If Going Deeper in Debt is Your Idea of Summer Fun, the Dave App Might Have What You Need
Friday Financial Fraud Roundup - June 30, 2023
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The Dave App pitches itself as the fun, friendly, low-dollar loan store right on your phone.
The mascot is a cartoon bear, and the loans are easy to get, don’t require a credit check, and can be processed in just a few minutes.
What’s not to love?
Well, a lot!
First, there’s the interest rate - which can be as much as 500%.
Then, there’s the fact that Dave uses gambling games to prompt its users to borrow more cash.
In the latest promotional email from the app-based lender, borrowers can be entered for a chance to win a cool $2000 in the heat of the summer.
All you need to do is check your account — and see how much they’d let you borrow.
Of course, the hope on the part of that seemingly friendly bear is that you’ll then take out a small summer loan. You know, maybe for a fun weekend with friends or a short family trip.
Of course, what Dave doesn’t mention is the ridiculous interest rates and cycle of debt that are both key features of their lending model.
A story from the L.A. Times digs deeper, explaining just how bad the fees associated with friendly, cartoon bear apps can be.
Here’s how the Times broke down the fees associated with a loan from Dave:
Given that the money had to be repaid in 12 days, the $5.99 fee and $2 tip, if considered as interest, cost Goad 122% on an annual percentage rate basis — a metric that helps compare the relative cost of loans. If he tipped $6.93, the company’s average in the first quarter, it would amount to an APR of nearly 200%. If he chose a 15% tip, the total cost would rise to $35.99 with an APR of 547% — corner payday loan territory.
500% interest on a short-term loan doesn’t sound like much fun to me!
Oh, and using games of chance to entice borrowing isn’t a new trick for Dave. They played a similar game last summer for a $1000 prize.
Company that Caused Headaches for Customers of Mr Cooper Mortgage Servicing Fined $25 Million
A payment processing company has been fined $25 million by the Consumer Financial Protection Bureau (CFPB) for data practices that resulted in $2.3 billion in unauthorized mortgage charges impacting 500,000 customers of mortgage servicer Mr. Cooper.
“The CFPB’s investigation found that ACI perpetrated the 2021 Mr. Cooper mortgage fiasco that impacted homeowners across the country,” said CFPB Director Rohit Chopra. “While borrower accounts have now been fixed, we are penalizing ACI for its unlawful actions that created headaches for hundreds of thousands of borrowers.”
The impact of the mishandled data was far-reaching. ACI initiated approximately 1.4 million ACH withdrawals on behalf of Mr. Cooper from homeowners’ accounts on April 23, 2021, without a valid written authorization. This included initiating electronic fund transfers on days when they were not scheduled and initiating multiple transfers from the same accounts on the same day. The order notes that around 7300 customers saw their bank balances reduced by $10,000 or more overnight.
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