UTAH (ABC4) – Four Utah banks were called out for laundering predatory loans of up to 225% APR through “rent a bank” schemes last week. On Tuesday, one of those banks’ predatory lenders has reached a settlement with the District of Columbia (DC) to refund many of their consumers.
Elevate Credit, Inc. (Elevate) was laundering loans with up 149% APR to D.C. consumers through Utah FinWise Bank to evade DC’s interest rate limits.
Elevate was charging 99% to 149% interest on installment loans in DC despite the District’s 24% interest rate cap.
The settlement will stop Elevate from laundering loans to DC consumers through Utah FinWise Bank to evade DC’s interest rate limits and also requires Elevate to provide at least $3.3 million in relief to wronged consumers, a press release states.
The company will have to refund over 2,500 District consumers who were misleadingly marketed high-cost loans and lines of credit, waive over $300,000 in interest owed by those consumers, and pay $450,000 to the District.
The company will also be required to stop charging rates above the District’s legal cap of 24% and to cease deceptive and misleading business practices
Elevate, which is incorporated in Delaware, partnered with FinWise Bank to originate the loans and disguise them as bank loans not subject to state interest rate laws.
The company offers 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 line of credit product is called Elastic—for which Elevate does not disclose an APR, but which ranges between 129-251 percent.
“Utah’s FinWise Bank was helping the predatory lender Elevate to make loans up to 149% APR that are illegal in DC, but the DC Attorney General showed that states can stop rent-a-bank schemes enabled by rogue Utah banks,” said Lauren Saunders, associate director at the National Consumer Law Center. “The FDIC now must stop FinWise Bank and three other Utah Banks – Capital Community Bank, First Electronic Bank, and TAB Bank – from fronting for predatory lenders across the country.”
DC Attorney General Karl A. Racine says the banks are not the true lenders because Elevate controls the loans, taking on the risks and reaping most of the profits — which is why Elevate will pay the price instead of Utah FinWise Bank.
On Feb. 4, 15 national consumer and civil rights groups wrote a letter to the FDIC Board of Directors asking them to stop four banks in Utah and two others in Kentucky and Missouri from helping predatory lenders evade state interest rate laws.