Financial App Startup FloatMe Faces a $3 Million Penalty from the FTC for Deceptive Practices

Continuing a trend from 2023, the Federal Trade Commission has kicked off the new year with a host of enforcement activity. Of particular interest is their recent action against FloatMe, a cash advance firm based in San Antonio, Texas. Not only does this action align with the agency’s interest in payday and cash-advance lenders, it is another example of the consequences of non-compliance in marketing activity.

FloatMe is a venture-backed, Series A startup with over 2 million users. In their order, the FTC accused FloatMe of lying to customers about their chances of receiving a cash bonus and charging them undisclosed fees. For these actions, FloatMe faces a penalty of $3 million and a permanent injunction against future violations​​​​.

The case against FloatMe joins other recent actions brought against startups in the consumer finance space,including Tellus and Brigit, as part of the broader trend of increased regulatory scrutiny. Both the FTC and the Consumer Financial Protection Bureau (CFPB) have been more active in the consumer compliance space since the start of the Biden administration. This focus includes heightened scrutiny on marketing practices and failures to disclose important information to consumers.

For companies looking to stay on the right side of the law, these incidents underscore the importance of conducting regular marketing compliance reviews. Such reviews can identify potentially misleading and deceptive claims before they come to the attention of regulators and escalate into legal issues. These reviews are also crucial for maintaining consumer trust, saving legal costs and protecting revenue into the future.