A California lending company that targets Latinos with high-interest loans is dismissing thousands of lawsuits days after the Guardian questioned the volume of actions against customers.
An investigation by the Guardian has revealed that Oportun Inc is one of the most litigious debt collectors in California, accounting for at least 15% of all small claims filings from June 2017 through July 2018. The company advertises a path to the American dream, but an extraordinary number of its clients end up facing punitive legal actions.
According to an analysis of available court records in 20 of California’s 58 counties, the San Carlos-based company filed more than 30,000 collections lawsuits in 2019 and at least 14,000 through the first half of 2020, a period in which the coronavirus outbreak shattered unemployment records and pushed millions of Americans to the brink.
“The number is astounding,” said Noah Zinner, a consumer attorney at Bay Area Legal Aid. “Why are you suing people in small claims? Why are you suing people during a pandemic?”
The company, which sells unsecured personal loans in 12 states and auto loans in California only, declined to provide the total number of lawsuits it filed this year and last in California and Texas, where it has a robust process for filing small claims actions against customers who fall 60 days behind in their payments.
But four days after the Guardian contacted Oportun about its litigious practices, the company announced it would dismiss all pending small claims lawsuits and suspend legal collection efforts during the pandemic.
The company also said it would reduce future collections lawsuits by 60% and cap interest rates at 36%.
Raul Vazquez, Oportun’s CEO, told the Guardian last week that his company was spurred by recent media inquiries to examine how Oportun’s debt collection practices compared with larger financial institutions.
“The fact that we were even near the top … and in some counties, we were the top, was not consistent with the way that we seek to position our business as a mission-driven company,” he said.
But suing customers in small claims courts has been a consistent practice for Oportun. At a time when debt collection lawsuits represent the single most common type of civil litigation in America, Oportun stood as a leader in California, deluging Los Angeles county with more than 15,000 lawsuits last year, or one for every 667 residents in a county of over 10 million.
“They’re by far the largest segment of the small claims hearings here in San Diego,” said Alysson Snow, a legal aid attorney. Snow, who serves as the senior consumer protection attorney at the Legal Aid Society of San Diego, said Oportun had inundated her county courthouse with small claims lawsuits because that was the easiest way to secure indefinite monetary judgments against vulnerable people.
“Most of the time they win by default,” Snow said of Oportun. “They know the community they’re targeting, so there’s a lot of people who have questions of legality regarding citizenship status.”
In California, small claims courts do not have to provide interpreters and do not permit legal counsel, which is why even most legal aid organizations have not come across Oportun. If defendants do not show up to court, judges award default judgments against them in favor of the plaintiff. While damages are capped at $2,500 for anyone who files more than two small claims lawsuits a year, Snow and Zimmer said any judgments allowed Oportun to garnish its customers’ wages and pad on interest for at least 10 years.
Two sides of Oportun
It’s difficult to determine how much small claims judgments affect Oportun’s bottom line. The company boasted $600m in revenues last year – more than 90% of that from the interest rates customers pay on their loans.
According to company lore, Oportun was founded in 2005 by three college-age guys who wanted to help their Latino community members build their credit history. The company was called Progreso Financiero back then and, legend has it, distributed its first loan from a folding card table in a Latino grocery store.
In its 15 years, the company has weathered an economic recession, a name change and a bitter lawsuit from one of its founders on its way to becoming a quiet titan of high-interest loan debt.
In 2018, Oportun issued 374,488 unsecured consumer loans worth $1.1bn in principal, according to a report submitted to the California department of business oversight. Nearly 43% of those loans, all for amounts under $2,500, were charged an annualized interest rate between 40% and 69.9%. (California actually permits payday lenders to charge far more in some cases.)
The vast majority of Oportun’s customers fall behind on payments. At the end of 2018, Oportun collected nearly $8.2m in late fees from over 545,000 loans, roughly 75% of its customer portfolio, which numbered more than 743,000 active customers at the end of April.
According to the company’s filings to the US Securities and Exchange Commission, Oportun has customer contact centers in Mexico, Colombia and Jamaica, as well as a robust process for filing small claims lawsuits in California and Texas against customers who get too far behind.
Snow said Oportun’s interest rates did not do much to differentiate it from the predatory lenders it claims to be an alternative to.
“This is a desperate person’s type of loan,” she said. “You take out a loan to help pay your electric bill and then all of a sudden you have a [small claims] judgment that puts you in a worse position than you would’ve been without the loan in the first place.”
The loyal customer
That’s what happened to David Barrera, an Oportun customer of two years who was served papers in June.
The 49-year-old El Salvadoran lives with his wife, son, daughter and two granddaughters in a two-level apartment that sits a five-minute walk from Oportun’s office in San Francisco’s Mission District. Barrera works as a desk clerk at a residential hotel in the city, where he makes $16 an hour and tries to stretch his salary to keep a roof over his family’s head. His daughter was laid off during the pandemic and his wife, who has worsening diabetes and painful arthritis, can no longer work.
Like a half-dozen other Oportun customers interviewed by the Guardian, Barrera said he desperately needed a little help to pay his bills. Barrera says a friend told him about a place that lends money to people like them – working-class immigrants with dismal or no credit scores, who don’t have access to traditional loans. It was called Oportun, which means “opportunity” in Spanish.
Spanish-language loan documents show Oportun issued Barrera a $6,500 loan in 2018, which he would have to pay back in biweekly installments of $135 with fees and a 33.9% interest rate. Even if everything went as planned, Barrera would remain in debt to the company for 156 weeks and pay it $4,040.32 more than he borrowed.
But then the pandemic hit and Barrera fell behind. Then came the phone calls, no longer friendly. Then came the lawsuits, one for him and his daughter, who had taken out her own loan before she lost her job.
“If before I was barely making it, now I’m struggling very bad,” Barrera told the Guardian. “I don’t know how I’m going to do it.”
A day after Oportun announced it was suspending all small claims actions along with capping annual percentage rates at 36%, Barrera hadn’t yet gotten his reprieve. In fact, he was sinking deeper into debt to the company. He owes $4,900 on his loan, more than when he first signed his name two years ago.
“I already paid $2,000 and that barely scratched my loan,” he said.
In mid-July, Barrera worked out a weekly payment plan to pay $135 every Saturday. Or thought he did. Two weeks later, he received a letter informing him he was being sued and setting his court date for November. His daughter is due in court the month before.
Vazquez, who joined Oportun in 2012, said his company’s pledge to lower interest rates and wipe out customer lawsuits show the company is serious about helping people like his parents, who are from small mining towns in Mexico. He said all customers have to do is text “defer” to a company representative to get a 30-day grace period.
“As we took a look at what’s happening in our country and around the world, we know that low- and moderate-income communities and communities of color – again, my friends, parents of friends, aunts, uncles, cousins – they’re being hit among the hardest of anyone,” Vazquez said. “So we decided that this was the right time to take a big step forward.”
Snow is not impressed by the recent announcements. She said she first encountered the company when it was still calling itself Progreso Financiero and taped a fake legal summons to her client’s front door “to scare them into paying their debts”.
A company spokesman declined to address that specific allegation, saying in a statement: “We have continually transformed our collections practices since our founding, and we haven’t utilized in-person collectors for over four years. We’ve already taken action on the commitments we announced earlier this week to further evolve our approach.”
Snow said she only learned the company had rebranded but maintained its rapacious collections appetite when she tagged along with an active-duty service member to his small claims hearing and heard one name dominate the docket: Oportun. “And [I was] like, ‘What the hell is going on? This is crazy,’” she recalled.
According to figures provided by the San Diego superior court, Oportun Inc has sued more than 6,500 people in the county between 2017 and 30 July of this year.
During the 2018 financial year in Sacramento and Orange counties, Oportun filed between 14% and 16% of all collections lawsuits and was the single largest source of small claims filings, outpacing housing agencies, bail bonds agencies and other payday lenders.
The company was responsible for nearly half of all small claims lawsuits in Madera and Tulare counties, and more than a quarter of small claims lawsuits in Fresno county.
In Tulare county, which is 65.6% Hispanic and where Oportun accounted for 46.6% of the 1,507 small claims lawsuits filed in 2017-18, the lending company won uncontested judgments in 38% of the 755 small claims lawsuits it filed in the 2018 calendar year.
In an email following Oportun’s announcement, Snow said the company was “still doing more extensive litigation than any other debt collector at the moment”.
The company has taken a financial hit during the pandemic. Oportun Financial Corp reported a net income loss of $13.3m at the end of March and its publicly traded stock was selling for a high of $15.23 a share on 27 July, down $8.54 since January.
As for Barrera, he was planning to call Oportun on Friday to let them know he wouldn’t be able to make his next $135 payment. He sighs when he thinks of his mounting bills.
“I can tell you, I’m behind on everything. I’m behind with my rent, I’m behind with my bills, my phone bills, I’m behind with everything,” he said. “We are not making it. I mean, we are barely surviving.”
The family has started frequenting food banks to stretch what they already don’t have. Barrera noted that it may actually be cheaper for him to lose in small claims court, where Oportun can obtain a maximum judgment against him of $2,500.
“It’s like way lower than I actually owe,” he said. “I thought about it.”
But Barrera quickly dismissed the idea. He said he’s not one to break his word.
“I never been a person who hides from my duties, my bills, and yeah, I will try to pay them off,” he said.
Oportun’s top executive will probably appreciate it. Vazquez only cleared $3.5m in salary, stock options and incentives last year, down from $4.5 million the previous year.