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The �鶹��ý Trade Commission is charging online cash advance provider FloatMe and its co-founders with using empty promises of quick and free cash advances to entice consumers to join its service, only to fail to deliver the promised advance amounts, make it difficult to cancel, and discriminate against consumers who receive public assistance. FloatMe is also being charged with making baseless claims that cash advance limits would be increased by an algorithm or another automated system.  

Under the terms of a settlement order, FloatMe, as well as its co-founders Joshua Sanchez and Ryan Cleary, are required to provide $3 million to be used to refund customers, stop the company’s deceptive marketing, make it easier for consumers to cancel their subscriptions, and institute a fair lending program.

“FloatMe lured consumers in with false promises of free money advances, and then used dark patterns to make it difficult for consumers to cancel,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “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.”

In its complaint against FloatMe, the FTC says that the company charged consumers $1.99 per month to join the app, and promised that consumers could access up to $50 in cash advances instantly as part of their membership.

The FTC said, however, that consumers were only able to access $20 in advances when they signed up and were charged a $4 fee if they wanted to get cash “instantly,” otherwise they had to wait up to three days for the promised funds. This stood in contrast to FloatMe’s ads that said consumers could get “emergency funds” for free “within minutes.”

When consumers contacted FloatMe to request a larger cash advance amount, the company told them that their advance limit could be increased by an algorithm over time, but the complaint charges that the algorithm did not exist. In fact, one company supervisor admitted the company’s claim was “a lie” in an email to colleagues. Instead of an algorithm, the complaint points to a complicated series of steps that required manual intervention to increase a consumer’s limit, which rarely happened.

The complaint also charges that FloatMe used dark patterns and other tricks to make it difficult for customers to cancel their subscriptions. In fact, the complaint alleges that Sanchez acknowledged in an internal communication that the cancellation process “make[s] it difficult for someone to quit.” At first, FloatMe’s cancellation process, according to the complaint, was manual-only, delay-filled, and error-ridden. Even after numerous consumer complaints caused the company to change its cancellation process in 2020, the issues still persisted, including a system that refused cancellation requests without actually informing the consumer of that decision.

FloatMe also illegally discriminated against consumers who receive public assistance like Social Security, military, and unemployment benefits, according to the complaint. The company failed to consider any income received through a public assistance program in determining whether a consumer was eligible to receive an advance, and it declined advances to consumers whose income came from public assistance. Despite this, FloatMe still charged these consumers for its monthly subscription, even though they could not access the main service offered by the company.

The complaint charges that FloatMe’s practices violate the FTC Act, the Restore Online Shoppers’ Confidence Act, and the Equal Credit Opportunity Act.

The court order, which was agreed to by the defendants in the case, requires them to pay $3 million to the FTC to be used to provide refunds to consumers. It also prohibits them from deceiving consumers about their products or services, including misrepresenting that they use an algorithm or artificial intelligence. The order requires them to get consumers’ express, informed consent for charges and provide an easy method for cancellation. The order also prohibits the defendants from deploying discriminatory practices and requires them to enact a fair lending program. In addition, the order requires defendants to create and maintain records of consumer testing, including A/B and multivariate testing, which are real-time experiments that companies can use to steer consumer behavior.

The Commission vote authorizing the staff to file the complaint and stipulated final order was 3-0. The FTC filed the complaint and final order in the U.S. District Court for the Western District of Texas. The Court entered the order on January 23, 2024.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.

The staff attorneys on this matter are Angel Reyes and James Doty of the FTC’s Bureau of Consumer Protection.