A bank partnership that has recently been the target of a series of “true lender” attacks has defeated a California regulator’s motion for a preliminary injunction.  The regulator sought the inunction as part of a lawsuit that seeks to hold the fintech firm Opportunity Financial LLC (“OppFi”) liable for violations of California’s usury laws.  The court’s decision is a significant victory for companies that follow the bank partnership lending model to provide consumer loans.

We have previously covered the lawsuit at issue here, which OppFi brought in March 2022 against the California banking commissioner, to stop the regulator from enforcing the state’s interest rate caps on loans made in partnership with FinWise Bank (“FinWise”) (which is based in Utah).  See Opportunity Fin., LLC v. Hewlett, No. 22STCV08163 (Cal. Super. Ct. Mar. 7, 2022).  The commissioner has argued that OppFi—and not FinWise—is the “true lender” for purposes of assessing the validity of the loans’ interest rates.  While the interest rates on the loans exceed California’s state interest rate caps, FinWise, as an out-of-state lender, is exempt from those caps.  But the bank commissioner argues in its countersuit that OppFi, as the “true lender,” is violating the state’s consumer interest rate cap—and thus should pay at least $100 million in penalties.  OppFi has described the commissioner’s position as an “existential threat” to its business.

The regulator’s motion for a preliminary injunction sought to immediately stop OppFi from issuing its OppLoans product in California.  But the court rejected the request because the commissioner had not shown a reasonable probability of prevailing on the merits.  Specifically, the court found the commissioner had “not demonstrated” that the loans were “usurious in the first place” or that the bank partnership was a “mere sham and subterfuge,” where OppFi was the “true lender.”  To reach this conclusion, the court relied on OppFi’s 10-K filing, which states that OppFi’s algorithms used to determine applicants’ creditworthiness and to facilitate underwriting are “bank-approved” and “validated by bank partners” (like FinWise Bank).  The court also considered the testimony of OppFi executives, which demonstrated the financial benefits that FinWise gains from its partnership with OppFi.  Because FinWise is actively involved in the loan-making process and profits from the partnership, the court said, there was insufficient evidence that it was a mere “straw lender” or that the partnership was designed to “cover up a usurious transaction.”

The decision is an important development in a case that has significant implications for the “true lender” doctrine and fintech companies like OppFi that utilize a bank partnership lending model.

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Photo of Dominic Booth Dominic Booth

Dominic Booth is an associate in the firm’s Palo Alto office who focuses on commercial litigation and complex class actions. He has experience working with clients in the technology and financial services industries in matters involving privacy, consumer protection, and breach of contract…

Dominic Booth is an associate in the firm’s Palo Alto office who focuses on commercial litigation and complex class actions. He has experience working with clients in the technology and financial services industries in matters involving privacy, consumer protection, and breach of contract claims.

Photo of Ashley Simonsen Ashley Simonsen

Ashley Simonsen is a litigator whose practice focuses on defending complex class actions in state and federal courts across the country, with substantive experience in the three hotbeds of class action litigation: New York, San Francisco, and Los Angeles.

Ashley represents clients in…

Ashley Simonsen is a litigator whose practice focuses on defending complex class actions in state and federal courts across the country, with substantive experience in the three hotbeds of class action litigation: New York, San Francisco, and Los Angeles.

Ashley represents clients in the technology, consumer brands, financial services, and sports industries through all stages of litigation, including trial, with a strong track record of success on early dispositive motions. Her practice encompasses advertising, antitrust, product defect, and consumer protection matters. Ashley regularly advises companies on arbitration clauses in consumer agreements and related issues, including mass arbitration risks and issues arising under McGill v. Citibank, N.A. And she is one of the nation’s leading experts on “true lender” issues and the related “valid when made” doctrine.

Photo of Andrew Soukup Andrew Soukup

Andrew Soukup has a wide-ranging complex litigation practice representing highly regulated businesses in class actions and other high-stakes disputes. He has built a successful record of defending clients from consumer protection claims asserted in class-action lawsuits and other multistate proceedings, many of which…

Andrew Soukup has a wide-ranging complex litigation practice representing highly regulated businesses in class actions and other high-stakes disputes. He has built a successful record of defending clients from consumer protection claims asserted in class-action lawsuits and other multistate proceedings, many of which were defeated through dispositive pre-trial motions.
Andrew is co-chair of the firm’s Class Action Litigation practice group.

Andrew has helped his clients achieve successful outcomes at all stages of litigation, including through trial and appeal. He has helped his clients prevail in litigation against putative class representatives, government agencies, and commercial entities. Representative victories include:

  • Delivered wins in multiple nationwide class actions on behalf of large financial companies related to fees, disclosures, and other banking practices, including the successful defense of numerous lenders accused of violating the Paycheck Protection Program’s implementing laws, which contributed to Covington’s recent recognition as a “Class Action Group Of The Year.”
  • Successfully defending several of the nation’s leading financial institutions in a wide variety of litigation and arbitration proceedings involving alleged violations of RICO, FCRA, TILA, TCPA, FCBA, ECOA, EFTA, FACTA, and state consumer protection and unfair and deceptive acts or practices statutes, as well as claims involving breach of contract, fraud, unjust enrichment, and other torts.
  • Successfully defended several of the nation’s leading companies and brands from claims that they deceptively marketed their products, including claims brought under state consumer protection and unfair deceptive acts or practices statutes.
  • Obtained favorable outcomes for numerous clients in commercial disputes raising contract, fraud, and other business tort claims.

Because many of Andrew’s clients are subject to extensive federal regulation and oversight, Andrew has significant experience successfully invoking federal preemption to defeat litigation.

Andrew also advises clients on their arbitration agreements. He has successfully helped numerous clients avoid multi-district class-action litigation by successfully enforcing the institutions’ arbitration agreements.

Clients praise Andrew for his personal attention to their matters, his responsiveness, and his creative strategies. Based on his “big wins in his class action practice,” Law360 named Mr. Soukup a “Class Action Rising Star.

Prior to practicing law, Andrew worked as a journalist.