Oportun is latest nonbank lender to seek a bank charter

Oportun Financial Corp. is the latest Silicon Valley consumer lender to apply for a national bank charter.

The San Carlos, Calif., company filed an application Monday with the Office of the Comptroller of the Currency, following a trail blazed by fintechs such as Varo Money and SoFi.

Oportun specializes in loans to Americans with low and moderate incomes, which differentiates the firm from SoFi and a host of other fintechs that cater to more upscale customers. Another difference from many lending upstarts: Oportun is very much a brick-and-mortar lender — it operates more than 300 retail locations in states such as California, Arizona, Nevada, Texas Florida and Illinois — though it also offers loans online.

If Oportun’s application gets approved, the firm plans to offer checking accounts, savings accounts and certificates of deposits to consumers nationwide. It also plans nationwide distribution of personal installment loans, credit cards and auto loans, which are currently available in certain states.

CEO Raul Vazquez said he expects Oportun’s stores to become loan production offices, rather than branches.

CEO Raul Vazquez said in an interview Monday that he expects Oportun’s stores to become loan production offices, rather than branches, assuming the application gets approved. The company also anticipates opening an unspecified number of new locations in additional states.

“We continue to believe that a combination of channels is better than a business that only offers one channel,” Vazquez said. “In terms of how many physical locations, we’ll figure that out in the coming months. Some of that will depend on how much of the behavior that we’re seeing in the pandemic sticks.”

Oportun sees various advantages in becoming a bank, including the ability to reach customers in all 50 states, the capacity to offer additional products and the advantages associated with low-cost deposit funding. The company also expects to be able to operate more efficiently by avoiding the patchwork of state licensing regimes.

Even prior to applying for a bank charter, Oportun had taken an interim step toward expanding nationwide, announcing a partnership earlier this month with MetaBank in Sioux Falls, S.D. That arrangement, which is expected to launch in mid-2021, should allow Oportun to start making loans outside of its current geographic footprint during what could be a lengthy approval process.

Oportun said that its application to the OCC includes a plan for complying with the Community Reinvestment Act, though a copy of the document was not made available.

Oportun also said that its bank will cap all of its credit products at an annual percentage rate of 36% — an extension of a pledge the company made in July, when it also promised to dismiss all pending debt collection cases and take fewer borrowers to court in the future.

Those pledges came amid scrutiny by ProPublica and the Texas Tribune of Oportun’s pandemic-era debt-collection lawsuits.

Oportun, which was founded in 2005, originally focused on loans to Spanish-speaking consumers, but it has sought more recently to reach a broader mix of Americans who are shut out of the financial mainstream. Its customers have an average gross income of $46,000 per year.

The company’s flagship product is a personal loan that ranges in size from $300 to $10,000. At the end of the third quarter, Oportun’s personal loans had an average APR of 33.3%, according to a recent investor presentation.

Oportun went public last year, and its share price has since been on a roller coaster. After pricing at $15 per share in September 2019, the stock price rose to more than $23 in early January, and then plunged to less than $6 amid the COVID-19 lockdowns in April. Shares closed at $17.19 on Monday.

Oportun’s annualized net charge-off rate was 10.8% at the end of the third quarter, up from 8.1% a year earlier. But the percentage of its loans that were at least 30 days delinquent fell from 3.8% in the third quarter of 2019 to 3.5% last quarter.

“We think we’ve navigated the recession and the pandemic very well,” Vazquez said Monday.

He said that Oportun’s decision to apply for a new bank charter — rather than buy an existing depository, as LendingClub Corp. is doing — was rooted in the company’s 15 years of experience in complying with regulations.

“We really felt that we already had a solid foundation to build upon in terms of dealing with prudential regulators,” he said.


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