Federal government investigates lender who sued thousands of low-income Latinos during pandemic

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Eddie Gaspar / The Texas Tribune

Oportun Inc., a low-dollar lending company, has revealed to investors that it is under investigation by the Consumer Financial Protection Bureau following a report by ProPublica and the Texas Tribune.

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A federal consumer watchdog has launched an investigation into a company that aggressively pursued thousands of Latino borrowers in Texas during the coronavirus pandemic while posing as a community financial ally.

Oportun Inc., a Silicon Valley-based installment lender that was founded to help Latino immigrants create credit so they can continue to achieve the American Dream, revealed to investors last week that it had received a civil investigation request of the Consumer Financial Protection Bureau.

The company said it was part of a larger federal watchdog investigation of low dollar lenders, which was formed by Congress in the aftermath of the 2008 financial crisis in an effort to better protect Americans against abusive lending practices.

Inquiry comes after ProPublica and The Texas Tribune last year revealed that Opportunity had become Texas’ most contentious personal loan company, pursuing thousands of low-income borrowers at a rapid pace even as other lenders halt or slow lawsuits during the pandemic.

An analysis of court records in nine of Texas’ 10 largest counties – home to the vast majority of the 80 kiosks and mall storefronts the company operates in the state – found that Opportun has sued Texas borrowers for more than 47,000 times from May 2016 to July 2020 More than 5,000 lawsuits were filed after the World Health Organization declared the coronavirus a pandemic.

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The company has also consistently charged high interest rates and held borrowers at the mercy, sometimes for years, by offering larger and larger loans at slightly lower rates, news outlets have found.

In its last quarterly financial report deposit, Oportun told investors that the federal investigation “will focus on the company’s legal collection practices from 2019 to 2021 and the difficult treatments offered during the COVID-19 pandemic.”

Company officials told investors they were unable to predict the outcome of the federal investigation and were unsure whether it “would result in action or proceedings against the company or a change in its practices. “.

In a statement to ProPublica and the Tribune, Oportun said he would cooperate with the investigation but “believed our practices were fully in line with CFPB guidelines” and had “followed all authorities posted on these questions”.

The CFPB did not respond to a request for comment.

Federal inquiry comes as President Joe Biden’s administration begins to build up muscle office staff in anticipation of more law enforcement activities.

In a letter to staff in January, Acting Director Dave Uejio said his two main priorities are to help consumers who have been economically affected by the COVID-19 pandemic and to address racial inequalities.

“On COVID-19, we need to take swift action now, to make sure our actions are helping people in the midst of the crisis, rather than just cleaning up after the fact,” Uejio wrote. “(We) will also be looking more broadly, beyond equitable lending, to identify and eliminate illegal behavior that disproportionately impacts communities of color and other vulnerable populations. ”

Horacio Mendez, president and CEO of the Woodstock Institute, a nonprofit political group that advocates for fair lending and economic equality, said that in the past many office investigations have resulted in settlements that he and other advocates felt too forgiving to change their behavior.

In the case of Opportunity, he said the behavior was particularly egregious because the company was certified as a community development financial institution, an esteemed federal designation for banks, credit unions and other lenders that largely serve low-income or underserved communities of color.

“What they’ve shown us before is that the pursuit of profitability often trumps ethical behavior,” Mendez said of Oportun. “And the fact that they are CDFI and that they did that, it was an additional cross in their obituary.”

In December, the Woodstock Institute and dozens of other consumer organizations and Latino civil rights groups challenged Oportun’s effort become a national bank, citing the ProPublica and Tribune survey and another probe by The Guardian in California’s Prolific Legal Debt Collection Practices.

Oportun made some changes to its business and debt collection practices last year.

After ProPublica and the Tribune began asking questions about its debt collection practices, the company announced it would drop all pending lawsuits, temporarily suspend new filings, and file 60% fewer cases in the future. . It also pledged to cap interest rates on its loans at 36%.

Consumer advocates have said the measures do not go far enough.

Ann Baddour, director of the Fair Financial Services Project at nonprofit advocacy group Texas Appleseed, called the bureau’s investigation of Oportun and other low dollar lenders encouraging.

“Families in Texas are currently suffering a double whammy with financial setbacks from the pandemic made worse by the winter storm,” she said, referring to last month’s cold blast that left million inhabitants without electricity or water. “It is essential that businesses that lend in our state are held accountable under the law and that they treat their customers fairly.”

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