The Department of Justice is levying civil charges against the founder of Dave, a publicly traded cash-advance app, for allegedly misleading consumers and charging hundreds of millions of dollars in surprise fees.
In a Monday press release, the FTC said that it refers a complaint to the DOJ for civil penalties “when it has ‘reason to believe’ that the named defendants are violating or are about to violate the law.”
Dave did not immediately respond to a request for comment. In after-hours trading on Monday night, its stock fell 8.37%.
Still, the fintech was one of the best market performers of 2024, notching a 995.82% rise since January.
When the FTC sued Dave on Nov. 5, the company accused the agency of regulatory overreach and vowed to fight its charges.
“Following months of good faith negotiations, we are disappointed the FTC has chosen to file suit against Dave, a company on a mission to level the financial playing field for the millions of Americans poorly served by the legacy financial system,” the company said in a statement at the time. “We take compliance and customer transparency very seriously and believe that we have always acted within the law.”
The DOJ alleged Monday that Wilk, who also serves as the company’s president and chairman, reviewed many consumer complaints and internal reports about “consumer dissatisfaction arising from Dave’s deceptive representations.”
“The Justice Department is committed to stopping companies and their executives from preying on financially vulnerable consumers with deceptive advertisements, hidden fees and subscriptions that are difficult to cancel,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department’s Civil Division, in a press release.
Dave advertised to new consumers that they could easily and quickly get “up to $500,” but in the first 14 months after it started pushing those messages, the company offered that amount .002% of the time, or less than once in every 45,000 instances, per the suit. A majority of the time, Dave did not offer new users any advance, the lawsuit adds.
The complaint also contends that Wilk designed a key feature that led to the lawsuit. Dave charges what it calls “tips” — a 15% cut of an advance — without making such costs clear to consumers, according to the complaint. When users accept and transfer an advance, a green “Thank you!” button that appears that, when clicked, imposes the tip.
Wilk implemented and designed the tipping function, the DOJ says.
The government also alleges that the company, with Wilk’s knowledge, charged consumers undisclosed fees for them to get their advances instantly, per the company’s marketing. An internal Dave presentation, cited by the DOJ, noted that “[w]hat we promised [to consumers] is not what they see,” in the case of these “Express Fees.”
“The presentation recommends that Dave should ‘[s]et expectations much earlier on the true cost of the money [consumers] are borrowing,'” the suit says. “Defendants did not adopt that recommendation.”
Wilk, who has served as the fintech’s CEO since 2016, holds 60% of the voting power of Dave’s executive stock and has a “key role” in the company’s operations, content, design and marketing, per the suit.
After the FTC sued Dave in November, the company brought on Kevin Frisch as chief marketing officer to lead its strategy, including brand, content and product marketing. Frisch previously served in similar roles at Intuit, Wag and Uber.