‘Detrimental Cycles of Debt:’ Lending App Dave Charges Excessive Fees on Cash Advances, Class Action Says

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A proposed class action alleges Dave, Inc. charges consumers excessive “tips” and fees on cash advances offered through its lending app, Dave.

The 20-page lawsuit out of Pennsylvania claims that although Dave deceptively advertises that it offers no-cost, no-fee cash advances in amounts up to $250, most customers must pay an “express fee” ranging from $1.99 to $5.99 if they need cash advances right away. Moreover, many consumers are tricked into paying a default 15 percent “tip,” which goes to a profit center for a “highly capitalized, publicly traded company” backed by investors like Mark Cuban, the suit alleges.

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Although Dave discloses to investors that “tips” make up a large part of the company’s “service revenue,” app users are given the false impression that the money goes to a human being providing a service, the case says. The filing adds that some users pay a “tip” because they don’t realize they are being charged an extra fee, while others believe it’s required or simply don’t know how to deselect the tip from their total.

As a result of Dave’s fees, consumers unknowingly purchase cash advances with APRs in the triple digits since the company fails to disclose these percentages at any point, the complaint says.

Considering that Dave’s cash advances are due to be repaid on the consumer’s next payday, which is usually two weeks after a loan is obtained, “… a $100.00 cash advance with a $5.99 ‘express fee,’ a 15% ‘tip,’ and a two-week repayment schedule yields a 560.27% APR,” the complaint explains. “And even without a 15% ‘tip,’ a $100.00 advance with a $5.99 ‘express fee’ and a two-week repayment schedule still yields a 169.20% APR.”

According to the lawsuit, the default interest rate for most loans in Pennsylvania is six percent simple interest per year. Should Dave become licensed under the Consumer Discount Company Act (CDCA), which it is currently not, the company could still only legally charge up to 24 percent interest per year, the case contends.

“Dave may argue that its fees and ‘tips’ do not constitute interest, but whatever term Dave uses to describe its charges, the fact remains that these charges are made for the use of money and therefore, are interest,” the filing states. “But even if Dave’s fees and ‘tips’ are not interest, the CDCA prohibits charging, collecting, contracting for, or receiving interest, fees, or any other charges that, in the aggregate, exceed 6% simple interest per year.”

Per the case, Dave’s cash advances are merely “repackaged” payday loans designed to trap consumers in “detrimental cycles of debt.” Indeed, Pennsylvania has limited ARPs to no more than six percent for unlicensed lenders since many consumers cannot pay back such costly loans due in a single amount at a specific time and are consequently forced to take out more loans.

The lawsuit looks to represent Pennsylvania residents who obtained an advance or loan from Dave and paid a monthly membership fee, ‘express fee, ‘tip’ or any other interest, fee, charge or cost.

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