Baltimore Mayor Brandon Scott has initiated a lawsuit against the fintech company Dave, alleging misleading marketing and excessive interest charges that exploit vulnerable residents. The lawsuit highlights the app’s ExtraCash Advances, marketed as providing “Up to $500 in five minutes or less,” which the mayor claims traps financially precarious individuals in a cycle of debt.
The lawsuit emerges as the Consumer Financial Protection Bureau (CFPB), previously an active regulator in such cases, faces significant cuts and restructuring. Baltimore’s investigation into several online lenders, including a previous lawsuit against MoneyLion, revealed concerning practices by Dave that prompted this legal action.
Among the practices cited, the lawsuit points to mandatory overdraft fees of 5% of a loan’s principal, with a minimum charge of $5 and a maximum of $15 per transaction. Additionally, users who require immediate access to funds face express fees. The company charges a $1 monthly membership fee, and until February 2025, reportedly manipulated consumers into providing “tips.”
For instance, a consumer who takes out a $40 cash advance due in three days may incur an overdraft fee of $5, an express processing fee of $0.60, and a membership fee of $3. This combination results in an astonishing annual percentage rate (APR) of over 2,500%, far exceeding Maryland’s legal limit of 33% for consumer loans.
The complaint underscores that consumers using ExtraCash Advances often find themselves in a debilitating cycle. As stated, “As a consumer obtains one ExtraCash Advance after another, a consumer is less able to afford utility bills, rent, and food.” This dependency creates an escalating need for further advances, exacerbating their financial distress.
In response to the lawsuit, a spokesperson for Dave stated that the company is reviewing the allegations and emphasized their commitment to consumer transparency, claiming compliance with applicable laws. Mayor Scott countered that the business practices of Dave are not only unfair but also illegal, asserting a commitment to protecting Baltimore’s most vulnerable residents from predatory lending.
The lawsuit references a September 2025 study by the Center for Responsible Lending, titled “Escalating Debt: The Real Impact of Payday Loan Apps Sold as Earned Wage Advances.” The study analyzed data from over 5,000 users of five lending apps, including Dave, revealing an average APR of 383% for loans repaid within one to two weeks, comparable to traditional payday loans.
Whitney Barkley-Denney, deputy director of state policy for the Center for Responsible Lending, expressed approval for Baltimore’s legal actions, stating that they are crucial for enforcing consumer protection laws and seeking justice against predatory lenders.
The Baltimore lawsuit follows a pattern of complaints against various fintech lenders, including Dave, which have been accused of deceptive practices and exorbitant fees. In November 2024, the Federal Trade Commission filed a complaint against Dave, alleging that the company frequently provided much lower loan amounts than advertised and charged fees disguised as tips.
This ongoing legal battle underscores the complexities and challenges of regulating fintech companies that often operate in grey areas of financial law. As the situation develops, the outcome may set significant precedents for consumer protection in the rapidly evolving fintech landscape.
