ARTICLE
9 January 2025

FTC And DOJ File Amended Complaint Against Cash Advance Fintech

SM
Sheppard Mullin Richter & Hampton

Contributor

Sheppard Mullin is a full service Global 100 firm with over 1,000 attorneys in 16 offices located in the United States, Europe and Asia. Since 1927, companies have turned to Sheppard Mullin to handle corporate and technology matters, high stakes litigation and complex financial transactions. In the US, the firm’s clients include more than half of the Fortune 100.
On December 30, the Department of Justice (DOJ), at the Federal Trade Commission's (FTC) referral, filed an amended complaint against an online cash...
United States Technology

On December 30, the Department of Justice (DOJ), at the Federal Trade Commission's (FTC) referral, filed an amended complaint against an online cash advance provider. The complaint now names the company's CEO as a defendant, alleging violations of the FTC Act, 15 U.S.C. §§ 45(a), and the Restore Online Shoppers' Confidence Act, 15 U.S.C. § 8403.

The FTC first initiated its case in November 2024 (previously discussed here), accusing the fintech app of using misleading marketing to deceive consumers regarding the amounts of its cash advances and imposing undisclosed fees and surprise "tip" fees. The amendment to the complaint alleges that both the company and its CEO marketed the app as offering instant cash advances "up to $500" without hidden fees. However, the complaint alleges that consumers rarely receive anywhere near $500, and in many cases, no cash advance was provided at all. Additionally, the app allegedly charges consumers an "express fee" for immediate advances, and fails to clearly disclose this charge.

The amended complaint further alleges that the app has charged consumers hundreds of millions of dollars in "tips," which many consumers were either unaware of or did not realize could be avoided. It is also claimed that the company misleadingly markets these "tips" as contributing to meals for needy children, while only a fraction of the money collected—10 cents for every percentage tipped—is donated. The company purportedly retains the remainder of the "tips" collected.

The amended complaint seeks civil penalties and consumer refunds while aiming to halt the alleged deceptive practices.

Putting It Into Practice: This development underscores the FTC's ongoing focus on fintech companies and their marketing practices. Similar cases involving deceptive fee practices have been highlighted in previous enforcement actions (previously discussed here and here). Providers of consumer financial products should review these developments and assess their compliance frameworks, ensuring transparency in all aspects of consumer engagement. Proactive measures could include updating disclosure practices and auditing marketing materials for clarity and accuracy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More