FTC settles complaint with cash advance firm for $3M

“I downloaded this app because I was struggling and needed help and all it has done is make things worse and never offer remedy.”

This complaint was cited in an Federal Trade Commission blog about its $3 million settlement with Floatme, a mobile app that claimed to offer subscribers small short-term cash advances called Floats. For $1.99 per month, subscribers were told they could get up to $50 instantly.

Floatme targeted people struggling to make ends meet with claims like “get $50 free money” and “get emergency funds” for free “within minutes.” Subscribers were told they could “Cancel anytime for any reason by contacting support.” The app could be downloaded from the Apple App Store or Google Play Store.

According to the FTC, the company limited most customers to getting no more than $20. During one three-month period, only one half of 1% of customers received a $50 Float. Customers who asked for more were sometimes told that their limit would be automatically increased by an algorithm (apparently the term “artificial Intelligence” was used) as the company gained more experience with them. There was no algorithm.

And customers could only get money instantly if they paid an additional $4 fee that was not clearly disclosed up front. Otherwise, they had to wait three days.

Floatme illegally discriminated against people due to income

Floatme made it difficult for customers to cancel their subscriptions or simply ignored requests to cancel. Another complaint cited in the FTC blog said “…I have canceled my subscription three times on the app, emailed them three times, received responses confirming cancellation, and they are still charging me monthly.”

Finally, the FTC said Floatme illegally discriminated against tens of thousands of consumers who receive public assistance like Social Security, a military pension, and unemployment benefits by not including that income in determining how much of an advance a consumer was eligible for. That practice violates the Equal Credit Opportunity Act. Floatme continued to collect the monthly subscription fee from consumers who couldn’t get an advance.

This was the second case the FTC brought against an online cash advance company in just two months. Its message to other companies offering similar products is that fair lending regulations and other established consumer protection laws apply to them, they need to clearly disclose material terms, and making it easy to enroll but hard to cancel is bad business. The FTC also warned against misusing trendy terms like “artificial intelligence” and “algorithms” in marketing communications.

3 tips to protect yourself against fraud, abuse

Samuel Levine, the Director of the FTC’S Bureau of Consumer Protection, said, “The FTC will continue to hold companies accountable for unfair, deceptive, and discriminatory credit practices, whether they call their products loans, advances, income-share agreements or something else.”

The FTC offers this advice for consumers: h If you need to borrow money, consider other options before you take a cash advance.

h Know you have legal protections when applying for a loan, including that lenders can’t consider your race, national origin, age, or whether part or all of your income comes from public assistance.

h Businesses must give you a simple way to cancel a paid subscription. If they don’t, report them to the FTC at Reportfraud.ftc.gov – and don’t do business with them.

Check out companies with the BBB. Floatme has a poor rating.

Randy Hutchinson is president & CEO Better Business Bureau of the Mid-south.