An Important Win for Fintech Bank Sponsorships

On February 24, 2026, a judge on the Los Angeles County Superior Court granted a motion for summary judgment filed by Opportunity Financial, LLC (OppFi) against the California Department of Financial Protection and Innovation (DFPI), finding that OppFi’s bank sponsor, FinWise Bank (FinWise), a Utah-chartered, FDIC-insured bank, is the “true lender” of installment loans made to California borrowers originated by FinWise and offered through OppFi’s online platform. This is a significant development in the long-running litigation between OppFi and DFPI and provides further support for the “bank sponsorship” lending model utilized by many fintechs.

By way of background, persons extending consumer or commercial loans to California residents are required to be licensed under the California Financing Law (CFL) administered by the DFPI, unless an exemption from licensing applies, including an exemption for national and state-chartered banks. CFL licensees must observe certain legal requirements, such as interest rate limitations.

The CFL provides an exemption from the California usury law for licensees but limits the rate of interest for consumer loans below certain amounts. In 2019, the Legislature amended the CFL to raise the amount at which the limits no longer apply from $2,500 to $10,000 (and establishing a roughly 36% cap on rates for such loans). This change adversely impacted several fintechs and other lenders operating under the CFL that had been extending loans to credit-challenged California consumers at rates exceeding the limits in amounts of more than $2,500 (typically $2,600).

Unable to extend credit under their risk models to such consumers at the higher amount of $10,000 or more, certain of these lenders, including OppFi, pursued sponsorship arrangements with banks chartered in rate-friendly states such as Utah, relying on the bank exemption to the CFL as well as the federal interest rate exportation authority under the federal Depository Institutions Deregulation and Monetary Control Act of 1980 with respect to the California usury law.

The DFPI publicly suggested that it would challenge bank sponsorships as an attempt to circumvent the CFL’s rate limits, and, anticipating such a challenge, OppFi sued the DFPI seeking a declaratory judgment validating its bank sponsorship arrangement with FinWise. In response, the DFPI brought counterclaims against OppFi seeking at least $100 million for violating the CFL and other laws.

In granting OppFi’s motion for summary judgment, the court applied the “valid when made" doctrine and concluded that OppFi met its burden of demonstrating that the bank-originated loans offered on the OppFi platform were not usurious at inception and that FinWise was not a mere “dummy” that had no role in the lending process. The court reviewed several supporting documents and testimony proffered by OppFi and concluded that they all supported the motion. Specifically, the court found that OppFi’s evidence established that:

• FinWise controls the application process, underwriting criteria, and independently underwrites the loans;
• FinWise funds the loans and retains ownership over them (although receivables are sold to OppFi with FinWise retaining a 5% interest);
• FinWise is exposed to substantial risk and benefits from the loans;
• FinWise controls the marketing for the loans; and
• FinWise audits and otherwise oversees the loans and is responsible for legal compliance.

In short, the court concluded that FinWise, not OppFi, was the true lender of the loans offered on OppFi’s platform.

DFPI is likely to appeal the decision, and, if appealed, it is uncertain how the California Court of Appeal and perhaps ultimately the California Supreme Court would rule. Nevertheless, the court’s decision is helpful in supporting bank sponsorship arrangements, may provide a “roadmap” for structuring defensible arrangements in California, and in particular the conclusion that a retained interest in receivables by the bank of 5% was sufficient is meaningful in light of “predominant economic interest” challenges to these arrangements in various states and courts.

If you have questions regarding this development or require assistance including with respect to bank sponsorships, please contact one of the authors or any member of the team with whom you work.