FTC Secures $17 Million Settlement Against Cash-Advance App Cleo AI
On March 27, 2025, the Federal Trade Commission (FTC) announced a proposed settlement with online cash-advance and personal finance company Cleo AI, Inc., requiring the company to pay $17 million to resolve allegations that it deceived consumers and obstructed subscription cancellations. The complaint and proposed settlement order were filed in the U.S. District Court for the Southern District of New York.
The settlement consists of $10 million in consumer redress and a $7 million civil penalty. It represents a significant enforcement action against a fintech platform utilizing conversational AI and automated assistants to market financial products.
The AI System and Deceptive Practices
Cleo AI operates a mobile personal finance app that uses a conversational AI assistant (chatbot) to interact with users. The FTC alleged that the company engaged in deceptive practices in violation of Section 5 of the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA):
- Deceptive Cash Advance Claims: Cleo's advertisements and AI interface promised users "instant" or same-day cash advances ranging from $250 to $500. In reality, almost no users received the advertised amounts, with most routinely offered negligible advances under $100.
- Hidden Fees: The "same-day" or "instant" delivery of cash required users to pay an additional fee that was not clearly disclosed. Even after paying, users often waited until the next day to receive their funds.
- Negative Option and Subscription Traps: To apply for an advance, users were required to enroll in an auto-renewing subscription costing $5.99 or $14.99 per month. The actual eligible cash advance amount was only disclosed after payment information was entered and the subscription was active.
- Obstructing Cancellations: When users attempted to cancel, Cleo's system blocked them, falsely claiming they could not cancel their subscription until any outstanding cash advances were repaid, while continuing to charge monthly fees.
Verbatim Quotes
From Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection:
“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.” — FTC Press Release
From legal analysis of the complaint's details:
"While Cleo advertised up to $250 to $500 in cash advances, users were routinely offered amounts under $100. The FTC alleged that many users complained that the offered cash advance was negligible. Furthermore, users were charged additional fees if they wanted to receive the cash the same day, but the agency claimed that such fees were not clearly disclosed." — All About Advertising Law
Significance and Enforcement Patterns
This case demonstrates the FTC's aggressive application of ROSCA to negative-option billing and subscription models in fintech, even where conversational AI is used as the primary interface. It underscores that regulators will look past "AI-driven" personalization to hold companies strictly accountable for the underlying terms, fees, and friction in their consumer transactions.