Americans are struggling.
The cost of living is rising, and paychecks just aren’t keeping up. For some, the month stretches further than the pay. One lender taking advantage of this situation is OppFi, otherwise known as Opportunity Financial, which makes short-term installment loans at up to 195% Annual Percentage Rate (APR).
For this report, CRL employed a mixed-methods approach to understand how OppFi loans affect borrowers. The report relies on OppFi’s public securities filings, the complaint database of the Consumer Financial Protection Bureau (CFPB), and anonymized transactional data from a national nonprofit. Together, these sources paint a striking picture of unaffordable loans, borrower churn, and a deepening debt trap. OppFi borrowers are already stretched thin, and the company saddles them with excessive interest rates that allow OppFi to lend without regard to ability to repay. The result is that—as OppFi discloses in its securities filings—a shocking percentage of OppFi’s loan portfolio (roughly one third) is in default, and the majority of OppFi’s income comes from loan refinances.
Our analysis of the transactional data uncovered examples of borrowers caught in an unaffordable cycle of refinancing, including instances of refinancing two to three months after taking out an OppFi loan. Moreover, the transactional data include many instances of OppFi borrowers also using other high-cost forms of credit, which demonstrates that OppFi contributes to the financial burden of borrowers trapped in an unaffordable debt cycle.
Takeaways
- OppFi charges exorbitant rates on personal installment loans, with APRs of up to 195% on loans ranging from $500–$5,000.
- Frequent refinancing is built into OppFi’s business model. According to a 2021 lawsuit by the District of Columbia, 75% of the pre-tax income that OppFi makes from OppLoans consumers is the result of refinancing. OppFi profits from borrowers who spend extended periods carrying extremely high-cost consumer debt.
- OppFi loans fail at a staggeringly high rate. The company has publicly disclosed in its latest 10-K filing a net charge-off rate of 51.4% (as a percentage of average receivables), and a 2021 lawsuit by the District of Columbia alleges that their underwriting model anticipates that up to one third of borrowers will default. OppFi expects their borrowers to struggle, but it continues to lend to them regardless.
- Many borrowers in our sample had not just OppFi loans, but other high-cost loan products as well, indicating that OppFi loans do not help borrowers transition to safer credit products but are used in conjunction with other predatory loans.