US federal regulators accused a popular financial app of targeting struggling borrowers and misleading them about the terms of its cash advances, the

Fintech lender Dave accused of misleading needy borrowers

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2024-11-06 00:00:38

US federal regulators accused a popular financial app of targeting struggling borrowers and misleading them about the terms of its cash advances, the latest blow to a generation of fintech firms that cast themselves as friendlier alternatives to mainstream lenders.

The Federal Trade Commission sued Dave, whose early investors included billionaire Mark Cuban, NFL team owner Robert Kraft, and venture capital giant Tiger Global, in federal court today. The agency said the company misled consumers about how much money they could get, charged undisclosed fees, and made it hard to cancel memberships.

Dave belongs to a generation of fintech firms launched in the mid-2010s with friendly names — Frank, Marcus, Finn, and (somehow) Mr. Cooper — and promises to level the financial playing field. Dave doesn’t charge interest on its loans, but instead steers users toward fees that release their cash faster and a suggested 15% “tip” on each transaction that some users have said they were duped into paying.

The FTC sued another cash-advance app, FloatMe, in January, accusing it of failing to deliver promised amounts and making it hard for users to cancel their subscriptions. (Byzantine cancellation procedures — known in behavioral science as “dark patterns” — are a key part of the FTC’s antitrust case against Amazon.)