Oportun pulls bank charter application, says it plans to refile

The Silicon Valley consumer lender Oportun has withdrawn its application for a bank charter nearly a year after submitting its bid to the Office of the Comptroller of the Currency.

The decision came after 22 federal and state consumer advocacy groups wrote to acting Comptroller Michael Hsu on Aug. 4, asking the agency to delay any decision on the application until the Consumer Financial Protection Bureau completed an investigation into the company’s debt collection practices.

Oportun said that it’s planning to revise elements of its application to reflect changes in its business. Last year, the company announced a partnership with MetaBank in Sioux Falls, South Dakota, which has allowed it to operate in 33 states, up from 12 states when it first applied for a charter.

Raul Vazquez
Oportun Financial, led by CEO Raul Vazquez, had planned to use a bank charter to offer checking and savings accounts, certificates of deposits and, eventually, various consumer loan products.
Stefanie Herzer

“We have forged a constructive relationship with the OCC since filing our initial application nearly a year ago,” Oportun said in a statement Friday. “We remain committed to pursuing a bank charter with the OCC … .“

The OCC declined to comment.

Though it is backed by Silicon Valley venture capitalists, the San Carlos, California-based company differs from other online lenders because it offers loans to lower-income borrowers and those with thin credit histories through brick-and-mortar locations as well as online.

Oportun, which has been led since 2012 by CEO Raul Vazquez, had planned to use a national bank charter to offer checking and savings accounts, certificates of deposit and, eventually, personal installment loans, credit cards and auto financing.

A source familiar with Oportun’s application said that “it is not uncommon for companies, including fintechs like SoFi and Varo, to withdraw their initial applications before ultimately resubmitting and being granted banking charters.”

Reports last year by ProPublica and The Guardian raised issues about the affordability of the loans Oportun was offering, as well as about the large number of debt collection lawsuits the company had filed and the speed with which it was taking borrowers to court over past-due debt.

Advocacy groups, including the Center for Responsible Lending, the National Consumer Law Center and the League of United Latin American Citizens, raised concerns in their letter to Hsu that the company’s debt collection practices could dent citizenship applications for Latino immigrants.

“Oportun has weaponized the legal system as their debt collector with zero regard to the impact on the Latino community that they purport to serve,” the groups said in the letter.

Oportun announced changes to its debt collection practices in July 2020, around the time that ProPublica published its first article, which the company said would result in fewer cases.

Apart from opposing Oportun's charter application, advocacy groups also want the OCC to stop Oportun from “renting out” MetaBank’s charter.

“Oportun’s partnership with MetaBank would allow Oportun to expand its reach to consumers across the country and make loans not permitted for nonbanks under the laws of certain states, even despite Oportun’s not receiving the bank charter it sought,” the groups said in the statement Friday.

Oportun’s decision to withdraw its application is an indication that the OCC is taking a tougher stance on new charters during the Biden administration than it did in the Trump era. Oportun submitted its application when the OCC was being led on an acting basis by Brian Brooks, who was warmer to nonbanks gaining bank charters.

Since taking over as acting comptroller in May, Hsu has taken a more cautious tone toward approving applications from nonbanks, including fintechs.

Last month, President Biden nominated Saule Omarova, a law professor at Cornell University and former Treasury advisor, to become comptroller. Banking groups have aligned against her nomination.

Last year, Omarova spoke to American Banker about the question of whether fintechs should face stiffer challenges to gaining bank charters. She said it was time to “assess the systemic importance of not just chartering banks, but the systemic importance of regulating banks and understanding what it is that banks do.”

This story has been updated to include additional comments from advocacy groups.

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