A California court has finalized a summary judgment in favor of OppFi, rejecting the Department of Financial Protection and Innovation’s “true lender” theory. The ruling, which was granted on May 19, 2026, is a significant decision in the dispute between OppFi and the Department of Financial Protection and Innovation, which centered on whether OppFi violated California’s interest rate caps under the Fair Access to Credit Act.
The litigation, which began in 2022, focused on OppFi’s partnership with FinWise Bank, a Utah state-chartered bank. The Department of Financial Protection and Innovation alleged that OppFi was the “true lender” on loans originated through this partnership, and that the arrangement was a scheme to evade California’s rate cap.
The Department of Financial Protection and Innovation sought penalties of at least $100 million and restitution for approximately 38,000 California borrowers. OppFi argued that the Department of Financial Protection and Innovation’s adoption of the true lender doctrine without notice-and-comment rulemaking constituted an invalid regulation under California’s Administrative Procedure Act.
Related: Directors Face Risk and Reputation Challenges
The court applied the framework of Janisse v. Winston Investment Co. and found that the undisputed evidence showed FinWise controlled the application and underwriting process, funded loans with its own money, retained title and ownership, and bore 100 percent of the risk of loss at origination.
The court found that the Department of Financial Protection and Innovation failed to raise a triable issue of material fact. On receivables, the court held that FinWise’s post-origination sale of loan receivables could not render the loans usurious because under California law, “a contract, not usurious in its inception, does not become usurious by subsequent events.”
The court relied upon Section 27 of the Federal Deposit Insurance Act and the FDIC’s “valid when made” rule, which provides that the sale, assignment, or transfer of a loan does not affect the permissibility of interest, and such interest is determined when the loan is made.
Due to the primary ruling, OppFi’s cross-complaint challenging the true lender doctrine as an underground regulation was dismissed, without prejudice, as being moot. However, the claim remains significant because it leaves a broader question undetermined: whether the Department of Financial Protection and Innovation’s asserted “true lender” doctrine is even lawful under the Administrative Procedure Act.
Related: Lawyers warned of AI recording risks
Scott Hyman, Justin Bradley, and Paul Soter have observed that California’s Administrative Procedure Act prohibits state agencies from enforcing rules not adopted through notice-and-comment rulemaking, and courts afford “no deference at all” to noncompliant regulations.
This decision is significant to financial services companies and fintech programs involving contractual partnerships with depository institutions, as it upheld the validity of these programs against “true lender” claims.
It is a significant decision.
Leave a Reply