Silicon Valley loan company withdraws bank request in federal investigation, but it continues to expand

A Silicon Valley financial lender withdrew its candidacy to become a national bank on Friday as a federal investigation continues into its debt collection practices. But Oportun Financial Corp., which has come under scrutiny for suing thousands of its mostly low-income Latin American clients in small claims court during the pandemic, is not finished. ‘try to develop.

The San Carlos-based Lender is a community development financial institution, a federal designation for loan companies that operate in low-income or underserved communities of color.

The Guardian and Propublica’s August 2020 investigations found Opportunity to be one of the most contentious debt collectors in California and Texas. Almost all of the company’s recovery lawsuits in California have gone through small claims courts, where there is no right to legal representation and access to translators is scarce, making it uniquely intimidating for those with language barriers.

In March, Oportun revealed to the United States Securities and Exchange Commission that the Consumer Financial Protection Bureau was formally investigating its collection practices from 2019 to 2021.

The company filed 14,000 small claims lawsuits in the first six months of 2020, the Guardian reported. The Chronicle revealed that Opportun had filed nearly 2,400 of these Bay Area small claims lawsuits and was responsible for 17.5% of the entire small claims case in San Francisco Superior Court in 2018.

Oportun has responded to explosive media inquiries by promising to dismiss all pending lawsuits and to review its collection practices. Online court records show that the company’s last court case in San Francisco was on Jan. 1, when it filed for dismissal of one of its collection requests.

Banking watchdogs and consumer groups sounded the alarm when the company filed for bank status in November 2020, saying its allegedly predatory practices would develop under a bank designation. Financial lenders with bank status are federally regulated and exempt from the type of state interest rate cap that Opportunity supported through AB539, which Governor Gavin Newsom enacted in 2019. While AB539 capped In the interest rates businesses could charge on personal loans from $ 2,500 to $ 10,000, the kind in which Oportun specializes, a banking status would allow the business to charge customers more.

Timely, abbreviation of “opportunity“or” opportunity “in Spanish, said he planned to re-file his bank status application in a press release, although he did not specify when he planned to do so. did not respond to The Chronicle’s request for comment.

Apart from the banking app, which would also allow Oportun to add more locations across the country, the company found a way to increase its footprint. According to trade publication American Banker, Oportun now operates in 33 states, up from 12 a year ago when it applied for a banking charter, due to its partnership with MetaBank, a bank in Sioux Falls, SD.

Marisabel Torres, California policy director at the Center of Responsible Lending, a North Carolina-based nonprofit, called the partnership “an end to the charter process itself.”

“Their partnership with MetaBank allows them to expand into other states,” Torres told The Chronicle. “Their expansion means more consumers will be vulnerable to the same abusive debt collection practices. “

MetaBank operates as the lender of Opportunity loans in certain states, which means the loans are not subject to interest rate caps, Torres said.

“They basically bypass what another non-bank lender would have to buy into, by going around and using the MetaBank charter instead,” Torres said.

Shwanika Narayan is a writer for the San Francisco Chronicle. Email: [email protected] Twitter: @shwanika Instagram: @shwanika

Janet E. Fishburn