Earlier this month, a federal judge in Virginia gave final approval to a settlement involving Elevate Credit, a publicly traded lender based in Fort Worth, Texas. It was a quiet coda to a short-lived era when deep-pocketed companies partnered with Native American tribes in an effort to maneuver around state restrictions on high-cost consumer loans.
Under the settlement, Elevate agreed to pay $33 million to resolve litigation related to a predecessor company's dealings with various tribes.
The money will largely go to U.S. consumers who took out loans over the internet at interest rates of up to 400% or higher. Attorneys for the borrowers have been targeting various people and entities associated with Think Finance, a now-defunct company that partnered with tribes on high-cost consumer loans, then later spun off Elevate and filed for bankruptcy.
"Think Finance was a behemoth back in the day, before it all unraveled," said Andrew Guzzo, an attorney in Virginia who represented borrowers in the class-action litigation. Referring to high-cost tribal loans, he added: "No one's doing this anymore at this volume."
The settlement, which received final approval on Aug. 16, is the latest blow to the tribal lending experiment — a well-funded
The Elevate settlement follows a number of other large payments by people and entities associated with Think Finance. Including two previous settlements, the various defendants have now agreed to pay around $155 million and to cancel more than $760 million in consumer debt.
Over the last several years, lawsuits brought by both regulators and private litigants have exposed numerous details of the business arrangements between Native American tribes and Think Finance. They have also shed light on how assets were transferred from Think Finance to Elevate before the former company's bankruptcy filing.
Shortly after the latest settlement agreement was reached in February, Elevate said in a
"We are pleased to put this matter behind us," Elevate CEO Jason Harvison said in a statement at the time. "These agreements are, without a doubt, in the best interest of all Elevate stakeholders. The resolution of the legacy litigation allows Elevate to move forward and unlock value for shareholders with our continued focus on innovative credit solutions for everyday Americans."
On Friday, an Elevate spokesperson declined to provide additional comment.
Think Finance's roots date back to a consumer lending company called ThinkCash. More than a decade ago, ThinkCash partnered with First Bank of Delaware on high-cost loans, according to a 2020 court filing by the plaintiffs in litigation related to the Think Finance bankruptcy.
First Bank of Delaware eventually
In 2011, Think Finance began entering into contracts with tribes, including the Otoe-Missouria Tribe in Oklahoma.
"Short-term lending on the internet for us has been one of the most successful ventures we've been involved in since gaming," John Shotton, chairman of the Otoe-Missouria Tribe, said in a 2014 interview with Bloomberg. Shotton did not respond Friday to requests for comment.
Think Finance and its partners sought to rely on the concept of tribal sovereign immunity — a doctrine that can protect tribes from certain lawsuits — as a legal shield.
But under its contracts with tribes, Think Finance had control of the lending operations, providing services related to loan collections, loan servicing, marketing and human resources, according to the 2020 court filing.
A joint venture between Think Finance and an investment fund called Victory Park Capital purchased roughly 99% of the participation interests in loans within 48 hours, the filing alleged.
Billions of dollars in revenue were generated, and Think Finance was entitled to the "overwhelming majority of the profits," according to the court filing.
Soon came regulatory scrutiny — both from various states and, eventually, from the Consumer Financial Protection Bureau.
In 2014, Pennsylvania Attorney General Josh Shapiro sued Think Finance and former CEO Kenneth Rees. The same year, Think Finance transferred various assets to Elevate, where Rees went on to serve for several years as chief executive and chairman of the board before stepping down in 2019.
Under the deal, a purported tax-free spinoff, Elevate received hundreds of millions of dollars worth of assets without paying anything, lawyers representing borrowers later alleged. Meanwhile, Think Finance was left undercapitalized and saddled with liabilities, according to lawyers who later sought to recoup money on behalf of borrowers.
The Consumer Financial Protection Bureau is scrutinizing “rent-a-bank schemes” that charge borrowers high interest rates, the agency’s deputy director said Wednesday. Consumer advocates have long pushed for limits on such partnerships between banks and nonbank lenders.
"As the regulators were closing in on participants in tribal lending, a number of them tried to protect their assets and avoid liability through complex corporate transactions or transfers," said Gary Leibowitz, a lawyer who sought to recover money from Elevate as part of the Think Finance bankruptcy case.
"There's nothing inherently wrong with tax-free spinoffs — they occur all the time — as long as they satisfy the required elements," Leibowitz said. "To do it correctly, among other things, both companies have to be solvent after the spin and continue in business for a period of time."
Think Finance filed for bankruptcy in October 2017 — about six months after Elevate completed its
Since 2018, shares in Elevate have fallen from a peak of more than $10 to $1.52. The company's market capitalization on Friday was around $47 million.
