A dispute between the city of Baltimore and Dave Inc. (Dave) raises questions about the scope of local consumer-protection authority and its relationship to Maryland’s statewide consumer-lending framework. Dave has moved to dismiss Baltimore’s lawsuit concerning the company’s “ExtraCash” advances, contending that the city lacks authority to invoke the ordinance underlying its claims because Maryland’s consumer-loan laws preempt Baltimore’s consumer protection ordinance. Dave characterizes ExtraCash as a bank-originated overdraft product, rather than as an earned wage access product, although it is sometimes incorrectly grouped with earned wage access apps.
The dispute presents a question of significance to lenders and financial technology companies operating in Maryland: whether Baltimore may invoke a local ordinance to enforce consumer-protection requirements or whether the state’s consumer-loan laws preempt Baltimore. The court has not ruled on Dave’s motion.
Baltimore City’s Consumer Protection Claims Against ExtraCash
Baltimore brought this action against Dave, alleging that the company operated without the required licenses and used deceptive marketing that led consumers to believe its ExtraCash advances are not loans. The city further alleged that the advances imposed substantial costs and might contribute to cycles of indebtedness.
The complaint asserted claims under Baltimore’s Consumer Protection Ordinance (CPO), which authorizes the city to pursue allegedly unfair, abusive, or deceptive trade practices. Baltimore sought statutory penalties and injunctive relief and asked the court to declare the allegedly unlawful advances void and unenforceable. The city has also sought restitution of the principal, fees, and tips that Baltimore consumers paid.
The complaint cited advertisements stating that new customers may promptly receive advances of up to $500. According to the city, however, internal documents in the possession of federal agencies indicated that Dave offered $500 to only a small fraction of new users and made fewer than 1% of its loan offers for $250 or more. The city further alleged that, when a borrower repays a $40 advance within three days, the associated fees could result in an annual percentage rate exceeding 2,500%.
These allegations appear in the city’s complaint, and the court has made no findings concerning them.
Dave’s Arguments in Its Motion to Dismiss: Local Authority and Maryland Law Preemption
Dave’s motion advanced two principal grounds for dismissal:
- The CPO is not a valid local law. Dave contended that the Maryland Constitution limits Baltimore’s legislative authority to laws that are local in subject matter, substance, and effect. According to Dave, the CPO regulates consumer credit and commercial conduct with statewide effects and confers upon the city an enforcement mechanism that the Maryland General Assembly does not authorize. Dave further asserted that the ordinance incorporates substantive provisions of Maryland’s Consumer Protection Act (MCPA), whose enforcement provisions, in Dave’s view, apply uniformly throughout the state.
- State consumer-loan law preempts the city’s claims. Dave contended that, even if the CPO is valid, the Maryland Consumer Loan Law (MCLL) preempts Baltimore’s attempt to impose a separate, local enforcement regime on products that state law governs. Dave maintained that allowing the claims to proceed would expose companies to local requirements that might conflict with Maryland’s uniform statewide framework.
The action also presents threshold questions concerning whether ExtraCash advances constitute loans subject to the MCLL and whether Dave’s marketing and related practices violate applicable law.
Potential Implications for Consumer-Credit Products in Maryland
The motion to dismiss may have implications beyond Dave and Baltimore if the court addresses the boundary between local consumer-protection enforcement and Maryland’s statewide regulatory framework. For companies offering consumer-credit products, the dispute underscores the importance of evaluating licensing requirements, product structure, fee disclosures, and marketing practices under applicable state law and assessing whether local ordinances create additional exposure. For municipalities, the case may clarify the limits of local authority to establish or invoke consumer-protection enforcement mechanisms when state statutes already regulate the relevant conduct. The outcome may depend on the ordinance’s scope and effect, its relationship to state law, and the specific products and claims at issue.
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