California's consumer protection agency wants to stop the consumer lender OppFi from issuing more high-cost loans.
The state's Department of Financial Protection and Innovation requested a preliminary injunction from a state court judge in Los Angeles that would prevent OppFi from making loans with interest rates above 36% to California consumers, according to a court document filed this week. The injunction would not apply to loans that have already been issued.
"Denial of a preliminary injunction leaves additional California consumers at risk of being ensnared by usurious loans where they will owe more interest in a year than the principal amount they borrowed," according to the department's filing.
The department's request is the latest development in one of the most high-profile attempts to rein in so-called rent-a-bank operations. The operations, in which nonbank lenders partner with chartered banks, often circumvent state-level limits on interest rates.
The department countersued the subprime lender, asking for damages of at least $100 million. It is asking for the preliminary injunction to be in effect until the litigation is resolved. A hearing on the injunction has been set for mid-March.
"Although we do not comment on active litigation, the company intends to continue to aggressively prosecute the claims set forth in its complaint and vigorously defend itself and its position as the matter proceeds through the court process," OppFi said in a statement.
California state law caps interest rates at 36% on installment loans between $2,500 and $10,000. OppFi, which is not a bank, said the law doesn't apply to its loans because it's not the actual lender on the loan, and because it only performs certain services on behalf of its bank partner, Utah-based FinWise Bank.
In May 2022, four California lawmakers asked the Federal Deposit Insurance Corp. to
Chicago-based OppFi operates in at least 34 states, including California.
