The lender LMI Oportun withdraws its request for an OCC banking charter


Dive brief:

  • Timely, a low-to-moderate income (LMI) loan specialist with a strong Latino slant, has voluntarily withdrawn his banking charter application from the Office of the Comptroller of the Currency (OCC), the company said. Friday in a press release on its website.
  • The company, in a March deposit, revealed that the Consumer Financial Protection Bureau (CFPB) was investigating whether Opportunity’s collection practices between 2019 and 2021 – and in particular, the hardship treatments the company was offering borrowers during the COVID-19 pandemic – violated consumer protection laws. Nearly two dozen consumer groups wrote to Acting Comptroller Michael Hsu in August, asking the OCC to wait until the CFPB completes its investigation before proceeding with the charter, American banker reported.
  • “We have forged a constructive relationship with the OCC since our initial request was filed almost a year ago,” Oportun said in his statement Friday. “We remain committed to pursuing a banking charter with the OCC and plan to modify elements of our charter request to reflect changes in our business.”

Dive overview:

Applying for a charter is certainly not a dead end for a company’s banking aspirations. Varo, which in July 2020 became the first challenger bank to receive a national banking charter from the OCC, took of a request to the Federal Deposit Insurance Corp. (FDIC) in 2018. The search for a license by the lender ultimately took three years and cost nearly $ 100 million.

Oportun is indeed at least the second company to withdraw its request for a banking charter within a week. British challenger Monzo withdrew from his efforts to obtain a US banking license, Banking Dive reported on October 4, after it became clear that the OCC would likely not approve it. “We are exploring many successful market entry avenues for other market entrants who are now major players,” said Monzo. told Reuters in a report.

Several other fintechs withdrew their initial charter requests, then filed a new case – or otherwise recalibrated. Square, who applied for an industrial loan company (I WILL SEE) charter with the FDIC in September 2017, withdrawn this request in July 2018 before being filed and approved in March 2020. Square’s banking arm was launched a year later.

Based in San Francisco fintech Brex has withdrawn its I WILL SEE and the deposit insurance claim in August. The Japanese e-commerce giant Rakuten withdrew its deposit insurance application for the second time in August 2020. And the Robinhood stock trading app withdrew its application to the OCC in December 2019.

Oportun caught the eye in August 2020, when ProPublica and the Texas Tribune reported that the company was suing thousands of low-income Latinos to collect debt during the early days of the COVID-19 pandemic. Oportun has committed to drop all outstanding debts, temporarily suspend news filing and cap its interest rate at 36%.

But advocacy groups such as the Center for Responsible Lending, the National Consumer Law Center, and the League of United Latin American Citizens have continued to detonate Oportun, claiming the company’s practices undermine citizenship applications for some immigrants.

“Oportun has armed the legal system as a debt collector without regard to the impact on the Latin American community they claim to serve,” they wrote in the August letter to Hsu, according to American Banker.

Among the business changes Oportun may refer to in its statement on Friday, the company announced in November 2020 a partnership with South Dakota-based Sioux Falls. MetaBank which could allow Oportun to grant loans outside of its current geographic footprint. Signature fintech personal installment loans, ranging from $ 300 to $ 10,000, are available in 12 states, but the company says it serves customers online and over the phone in 21 more.

Oportun also offers auto loans and credit cards, and last year had 340 physical locations. A national charter, if renewed and ultimately approved, would give products national distribution and a launching pad to offer checking and savings accounts and certificates of deposit.

Since the revelation of the CFPB investigation, Oportun has at least once made the effort to appear proactive with regulators. It was one of six fintechs that asked CFPB in June for more advice on how it will apply the disparate impact theory when artificial intelligence (AI), machine learning (ML) and alternative credit data is used to make lending decisions. Under disparate impact, a policy may be illegal if it has a discriminatory effect on a protected class, but may not be if the intention behind a business serves a “substantial, legitimate and non-discriminatory interest”.

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