Cleo AI, a British fintech which provides online cash advance services, has agreed to pay $17m to settle a lawsuit filed by the US Federal Trade Commission (FTC). The lawsuit alleges that the company misled consumers regarding its cash advance offerings. The legal action, initiated in a federal district court with an accompanying proposed settlement order, addresses issues related to Cleo’s promotional practices and the challenges faced by users trying to cancel subscriptions.
Cleo functions as an AI assistant to manage personal finances. By leveraging machine learning, it automatically categorises user transactions, provides insights into spending habits, and offers a comprehensive view of each user’s financial situation. It also provides a cash advance option to assist users in avoiding overdraft fees and managing their expenses.
Cleo’s role in personal finance management
The FTC’s complaint outlines several claims against Cleo. It states that the company’s advertisements falsely promised consumers access to substantial sums of cash advances, though only a limited number of users actually received amounts near those advertised. Additionally, Cleo marketed its services as offering same-day or instant advances but required subscribers to pay additional fees for expedited service. Despite these fees, users still experienced delays, receiving funds as late as the following day.
“The complaint lays out how Cleo misled consumers with promises of fast money, but consumers found they received much less than the advertised hundreds of dollars promised, had to pay more for same-day delivery, and then had difficulty cancelling,” said the FTC’s Bureau of Consumer Protection Director Christopher Mufarrige.
Compounding these issues, consumers reported difficulties in terminating their subscription services with Cleo. Many were repeatedly charged monthly fees despite making multiple cancellation requests. The complaint alleges that Cleo informed users they could not cancel their subscriptions until any outstanding cash advances were fully repaid, further complicating the cancellation process.
Under the terms of the settlement, Cleo must cease any misleading representations about its service terms. This includes clarifying the amount of money available through its cash advances and any fees that consumers might incur. The agreement mandates that Cleo provide clear disclosures concerning subscription terms and obtain explicit consumer consent before processing any subscription charges. Additionally, Cleo is required to implement an uncomplicated method for consumers to cancel their subscriptions.
The legal proceedings involved testimonies from consumers who expressed significant frustration about delayed access to essential funds for urgent needs such as rent and groceries. One customer detailed the financial strain caused by unexpected wait times for money after subscribing under the assumption of immediate availability.
To address the harm experienced by affected consumers, the $17m payment from Cleo will be allocated for refunds, said the FTC. This financial remedy aims to compensate users impacted by Cleo’s business practices. The decision to file both the complaint and proposed settlement order was unanimously approved by a 2-0 vote from the FTC commissioners.
The complaint and settlement were filed in the US District Court for the Southern District of New York. As part of ongoing compliance, Cleo is expected to implement changes in its business operations to enhance transparency and prevent future consumer deception.
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