{"version":1,"type":"rich","provider_name":"Libsyn","provider_url":"https:\/\/www.libsyn.com","height":90,"width":600,"title":"\u201cTrue Lender\u201d Doctrine Back in the Spotlight: Key Takeaways on OppFi v. Hewlett Tentative California Superior Opinion","description":"The latest episode of the Consumer Finance Monitor Podcast being released today tackles one of the most consequential developments in bank\u2013fintech litigation in recent years: the Los Angeles Superior Court\u2019s tentative decision in Opportunity Financial, LLC v. Hewlett (read more here). This case squarely addresses the long-debated \u201ctrue lender\u201d doctrine which has for decades bedeviled banks and Fintechs and \u201cbricks and mortar\u201d non-banks that have entered into joint ventures with one another to engage in interstate lending programs which take advantage of interest rate exportation rights afforded to banks. After applying application California and federal law, the Court granted summary judgment to OppFi and against the California Department of Financial Protection and Innovation (DFPI) which unsuccessfully maintained that OppFi is the true lender and not OppFi\u2019s partner, FinWise Bank. In this episode, host Alan Kaplinsky, founder and former chair of the Consumer Financial Services Group and now Senior Counsel, is joined by two leading voices with sharply contrasting perspectives: Professor Emeritus Arthur Wilmarth, a prominent critic of bank\u2013fintech partnerships, and Ballard Spahr Senior Counsel Ron Vaske, who regularly advises banks and fintech companies on structuring such programs. Their discussion offers a deep and balanced exploration of the court\u2019s reasoning and its broader implications.   A Tentative Decision with Significant Implications At the center of the case is a partnership between OppFi, a fintech platform, and FinWise Bank, a Utah-chartered, FDIC-insured institution. The program allowed FinWise to originate consumer loans at interest rates permissible under Utah law and export those rates nationwide under Section 27 of the Federal Deposit Insurance Act. The DFPI challenged the arrangement, arguing that OppFi\u2014not FinWise\u2014was the \u201ctrue lender,\u201d which would subject the loans to California\u2019s 36% interest rate cap. In a tentative ruling, the court rejected the DFPI\u2019s position and granted summary judgment in favor of OppFi. The court emphasized traditional indicia of lending authority, including: \u2022           FinWise\u2019s role in funding the loans \u2022           Its control over underwriting criteria \u2022           Its retention of a 5% ownership interest \u2022           Its ongoing oversight of compliance and marketing Critically, the court also relied on the longstanding California law principle that usury is determined at the inception of the loan. (See the discussion below.) Because FinWise originated the loans, the court concluded they were not rendered unlawful by OppFi\u2019s subsequent purchase of a 95% participation interest giving which gave it a predominant economic interest.   Competing Views on \u201cTrue Lender\u201d The podcast highlights a fundamental divide in how courts and commentators approach the true lender doctrine. Professor Wilmarth argues that the court failed to meaningfully engage with the \u201cpredominant economic interest\u201d test, which focuses on who bears the majority of the economic risk and reward. In his view, OppFi\u2019s 95% participation interest suggests that it\u2014not the bank\u2014is the real lender in substance. He also raises broader concerns about whether such arrangements undermine state usury laws and expose consumers to excessively high-cost credit. Ron Vaske, by contrast, emphasizes the legal and structural realities of the transaction. He underscores that FinWise is the named lender, funds the loans, and remains legally responsible to borrowers. From this perspective, the allocation of economic interests after origination should not redefine the identity of the lender or override federal law permitting rate exportation.   The Role of \u201cValid When Made\u201d Another key related theme explored in the episode is the \u201cvalid when made\u201d doctrine\u2014the principle that a loan that is lawful at origination remains lawful after assignment. The court\u2019s reliance on this concept reinforces the importance of determining lender status at the moment the loan is made, rather than based on subsequent transfers or participations. The discussion also touches on the interplay between state and federal law, as well as the continuing relevance of regulatory interpretations following the Supreme Court\u2019s decision in Loper Bright, which curtailed Chevron deference.   What Comes Next? It is important to note that the court\u2019s ruling is still tentative. In accordance with California procedure, OppFi must submit a proposed final opinion and order to the Court. If adopted, an appeal by the DFPI appears likely\u2014potentially setting the stage for further appellate guidance on the true lender doctrine in California and beyond.   Why This Matters This case is part of a broader and ongoing policy debate: \u00b7                 Supporters of bank\u2013fintech partnerships argue they expand access to credit and operate within well-established federal banking frameworks. \u00b7                 Critics contend they can be used to circumvent state consumer protection laws, particularly interest rate caps. As the regulatory and judicial landscape continues to evolve, OppFi v. Hewlett represents a significant\u2014and closely watched\u2014development. It may be significant to note that, unlike several other states, California does not have a statute stating that the holding of a \u201cpredominant economic interest\u201d in a loan makes the holder the true lender  Be sure to listen to the full podcast episode for a deeper dive into the case and the competing legal and policy perspectives shaping the future of bank\u2013fintech partnerships. Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry. ","author_name":"Consumer Finance Monitor","author_url":"https:\/\/www.ballardspahr.com\/","html":"