Elastic Credit Lawsuit: Rent-a-Bank Scheme, Settlement, and Aftermath

The Elastic line of credit lawsuit was filed in June 2020 by the District of Columbia against Elevate Credit, Inc., which markets the product. DC alleged that Elastic carried effective annual interest rates between 129% and 251%, far above the District’s 24% cap, and that Elevate used a partnership with a Kentucky bank to sidestep local usury law. The case settled in February 2022 for nearly $4 million in refunds, debt forgiveness, and penalties.¹

What the District of Columbia Alleged

Attorney General Karl Racine filed the complaint on June 5, 2020, in DC Superior Court. It targeted two Elevate products, the Rise installment loan and the Elastic line of credit, and centered on Elastic’s effective APRs of 129% to 251%. The District’s usury law caps interest at 6% or 24% depending on the contract, so the alleged Elastic rates ran as much as 42 times the legal ceiling.¹

The complaint made three core claims. Elevate had originated at least 1,680 Elastic lines of credit for DC residents without holding a required money lending license. It marketed Elastic as a tool to “avoid expensive overdraft fees” while allegedly leaving the true cost out of direct mail solicitations and ads. And the loans themselves were unconscionable under District law, which would render them void and unenforceable.²

DC asked the court for a permanent injunction, full restitution, civil penalties, and a declaration that the loans were unenforceable.

The Rent-a-Bank Structure at the Center of the Case

Elevate did not itself originate Elastic loans. It partnered with Republic Bank & Trust Company, a Kentucky-chartered, FDIC-insured bank. Republic issued each line of credit, then sold roughly 90% of each advance to third parties within days.³ Because federally regulated banks can generally export their home-state interest rate rules to borrowers elsewhere, the arrangement let Elastic operate at rates that would otherwise be illegal in DC.

The Attorney General called this a “rent-a-bank” scheme. The complaint argued that Elevate was the true lender because it controlled the marketing, underwriting, analytics, and funding, and because the economic risk of the loans flowed to a Cayman Islands special purpose vehicle Elevate controlled rather than to Republic. Republic Bank, in this account, was a pass-through whose charter gave the operation a federal veneer.²

Elevate tried to move the case to federal court. On July 15, 2021, a federal judge sent it back to DC Superior Court for lack of federal jurisdiction.⁴

The Settlement Terms

On February 8, 2022, Racine announced a consent order resolving the case. The package came to nearly $4 million and included several distinct components.¹

At least $3.3 million in refunds to more than 2,500 DC consumers who paid interest above what a 24% APR would have produced.
Over $300,000 in outstanding interest waived for borrowers still carrying balances.
A $450,000 civil penalty paid to the District.
An obligation to work with the credit bureaus to permanently delete negative credit reporting tied to the affected loans.
A commitment to stop charging DC consumers above the 24% cap, to stop servicing lenders that exceed it in the District, and to accurately describe its licensing status.⁵

Consumers did not need to file a claim. Elevate was responsible for identifying affected borrowers and calculating each refund, then paying by direct deposit to the bank account on file or, if that failed, by mailed check. The company reserved $3.4 million for restitution and had 120 days to distribute it; any unclaimed funds went to the District.⁶

How Elastic Prices Its Loans

Elastic is a revolving line of credit for $500 to $4,500, aimed at subprime and near-prime borrowers. Instead of quoting a conventional APR, the product charges a cash advance fee of 5% to 10% of each draw plus a carried balance fee of 5% to 10% for every billing cycle with a balance outstanding.² Elevate’s SEC filings indicated an effective APR of 109% on a $2,500 advance; DC estimated the range ran considerably higher depending on the amount borrowed and how quickly the borrower repaid.⁷

Republic Bank’s own internal figures showed average effective rates on Elastic loans of 91.7% in 2020, 93.6% in 2021, and 94.25% in 2022. Consumer advocates have argued that labeling the price as “fees” rather than “interest” makes it harder for borrowers to compare Elastic to other credit products.³

What Has Happened Since the Settlement

The DC case ended in 2022, but pressure on the bank that made the model possible has continued. On March 30, 2023, the National Community Reinvestment Coalition and ten other groups petitioned the FDIC to downgrade Republic Bank & Trust’s Community Reinvestment Act rating, citing loans through partners including Elevate, NetCredit, OppFi, LoanMart, and Check ‘n Go with rates as high as 225%.⁸ The coalition noted that Republic Processing Group, the segment housing these fintech partnerships, produced 31% of the bank’s net revenues in 2022, and sent a parallel request to the Kentucky Department of Financial Institutions.³

Republic Bank has defended the arrangement. In July 2024 congressional testimony, executive chair Steven Trager told a House subcommittee that the bank undergoes annual FDIC compliance exams of its fintech programs and staffs a dedicated compliance team for partner oversight. He argued existing regulation is adequate and warned against “regulation through enforcement.” Republic said it held an “Outstanding” CRA rating at that time.⁹

Elevate itself went private in early 2023. Park Cities Asset Management completed an all-cash acquisition on February 28, 2023, valued at roughly $67 million, or $1.87 per share, and Elevate delisted from the NYSE while continuing to operate under its existing name from Fort Worth, Texas.¹⁰ The Elastic line of credit remains available, with Republic Bank & Trust still serving as the issuing bank.¹¹

Other Legal Actions Against Elevate

The DC lawsuit was not the only challenge Elevate has faced. California firm Warren Terzian LLP publicly opened an investigation into a potential class action over Rise and Elastic, alleging that Elevate’s rates ran double or triple California’s roughly 36% cap on loans between $2,500 and $9,999 under a law that took effect January 1, 2020. The firm flagged similar potential claims in more than a dozen other rate-cap states. Based on available records, that investigation had not produced a filed lawsuit.¹²

Separately, Elevate reached a proposed $33 million settlement in early 2022 to resolve what was described as a nationwide “web of litigation” alleging a decade-long predatory lending scheme affecting more than a million low-income consumers. Details of the individual underlying cases and courts are limited in the available record.¹³

1
DC Office of the Attorney General. AG Racine Announces Nearly $4 Million Settlement
2
DC Office of the Attorney General. Elevate Credit Complaint
3
NCRC. NCRC and 10 Other Advocacy Groups Call on the FDIC to Downgrade Republic Bank and Trust
4
vLex. District of Columbia v. Elevate Credit, Inc.
5
Banking Dive. Subprime Lender Elevate to Pay More Than $3.75M to End DC Interest Rate Suit
6
DC Office of the Attorney General. Elevate Credit Consent Order
7
National Consumer Law Center. Rent-a-Bank One Pager
8
NCLC. FDIC Should Downgrade Three Banks Engaged in Predatory Rent-a-Bank Lending
9
U.S. House of Representatives. Testimony of Steven E. Trager Before the House Financial Services Subcommittee
10
Elevate Credit. Park Cities Asset Management Completes Acquisition of Elevate
11
Elastic. About Us
12
Warren Terzian LLP. Elevate Credit Class Action Investigation
13
Cole Schotz. Fort Worth Fintech Elevate Credit Settles Massive Litigation for $33 Million