In a complaint filed in the U.S. District Court for the Northern District of California, the FTC alleges that a company that distributes a mobile banking application (App) and its founder who is the company’s sole officer have engaged in deceptive practices in violation of Section 5 of the FTC by making misrepresentations regarding consumers’ ability to access their funds and the interest rates paid on consumers’ accounts.

According to the complaint, the defendants advertised the App “as a high-interest bank account that operates by placing consumers’ funds at unspecified FDIC-insured banks.”  The FTC alleges that the defendants represented that consumers will (1) have “24/7” access to their funds and that withdrawn funds will be returned in five or fewer business days, and (2) be paid interest at “best” or “high” rates and specified “minimum base rates.”  Such representations are made on the company’s website and through the Apple App Store and Google Play Store which offer the App for download by consumers.

The FTC alleges that some App users waited weeks or even months to receive their funds despite repeated complaints to the company, while other users claimed that they never received their funds.  It also alleges that the company failed to pay users high interest rates, including minimum base rates, as represented, and in some circumstances, did not pay any interest.

According to the complaint, the FTC issued a civil investigative demand to the company seeking information about its business practices, including its practices for returning funds to consumers and for paying interest.  The FTC alleges that the company has not provide any formal or informal written answers or documentary materials in response to the CID and has refused to provide substantiation for its interest rate claims.

The complaint seeks injunctive and other relief as the court deems appropriate in the exercise of its equitable jurisdiction.  (While the FTC alleges that court’s equitable jurisdiction allows it to award restitution and disgorgement, the question of whether a court can award such relief is currently before the U.S. Supreme Court.)