Sens. Elizabeth Warren and Chris Van Hollen are pressuring nonbank lender OppFi to abandon its bid to acquire Arizona-based bank holding company BNCCORP and its subsidiary, BNC National Bank. The lawmakers allege that OppFi’s business model is built on lending practices that charge high interest rates, including rates as high as 195% annual percentage rate.
OppFi provides financial services to consumers through installment loans, branding itself as a lender that helps everyday consumers overcome financial hurdles and build long-term financial stability. However, the senators claim that a closer look at OppFi’s business model reveals persistent financial strategies that take advantage of consumers.
Warren and Van Hollen point out that OppFi and another nonbank lender, Enova, are similarly structured, targeting consumers who are underserved by traditional banks due to credit reasons. Enova recently terminated its bid to buy Grasshopper Bank, citing a lack of clear standards for nonbanks that want to become banks and political pressure.
The senators believe that OppFi should follow suit and withdraw its application to acquire a national bank. They cite a 2021 lawsuit filed by the D.C. attorney general, which alleged that OppFi’s underwriting model anticipates that up to one third of its borrowers will fail to repay their loans and default.
A spokesperson for OppFi pushed back against the senators’ characterization of its lending business, stating that politicizing and attacking OppFi’s bank charter application does a disservice to consumers who need access to credit. The spokesperson claimed that OppFi’s business model is fully compliant and that transitioning into the regulated banking system will subject it to rigorous federal oversight.
OppFi’s spokesperson also disputed the data used in Warren and Van Hollen’s letter, stating that the average loan duration is roughly four months and that annualizing quarterly charge-offs makes it appear as though actual charge-offs are up to three times greater than they really are. The spokesperson claimed that the lifetime charge-off rate for such loans over the past three years has been 18% to 25%.
The Enova-Grasshopper and OppFi-BNC National deals have been the subject of controversy, with 20 state attorneys general urging the Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., and Federal Reserve not to approve the deals. The attorneys general alleged that these arrangements are efforts to avoid state usury laws and to extract profit from those that are in desperate need of money.
