Subprime consumer lender Elevate settles with D.C. authorities

The subprime consumer lender Elevate has agreed to pay at least $3.75 million to settle a lawsuit alleging that it violated the District of Columbia’s interest rate cap.

Under the deal, the Fort Worth, Texas, company pledged not to advertise loans with annual percentage rates above 24% to Washington, D.C., consumers. It also agreed to facilitate the deletion of negative credit information for D.C. consumers who paid higher rates.

“This settlement will put money back into the pockets of District consumers who were illegally overcharged,” D.C. Attorney General Karl Racine said in a press release Tuesday. “Interest rates like those involved in this settlement often exceed 100% and have a devastating impact on individuals who are in need of an honest and lawful loan.”

Bloomberg

An Elevate spokesperson said in an email that the company has complied with all financial regulations and will continue to do so.

"While we disagree with this lawsuit and believe District residents deserve more — not less — access to credit, we agreed to a settlement with the D.C. Attorney General in order to move forward and maintain our focus facilitating access to responsible credit options for those who need it,” the spokesperson said.

For years, state and local officials across the country, typically in Democratic-leaning areas, have been battling with high-cost lenders over their use of bank partnerships in an effort to avoid interest rate caps.

The lenders argue that their loans are not subject to state and local interest rate limitations because their partner banks have the ability to export their home-state rules.

The high-cost lenders won a key victory on Tuesday when a federal judge in Oakland, California, threw out a legal challenge by New York, California and Illinois to a Trump-era rule by the Office of the Comptroller of the Currency, which critics said would encourage predatory lending.

The D.C. attorney general’s office sued Elevate in 2020, alleging that the company illegally offered two loan products to D.C. residents. The suit charged that even though banks were involved, Elevate was the true lender.

One of the Elevate products was an installment loan with annual percentage rates of between 99% and 149%, and the other was a line of credit that also features triple-digit APRs, according to the attorney general’s office.

Elevate partners with FinWise Bank in Utah and Republic Bank & Trust in Kentucky, but the attorney general’s office said in its press release that Elevate takes on the risk and reaps most of the profits.

FinWise Bank and Republic Bank & Trust are both state-chartered banks whose primary federal regulator is the Federal Deposit Insurance Corp.

Last week, 15 consumer groups asked new leaders at the FDIC to cut off partnerships between banks and nonbank lenders that feature triple-digit interest rates. The letter was sent to Democratic appointees on the FDIC board who were preparing to take the agency’s reins from then-Chair Jelena McWilliams, a Republican appointee.

In 2020, Racine was part of a group of attorneys general who sued the FDIC over a rule that they contended could lead to more so-called rent-a-bank partnerships.

Under the settlement announced Tuesday, Elevate will be required to provide at least $3.3 million in restitution to affected D.C. customers, plus $450,000 to the D.C. government. The company will also provide $300,000 in debt forgiveness to affected D.C. customers.

Last December, the D.C. attorney general’s office announced a $2 million settlement with OppLoans, another subprime consumer lender that partnered with banks to offer high-cost loans to local residents.