By Connor Hart

The Federal Trade Commission filed a lawsuit against Dave Inc., alleging the digital-banking service used misleading marketing to deceive consumers and charged users undisclosed fees.

The company's advertising claims users can receive "up to $500 instantly," though this advance is only offered a tiny percentage of the time, the FTC said Tuesday.

The company also requires consumers to pay what it calls an "express fee"--which the agency alleges isn't disclosed until after the sign-up process is complete and the company has access to the user's bank account--in order to get instant access to money. And consumers who take advances from Dave are often charged a surprise fee of 15% of their advance, described by the company as a tip, the agency said.

"Dave lured in consumers living paycheck-to-paycheck with false claims of big-dollar advances, then reached into their pockets to give itself a so-called 'tip,'" Samuel Levine, director of the FTC's Bureau of Consumer Protection, said. "Whether the products are called cash advances, payday loans, or something else, the FTC will take action to protect consumers from unauthorized charges and deceptive claims."

Dave said it is disappointed that the FTC chose to file suit after having engaged in what the company called "months of good-faith negotiations."

"We believe this case is another example of regulatory overreach by the FTC, and we intend to vigorously defend ourselves," the company said. "We take compliance and customer transparency very seriously and believe that we have always acted within the law.

Chief Executive Jason Wilk said the company wanted to share its preliminary third-quarter results and "reiterate the positive outlook for our business" in response to the litigation.

Dave expects to swing to a profit of about $500,000, inclusive of a $7 million legal settlement, from a $12.1 million loss in last year's quarter.

Revenue is projected to rise 41%, to $92.5 million, coming in ahead of the $80.7 million that analysts surveyed by FactSet expect.

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

November 05, 2024 18:25 ET (23:25 GMT)

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