Baltimore Mayor Files Lawsuit Against Challenger Bank Dave
Baltimore Mayor, Brandon Scott, has recently taken legal action against challenger bank, Dave. The lawsuit alleges that the bank uses deceptive marketing and imposes excessive interest charges, which leaves the financially vulnerable residents of Baltimore entrapped in a cycle of unending debt. This comes at a time when the Consumer Financial Protection Bureau (CFPB), formerly responsible for handling such cases, is being dismantled.
Concerns Over Dave’s “ExtraCash Advances” Product
The main concern of the lawsuit is a product offered by Dave, known as ExtraCash Advances. Advertised under the tagline “Up to $500 in five minutes or less,” this product allows users to provide Dave with a feed of information about their bank accounts. The bank then uses this information to determine the creditworthiness of customers and directly debit their accounts to reclaim the advances.
However, following an investigation into several online lenders, the city of Baltimore discovered several issues with the business practices of Dave. It’s worth noting that this isn’t the first time the city has had issues with online lenders; back in October, a similar lawsuit was filed against MoneyLion.
Alleged Unfair Practices
According to the complaint, 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. On top of this, the company also charges an express fee to customers who wish to receive their loan immediately rather than waiting for several business days. A $1 monthly membership fee is also imposed, and until February 2025, Dave allegedly manipulated and deceived consumers into providing ‘tips.'”
The complaint illustrates how these charges can quickly add up. For example, if a consumer takes out a $40 cash advance with a repayment period of three days, they would be charged an overdraft fee of $5, an express processing fee of $0.60, and a membership fee of $3. This translates into a shocking annual percentage rate (APR) of over 2,500% for this transaction. The lawsuit claims that Dave’s APRs are routinely tens or hundreds of times higher than the maximum 33% interest rate allowed for consumer loans under Maryland law.
The Debt Trap
The lawsuit argues that customers who use ExtraCash often find themselves trapped in a cycle of debt. As consumers take out one ExtraCash Advance after another, they become less able to afford essential expenses such as utility bills, rent, and food. This then leads them to take out more ExtraCash Advances, and so the cycle continues. The lawsuit accuses Dave of exacerbating the financial vulnerabilities of their customers, leaving them living day-to-day, weighed down by increasing fees.
In response to the lawsuit, a spokesman for Dave told American Banker that the company takes consumer transparency very seriously and believes that their practices have always complied with the law.
Mayor Scott’s Statement
Mayor Scott has made it clear that his lawsuit is about protecting Baltimore residents from financial scams. He accuses Dave’s business practices of being 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.
Findings of the Center for Responsible Lending
The complaint also cites a September 2025 study by the Center for Responsible Lending, which analyzed anonymized transactions data from more than 5,000 people who used at least one of five lending apps between January 2021 and May 2025. The apps included Dave, Cleo, Brigit, EarnIn, and FloatMe. The study found that the average APR for loans 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, expressed her approval of Baltimore’s efforts to enforce consumer protection laws and “pursue justice for Baltimore families exploited by high-cost, predatory lenders masquerading as financial saviors.”
Similar Complaints Against Other Fintech Lenders
The Baltimore lawsuit reflects complaints filed in recent years against several fintech lenders, including Earnin, Dave, MoneyLion, and SoLo Funds. These companies have been accused of requesting voluntary tips that are not truly voluntary and charging fees that make their products prohibitively expensive.
In November 2024, a complaint was filed against Dave by the Federal Trade Commission (FTC) and was referred to the Department of Justice a month later. The government accused Dave of rarely providing loans of up to $500, but instead, typically lending only $25. Furthermore, the FTC claims that Dave took an additional 15% charge as a “tip” that was hard to avoid, and the company alleged that it donated part of this tip to a charity providing meals to hungry children. However, upon analysis, Dave was found to have donated only $1.50 or less per transaction, while keeping the majority of the “tips” for itself. According to the Baltimore lawsuit, Dave stopped charging tips in February 2025.
Conclusion
Aaron McPherson, principal of AFM Consulting, summarizes the situation by saying “Dave is a case of a fintech getting too creative with its business model, and getting out in front of what the law allows.” Only time will tell what the outcome of this lawsuit will be, but it’s clear that the issue of consumer protection in the financial sector remains a serious concern.
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