The Federal Trade Commission (FTC) has filed a lawsuit against a popular cash advance app, accusing it of misleading financially vulnerable consumers.  This case spotlights the FTC’s role in regulating consumer financial services under Section 5 of the FTC Act, which generally targets unfair and deceptive acts and practices (UDAP).  Meanwhile, the Consumer Financial Protection Bureau (CFPB) continues its own enforcement of UDAAP standards under the Dodd-Frank Act.  There is significant overlap between the provisions, and turf battles between agencies commonly arise.  As always, the allegations by the agency are just that – allegations. 

What Did the FTC Allege?

The FTC’s complaint lays out several alleged misrepresentations by the App, including:

• False Promises of Instant Cash Advances:  The App advertises “instant” access to advances up to $500, but according to the FTC, few users receive this amount, with many offered significantly less or none at all.

• Hidden Express Fees:  While marketed as “instant,” most users wait 2-3 days for funds unless they pay an Express Fee ranging from $3 to $25—terms the FTC says are not disclosed clearly, leading to consumer confusion.

• Default Tips and Misleading Charity Claims:  The FTC claims the App often sets a default “tip” of 15% on advances, nudging users to leave a tip without fully disclosing options to avoid it.  The App allegedly marketed these tips as supporting charitable causes, promising meals for children—but the FTC alleges only a small portion of tips went to charity, with most retained by the App.

• Recurring Membership Fee Without Clear Consent:  The FTC also challenges a $1 monthly membership fee, asserting that many consumers were unaware of the charge and faced difficulties canceling due to confusing app processes.  Under the Restore Online Shoppers’ Confidence Act (ROSCA), the FTC claims the App did not obtain clear consumer consent for this charge or provide an easy cancellation method.

Key Takeaways for Consumer Financial Services Companies

This case sends clear reminders to the consumer financial services and fintech sectors, including that the government expects transparency.  Both the FTC and CFPB are actively enforcing their UDAP and UDAAP rules, and one can expect that approach to continue.  In fact, UDAAP theories seemed to be a tool of choice during the first Trump Administration’s CFPB.  Accordingly, companies should work hard to:

• Ensure charges and terms are disclosed upfront and clearly to help avoid consumer misunderstanding. 

• Review user flows and marketing practices to remove potentially misleading or confusing elements.

Transparency and straightforward communication both builds consumer trust and also helps companies avoid regulatory scrutiny and costly enforcement actions.  The complaint is heavily redacted, but read it here.  It will prove insightful as to how an agency can approach these situations.  For more information, contact Troy Garris at troy@garrishorn.com.