A lender sued thousands of lower-income Latinos during the pandemic. Now it wants to be a national bank.

click to enlarge A lender sued thousands of lower-income Latinos during the pandemic. Now it wants to be a national bank.
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This article is co-published with ProPublica, a nonprofit newsroom that investigates abuses of power. Sign up for ProPublica’s Big Story newsletter to receive stories like this one in your inbox as soon as they are published.

Dozens of consumer advocacy organizations and Latino civil rights groups are contesting an effort by Oportun Financial Corp. to become a national bank, citing an investigation published last year by ProPublica and The Texas Tribune.

The monthslong probe showed the loan company had sued thousands of lower-income Latinos in Texas during the coronavirus pandemic while depicting itself as a benefactor of that community. It also revealed that Oportun had become the most litigious personal loan company in the state and routinely charged high interest rates while keeping customers on the hook with repeated refinancing.

California-based Oportun, founded in 2005, has always been a regional company and lends in just 12 states including Texas. But on November 23, it submitted a bank charter application to the Office of the Comptroller of the Currency, the federal agency that regulates national banks and federal savings associations, that would allow it to go national if approved.

In a December 22 letter to the agency, more than 40 groups, including the League of United Latin American Citizens, UnidosUS, the National Consumer Law Center and Consumer Reports, said both the OCC and Oportun need to address the “serious issues” raised by the investigation before the company is able to become a national bank.

“Unfortunately, recent investigations and research have revealed egregious debt collection practices by Oportun,” the letter states. “The investigation raised problems including unaffordable loans, high volumes of collections suits, and abusive and intimidating debt collection tactics. These raise substantial and serious questions regarding Oportun’s application.”

The letter also cited an investigation by The Guardian into the company’s prolific legal debt collection practices in California.

More than half a dozen of the organizations that signed the letter, including the Center for Responsible Lending, the California Reinvestment Coalition, LULAC and the Woodstock Institute, submitted more detailed missives that cited the ProPublica/Tribune and Guardian investigations along with their own extensive research into the company’s business practices.

The involvement of UnidosUS is particularly notable as Oportun partnered with the group in 2019 to expand a financial literacy program.

The Center for Responsible Lending unsuccessfully requested a 60-day extension of the 30-day public comment period on the application, which ended on Christmas Day. (The center was started with support from the Sandler Foundation, which provided most of the original funding for ProPublica and remains one of its largest donors.)

“The OCC is reviewing the comments received and has not extended the comment period,” agency spokesman Bryan Hubbard said in an email.

Under its standard review process, the agency aims to make decisions on applications no more than 120 days after they are submitted, according to information on its website. That means the OCC may decide on Oportun’s application by early spring.

“The public comment period is an important part of this process,” Oportun said in a statement to ProPublica and the Tribune. “As we enter the next phase of our application, we look forward to working with the regulators and other stakeholders to evaluate any comments.”

The company has declined to address the publications’ specific findings, instead pointing out its high customer satisfaction scores and rates of repayment. It also said last summer that it had enrolled tens of thousands of customers in its emergency hardship deferral program since the start of the pandemic.

But the company, which went public in 2019, already had taken some steps to address issues raised in the ProPublica, Tribune and Guardian reports.

Last July, after the publications began asking questions about the company’s debt collection practices, Oportun announced it would drop all pending lawsuits, temporarily suspend new filings and file 60% fewer cases in the future. It also vowed to cap interest rates on its loans at 36%.

While significant, consumer advocates have said those measures don’t go far enough.

All public comment letters to the OCC expressed concern about a lack of detail in Oportun’s 200-page application, including how it would comply with the Community Reinvestment Act, a federal law that encourages commercial financial institutions to better serve low-income communities.

“Oportun provides very little detail on its CRA plans, though it appears those plans consist of online-only bank accounts, and Oportun’s high cost consumer, credit card, and auto loans, with rates up to 36% APR (annual percentage rate),” the letter submitted by the 40-plus member coalition stated. “Given that Oportun targets the Latino community for these high cost products, the OCC should ensure that an independent fair lending audit is conducted of Oportun’s operations and products, and that Oportun enables its customers to graduate to lower cost products, before any charter approval is granted.”

Oportun, formerly known as Progreso Financiero, has been certified for years as a Community Development Financial Institution, an esteemed federal designation for banks, credit unions and other lenders with clienteles that are largely low-income or in underserved communities of color.

In its own letter, the National Community Reinvestment Coalition said Oportun’s debt collection practices “fall short of the expectations of a CDFI, and certainly a CDFI seeking a national bank charter.”

In its application, Oportun noted that it’s already set to start lending in 30 additional states thanks to a new partnership with MetaBank, which is national. (Consumer advocates frown on such arrangements as they can be a way for non-bank lenders to skirt state-imposed interest rate caps, which national banks are allowed to ignore.)

It described its desire to go national in part as a way to minimize administrative and regulatory hassles, noting that it has to maintain licenses in two dozen states and “manage a range of partner banking relationships.”

“With a national bank charter, by contrast, the Company will be able to focus on meeting the requirements of a single primary regulator,” it wrote, referring to the OCC.

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