How “everything went” for an online tribal lender

Earlier this month, a federal judge in Virginia gave final approval to a settlement involving Elevate Credit, a publicly traded lender based in Fort Worth, Texas. It was a quiet coda to a short-lived era when deep-pocketed corporations teamed up with Native American tribes in an effort to circumvent state restrictions on high-cost consumer loans.

As part of the settlement, Elevate agreed to pay $33 million to resolve a dispute related to a predecessor company’s dealings with various tribes.

The money will largely go to US consumers who have taken out loans over the internet at interest rates of up to 400% or more. The borrowers’ attorneys targeted various individuals and entities associated with Think Finance, a now-defunct company that partnered with tribes on high-cost consumer loans, then later spun off Elevate and filed for bankruptcy.

Kenneth Rees (left) was previously the CEO of Think Finance, which before filing for bankruptcy partnered with the Otoe-Missouria Tribe in Oklahoma for high-cost consumer loans. Tribal chairman John Shotton is shown in a photo from 2014.


“Think Finance was a juggernaut back then, before it all fell apart,” said Andrew Guzzo, a Virginia attorney who represented the borrowers in the class action lawsuit. Referring to high cost tribal loans, he added: “‘No one does that at this volume anymore.’

The settlement, which received final approval Aug. 16, is the latest blow to the tribal lending experiment — a well-funded attempt about a decade ago to circumvent state interest rate caps. .

The Elevate settlement follows a number of other significant payments made by individuals and entities associated with Think Finance. Including two previous settlements, the various defendants have now agreed to pay approximately $155 million and cancel more than $760 million in consumer debt.

In recent years, lawsuits by regulators and private litigants have uncovered many details about business deals between Native American tribes and Think Finance. They also shed light on how assets were transferred from Think Finance to Elevate before the former company filed for bankruptcy.

Shortly after the final settlement agreement was reached in February, Elevate said in a securities deposit that he denied any wrongdoing or responsibility.

“We are thrilled to put this matter behind us,” Elevate CEO Jason Harvison said in a statement at the time. “These agreements are, without a doubt, in the best interest of all Elevate stakeholders. Resolving the legacy litigation moves Elevate forward and unlocking shareholder value with our continued focus on innovative credit solutions for everyday Americans.

On Friday, a spokesperson for Elevate declined to provide additional comment.

Think Finance’s roots go back to a consumer lending company called ThinkCash. More than a decade ago, ThinkCash partnered with First Bank of Delaware for high-cost loans, according to a 2020 filing by plaintiffs in litigation related to Think Finance’s bankruptcy.

First Bank of Delaware finally ceased its activities after being repeatedly cited by banking regulators for violations.

In 2011, Think Finance began contracting with tribes, including the Otoe-Missouria Tribe in Oklahoma.

“For us, short-term internet lending has been one of the most successful businesses we’ve been involved in since gambling,” Otoe-Missouria Tribe President John Shotton said in a 2014 interview. with Bloomberg. Shotton did not respond to requests for comment on Friday.

Think Finance and its partners have sought to rely on the concept of tribal sovereign immunity – a doctrine that can shield tribes from certain lawsuits – as a legal shield.

But under its contracts with the tribes, Think Finance controlled loan operations, providing services related to loan collection, loan servicing, marketing and human resources, according to the 2020 court filing.

A joint venture between Think Finance and an investment fund called Victory Park Capital bought around 99% of the loan stakes within 48 hours, according to the filing.

Billions of dollars in revenue were generated and Think Finance was entitled to the “overwhelming majority of the profits”, according to the court filing.

Soon came regulatory scrutiny – both from various states and, eventually, from the Consumer Financial Protection Bureau.

In 2014, Pennsylvania Attorney General Josh Shapiro sued Think Finance and former CEO Kenneth Rees. In the same year, Think Finance transferred various assets to Elevate, where Rees then served for several years as managing director and chairman of the board before stepping down in 2019.

As part of the deal, an alleged tax-free spinoff, Elevate received hundreds of millions of dollars in assets without paying anything, lawyers representing the borrowers later claimed. Meanwhile, Think Finance found itself undercapitalized and saddled with debt, according to lawyers who then sought to recover money on behalf of the borrowers.

“As regulators moved closer to tribal loan participants, a number of them attempted to protect their assets and avoid liability through complex transactions or corporate transfers,” said Gary Leibowitz. , an attorney who sought to recover money from Elevate in the Think Finance bankruptcy case.

“There’s nothing inherently wrong with tax-free spinoffs — they happen all the time — as long as they meet the required elements,” Leibowitz said. “To do this properly, among other things, both companies must be solvent after the spin-off and continue to operate for a period of time.”

Think Finance filed for bankruptcy in October 2017, about six months after its initial public offering by Elevate closed.

Since 2018, shares of Elevate have fallen from a high of over $10 to $1.52. As of Friday, the company’s market capitalization was around $47 million.

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