D.C.’s attorney general on Monday announced that he had filed a lawsuit against an online lender, charging it had deceptively marketed loans with interest rates of up to 198%.
The Office of Attorney General Karl Racine said that Opportunity Financial had lent money to more than 4,000 District residents, saying that the loans would help people build up credit. Racine said they did the opposite.
“OppFi lures vulnerable borrowers in with false promises, and then forces them to pay interest rates that far exceed what is allowed in the District,” Racine said in a statement. “This scheme traps OppFi’s victims in cycles of debt.”
The cap on loan interest in D.C. is 24%. Racine has accused OppFi of what’s called a “rent-a-bank” scheme. According to documents from the National Consumer Law Center provided by Racine’s office, most banks can ignore state caps on interest. A rent-a-bank scheme happens when a non-bank lender sets up a loan between a borrower and a bank, then buys the loan from the bank and thus can charge whatever interest rate it wants.
In a statement, Opportunity Financial called the allegations “lacking in merit” and said they “fail to account for well-established and longstanding federal banking and lending laws.”
The statement continued, “OppFi powers state-regulated, FDIC-insured banks to provide simple, affordable and safe loans to millions of everyday consumers, who lack access to traditional credit products.”
The company said its practices “are unambiguously legal under federal law, and it agrees with federal and other regulators’ rationale for supporting this longstanding policy.” It “intends to vigorously defend itself against these baseless allegations for which OppFi believes it has good defenses.”
Racine is looking for the cancellation of the Opportunity Financial loans that it calls fraudulent and barring the company from engaging in misleading practices. The lawsuit also seeks restitution for consumers, civil penalties, fees and legal costs.