Baltimore Mayor Brandon Scott has filed a lawsuit against the challenger bank Dave for “misleading marketing and usurious interest charges that trap some of the most financially precarious residents in an exploitative cycle of debt.” The lawsuit comes as the Consumer Financial Protection Bureau, which formerly pursued such cases, is being dismantled.
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The lawsuit focuses on a product Los Angeles-based Dave offers called ExtraCash Advances, which comes with the marketing tag line, “Up to $500 in five minutes or less.” Users allow Dave to receive a feed of information about their bank accounts, which Dave uses to determine their creditworthiness and directly debit the accounts to collect on the advances.
In an investigation of several online lenders, the city of Baltimore found several problems with Dave’s business practices. (In October, the city filed a
In one practice the complaint cited, Dave recently began charging mandatory overdraft fees of 5% of a loan’s principal, with a minimum of $5 and a maximum of $15 for every transaction. The company also charges an express fee to customers who want to receive their loan immediately rather than wait several business days. The company charges a $1 monthly membership fee and until February 2025, Dave “manipulated and deceived consumers into providing ‘tips.'”
If a consumer takes out a $40 cash advance with repayment within three days, they will be charged an overdraft fee of $5, an express processing fee of $0.60, and a membership fee of $3, the complaint stated. “Dave will have charged a shocking usurious rate of over 2,500% [annual percentage rate] for this transaction.” Dave’s APRs are routinely tens or hundreds of times higher than the maximum 33% interest rate allowed for consumer loans under Maryland law, it said.
Customers who use ExtraCash get trapped in a cycle of debt, the complaint said.
“As a consumer obtains one ExtraCash Advance after another, a consumer is less able to afford utility bills, rent, and food,” it stated. “As a consumer is less able to pay for utility bills, rent, and food, a consumer needs more ExtraCash Advances, and the cycle starts again. Consumers who need $25 or $100 at a time are not just living paycheck-to-paycheck. Because of Dave, they are living day-to-day, with each day burdened with more fees.
A Dave spokesman told American Banker the company is reviewing Baltimore’s lawsuit. “We take consumer transparency very seriously and believe that our practices have at all times been in compliance with applicable law,” he said.
Mayor Scott said his lawsuit is about protecting Baltimore residents who are vulnerable to financial scams. “Dave’s business practices are intentionally designed to trap individuals in cycles of debt. It’s not just unfair; it’s illegal, and we’re committed to holding them accountable for the damage they’ve caused,” he said in a statement.
The complaint cited a September 2025 study conducted by the Center for Responsible Lending, “Escalating Debt: The Real Impact of Payday Loan Apps Sold as Earned Wage Advances.” The group analyzed anonymized transactions data from more than 5,000 people who used at least one of five lending apps – Dave, Cleo, Brigit, EarnIn and FloatMe – between January 2021 and May 2025. It found that the average annual percentage rate for loans that were repaid in seven to 14 days was 383%, a rate comparable to a typical storefront payday loan (391%).
Whitney Barkley-Denney, deputy director of state policy and senior policy counsel at the Center for Responsible Lending, told American Banker she was pleased that Baltimore’s leaders are enforcing consumer protection laws and “pursuing justice for Baltimore families exploited by high-cost, predatory lenders masquerading as financial saviors.”
The Baltimore lawsuit echoes complaints that have been filed in recent years against several fintech lenders, including
In November 2024, the Federal Trade Commission filed a complaint against Dave that was referred to the Department of Justice a month later. The government accused Dave of rarely providing loans of up to $500, but typically lending only $25. It cited the $3 to $25 express fee. It said that Dave took an additional 15% charge as a “tip” that was hard to avoid and claimed it donated part of the tip to a charity that provides meals to hungry children, whereas upon analysis, Dave actually donated only $1.50 or less per transaction while keeping the bulk of the “tips” for itself. According to the Baltimore lawsuit, Dave stopped charging tips in February 2025.
“Dave is a case of a fintech getting too creative with its business model, and getting out in front of what the law allows,” Aaron McPherson, principal of AFM Consulting, told American Banker.