Baltimore Sues Dave Inc. for 2,500% APR Loans Disguised as 'Overdraft Protection

Dave is a fintech company that offers a product called "ExtraCash." The company markets itself as a friendly alternative to payday lenders, using a "proprietary AI underwriting model that analyzes cash flow, not credit scores" to determine how much you can borrow .

The Allegations

The City of Baltimore filed a lawsuit against Dave in January 2026, alleging that ExtraCash is actually an illegal, unlicensed payday loan scheme disguised as an "overdraft service" .

Here is what the lawsuit claims:

It is a Loan, Not an Overdraft

Dave uses "CashAI" models to underwrite loans. It verifies recurring income through linked bank accounts. It uses preauthorized ACH debits for repayment. It has near-total collection rates. These are all characteristics of a LOAN, not an overdraft service .

The Fee Structure Creates Astronomical Interest Rates

Dave charges several fees:

• A monthly membership fee (increased from $1 to $3)
• A mandatory "overdraft fee" equal to 5% of the principal (minimum $5, maximum $15)
• Express processing fees for "instant" access to funds

Here is how the math works out, according to the lawsuit :

• A $40 advance repaid in three days with a $5 overdraft fee, $0.60 express fee, and $3 membership fee yields an APR exceeding 2,500%
• A $25 advance with a $5 fee and 10-day repayment equates to 730% APR, even before other charges

Maryland law caps consumer loan interest at 33%. Dave is allegedly charging many times that amount .

The $500 "Bait-and-Switch"

Dave advertises advances "up to $500." But according to the lawsuit :

• Dave offers no advance at all more than 75% of the time
• Only 0.009% of new users receive $500 advances
• Less than 1% receive $250 or more

Past Regulatory Action

This is not Dave's first run-in with regulators. In December 2024, the Department of Justice (DOJ) and Federal Trade Commission (FTC) filed an amended complaint against Dave, alleging deceptive marketing practices .

Dave's Response

Dave has called the lawsuit "without any basis" and "a continued example of government overreach." The company has since eliminated optional tips and express fees, making some fees mandatory and simplified. New members joining after December 4, 2024, are on the new fee structure .