A bank partnership is the target of yet another “true lender” attack in a new class action filed last week. Michael v. Opportunity Fin., LLC, No. 1:22-cv-00529 (W.D. Tex. June 1, 2022). The lawsuit is aimed at the lending partnership between OppFi (a fintech) and FinWise Bank (its bank partner), which was also the target of a recent investigation by California’s banking regulator and another class action earlier this year. This latest development cements a growing trend of true lender attacks after Congress repealed a regulation on the topic last year, dashing hopes of a uniform and predictable standard to identify the “true lender” in bank partnerships.
The lawsuit asserts that the interest rates on consumer loans made in partnership with FinWise Bank violate Texas’s interest rate cap. According to the complaint, OppFi and not FinWise Bank is the supposed “true lender” for purposes of assessing the validity of the loans’ interest rates. The interest rates on the loans, if made by OppFi, would be subject to (and would exceed) Texas’s interest rate cap of 30% per year for state-licensed lenders. The plaintiff alleges Texas usury and unjust enrichment claims, and federal RICO claims, all on behalf of a class of Texas consumers who obtained the loans at issue.
According to the plaintiff, OppFi “concede[s]” it may be the true lender. OppFi said in an SEC filing that loans made in partnership with its bank partners “may be unenforceable or otherwise impaired” if they “were subject to successful challenge that the bank partner was not the ‘true lender.’” For its part, Oppfi was successful in fending off a recent true lender attack in California federal court, and went on the offensive against California’s banking regulator earlier this year, filing suit in to stop the regulator’s threatened enforcement of state usury laws under a true lender theory.