There’s a new legal battle brewing in the world of financial apps, and this time, the target of consumer complaints is the popular fintech app, Dave. Dave touts itself as a convenient and easy-to-use online financial platform that provides cash advance service, checking and savings instruments, and budgeting tools to help users better manage their money.

The Federal Trade Commission (FTC), however, argues that the popular app is causing more harm than good for its users. In a newly filed lawsuit, the FTC accuses Dave of misleading its users—particularly those who are most financially vulnerable—about the true cost of its services.

The FTC filed its lawsuit in the U.S. District Court for the Central District of California. In it, they accuse the company of targeting individuals who were “financially vulnerable” or “financially coping,” describing people who had limited savings, frequent overdrafts, and spending that often exceeded their income.

The lawsuit alleges that Dave gave consumers misleading information including claims that users could get “up to $500” instantly. In reality, only a small fraction of its users qualified for the full $500 advance.

The lawsuit also argues that users had to pay an “Express Fee” to receive cash instantly. The fee ranged anywhere from $3 to $25. The complaint details that the fee was disclosed only after users had already signed up and linked their bank accounts. Users who didn’t want to pay the fee had to wait two to three business days for their funds.

The complaint also highlights the company’s misleading “Tip” charges and how users were misled or were unaware of these charges. Users were often charged a “tip” fee of up to 15% of their advance, with many consumers being unaware of this charge or didn’t understand that it was optional.

There are also claims of dubious charity fees. Dave advertised that the “tips” that were included in cash advances were to help provide meals for children in need. However, only 10 cents per tip was donated, far less than what’s required to fund a single meal. Taking this dubious charge further, the app included visual cues of a child cartoon with a plate of food. As users lowered their tip, the cartoon child’s plate would lose portions of the food until there was only an empty plate. The FTC called this marketing tactic manipulative, considering that a majority of the tip did not go to fund a meal for a child.

Additionally, Dave is accused of charging customers a $1 monthly membership fee –a fee that comes out of a user's linked bank account and is not clearly disclosed to users.

The FTC argues that Dave’s practices exploited consumers’ trust through what it calls “dark patterns”—manipulative design tactics that push users into taking actions that serve a company’s goals rather than the customer’s.

These dark tactics are not new in the world of e-commerce platforms. They include features such as pre-checked boxes, misleading donation claims, and confusing interfaces that hide or obscure fees.

Deceptive practices such as these are not only unethical but, according to the FTC, illegal. The lawsuit highlights a growing effort by the agency to crack down on companies that use such tactics to mislead financially vulnerable consumers.

Dave isn’t the only company under fire for these practices. According to a recent FTC study, most subscription apps and websites use similar dark patterns to trick users into paying for services or spending more than they intended.

In Dave’s case, the FTC revealed that the company earned more than $149 million in revenue from tips alone between 2022 and mid-2024, a stark contrast to the app’s charitable claims.

In its lawsuit, the FTC is seeking to hold Dave accountable for the company’s misleading marketing and to ensure transparency in how it handles user fees.