Cleo AI Settles $17 Million FTC Case Over Deceptive Cash Advance Practices

FTC Charges and Settlement

Cleo AI, a cash advance company utilizing artificial intelligence technology, has agreed to pay $17 million to settle charges brought by the Federal Trade Commission (FTC) for allegedly deceiving consumers about its services. The FTC complaint accused Cleo of misleading customers regarding the amount of money they could receive and how quickly they could access it 1

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Christopher Mufarrige, director of the FTC's Bureau of Consumer Protection, stated, "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 canceling" 1

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Allegations of Deceptive Practices

According to the FTC, Cleo's advertising promised consumers access to cash advances worth hundreds of dollars, with some ads mentioning amounts up to $250 and $500 for their Cleo Plus and Cleo Builder subscription services. However, the FTC claims that almost no customers received anything close to these amounts, with some advances totaling just $20 2

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The company was also accused of falsely promising "instant" or "same-day" advances while charging additional fees for such guarantees. Even with these fees, the FTC alleged that advances might still arrive the next day 2

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Subscription Cancellation Issues

The FTC complaint highlighted difficulties faced by consumers attempting to cancel their subscriptions. Cleo allegedly required customers to repay outstanding advances before canceling, and continued to charge monthly fees of $5.99 or $14.99 despite repeated cancellation requests 2

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Cleo's Response and Settlement Terms

Cleo AI has denied any wrongdoing in agreeing to the settlement. Colin Jones, Cleo's general counsel, stated, "Though we strongly deny any wrongdoing and are confident that we would have prevailed in court, putting this matter behind us was the best move to keep our focus where it belongs -- improving the financial lives of millions of Americans" 1

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The settlement requires Cleo to improve disclosures, obtain informed consent before charging for subscriptions, and make cancellation processes easier. The $17 million will be refunded to affected customers 2

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AI Technology in Fintech

Cleo offers advances through mobile apps on Apple and Google stores and uses an artificial intelligence risk classifier scoring system, according to court papers 2

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. This case highlights the growing intersection of AI technology and financial services, as well as the regulatory challenges that may arise in this rapidly evolving sector.

Consumer Impact and Market Context

The case comes at a time when cash-strapped American consumers continue to seek alternative sources of credit to cover their bills, as highlighted by PYMNTS Intelligence research 1

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. The FTC's action against Cleo AI underscores the importance of consumer protection in the growing field of AI-driven financial technology services.