True lender
Opportunity Financial LLC v. Clothilde Hewlett
Date: Feb. 25, 2026
Issue: Whether Opportunity Financial (OppFi) engaged in a “rent-a-bank” partnership scheme with FinWise Bank to evade California interest rate caps.
Case Summary: In a tentative decision, a California state judge preliminarily ruled that regulators cannot classify OppFi’s partnership with FinWise Bank as an unlawful “rent-a-bank” scheme.
In 2019, California passed California’s Fair Access to Credit Act (also known as AB 539), which limits the interest rate on loans of $2,500 to $10,000 by lenders licensed under the California Financing Law (CFL) to 36% plus the federal funds rate.
On March 7, 2022, OppFi sued the Department of Financial Protection and Innovation for the state of California (DFPI) in the Superior Court of California to block the regulator from applying California usury law to loans made through OppFi’s partnership with FinWise, a state-chartered, FDIC-insured bank located in Utah. According to the complaint, the DFPI threatened enforcement because OppFi, not FinWise, is the “true lender” for assessing the validity of the loans’ interest rates. If OppFi is the true lender, the interest rates would exceed California’s interest rate caps under California’s Fair Access to Credit Act. OppFi sought a declaratory statement declaring its activities were lawful under California law, and an injunction restraining the DFPI from enforcing AB 539 against OppFi.
The DFPI filed a cross-complaint seeking to enjoin OppFi from collecting on the program loans and to declare the loans void, alleging OppFi was the true lender based on the “substance of the transaction” and the “totality of the circumstances.” The DFPI claimed the primary factor was whether the nonbank had the predominant economic interest in the transaction. DFPI alleged OppFi holds the predominant economic interest in the loans because OppFi purchases 95% to 98% of the loans’ receivables; on average, OppFi purchases the receivables from FinWise within three days after the bank funds the loan; OppFi insulates FinWise from credit risk by creating a guaranteed secondary market for the loans; and OppFi pays FinWise a guaranteed monthly fee based on a percentage of the principal amount of loans originated by the bank.
In October 2023, Judge Timothy Dillon of the Superior Court of California denied the DFPI’s motion for a preliminary injunction to stop OppFi from facilitating loans to California borrowers from FinWise. Judge Dillon examined whether OppFi’s loan program was a mere sham and subterfuge to cover up a usurious transaction. Judge Dillon determined “there was not sufficient evidence that FinWise was merely a dummy” because FinWise uses its own funds to originate the loans, retains title and ownership of the loans throughout the life of the loan, retains a 5% interest in loan receivables, and collects a percentage fee on each loan.
In his tentative decision, Judge Gary Roberts ruled that he would grant summary judgment to OppFi, concluding the DFPI failed to establish that FinWise acted as a “dummy” lender or that the lending program was a sham designed to evade state interest rate limits. The court found that OppFi met its burden by showing the loans were not usurious at inception and that FinWise, not OppFi, served as the true lender in the program. Because both parties agreed that granting the motion would resolve the entire case, the court’s ruling effectively disposed of the DFPI’s claims under both the California Financing Law and the California Consumer Financial Protection Law.
The court relied on evidence demonstrating FinWise’s substantive role in the lending program. It found that FinWise controlled key aspects of the loans, including the application process, underwriting criteria, and final approval decisions, and that no loan could be issued without the bank’s independent underwriting determination. The court also emphasized that FinWise funded the loans using its own capital, retained ownership and a continuing economic interest in the loans, and bore meaningful risk of loss. In addition, FinWise exercised oversight over marketing materials, compliance and servicing, including requiring approvals for changes and conducting ongoing audits and monitoring. These facts, in the court’s view, showed that FinWise operated as a genuine lender with real authority and risk, rather than as a nominal participant.
The court rejected the DFPI’s counterarguments that OppFi effectively controlled the loans through receivables arrangements, title provisions, or its role in developing underwriting models. It found that these points did not create a triable issue of material fact and did not undermine the evidence that FinWise retained ultimate authority over lending decisions. The court also reaffirmed longstanding principles that a loan must be usurious at its inception to violate California law and that subsequent events, such as assignment or sale of receivables, do not render an otherwise lawful loan usurious. Because the DFPI failed to present evidence showing that the partnership was a sham or that the loans were unlawful when made, the court sided with OppFi.
Bottom Line: A California judge’s tentative decision concluded that OppFi’s partnership with FinWise is not an unlawful “rent-a-bank” scheme and that FinWise, not OppFi, is the true lender, defeating the DFPI’s claims
Document: Opinion
