FloatMe Lawsuit Claims Lender’s Cash Advances Are Illegal

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FloatMe faces a proposed class action lawsuit that alleges the online lender’s cash advances are illegal given that it charges monthly fees that yield for the company triple-digit yearly interest rates far in excess of what is allowed under Pennsylvania law. 

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The 28-page FloatMe lawsuit says that although the venture capital-backed online lender advertises its cash advances as no-interest, free-credit products, this is untrue given that, say, a $20 cash advance from the company, with a two-week repayment schedule, a $5 express fee and $3.99 monthly fee, yields for FloatMe an annual percentage rate (APR) of more than 1,300 percent. 

FloatMe runs a mobile app that offers consumers short-term cash advances of $20, $30 or $50, which are automatically debited from their connected checking account, in exchange for a $1.99 monthly subscription fee, the suit says. According to the complaint, FloatMe does not disclose the APRs of its cash advances before, during or after any transaction, thereby allowing the company to “mislead[] borrowers to believe its advances have no cost.” 

Per the suit, the APRs associated with FloatMe’s cash advances are similar to those tied to payday loans, which historically “leave holes in the paychecks of borrowers,” sparking a cycle of reborrowing in which new loans are taken out to repay old ones.

“Cash advance apps, including FloatMe, create these same holes and reborrowing cycles,” the lawsuit stresses. 

Despite raking in amounts “just as costly as those charged for a payday loan,” and despite receiving that money on virtually every cash advance it issues, FloatMe, unlike payday lenders, never discloses the cost of its advances in terms of APR for borrowers, the case claims. As a result, borrowers fail to understand the true cost of FloatMe’s advances, which the lawsuit goes so far as to say are “worse than payday loans” in terms of how they are misleadingly advertised and the rate at which the company pulls in triple-digit interest compensation (a rate of at least 97 percent) from borrowers’ bank accounts. 

“By taking fees that yield triple digit APRs from user’s accounts with a 97% success rate, and by failing to disclose the cost of its cash advances with a recognizable metric—like APR—FloatMe is trapping Pennsylvanians in a detrimental ‘cycle of get paid and borrow, get paid and borrow,’” the complaint alleges. 

The proposed class action lawsuit against FloatMe was filed in the wake of a January 2024 Federal Trade Commission (FTC) order requiring the lender to provide $3 million in refunds, clean up its advertising, stop using “dark patterns” to discourage cancellation and institute a fair lending program. The FTC charged FloatMe in particular with using “empty promises of quick and free cash advances” to induce consumers to sign up for its service, “only to fail to deliver the promised advance amounts, make it difficult to cancel, and discriminate against consumers who receive public assistance.” 

The FTC claimed that although FloatMe said consumers could access up to $50 in cash advances instantly as part of their monthly subscription, many were only able to get advances of $20 and had to pay an extra $4 fee if they wanted cash instantly. 

Pennsylvania law sets the maximum interest rate for a cash loan at six percent, while entities licensed under the state’s Consumer Discount Company Act (CDCA) are allowed to receive interest and fees that yield APRs of between 24 and 29 percent, depending on the term and size of the loan and other factors, the lawsuit relays. 

Per the complaint, FloatMe is not licensed under the CDCA, meaning it cannot charge, collect, contract for, or receive interest, fees or other amounts from loans that exceed six percent. Even if it were licensed, the suit adds, its cash advances “would still be illegal” given the triple-digit APRs on its loans. 

The lawsuit looks to cover all Allegheny County, Pennsylvania residents who have obtained an advance or loan from FloatMe within the applicable statute of limitations period. 

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