WASHINGTON, D.C. — Attorney General Karl A. Racine today filed a lawsuit against Elevate, an online lender, for deceptively marketing high-cost loans carrying interest rates far above the District’s cap on interest rates. 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 percent, or up to 42 times the legal limit. District law sets the maximum interest rates that lenders can charge at 6 percent or 24 percent per year, depending on the type of loan contract. Although the company touted its product as less expensive than payday loans, payday loans are illegal in the District. 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.
“District law sets maximum interest rates that lenders can charge to protect residents from falling prey to unscrupulous, exploitative lenders,” said AG Racine. “Elevate misrepresented the nature of their loans—which had interest rates that ran up to 42 times over the District’s interest caps. By actively encouraging and participating in making loans at illegally high interest rates, Elevate unlawfully burdened over 2,500 financially vulnerable District residents with millions of dollars of debt. We’re suing to protect DC residents from being on the hook for these illegal loans and to ensure that Elevate permanently ceases its business activities in the District.”
Elevate is an online company incorporated in Delaware that has offered, provided, serviced, and advertised two loan products to District residents. 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 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.
In the District, interest rates are capped at 24 percent for loans provided by a licensed money lender with a rate stated in the contract. The limit is six percent for loans provided by licensed money lenders that do not state an interest rate in the contract. Violations of these limits are illegal under the Consumer Protection Procedures Act, which also prohibits misleading and otherwise unfairly treating consumers.
Elevate started marketing and offering its Elastic-brand loans to District consumers in 2014 and its Rise loans in the second half of 2018. Though the company was not licensed to lend money in the District of Columbia, it continued to pursue District consumers until OAG issued a cease and desist letter in April 2020. In that time, Elevate provided at least 871 Rise loans and at least 1680 Elastic loans to District consumers, collectively charging them millions of dollars in unlawful interest on the loans.
OAG alleges that Elevate’s business in the District violated the CPPA by:
- Illegally providing loans and charging consumers interest rates far in excess of the District’s interest-rate limit: Elevate is not licensed to loan money in the District and charged APRs ranging from 99-251 percent, or between four and 42 times the District’s caps on interest rates.
- Engaging in highly misleading marketing efforts to consumers: Elevate deployed a deceptive marketing scheme around its products, describing its loans as “solutions that can help… end the cycle of debt.” In fact, the predatory, high-cost loans entice vulnerable consumers with the prospect of fast cash only to weigh them down with extraordinarily high interest rates. Further, the company would not disclose exact APRs on its loans in its direct mail offers and falsely claimed its products were less expensive to consumers than alternatives such as overdraft fees, late fees, and utility disconnection fees. In fact, the actual cost to consumers from those alternatives pales in comparison to the interest on Elevate’s loans.
- Neglecting to disclose critical information to consumers regarding interest rates: Elevate did not communicate that their products’ interest rates exceeded the legal limit in the District—nor did the company adequately provide consumers with an actual, expected, or approximate rate of interest on its loans.
A copy of the complaint is available at: https://oag.dc.gov/sites/default/files/2020-06/Elevate-Complaint.pdf
Along with a permanent injunction and civil penalties, OAG is seeking restitution for affected consumers. The lawsuit asks the court to hold Elevate’s loans void and unenforceable, and order the company to compensate District residents for interest paid.
How to Report Illegal or Unfair Business Practices
To report illegal or unfair business practices, you can submit a consumer complaint to OAG by calling (202) 442-9828 or online at oag.dc.gov.