California Superior Court Finalizes Summary Judgment in Favor of OppFi, Rejecting DFPI’s “True Lender” Theory

On May 19, 2026, the Superior Court of California, County of Los Angeles, granted summary judgment in favor of Opportunity Financial, LLC ("OppFi") in its dispute with Clothilde Hewlett, in her official capacity as Commissioner of the Department of Financial Protection and Innovation ("DFPI"). 

This finalized ruling comes shortly after the tentative decision granting summary judgment in favor of OppFi on February 24, 2026. Dating back to 2022, the litigation focused on whether OppFi violated California's interest rate caps under the Fair Access to Credit Act, which capped interest rates at 36% on consumer loans between $2,500 and $9,999 made by "finance lenders" under the California Financing Law. The DFPI filed a cross-complaint alleging that OppFi was the "true lender" on loans originated through its partnership with FinWise Bank, a Utah state-chartered bank. It further described the arrangement as a "rent-a-bank" scheme to evade California’s rate cap, noting that Utah does not impose an interest rate cap. The DFPI sought penalties of at least $100 million and restitution for approximately 38,000 California borrowers. OppFi filed its own cross-complaint in response, arguing that the DFPI's adoption of the true lender doctrine without notice-and-comment rulemaking constituted an invalid "underground regulation" under California's Administrative Procedure Act ("APA").

In what will be a precedent setting decision respective to the treatment of bank partner programs, the court granted summary judgment that rejected DFPI’s true lender claims on the grounds that the DFPI could not demonstrate FinWise was "merely a dummy" lender. Applying the framework of Janisse v. Winston Investment Co., the court found the undisputed evidence showed that FinWise controls the application and underwriting process, funds loans with its own money, retains title and ownership, bears 100% of the risk of loss at origination, retains a 2% to 5% interest in receivables, controls marketing, and oversees legal and regulatory compliance. 

The court found that the Commissioner 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. 

On the issue of underwriting, the court rejected the argument that OppFi's ownership of its credit model intellectual property made it the lender, noting that banks routinely use third-party models such as FICO scores without making the model owner the lender. On funding, the court found no evidence that OppFi's collateral account was ever used to fund loans, observing that OppFi provided unrebutted evidence that the account was "almost always insufficient" to cover FinWise's funding obligations. The court also noted that the collateral account merely secured OppFi’s obligation to purchase receivables and was not used to fund the program loans.

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. Even so, the claim remains significant because it leaves a broader question undetermined, which is whether the DFPI’s asserted “true lender” doctrine is even lawful under the APA. As Womble Bond Dickinson Partner Scott Hyman, Deputy General Counsel of Worldwide Acceptance Corporation Justin Bradley, and veteran California financial services attorney Paul Soter have observed, California's APA prohibits state agencies from enforcing rules not adopted through notice-and-comment rulemaking, and courts afford "no deference at all" to non-compliant regulations.. 

With federal deregulation reducing enforcement at the national level, states are expected to pursue more aggressive theories, making the underground regulation doctrine "more critical for regulated companies.” Further, “application of a ‘regulation-by-enforcement’ philosophy similar to that of the former Consumer Financial Protection Bureau Chairman’s ‘compliance malpractice’ statement would run afoul of California’s prohibition against underground regulation.” The court’s treatment of the underground regulation issue may signal a warning to the DFPI against pursuing the industry under unwritten rules.

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. OppFi illustrates the importance of well-developed programs and specified key indicators of the requisite bank involvement, including: independent underwriting authority, funding with the bank's own capital, economic risk retention, and marketing and regulatory compliance oversight. 

These key indicators coupled with evaluating for usury at inception are instructive criteria for bank partner programs operating in California. While this ruling would make it more difficult for the DFPI to pursue true lender actions in the future, we would expect the DFPI to appeal the ruling, and it has 60 days to do so.

If you have any questions about this alert, please contact the authors or the Womble Bond Dickinson with whom you normally work.

Click here to read the full decision.