WASHINGTON— District of Columbia Attorney General Karl A. Racine has filed a lawsuit against Elevate, an online lender, alleging the company has been deceptively marketing high-cost loans carrying interest rates far above the District’s cap on interest rates.
Karl Racine
According to prosecutors, Elevate is not a licensed moneylender in the District, but offered two kinds of short-term loan products carrying interest rates of between 99% and 251%, or up to 42 times the legal limit. District law sets the maximum interest rates that lenders can charge at 6% or 24% per year, depending on the type of loan contract, the Attorney general said.
“Although the company touted its product as less expensive than payday loans, payday loans are illegal in the District,” the AG said in a statement.
According to the lawsuit, over roughly two years, Elevate made 2,551 loans to District consumers and collected millions of dollars in interest. Following a cease and desist letter sent to the company in April 2020, OAG has filed suit to permanently stop Elevate from engaging in misleading business practices, require Elevate to void the loans made to District residents, return interest paid by consumers as restitution, and pay civil penalties, the Attorney General said.
Elevate is an online company incorporated in Delaware that has offered, provided, serviced, and advertised two loan products to District residents, the Attorney General said.
The Products
“One of these loan products, Rise, is an installment loan product with an advertised Annual Percentage Rate (APR) range of 99-149 percent. The second product is called Elastic—for which Elevate does not disclose an APR, but which has effectively ranged between 129-251 percent,” the Attorney General alleged. “The company has advertised these online products through direct mail, e-mails, and via online banner ads. In 2019 alone, it sent more than 62 million pre-selected credit offers to consumers nationwide. Elevate partners with two state-chartered banks to originate both types of loans, but the company ultimately controls the loans, taking on the risks and reaping the profits.”
The AG noted in the District interest rates are capped at 24% for loans provided by a licensed money lender with a rate stated in the contract. The limit is 6% for loans provided by licensed money lenders that do not state an interest rate in the contract.
Consumer Groups Welcome Suit
The AG’s lawsuit was welcomed by several consumer groups.
“Since the time of the American Revolution, states have capped interest rates to protect people from predatory lending. Yet predatory lenders are now trying to evade state interest rate limits by laundering their loans through a few rogue out-of-state banks in Utah and Kentucky. DC Attorney General Racine’s important lawsuit points out the obvious truth: these predatory high-cost lenders are the true lender and they cannot hide behind a bank to make illegal loans,” said Lauren Saunders, associate director of the National Consumer Law Center.