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On Jan. 2, the FTC filed a lawsuit against FloatMe — whose app "floats" small amounts to members who pay the $3.99 monthly membership fee — and ordered the company to pay $3 million. The FTC alleges FloatMe made a number of deceptive claims, engaged in unfair discrimination and charged customers without their consent.
For instance, the FTC claims that the San Antonio, Texas-based company knowingly lies to consumers about their chances of receiving advances of up to $50 via an automated process that increases the cash advance limit over time. In reality, the FTC says, this automated process does not exist, and a very slim percentage ever receive $50. There is a $4 surprise fee for receiving money instantly, rather than after the standard three-day waiting period, contrary to advertising that suggests the advances are instant for members upon downloading the app for "no hidden fees," the FTC says.
In determining which users receive advances, FloatMe doesn't count income that derives from gig work, tips, pensions, military benefits or public assistance, according to the FTC. Finally, the FTC claims that FloatMe has charged users in several instances without their consent, including after customers canceled their accounts.
An attorney for FloatMe did not immediately respond to a request for comment.
FloatMe changed some of its wording after learning of the FTC's investigation, according to the agency, such as removing the "up to $50" assertion on its website. "Only after the FTC's investigation began did FloatMe add anything about the $4 fee for instant advances to its website; even then, FloatMe buried any mention of the fee in the bottom half of its website, after multiple links inviting consumers to leave the site to download the app," reads the complaint. Currently, the homepage lists varying fees for Instant Floats.
These issues echo claims the FTC lodged in November against Brigit, a consumer finance app that allegedly misled customers about the amount of money they could access via cash advances — "up to $250" — and locked them into paid subscription plans that were burdensome to cancel. The proposed court order would require Brigit to pay $18 million in consumer refunds and change the way it markets to customers and handles cancellation requests.
The Federal Trade Commission penalized the finance app Brigit after alleging it misled customers about being able to access "up to" $250 in cash advances in exchange for a monthly fee and made it difficult for them to cancel their subscriptions.
Brigit told American Banker at the time that it "strongly disagree[s]" with the allegations but it decided to settle with the FTC nonetheless in the best interests of its customers and employees.
The FTC's action against Brigit is one of several it has initiated in recent years against companies extending some form of credit, suggesting that it is an enforcement priority and an area where fintechs specializing in nontraditional credit need to tread carefully.
"For those operating in this space, it's a good reminder that you have to be exercising caution" on matters ranging from how services are marketed to how fees are disclosed, Donnelly McDowell, a Washington-based partner at the law firm Kelley, Drye & Warren, said in a November interview with American Banker.
