FTC & DOJ Take Action Against Dave Inc. for Misleading Marketing and Undisclosed Fees
In a significant enforcement action, the Federal Trade Commission (“FTC”) has filed a lawsuit against California-based online cash advance provider, Dave Inc., accusing the company of deceptive practices that misled consumers about the availability of cash advances and charged undisclosed fees. The charges and subsequent legal actions highlight lessons for businesses about transparency, consumer trust, and the importance of clear communication in marketing.
On November 5, 2024, the FTC filed its complaint in the Central District of California, claiming that Dave Inc. misled consumers with false promises of “instant” cash advances of “up to $500.” However, according to the complaint, the company rarely delivered on these promises, with many consumers receiving advances much smaller than advertised. In some cases, consumers were unable to get any cash advance at all. These deceptive marketing practices are not only harmful to consumers but violate the FTC Act and the Restore Online Shoppers’ Confidence Act (“ROSCA”), which mandate clear and truthful advertising and the proper disclosure of fees.
The FTC further alleges that Dave Inc. charged consumers fees that were not disclosed upfront. For example, to receive “instant” access to cash advances, users were required to pay an “Express Fee,” which ranged from $3 to $25. If consumers did not pay this fee, they were forced to wait two to three business days for their advance. Additionally, Dave allegedly charged consumers an automatic monthly subscription fee of $1, which could only be stopped through a convoluted and difficult process. These undisclosed fees left many users unaware of the costs they were incurring when using the app.
One of the most alarming aspects of the FTC’s allegations is Dave’s use of so-called “tip” fees. When consumers took advances, they were often charged a surprise fee that was described as a “tip” for a charitable cause, supposedly to provide meals to needy children. However, the complaint claims that Dave misled consumers into believing their “tips” were going to charity, when in fact the company only donated a small fraction of the fee (just 10 cents per percentage of the tip) and kept the rest. Many consumers were either unaware of the charge or felt pressured into giving more than they intended, as the app’s interface made it difficult to adjust the tip amount.
This practice is especially problematic given that the company did not adequately disclose the tip fee before consumers provided their bank account information. The FTC’s complaint indicates that Dave’s conduct violated both the FTC Act and ROSCA, which are designed to protect consumers from misleading or deceptive business practices, particularly in the realm of online transactions.
After the FTC’s initial filing, the case was referred to the DOJ, which filed an amended complaint in December 2024. The amended complaint named Dave’s CEO, Jason Wilk, as a defendant and expanded the charges to seek civil penalties. Wilk, as the co-founder and leader of the company, is now facing legal scrutiny alongside Dave for their role in allegedly deceiving consumers and failing to properly disclose fees.
The involvement of the DOJ in seeking civil penalties emphasizes the severity of the charges. It also marks a rare and important reminder for businesses in all industries: failure to properly manage consumer expectations and deliver on promises can have serious legal and financial consequences.
Compliance Recommendation.
The FTC’s case against Dave Inc. highlights several critical compliance takeaways for businesses, especially those in the financial services sector, or any company that handles sensitive consumer data:
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Be Transparent with Consumers. Any claims made in advertisements must be accurate. Dave’s misleading claim of offering “instant” advances of up to $500 without adequately disclosing the actual experience of most users is a clear violation of advertising standards. Businesses should ensure that all promotional materials provide a truthful representation of what consumers can expect.
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Disclose Fees Clearly. If your business charges fees, these must be disclosed clearly before the transaction is completed. Dave’s practice of charging consumers surprise fees for “instant” access and automatic membership subscriptions without adequate disclosure violated both the FTC Act and ROSCA. Transparency in fee structures helps build trust with consumers and avoids legal issues down the road.
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Clarify Any “Tips” or Charitable Donations. If a fee is described as a “tip,” businesses must make it clear that it is not voluntary and not connected to a legitimate charitable donation unless explicitly stated. Misleading consumers about how their money is being used—particularly in a way that takes advantage of their desire to help others—can lead to severe legal consequences.
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Simplify Cancellation Processes. Dave’s complex cancellation process for the $1 monthly subscription fee is another area that drew the FTC’s scrutiny. Businesses must make it easy for consumers to cancel subscriptions or memberships. Any process that makes it difficult for a consumer to opt-out or stop payments can lead to consumer complaints and regulatory actions.
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Follow the Rules. The FTC’s complaint also stressed that Dave’s conduct violated both the FTC Act and ROSCA. These laws provide guidelines for online businesses that engage in transactions with consumers, particularly when it comes to advertising and billing practices. Compliance with these rules is essential for avoiding legal challenges and maintaining good customer relations.
The case against Dave Inc. is still unfolding, but it’s already clear that the company’s practices have triggered widespread scrutiny. While the ultimate legal outcomes will take time to unfold, businesses of all sizes, transparency and honesty are crucial for building trust, maintaining a positive reputation, and complying with the law. By adhering to ethical business practices, disclosing all relevant fees upfront, and ensuring that promises align with reality, businesses can avoid the pitfalls that have ensnared Dave.
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This article is for information purposes only. It is not intended to be and should not be relied on as legal advice for any particular matter.