Loan Company That Sued Thousands of Low-Income Latinos During the Pandemic
On an afternoon in mid-June, Analleli Solis was walking home from her brother’s house just down the street when she noticed someone she didn’t know retreating from the front door of her modest brick home.
Solis approached the woman, who handed her an envelope. Inside was a lawsuit from Oportun Inc., a personal loan company Solis had turned to for years when she and her husband didn’t have enough cash to cover rent, fix their cars or take a vacation.
Now, the company was suing Solis to recoup some of that money, demanding $4,196.23 including fees and interest. Solis’ shock quickly gave way to anger. Three months earlier, after she missed a few of her $130 bimonthly payments, she said she called Oportun to tell the company she had lost her jobs as a hotel housekeeper and fast food worker because of the coronavirus pandemic and needed some relief. The 43-year-old mother of three expected the company would understand. She was a longtime customer, after all. Her latest loan, which she took out to repair her aging SUV, was her fifth with Oportun since 2013, she said, and she had never missed a payment. Staffers were always friendly and helpful.
Silicon Valley-based Oportun, a subprime installment lender that operates in 12 states, also portrayed itself as a financial ally to the Latino immigrant community, its primary customer base, and had built a reputation as a more affordable and humane alternative to payday lenders. In its business filings and on its website, the company — whose name is short for “oportunidad,” Spanish for opportunity — claimed to work with borrowers grappling with cash-flow problems beyond their control. Just two weeks into the pandemic, it announced a special hardship program that postponed payment due dates as long as impacted customers notified the company in advance.
But over a series of phone calls, Solis said, Oportun agents told her there was nothing they could do to help her, even though her financial situation was particularly dire as her husband had also recently lost his job. She said they didn’t offer a payment plan or mention the hardship program.
“I feel powerless not being able to pay them,” Solis, who immigrated from Mexico as a teenager, said in Spanish.
Solis is among tens of thousands of Oportun borrowers who have found themselves in a similar predicament in recent years, according to a monthslong investigation by ProPublica and The Texas Tribune that drew on more than a million Texas court records, hundreds of pages of company financial filings, and interviews with more than a dozen consumer advocates, attorneys and industry experts.
Our reporting revealed a company that draws clients in by depicting itself as a benefactor of the Latino immigrant community yet charges high interest rates, keeps customers like Solis on the hook with repeated refinancing and routinely uses lawsuits to intimidate delinquent borrowers into paying again.
An analysis of court records in nine of Texas’ largest counties — home to the vast majority of the 80 kiosks and strip mall storefronts the company operates in the state — found that Oportun has sued borrowers after they fell behind on their payments more than 47,000 times from May 2016 through July of this year. That’s 30 lawsuits per day on average. So far this year, Oportun has filed nearly 10,000 lawsuits against customers in those counties, with more than half of those coming after the World Health Organization declared the coronavirus a pandemic in mid-March.
That number of filings makes Oportun the most litigious personal loan company in Texas and one of the most litigious debt collectors in the state overall this year. It is rivaled only by larger companies like Conn’s HomePlus, Capital One and a handful of firms that buy unrecovered debts from banks and other creditors.
Asked why it sues so many of its customers, particularly during a pandemic, Oportun referred ProPublica and the Tribune to a recent blog post from company CEO Raul Vazquez that said the company used lawsuits as “a mechanism of last resort to get the small minority of our customers who have fallen behind in their payments and not answered our calls, letters, texts or emails for several months to reengage with us.”
That was the case with Solis, according to a statement Oportun released after she gave the company permission to comment on her account. “According to our records, this customer did not reach out to us and was unresponsive to our repeated attempts to reach them,” the statement said, adding that “if a customer tells us they are impacted by the pandemic, they are eligible for our emergency hardship programs.”
Vazquez defined the “small minority” of loans resulting in lawsuits as less than 6% over the past five years. Though he didn’t say how many lawsuits that represented, he said that it had “become a big number” over time and announced that the company would drop all pending debt claims — including the one against Solis — and temporarily suspend the filing of new ones. He also vowed to reduce the company’s filing rate by more than 60% and cap interest rates at 36%, an annual percentage rate that consumer advocates consider an absolute maximum for smaller personal loans. (While the company says its average APR is already 36%, ProPublica and the Tribune found that it has often charged rates as high as 66.99% in Texas and California.)
The blog post came after the company discovered that reporters from ProPublica and the Tribune, as well as The Guardian, were investigating its debt collection practices in Texas and California.
“We have always designed our products and practices to benefit our customers, so we asked ourselves how we can better serve our customers, especially in the current environment, while keeping our commitments to other stakeholders,” wrote Vazquez, a former Walmart executive who grew up in El Paso. “After extensive discussions and with enthusiastic support from our leadership team and Board, we have decided that we can do better and I’m writing today to share how we intend to do that on a permanent basis.”
Vazquez acknowledged that his company had become the No. 1 filer in small claims courts in both states. Still, the ProPublica/Tribune analysis shows Oportun has filed so many lawsuits that it would remain among the most litigious debt collectors in Texas even if it filed 60% fewer debt claims.
The company declined to make Vazquez available for an interview or respond to an exhaustive list of written questions regarding its legal collections strategy and general business practices.
Instead, it released a one-paragraph statement that touted its high customer satisfaction scores and rates of repayment. It also said it had enrolled more than 112,000 customers in its emergency hardship deferral program since the start of the pandemic, representing a total loan balance of more than $300 million.
“[Oportun is] consistently recognized by leading consumer advocates as a company that does right by its customers,” the statement said. “We are proud to have proven that it is possible to lend responsibly in low-and-moderate income communities and we are proud to receive customer satisfaction scores that are consistently on par with beloved brands like Ritz-Carlton, Apple, and USAA.”
But the same consumer advocates and legal aid groups who have recognized Oportun as a bright spot in the largely predatory world of subprime lending said they were disturbed by the scope of its legal collections activity. While the share of the company’s loans that lead to lawsuits may seem low, they said the rate is far higher than that of its peers — particularly for a lender that paints itself as a flexible benefactor. The ProPublica/Tribune analysis of the company’s loan originations show that its 6% filing rate would translate to well over 100,000 lawsuits.
Consumer advocates and legal aid groups also noted that the company has been certified for years as a Community Development Financial Institution, an esteemed federal designation for banks, credit unions and other lenders with clienteles that are largely low-income or in underserved communities of color, and said its collections practices fly in the face of that title.
Ann Baddour, director of the Fair Financial Services Project at the nonprofit advocacy group Texas Appleseed, said the scope of Oportun’s legal collections activity is “really problematic.”
“We’ve generally seen them as a positive player in the marketplace, so it was really shocking to me to see them as a major filer,” Baddour said, when informed of the publications’ findings. “We hope they will revisit their collections practices and look at aligning them with the community development mission that they have long highlighted as key to their business model.”
Baddour is particularly familiar with Oportun as she recently served alongside Vazquez on the Consumer Advisory Board of the Consumer Financial Protection Bureau, the federal watchdog agency formed in the wake of the 2008 financial crisis to better guard Americans from abusive lending practices.
Other consumer advocates say the measures Vazquez announced don’t address what they see as the root cause of the problem: Oportun lends money to people who can’t pay it back and not just during the pandemic. That’s evident not just from its voluminous lawsuits, but also its practice of refinancing high-interest loans, which makes it appear that borrowers have paid them off but actually keeps them on the hook, sometimes for years.
“When we saw the announcement, we didn’t immediately pop any Champagne bottles,” said Kiran Sidhu, policy counsel for the Center for Responsible Lending’s state policy team. (The center was started with support from the Sandler Foundation, which provided most of the original funding for ProPublica and remains its largest donor.)
Oportun’s Origin Story
Oportun — originally called Progreso Financiero — was founded in 2005 by James Gutierrez, the grandson of Mexican immigrants, who launched the company while earning his master’s in business administration at Stanford Business School. His vision was to help Latino immigrants gain access to mainstream financial services — and prove that subprime lending with zero collateral could be done compassionately and profitably with the right kind of underwriting.
“I wanted to make a big impact on our social problems in America, and I wanted to do something that helped the Hispanic community find economic opportunities,” Gutierrez told Bloomberg TV in 2009, the year he turned 32.
While his grad school friends joined Wall Street hedge funds, Gutierrez set up folding card tables at Latino supermarkets in California and spent half a year trying to prove to angel investors that he could successfully lend to people with modest incomes and negligible credit histories using a scoring system that took into account hundreds of unique attributes to determine the likelihood an applicant would repay a loan. He never broke even, but succeeded enough.
Before he left the company in early 2012, Gutierrez — who founded a competing firm a year later — had closed tens of millions of dollars in new funding from major players including Madrone Capital, run by the eldest son of Walmart founder Sam Walton, and Greylock, known for its early investments in tech startups like Facebook. The infusions bankrolled the opening of dozens of kiosks and storefronts in California and Texas, the states with the largest Latino populations. The week after his departure from the company, Gutierrez told the Los Angeles Times that Progreso was finally on track to break even. But that wouldn’t happen for years, even after Vazquez took the helm.
Under Vazquez, the company has expanded into 10 more states, started offering auto loans and an Oportun-branded credit card, and executed a major rebranding and overhaul of its marketing and public relations strategies. Last September, the company went public.
To date, it’s disbursed more than 3.9 million loans totaling more than $9 billion. At the end of 2019, it had nearly 800,000 active customers, its first annual filing shows.
Revenues are up in recent years thanks to the expansion, and the company has reported five consecutive years of pre-tax profitability. But business filings show that as its operating expenses have soared, its profits have been modest and spotty.
In the first two quarters of 2020, Oportun’s net profits dropped by $50 million, compared with the same period in 2019, amid the widespread economic fallout from the COVID-19 pandemic.
In its 2019 year-end filing to the U.S. Securities and Exchange Commission, Oportun explained the financial challenges ahead, saying it would need to continue with its rapid expansion to “achieve and increase profitability.” Even if it succeeded, it said “we may not be able to maintain or increase our level of profitability over the long term.”
“Oportun has been exposed as a predatory lender for the Latino community and they are not letting up on their bad business practices. Part 2 to follow, showing how shameless they can prey on the most vulnerable in our society.”