to the complaint. What’s more, the FTC says, Dave sometimes also charged a surprise fee, which he described as a “tip.” The user interface was designed to make it difficult for users to spot or avoid the fee, making consumers feel ripped off, according to the FTC.
This last issue is another example of “dark patterns” (or manipulative design practices) that companies use to guide users into taking actions that benefit their own goals, not those of consumers. Examples of the kind of behavior the FTC now wants to penalize are things like automatically checking boxes when users sign up or displaying larger buttons for actions the company wants users to take.
According to a recent study by the government agency, most subscription apps and websites use dark patterns to deceive consumers.
In Dave’s case, consumers were shown images of a cartoon boy surrounded by food and messages like “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 only 10 cents of each “tip” is donated and the company keeps the remaining amount. In other words, the tip doesn’t actually provide a full meal, let alone 10 to 20 meals. Additionally, when consumers tried to lower the tip amount, they saw an image of the boy’s food being taken away until he was left with an empty plate, the complaint says.
According to SEC filings, Dave received more than $149 million in tip income from 2022 through the first six months of 2024, the FTC said.
Another problem was that Dave charges a $1 monthly membership fee that is debited directly from customers’ bank accounts. But when users discovered the fee, they couldn’t easily cancel it, according to the complaint. Some even tried to delete their account to avoid the fee and were still charged, the FTC says.
La full complaint includes several screenshots of Dave's deceptive techniques, 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 stop Dave from continuing his behavior and may also seek monetary damages or other relief as the court deems appropriate.
In response to the complaint, Dave said he is “disappointed” that the FTC decided to file a lawsuit.
“The FTC makes many incorrect claims regarding Dave’s disclosures and how the Company obtains consent for fees associated with our products,” a statement from the company read. “For the avoidance of doubt, Dave’s ability to charge subscription fees and optional gratuities and express fees is not in question. We believe this case is another example of regulatory overreach by the FTC and we intend to vigorously defend ourselves. We take compliance and customer transparency very seriously and believe we have always acted within the law. We remain focused on serving our members who love and trust our products.”
