Dave, Inc. provides the Dave app, which lets people “get paid early,” advancing them up to $250, purportedly without charging them a fee. But the complaint for this class action alleges that Dave is skirting lending regulations “through a linguistic trick: calling the payments to use its service ‘tips,’ ‘express fees,’ and a ‘subscription fee,’ instead of the cost of borrowing.”
The class for this action is all persons in the US who used the Dave app to get a cash advance and paid a tip, express fee, or subscription fee to use the service, since July 15, 2018. A California Subclass has also been defined, for all persons in the above class in California.
The Dave app advertises its services by claiming that consumers can “Get paid up to 2 days early, build your credit history, and get up to $250 advances without paying a fee.”
The Dave app has two components, Insights, which helps with financial management, and ExtraCash, which offers cash advances. Insights may warn users about upcoming financial transactions, for example, giving them time to ask for a cash advance from ExtraCash before payments become due.
The company earns revenue in a number of ways. First, it charges a $1 subscription fee for Insights. The company’s March 21, 2022 10-Q filing claims that Dave made around $4.2 million from these fees alone between January 1, 2022 and March 31, 2022. The complaint alleges, “Even if a user paid no other fees other than the subscription fee to obtain a cash advance, a $1 fee to obtain a $100 loan with a 14-day repayment period[] equates to a 26% APR on that loan.”
Second, a regular cash advance can take between two and five business days to appear in the user’s account. Users who want the money to arrive faster must pay an express fee of between $1.99 and $5.99. Since the money covers situations where users cannot wait for their regular paycheck to begin with, the complaint alleges that most will end up paying express fees. For the first quarter defined above, the complaint alleges that Dave earned $21 million in express fees.
Third, Dave asks users to give it tips of a percentage of the loan. The complaint alleges, “Although [Dave] claims that the tip is voluntary, it strongly encourages tipping and makes it difficult for users to avoid doing so.” For example, the complaint claims that users are presented with a default choice of leaving a tip of either 10% or 15% and must choose a “custom tip amount” if they want to leave less.
The complaint analyzes the tip amounts: “For example, borrowing $100 and paying $5 for it—half of the default tip amount—repayable in four days[] is effectively a 456% APR.”
According to the complaint, in certain versions of the tip screen displayed to users, the tips were said to be a chance to “pay it forwards” and “provide help to the Dave community.”
Article Type: LawsuitTopic: Loans
Most Recent Case Event
Dave App Cash Advances High Borrowing Costs Complaint
July 15, 2022
Dave, Inc. provides the Dave app, which lets people “get paid early,” advancing them up to $250, purportedly without charging them a fee. But the complaint for this class action alleges that Dave is skirting lending regulations “through a linguistic trick: calling the payments to use its service ‘tips,’ ‘express fees,’ and a ‘subscription fee,’ instead of the cost of borrowing.”
Dave App Cash Advances High Borrowing Costs ComplaintCase Event History
Dave App Cash Advances High Borrowing Costs Complaint
July 15, 2022
Dave, Inc. provides the Dave app, which lets people “get paid early,” advancing them up to $250, purportedly without charging them a fee. But the complaint for this class action alleges that Dave is skirting lending regulations “through a linguistic trick: calling the payments to use its service ‘tips,’ ‘express fees,’ and a ‘subscription fee,’ instead of the cost of borrowing.”
Dave App Cash Advances High Borrowing Costs Complaint