In a very significant and potentially precedent-setting February 24, 2026 decision, the Los Angeles County Superior Court (Hon. Gary D. Roberts) issued a tentative decision granting summary judgment in favor of Opportunity Financial, LLC (“OppFi”) and against the California Department of Financial Protection and Innovation (“DFPI”). The ruling rejects the DFPI’s claim that OppFi was the “true lender” of certain loans originated by Utah-chartered FinWise Bank and therefore subject to California’s 36% interest rate cap under the California Financing Law (CFL), as amended by AB 539.
If finalized, the decision will have substantial implications for bank–fintech partnerships, the continued vitality of the “valid-when-made” doctrine, and the scope of state “true lender” theories in the wake of federal interest rate exportation authority.
OppFi now has 30 days to submit to the District Court a proposed final statement of decision and judgment consistent with the Court’s tentative ruling. If the judgment is entered, DFPI will have the right to appeal to the United States Court of Appeals for the Ninth Circuit.
Procedural History
OppFi filed suit in March 2022 seeking declaratory and injunctive relief against the DFPI Commissioner after the agency threatened to enforce California’s Fair Access to Credit Act (AB 539) against loans originated by FinWise Bank.
In April 2022, DFPI filed a cross-complaint alleging:
- Violations of the California Financing Law, and
- Violations of the California Consumer Financial Protection Law.
DFPI’s theory was that FinWise Bank had merely “rented” its charter to OppFi, and that OppFi was the “true lender” of the loans. Because California caps interest at 36% for covered loans between $2,500 and $10,000, DFPI alleged the loans were unlawful and sought injunctive relief, restitution, and penalties exceeding $100 million.
OppFi moved for summary judgment. On January 29, 2026, the Court heard argument and took the matter under submission. On February 24, 2026, the Court issued its tentative decision granting summary judgment for OppFi.
Notably, although OppFi raised multiple independent grounds for relief, the Court granted summary judgment solely on one basis: DFPI failed to create a triable issue of material fact that FinWise Bank was a “mere dummy” lender.
The Legal Framework: Usury at Inception
The Court’s analysis was rooted in longstanding California usury principles. Under California law:
- A contract must be usurious “in its inception” to violate usury law.
- A loan that is non-usurious when made does not become usurious due to subsequent events, including assignment.
- Courts look to substance over form—but only where evidence supports a sham or subterfuge.
The Court relied heavily on California precedent, including:
- Sharp v. Mortgage Security Corp. of America
- Montgomery v. GCFS, Inc.
- Strike v. Trans-West Discount Corp.
The Court emphasized that assignment of loans by a bank, like FinWise Bank, that is exempt from California’s usury laws under the California Constitution, Article XV, Section 1, does not retroactively render a loan usurious. If lawful when made, the loan remains lawful.
Why the Court Found No Triable Issue of Fact
The Court concluded OppFi produced overwhelming evidence demonstrating that FinWise Bank—not OppFi—was the lender at inception. The DFPI failed to raise a genuine dispute of material fact.
The Court found the following facts particularly important:
1. FinWise Controlled Underwriting
The Court emphasized that FinWise:
- Controlled underwriting criteria.
- Performed final underwriting from its Utah offices.
- Had sole authority to approve or reject applications.
- Independently reviewed and approved changes to underwriting models.
- Rejected loans that failed to meet its thresholds.
Critically, OppFi was not permitted to alter underwriting criteria unilaterally.
The Court rejected DFPI’s argument that OppFi “controlled” underwriting because it owned the intellectual property behind its credit models. Ownership of a model did not equate to authority to approve loans. FinWise had final say.
The Court found no evidence that FinWise’s underwriting was a “rubber stamp.”
2. FinWise Funded the Loans with Its Own Money
The Court found undisputed evidence that:
- FinWise used its own funds to originate loans.
- Funds came from accounts controlled solely by FinWise.
- OppFi did not supply loan capital.
- OppFi had neither a possessory nor beneficial interest in the funding accounts.
DFPI’s theory that OppFi’s collateral arrangements effectively funded the loans was described as speculative. There was no evidence OppFi’s funds were used to originate loans.
3. FinWise Retained Ownership and Economic Interest
At origination:
- FinWise held title to the loans.
- FinWise retained at least a 5% receivable interest throughout the life of each loan.
- FinWise remained exposed to risk of loss.
- FinWise received origination-related fees and servicing fees.
The Court emphasized that even if FinWise later sold receivables, that fact did not retroactively alter the validity of the loans at inception.
Relying on its earlier preliminary injunction ruling, the Court reiterated that Section 27 of the Federal Deposit Insurance Act permits state-chartered banks to export interest rates allowed in their home state.
FinWise, as a Utah state-chartered bank, was permitted under Section 27 to charge Utah-permitted rates to California borrowers. The Court cited case authority interpreting Section 27 which holds that transfers of loans or receivables after origination are irrelevant. Most significantly, the District Court did not employ the “predominant economic interest” test which has been codified in some states. This test looks beyond who is named on the loan documents to determine who substantially holds the risk, rewards, and economic benefit. The District Court instead held that the “valid when made” test under California case law combined with the clear exemption of FinWise Bank from California’s usury laws under the California Constitution and preemption of California’s usury laws under Section 27 of the Federal Deposit Insurance Act are controlling
4. FinWise Controlled Marketing and Compliance
The Court also highlighted:
- FinWise approval of all consumer-facing marketing.
- Required approval for website changes, email campaigns, and new marketing channels.
- Oversight of vendor relationships.
- Weekly operational calls and quarterly audits.
- Monitoring of delinquencies.
- Board-level reporting.
- Review and approval of compliance policies.
These facts undermined DFPI’s argument that FinWise was a passive or nominal participant.
The Court’s Rejection of DFPI’s “True Lender” Theory
The Court concluded DFPI failed to produce evidence that the relationship was a “sham and subterfuge.”
Importantly, the Court framed the key inquiry under California usury doctrine as whether the loan was usurious at inception. Because FinWise was the lender when the loans were made—and because it was legally permitted under federal law to export Utah interest rates—the loans were lawful at origination.
DFPI’s post-origination arguments about receivable sales, collateral mechanics, branding, or warehouse lines did not create a triable issue of material fact.
As the Court stated, the Commissioner produced “simply no evidence” that OppFi controlled underwriting or that the structure was a disguised usurious scheme.
What the Court Did Not Reach
Although OppFi raised two additional independent grounds:
- That the loans were exempt from the CFL, and
- That OppFi was not a “finance lender” under the statute, the Court found it unnecessary to analyze those arguments because the “true lender” issue alone disposed of the case.
What Happens Next
The Court’s decision is currently tentative.
Under California Rule of Court 3.1590:
- OppFi has 30 days to submit a proposed statement of decision and proposed judgment consistent with the tentative ruling.
- If finalized, DFPI may appeal to the United Stares Court of Appeals for the Ninth Circuit.
An appeal would squarely present federal preemption and true-lender issues to the Ninth Circuit—potentially producing a major appellate decision affecting bank–fintech partnerships nationwide.
Why This Decision Matters
If finalized and upheld, the ruling reinforces several important principles:
- Usury is determined at inception.
- Assignment does not destroy bank interest rate exportation.
- Section 27 of the FDIA has real preemptive force.
- A regulator must produce actual evidence—not rhetoric—to survive summary judgment on a “true lender” claim.
- Bank oversight, funding of the loan, retained risk, and control over underwriting remain central to the true lender analysis.
For institutions structuring bank–fintech partnerships, the opinion provides a roadmap of facts that courts may find dispositive in determining lender status in California and perhaps other states.
