Baltimore has sued the fintech Dave, alleging the company used “misleading marketing and usurious interest charges,” victimizing some of the city’s “most financially precarious residents,” Mayor Brandon Scott announced last week.
“Dave’s business practices are intentionally designed to trap individuals in cycles of debt,” Scott said in a Dec. 30 statement. “It’s not just unfair; it's illegal, and we’re committed to holding [the company] accountable for the damage they’ve caused.”
The city accused Dave of violating Baltimore’s Consumer Protection Ordinance with a product the Los Angeles-based fintech dubs ExtraCash Advances. A marketing tagline on Dave’s website, referring to the product, reads “Up to $500 in five minutes or less.”
But few consumers ever obtained the full $500, the city alleged – just one in 10,000, according to Federal Trade Commission and Justice Department data.
Various fees associated with ExtraCash Advances are another major contention in the lawsuit.
On a $40 cash advance, Dave would have charged a minimum $5 overdraft fee, an “express processing fee” of $0.60 and a $3 membership fee, court documents state. That would amount to a 2,500% annual percentage rate.
Dave’s business model encouraged customers to take out multiple advances in as few as two weeks, the lawsuit contended.
“Dave’s APRs are routinely tens or hundreds of times higher than the maximum 33% interest rate allowed for consumer loans under Maryland law,” the city alleged.
In a statement, a Dave spokesperson contrasted ExtraCash against traditional bank overdraft fees.
"Dave’s customers can access an ExtraCash overdraft, which is provided by a partner bank, for as little as $5 per $100 of liquidity,” the spokesperson said. “By contrast, traditional household-name banks often charge fees of $34-$36 per overdraft, up to over $100 in fees per day, for similar liquidity amounts.
“This is information the City of Baltimore would have realized had they contacted Dave prior to this baseless lawsuit," the spokesperson added.
Dave is hardly the first fintech Baltimore has taken to court. The city sued MoneyLion in October, alleging the fintech operates as a “modern-day payday lender” that charges exorbitant interest on loans it advertised as zero-interest.
Cities and states have stepped in to sue banks and other lenders as the Consumer Financial Protection Bureau has drastically reduced its legal actions against companies.
“We are pleased that the City of Baltimore’s elected leaders are enforcing their consumer protection laws and pursuing justice for Baltimore families exploited by high-cost, predatory lenders masquerading as financial saviors,” Whitney Barkley-Denney, deputy director of state policy and senior policy counsel at the Center for Responsible Lending, said Monday in an emailed statement.
The Federal Trade Commission sued Dave in November 2024, alleging the fintech misled consumers with its ExtraCash product.
Dave later altered its fee structure, eliminating optional tips and express fees on its ExtraCash product. Dave CEO Jason Wilk called the lawsuit, which also involved the DOJ, “a continued example of government overreach.”
The Baltimore lawsuit could force Dave to halt its ExtraCash product, refund any tips, principal and fees to Baltimore consumers, and change how it markets cash-advance products.
Baltimore officials characterize the loans as “high-frequency, small-amount, short-term loans.”
The overdraft fees were mandatory, according to court documents, pegged at 5% of the principal and ranging from $5 to $15.
Dave allegedly also “manipulated and deceived customers into providing ‘tips,’” which the city characterized as unnecessary, according to the lawsuit.
Tips were sometimes framed as helping hungry children, but little of the money went toward charity, the city alleged.
