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D.C. reaches nearly $4 million settlement with online lender to resolve usury allegations

State Issues State Attorney General Settlement Enforcement Online Lending Usury Interest Rate Courts Predatory Lending

State Issues

On February 8, the District of Columbia attorney general announced a nearly $4 million settlement with an online lender to resolve allegations that lender marketed high-costs loans carrying interest rates exceeding D.C.’s interest rate cap. As previously covered by InfoBytes, the AG filed a complaint in 2020, claiming the lender violated the District of Columbia Consumer Protection Procedures Act (CPPA) by offering two loan products to D.C. residents carrying annual percentage rates (APR) ranging between 99-149 percent and 129-251 percent. Interest rates in D.C., however, are capped at 24 percent for loans with the rate expressed in the contract (loans that do not state an express interest rate in the contract are capped at six percent), and licensed money lenders that exceed these limits are in violation of the CPPA. According to the AG, the lender—who allegedly never possessed a money lending license in D.C.—violated the CPPA by (i) unlawfully misrepresenting it was allowed to offer loans in D.C. and failing to disclose or adequately disclose that its loans contain APRs in excess of D.C. usury limits; (ii) engaging in unfair and unconscionable practices through misleading marketing efforts; and (iii) violating D.C. usury laws.

Under the terms of the settlement, the company is required to (i) pay at least $3.3 million in restitution to refund alleged interest overcharges to D.C. borrowers; (ii) provide more than $300,000 in debt forgiveness to D.C. borrowers who would have paid future interest amounts in connection with an outstanding loan balance; and (iii) pay $450,000 to the District. According to the announcement, the company has also agreed that it “will not on its own, or working with third parties such as out of state banks, engage in any act or practice that violates the CPPA in its offer, servicing, advertisement, or provision of loans or lines of credit to District consumers.” The company is also prohibited from charging usurious interest rates, must delete negative credit information associated with its loans and lines of credit, and may not represent that it can offer loans or lines of credit in D.C. without first obtaining a D.C. money lender license.