“True Lender” Doctrine Back in the Spotlight: Key Takeaways on OppFi v. Hewlett Tentative California Superior Opinion

The latest episode of the Consumer Finance Monitor Podcast being released today tackles one of the most consequential developments in bank–fintech litigation in recent years: the Los Angeles Superior Court’s tentative decision in Opportunity Financial, LLC v. Hewlett (read more here). This case squarely addresses the long-debated “true lender” doctrine which has for decades bedeviled banks and Fintechs and “bricks and mortar” non-banks that have entered into joint ventures with one another to engage in interstate lending programs which take advantage of interest rate exportation rights afforded to banks. After applying application California and federal law, the Court granted summary judgment to OppFi and against the California Department of Financial Protection and Innovation (DFPI) which unsuccessfully maintained that OppFi is the true lender and not OppFi’s partner, FinWise Bank.

In this episode, host Alan Kaplinsky, founder and former chair of the Consumer Financial Services Group and now Senior Counsel, is joined by two leading voices with sharply contrasting perspectives: Professor Emeritus Arthur Wilmarth, a prominent critic of bank–fintech partnerships, and Ballard Spahr Senior Counsel Ron Vaske, who regularly advises banks and fintech companies on structuring such programs. Their discussion offers a deep and balanced exploration of the court’s reasoning and its broader implications.

 

A Tentative Decision with Significant Implications

At the center of the case is a partnership between OppFi, a fintech platform, and FinWise Bank, a Utah-chartered, FDIC-insured institution. The program allowed FinWise to originate consumer loans at interest rates permissible under Utah law and export those rates nationwide under Section 27 of the Federal Deposit Insurance Act.

The DFPI challenged the arrangement, arguing that OppFi—not FinWise—was the “true lender,” which would subject the loans to California’s 36% interest rate cap.

In a tentative ruling, the court rejected the DFPI’s position and granted summary judgment in favor of OppFi. The court emphasized traditional indicia of lending authority, including:

•           FinWise’s role in funding the loans

•           Its control over underwriting criteria

•           Its retention of a 5% ownership interest

•           Its ongoing oversight of compliance and marketing

Critically, the court also relied on the longstanding California law principle that usury is determined at the inception of the loan. (See the discussion below.) Because FinWise originated the loans, the court concluded they were not rendered unlawful by OppFi’s subsequent purchase of a 95% participation interest giving which gave it a predominant economic interest.

 

Competing Views on “True Lender”

The podcast highlights a fundamental divide in how courts and commentators approach the true lender doctrine.

Professor Wilmarth argues that the court failed to meaningfully engage with the “predominant economic interest” test, which focuses on who bears the majority of the economic risk and reward. In his view, OppFi’s 95% participation interest suggests that it—not the bank—is the real lender in substance. He also raises broader concerns about whether such arrangements undermine state usury laws and expose consumers to excessively high-cost credit.

Ron Vaske, by contrast, emphasizes the legal and structural realities of the transaction. He underscores that FinWise is the named lender, funds the loans, and remains legally responsible to borrowers. From this perspective, the allocation of economic interests after origination should not redefine the identity of the lender or override federal law permitting rate exportation.

 

The Role of “Valid When Made”

Another key related theme explored in the episode is the “valid when made” doctrine—the principle that a loan that is lawful at origination remains lawful after assignment. The court’s reliance on this concept reinforces the importance of determining lender status at the moment the loan is made, rather than based on subsequent transfers or participations.

The discussion also touches on the interplay between state and federal law, as well as the continuing relevance of regulatory interpretations following the Supreme Court’s decision in Loper Bright, which curtailed Chevron deference.

 

What Comes Next?

It is important to note that the court’s ruling is still tentative. In accordance with California procedure, OppFi must submit a proposed final opinion and order to the Court. If adopted, an appeal by the DFPI appears likely—potentially setting the stage for further appellate guidance on the true lender doctrine in California and beyond.

 

Why This Matters

This case is part of a broader and ongoing policy debate:

·                 Supporters of bank–fintech partnerships argue they expand access to credit and operate within well-established federal banking frameworks.

·                 Critics contend they can be used to circumvent state consumer protection laws, particularly interest rate caps.

As the regulatory and judicial landscape continues to evolve, OppFi v. Hewlett represents a significant—and closely watched—development.

It may be significant to note that, unlike several other states, California does not have a statute stating that the holding of a “predominant economic interest” in a loan makes the holder the true lender 

Be sure to listen to the full podcast episode for a deeper dive into the case and the competing legal and policy perspectives shaping the future of bank–fintech partnerships.

Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.