District of Columbia v. Elevate Credit, Inc.
Civil Action No. 2020-1809
| D.D.C. | Jul 15, 2021Background
- D.C. sued Elevate Credit, Inc. in Superior Court under the D.C. Consumer Protection Procedures Act, alleging a "rent‑a‑bank" scheme: Elevate marketed and sold high‑interest Rise and Elastic loans (alleged APRs up to ~149% and ~251%) to District residents and failed to register as a money lender.
- Complaint alleges Elevate is the "true lender": it created marketing, websites, underwriting models, serviced loans, funded or arranged funding via captive financing and Cayman SPVs, bore loss exposure, and captured most revenue.
- Elevate removed to federal court, invoking federal question jurisdiction on two grounds: (1) complete preemption by 12 U.S.C. § 1831d (FDIA §27) and (2) the "significant federal issue" (Grable) doctrine because FDIC/FDIA regulation and bank service‑provider rules allegedly govern the dispute.
- The District moved to remand for lack of subject‑matter jurisdiction. The court accepted the complaint allegations as true for the remand inquiry.
- The District Court granted remand: it held §27 (even if it completely preempts claims against state‑chartered banks) does not completely preempt state law claims directed at a non‑bank; and the Grable/"significant federal issue" exception did not apply because the case raises fact‑bound true‑lender questions and federal preemption would be a defense, not a necessarily‑raised federal issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FDIA §27 completely preempts D.C. usury/consumer claims so removal is proper | §27 cannot be used to defeat state enforcement against a non‑bank; claims target Elevate | §27 (like NBA §§85–86) preempts state usury claims related to loans originated by state‑chartered banks, so claims effectively federal | §27 does not completely preempt claims against a non‑bank; remand granted |
| Whether the complaint is really aimed at the banks (real/true‑lender analysis) | Complaint sufficiently alleges Elevate is the true lender and targets Elevate’s conduct | Banks are the true lenders; Elevate is merely a servicer/agent, so federal law governs | Court must accept plaintiff’s allegations on remand; factual disputes cannot be resolved on remand motion—claims are directed at Elevate for now |
| Whether FDIC’s regulatory regime over banks and service providers creates federal jurisdiction via complete preemption | D.C. stresses state enforcement of non‑bank conduct; Dodd‑Frank limits preemption for affiliates/agents | FDIC oversight, Bank Service Company Act, and related guidance mean federal law governs and preempts state claims | FDIC regulatory scheme does not convert §27 into complete preemption of state claims against non‑banks |
| Whether the Grable/"significant federal issue" exception supports removal | Plaintiff: federal issues are not necessarily raised; claims are state law and fact‑bound | Elevate: resolution requires interpreting federal bank statutes/regulations (thus a substantial, disputed federal issue) | Grable inapplicable: issues are fact‑bound (true‑lender) and federal law would be a defense, not a necessarily‑raised, context‑free federal question |
Key Cases Cited
- Beneficial Nat. Bank v. Anderson, 539 U.S. 1 (2003) (NBA §§85–86 provide exclusive federal remedy for usury claims against national banks)
- Metro. Life Ins. Co. v. Taylor, 481 U.S. 58 (1987) (complete‑preemption doctrine converts certain state claims into federal ones)
- Grable & Sons Metal Prods. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005) (narrow test for federal jurisdiction where a federal issue is necessarily raised, substantial, and capable of resolution without upsetting federal‑state balance)
- Gunn v. Minton, 568 U.S. 251 (2013) (applies Grable four‑part test)
- In re Cmty. Bank of N. Va., 418 F.3d 277 (3d Cir. 2005) (removal improper where claims targeted non‑bank despite bank involvement)
- West Virginia v. CashCall, Inc., 605 F. Supp. 2d 781 (S.D. W. Va. 2009) (remand where state sued non‑bank lender alleged to be true lender)
- Flowers v. EZPawn Okla., Inc., 307 F. Supp. 2d 1191 (N.D. Okla. 2004) (denying removal where complaint alleged non‑bank was true lender)
- Cmty. State Bank v. Knox, [citation="523 F. App'x 925"] (4th Cir. 2013) (claims against non‑bank servicers fall outside FDIA preemption in similar contexts)