A Round-Up of Recent Enforcement Actions – Dave and Navy Federal

This month, regulators have brought two enforcement actions that should get the attention of banks and other payment service providers.

First, on November 5, the Federal Trade Commission (“FTC”) announced it was bringing an enforcement action against banking app Dave in connection with a cash advance service that purported to give users up to $500 “instantly.” In reality, Dave often granted far less than $500 in credit and would not provide an advance “instantly” without the payment of an expedited delivery fee. In addition, while Dave’s service was designed to allow users to provide an avoidable “tip,” in practice, users have found the tip feature confusing and in many cases users were either unaware that the tip would be assessed or were unaware that it was avoidable.

Based on the foregoing, the FTC’s enforcement action alleges a number of deceptive and misleading practices on the part of Dave, including unclear disclosures and undisclosed fees.

The FTC’s action reinforces the importance of a careful review of marketing campaigns and disclosures, particularly those that promise a delivery of funds “instantly” or “immediately,” but rely on an expedited delivery fee. The action also has lessons for the much maligned practice of asking consumers for “tips” in connection with a service. To the extent a platform relies on voluntary tipping, the platform and interface should be designed in such a way that it is truly voluntary and the tip easily avoidable by the user. Providers should be keenly aware of any potential dark patterns in their UI flow that may mislead users into believing the tip is anything but voluntary.

Second, on November 7, the Consumer Financial Protection Bureau (“CFPB”) announced a $95 million enforcement action against Navy Federal Credit Union (“NFCU”). At issue in the enforcement action was NFCU’s overdraft practices. While some of the issues cited by the CFPB will be familiar to readers – for example, NFCU was cited for the criticized practice of Authorized Positive Settle Negative transactions – NFCU was also cited for certain disclosure issues in connection with the receipt of deposits from peer-to-peer platforms such as the Cash App. According to the CFPB, NFCU showed deposits received from peer-to-peer payments apps as available for spend while failing to disclose the processing times for such deposits. In reality, such deposits were subject to cutoff times after which the deposit would not post until the next business day. As a result, customers who attempted to use those funds prior to their availability risked an overdraft of their account and the assessment of a fee.

Providers should review their processes, procedures, and disclosures around the receipt of deposits from peer-to-peer payments apps to ensure any cut-off times are clearly and conspicuously disclosed.

A copy of the FTC Enforcement Action against Dave is available HERE.

A copy of the CFPB Enforcement Action against NFCU is available HERE.