10q10k10q10k.net

What changed in OppFi Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of OppFi Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+428 added−459 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-29)

Top changes in OppFi Inc.'s 2023 10-K

428 paragraphs added · 459 removed · 367 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

101 edited+13 added−26 removed95 unchanged
Biggest changeUnder such agreements, OppFi’s employees, consultants and contractors are subject to invention assignment provisions designed to protect its proprietary information and ensure its ownership in intellectual property developed pursuant to such agreements. 19 Table of Contents For additional information about its intellectual property and associated risks, see the section titled “Risk Factors—Risks Related to OppFi’s Business and Industry.” Employees and Human Capital OppFi believes it has built something very special in terms of its company culture.
Biggest changeFor additional information about its intellectual property and associated risks, see the section titled “Risk Factors-Risks Related to OppFi’s Business and Industry.” Employees and Human Capital OppFi believes it has built something very special in terms of its company culture. Building a great place to work for the best talent was a priority for OppFi from day one.
Under EFTA, and Regulation E that implements it, OppFi must obtain consumer consents prior to receiving electronic transfer of funds from consumers’ bank accounts, and its bank partners may not condition an extension of credit on the borrower’s agreement to repay the loan through preauthorized (recurring) electronic fund transfers.
Under EFTA, and Regulation E that implements it, OppFi must obtain consumer consents prior to receiving preauthorized electronic transfer of funds from consumers’ bank accounts, and its bank partners may not condition an extension of credit on the borrower’s agreement to repay the loan through preauthorized (recurring) electronic fund transfers.
Sanctions Laws Under the Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, or USA PATRIOT ACT, and certain U.S. sanctions laws, OppFi’s bank partners are required to maintain anti-money laundering, customer due diligence and record-keeping policies and procedures, which OppFi performs on behalf of its bank partners, and to avoid doing business with sanctioned persons or entities or engaging in types of sanctioned activity in certain jurisdictions.
Sanctions Laws Under the Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, or USA PATRIOT ACT, and certain U.S. sanctions laws, OppFi’s bank partners are required to maintain anti-money laundering (“AML”), customer due diligence and record-keeping policies and procedures, which OppFi performs on behalf of its bank partners, and to avoid doing business with sanctioned persons or entities or engaging in types of sanctioned activity in certain jurisdictions.
OppFi has shifted to the bank partner model because its bank partners operate under federal law, which allows them to lend nationally based on their state domicile and facilitates a national product offering for the consumer while also streamlining regulatory requirements and compliance infrastructure. Technology, Engineering Talent and Product Architecture Proprietary technology is essential to OppFi’s core operations.
OppFi has shifted to the bank partner model because its bank partners operate under federal law, which allows them to lend nationally based on their state domicile and facilitates a national product offering for the consumer while also streamlining regulatory requirements and compliance infrastructure. Technology, Engineering Talent and Product Architecture Technology is essential to OppFi’s core operations.
These fixed costs are tied to the loan application itself. In the case of smaller-sized consumer loans, these fixed costs are representatively large relative to loan amount; therefore, smaller loans require higher interest rates than larger loans. According to a report published in 2020 by the Federal Reserve 7 , break-even APRs are quite high for small loan amounts.
These fixed costs are tied to the loan application itself. In the case of smaller-sized consumer loans, these fixed costs are representatively large relative to loan amount; therefore, smaller loans require higher interest rates than larger loans. According to a report published in 2020 by the Federal Reserve, break-even APRs are quite high for small loan amounts.
Department of the Treasury’s Office of Foreign Assets Controls and equivalent foreign authorities. OppFi’s AML compliance program includes policies, procedures, reporting protocols, and internal controls, including the designation of an AML compliance officer, and is designed to address these legal and regulatory requirements and to assist in managing risk associated with money laundering and terrorist financing.
Department of the Treasury’s Office of Foreign Assets Controls (“OFAC”) and equivalent foreign authorities. OppFi’s AML compliance program includes policies, procedures, reporting protocols, and internal controls, including the designation of an AML compliance officer, and is designed to address these legal and regulatory requirements and to assist in managing risk associated with money laundering and terrorist financing.
Proprietary, Data Driven Decisioning and Risk Models OppFi’s underwriting takes a holistic approach to evaluating potential customers across traditional, nontraditional, banking history, and income/employment data to make decisions on each credit application. The models ignore traditional credit scores, instead relying on internally developed scoring and analytics to identify the creditworthiness of each application.
Proprietary, Data Driven Decisioning and Risk Models OppFi’s underwriting platform takes a holistic approach to evaluating potential customers across traditional, nontraditional, banking history, and income/employment data to make decisions on each credit application. The models ignore traditional credit scores, instead relying on internally developed scoring and analytics to identify the creditworthiness of each application.
All transfers of funds related to its operations conform to the EFTA, its regulations and NACHA guidelines. As part of OppFi’s servicing activities, OppFi obtains necessary electronic authorization from borrowers and investors for such transfers in compliance with such rules.
All transfers of funds related to its operations conform to the EFTA, its regulations and NACHA guidelines. As part of OppFi’s servicing activities, OppFi obtains necessary electronic authorization from borrowers and investors for such transfers in compliance with applicable rules.
OppFi continuously works to improve customer satisfaction by evaluating information from website analytics, customer surveys and Loan Advocate feedback. OppFi’s teams receive training on a regular basis and are monitored for quality assurance.
OppFi continuously works to improve customer satisfaction by evaluating information from website analytics, customer surveys and Customer Advocate feedback. OppFi’s teams receive training on a regular basis and are monitored for quality assurance.
The loans offered on OppFi’s platform by its bank partners must also comply with the requirement that a loan cannot be conditioned on the borrower’s agreement to repay the loan through recurring electronic fund transfers.
The loans offered on OppFi’s platform by its bank partners must also comply with the requirement that a loan cannot be conditioned on the borrower’s agreement to repay the loan through preauthorized (recurring) electronic fund transfers.
In contrast to traditional credit providers, OppFi does not take into account traditional credit scores and instead uses alternative data to assist in identifying borrowers who have the ability to repay. • OppFi TurnUp Program .
In contrast to traditional credit providers, OppFi does not take in account traditional credit scores and instead uses alternative data to assist in identifying borrowers who have the ability to repay. • OppFi TurnUp Program .
Machine learning-based risk models are custom built to effectively evaluate risk and provide customized credit product solutions for each credit application. The platform considers applicant data such as available bank balance trends, volatility of income, and proprietary fraud scores amongst others to predict repayment ability, and leverages this with real-time Instant Bank Verification, or IBV, response data.
Machine learning-based risk models are custom built to effectively evaluate risk and provide customized credit product solutions for each credit application. The platform considers applicant data such as available bank balance trends, volatility of income, and bank-approved fraud scores amongst others to predict repayment ability, and leverages this with real-time Instant Bank Verification, or IBV, response data.
The OppFi platform is a mobile-optimized online application where eligible applicants, at their request, are able to opt into the OppFi TurnUp Program. This program helps these applicants find more affordable credit options by checking the market voluntarily on their behalf for sub-36% annual percentage yield, or APR, products offered by traditional, mainstream lenders.
The OppFi platform is a mobile-optimized online application where eligible applicants, at their request, are able to opt into the OppFi TurnUp Program. This program helps these applicants find more affordable credit options by checking the market voluntarily on their behalf for sub-36% annual percentage rate, or APR products offered by traditional, mainstream lenders.
Each share of Class V Voting Stock entitles OFS to one vote per share at any annual or special meeting of the stockholders of OppFi, voting together with the holders of Class A Common Stock as a single class, but the shares of Class V Voting Stock do not entitle OFS to any economic rights in OppFi. 4 Table of Contents The following diagram illustrates the ownership structure of OppFi as of December 31, 2022.
Each share of Class V Voting Stock entitles OFS to one vote per share at any annual or special meeting of the stockholders of OppFi, voting together with the holders of Class A Common Stock as a single class, but the shares of Class V Voting Stock do not entitle OFS to any economic rights in OppFi. 4 Table of Contents The following diagram illustrates the ownership structure of OppFi as of December 31, 2023.
The CFPB rescinded portions of the rule requiring an ability-to-pay determination and finalized the balance of the rule in 2020. In October 2022, the Fifth Circuit Court of Appeals issued its opinion in Community Financial Services Association of America, et al. v. CFPB (CFSA v. CFPB) invalidating the CFPB’s Payday, Vehicle-Title, and Certain High-Cost Installment Loans rule (Small-Dollar Rule).
The CFPB rescinded portions of the rule requiring an ability-to-pay determination in 2020. In October 2022, the Fifth Circuit Court of Appeals issued its opinion in Community Financial Services Association of America, et al. v. CFPB (CFSA v. CFPB) invalidating the CFPB’s Payday, Vehicle-Title, and Certain High-Cost Installment Loans rule (Small-Dollar Rule).
State licensing statutes impose a variety of requirements and restrictions, including: • record-keeping requirements; • collection and servicing practices; • requirements governing electronic payments, transactions, signatures and disclosures; • examination requirements; • surety bond and minimum net worth requirements; • financial reporting requirements; • notification requirements for changes in principal officers, stock ownership or corporate control; and • restrictions on advertising and other loan solicitation activity, as well as restrictions on loan referral or similar practices.
State licensing statutes impose a variety of requirements and restrictions, including: • record-keeping requirements; • collection and servicing practices; • requirements governing electronic payments, transactions, signatures and disclosures; • examination requirements; 17 Table of Contents • surety bond and minimum net worth requirements; • financial reporting requirements; • notification requirements for changes in principal officers, stock ownership or corporate control; and • restrictions on advertising and other loan solicitation activity, as well as restrictions on loan referral or similar practices.
Some have experienced a hardship or emergency and need a loan; others are struggling to make ends meet; while others have unplanned expenses. When they apply for a loan through a bank, they are often rejected due to their credit score.
Some have experienced a hardship or emergency and need a loan; others are struggling to make ends meet; while others have unplanned expenses. When these consumers apply for a loan through a bank, they are often rejected due to their credit score.
The FDCPA primarily applies to third-party debt collectors, meaning parties collecting on behalf of another, and debt collection laws of certain states also impose similar requirements more broadly on creditors who collect their own debts. In addition, the CFPB prohibits unfair, deceptive or abusive acts or practices, or UDAAPs in debt collection, including first-party debt collection.
The FDCPA primarily applies to third-party debt collectors, meaning parties collecting on behalf of another, and debt collection laws of certain states also impose similar requirements more broadly on creditors who collect their own debts. In addition, the CFPB prohibits unfair, deceptive or abusive acts or practices, or UDAAPs in debt collection, including 13 Table of Contents first-party debt collection.
OppFi’s business and the industry in which OppFi operates are subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and elsewhere in this report.
OppFi’s business and the industry in which OppFi operates is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and elsewhere in this report.
If any lower cost products are identified, OppFi displays the offers from the applicable lenders and consumers can choose to finish their application at another lender’s platform. At that point, the applicant leaves OppFi’s platform.
If any lower cost products are identified, OppFi displays the offers from the applicable lenders and consumers can choose to finish their application at another lender’s website. At that point, the applicant leaves OppFi’s website.
The CFPB has imposed, and will continue to impose, restrictions on lending practices, including with respect to the terms of certain loans. OppFi and its bank partners are subject to the CFPB’s enforcement authority, which could increase under new CFPB leadership. The CFPB may request reports concerning OppFi’s organization, business conduct, markets and 15 Table of Contents activities.
The CFPB has imposed, and will continue to impose, restrictions on lending practices, including with respect to the terms of certain loans. OppFi and its bank partners are subject to the CFPB’s enforcement authority, which could increase under new CFPB leadership. The CFPB may request reports concerning OppFi’s organization, business conduct, markets and activities.
If a borrower with an outstanding loan qualifies for SCRA protection the interest rate on their loan (including certain fees) will be reduced to 6% for the duration of the borrower’s active duty. During this period, any interest holder in the loan will not receive the difference between 6% and the loan’s original interest rate.
If a borrower with an outstanding loan qualifies for SCRA protection the interest rate on their loan (including certain fees) will be reduced to 6% for the duration of the borrower’s active duty. During this 15 Table of Contents period, any interest holder in the loan will not receive the difference between 6% and the loan’s original interest rate.
OppFi has implemented an anti-money laundering (“AML”) program designed to prevent its platform from being used to facilitate money laundering, terrorist financing, and other illicit activity. OppFi’s AML program is designed to prevent its platform from being used to facilitate business in countries, or with persons or entities, included on designated lists promulgated by the U.S.
OppFi has implemented an AML program designed to prevent its platform from being used to facilitate money laundering, terrorist financing, and other illicit activity. OppFi’s AML program is designed to prevent its platform from being used to facilitate money laundering and from conducting business in countries, or with persons or entities, included on designated lists promulgated by the U.S.
OppFi expects that regulatory examinations by both federal and state agencies will continue, and there can be no assurance that the results of such examinations will not have a material adverse effect on OppFi. 13 Table of Contents Below, OppFi summarizes several of the material federal lending, servicing and related laws applicable to its business.
OppFi expects that regulatory examinations by both federal and state agencies will continue, and there can be no assurance that the results of such examinations will not have a material adverse effect on OppFi. Below, OppFi summarizes several of the material federal lending, servicing and related laws applicable to its business.
TILA also regulates the advertising of credit and gives borrowers, among other things, certain rights regarding updated disclosures and the treatment of credit balances. OppFi, on behalf of the applicable bank partner, provides applicants with a TILA disclosure when applicants complete their loan applications on its platform.
TILA also regulates the advertising of credit and gives borrowers, among other things, 12 Table of Contents certain rights regarding updated disclosures and the treatment of credit balances. OppFi, on behalf of the applicable bank partner, provides applicants with a TILA disclosure when applicants complete their loan applications on its platform.
OppFi and its bank partners have a permissible purpose for obtaining credit reports on potential borrowers, and OppFi also obtains explicit consent from borrowers to obtain such reports. As part of its loan servicing activities, OppFi accurately reports loan payment and 14 Table of Contents delinquency information to appropriate consumer reporting agencies.
OppFi and its bank partners have a permissible purpose for obtaining credit reports on potential borrowers, and OppFi also obtains explicit consent from borrowers to obtain such reports. As part of its loan servicing activities, OppFi accurately reports loan payment and delinquency information to appropriate consumer reporting agencies.
There are a variety of programs in place in order to prevent customers from entering delinquency at all, including: • no prepayment penalties; • borrower’s assistance program allowing customers to remain in good standing regardless of payment status and reduce accrued interest if they are affected by natural and/or man-made disasters, such as a pandemic (including COVID-19); and • temporary and permanent hardship programs for customers experiencing longer-term inability to pay, such as job loss. • Social impact relationships.
There are a variety of programs in place in order to prevent customers from entering delinquency at all, including: • no prepayment penalties; • borrower’s assistance program allowing customers to remain in good standing regardless of payment status and reduce accrued interest if they are affected by natural and/or man-made disasters, such as a pandemic (including COVID-19); • temporary and permanent hardship programs for customers experiencing longer-term inability to pay, such as job loss; and • One-time payment deferment to end of loan term. • Social impact relationships.
Traditional banks, which have historically played a substantial role in consumer credit markets, have often been slow to adapt to digital adoption among consumers. There are roughly 4,700 Federal Deposit Insurance Corporation (“FDIC”) insured institutions, many of which have legacy technology and lack sufficient mobile solutions in today’s digital era.
Traditional banks, which have historically played a substantial role in consumer credit markets, have often been slow to adapt to digital adoption among consumers. There are approximately 4,600 Federal Deposit Insurance Corporation (“FDIC”) insured institutions, many of which have legacy technology and lack sufficient mobile solutions in today’s digital era.
In addition, the FTC Telemarketing Sales Rule implements the FTC’s Do-Not-Call Registry and imposes numerous other requirements and limitations in connection with telemarketing. OppFi’s policies address the requirements of the TCPA as well as FTC Telemarketing Sales Rule and other laws 16 Table of Contents limiting telephone outreach.
In addition, the FTC Telemarketing Sales Rule implements the FTC’s Do-Not-Call Registry and imposes numerous other requirements and limitations in connection with telemarketing. OppFi’s policies address the requirements of the TCPA as well as FTC Telemarketing Sales Rule and other laws limiting telephone outreach.
By leveraging its deep knowledge of the credit market for everyday Americans, OppFi believes it has a significant runway to further scale and gain market share for its core OppLoans installment loan product by executing on its multi-channel marketing strategy that utilizes partners, affiliates, email, direct mail, referral, and SEO.
By leveraging its deep knowledge of the credit market for everyday Americans, OppFi believes it has a significant runway to further scale and gain market share for its core OppLoans platform by executing on its multi-channel marketing strategy that utilizes partners, affiliates, email, direct mail, referral, and SEO.
In order to build and maintain these proprietary, innovative and secure products, OppFi commits substantial resources to identifying, employing, and retaining talented and mission-driven technology-focused professionals and engineers. OppFi believes that its platform architecture and talent provides OppFi with a competitive edge over its more traditional credit competitors.
In order to build and maintain these proprietary, innovative and secure products, OppFi commits substantial resources to identifying, employing, and retaining talented and mission-driven technology-focused professionals and engineers. OppFi believes that its platform architecture and the talent retained to continually evolve provides OppFi with a competitive edge over its more traditional credit competitors.
If any lower cost products are identified, OppFi displays the offers from the applicable lenders and consumers can choose to finish their application at another lender’s platform. At that point, the applicant leaves the OppFi platform.
If any lower cost products are identified, OppFi displays the offers from the applicable lenders and consumers can choose to finish their application at another lender’s website. At that point, the applicant leaves OppFi’s website.
OppFi’s standard operating procedures, outbound dialer/email/SMS solutions, and associated controls are designed to ensure compliance with unfair, deceptive or abusive acts or practices, or UDAAPs, fair lending laws, the Telephone Consumer Protection Act, or TCPA, the federal Fair Debt Collection Practices Act, or FDCPA, and the Federal Controlling the Assault of Non-Solicited 9 Table of Contents Pornography and Marketing, or CAN-SPAM, Act.
OppFi’s standard operating procedures, outbound dialer/email/SMS solutions, and associated controls are designed to ensure compliance with unfair, deceptive or abusive acts or practice regulations, or UDAAPs; fair lending laws; the Telephone Consumer Protection Act, or TCPA; the federal Fair Debt Collection Practices Act, or FDCPA; and the Federal Controlling the Assault of Non-Solicited Pornography and Marketing, or CAN-SPAM, Act.
In addition, due to OppFi’s digital nature, as its bank partners’ originations grow, OppFi achieves greater operating leverage. OppFi’s model is primarily driven by a financial technology platform that does not require significant increases in operating overhead to support its bank partners’ origination growth.
In addition, due to OppFi’s digital nature, as its bank partners’ originations grow, OppFi achieves greater operating leverage. OppFi’s model is primarily driven by a tech-enabled platform that does not require significant increases in operating overhead to support its bank partners’ origination growth.
On the Closing Date, the Business Combination with OppFi was consummated, resulting in the combined company being organized in an “Up-C” structure, and FGNA as the registrant changed its name to “OppFi Inc.” OppFi is headquartered in Chicago, Illinois. 20 Table of Contents
On the Closing Date, the Business Combination with OppFi was consummated, resulting in the combined company being organized in an “Up-C” structure, and FGNA as the registrant changed its name to “OppFi Inc.” OppFi is headquartered in Chicago, Illinois.
In addition, approximately 75.1% of loans originated on the OppFi platform were derived through key strategic partners who are compensated with a negotiated fixed unit price per loan funded or fixed percent of principal dollars funded. Approximately 7.2% of loans originated on the OppFi platform in 2022 were sourced from direct mail marketing channels.
In addition, approximately 74.2% of loans originated on the OppFi platform were derived through key strategic partners who are compensated with a negotiated fixed unit price per loan funded or fixed percent of principal dollars funded. Approximately 7.5% of loans originated on the OppFi platform were sourced from direct mail marketing channels.
OppFi believes it competes favorably based on the following competitive factors: • Constantly improving models; • Compelling loan offers from bank partners to consumers that improve regularly; • Automated and user-friendly loan application process; • Cloud-native, multi-tenant architecture; • Combination of technology and customer acquisition for bank partners; • Robust and diverse loan funding program; and • Brand recognition and trust.
OppFi believes it competes favorably based on the following competitive factors: • Constantly improving models; 11 Table of Contents • Compelling loan offers from bank partners to consumers; • Automated and user-friendly loan application process; • Cloud-native, multi-tenant architecture; • Combination of technology and customer acquisition for bank partners; • Robust and diverse loan funding program; and • Brand recognition and trust.
In addition, OppFi had a Net Promoter Score (NPS) of 82 for the year ended December 31, 2022. Financial education is also important, which is why OppFi launched its own online financial education portal —OppU. Customers and non-customers can use OppU to learn about building credit and budgeting, as well as how to better manage finances.
In addition, OppFi has a Net Promoter Score (NPS) of 79 for the year ended December 31, 2023. Financial education is also important, which is why OppFi launched its own online financial education portal —OppU. Customers and non-customers can use OppU to learn about building credit and budgeting, as well as how to better manage finances.
The Customer Advocate team works with delinquent customers to quickly re-establish a positive payment history by providing flexible pathways out of delinquency for customers who are willing to pay. Proactive outreach via email and text messages encourages delinquent customers to visit OppFi’s online portal or to call the Customer Advocate team.
The Customer Advocate team works with delinquent customers to quickly re-establish a positive payment history by providing flexible pathways out of delinquency for customers who are able to pay. Proactive outreach via email and text messages encourages delinquent customers to visit OppFi’s online portal or to call the Customer Advocate team to set up customized payment arrangements.
OppFi believes these nontraditional methods more accurately identify those consumers who are willing and able to repay loans, while simultaneously avoiding the issuance of loans to those consumers who may have received a loan that they cannot afford or do not intend to repay. OppLoans Lending Platform Highlights • Simple interest i nstallment loans .
OppFi believes these nontraditional methods more accurately identify those consumers who are willing and able to repay loans, while simultaneously avoiding the issuance of loans to those consumers who may have received a loan that they cannot afford or do not intend to repay. Highlights • Simple interest installment loans.
As part of OppFi’s commitment to help customers build a better financial path through more resources, education and support, OppFi maintains relationships with a suite of social impact-focused organizations whose services customers can access for free. OppFi seeks to add relationships with organizations that share its social impact mission.
As part of OppFi’s commitment to help customers build a better financial path through more resources, education and support, OppFi maintains relationships with a suite of social impact-focused organizations whose services customers can access for free. OppFi seeks to add relationships with organizations that share its social impact mission. Current relationships include Zogo, SpringFour, and Experian Boost®.
As of December 31, 2022, OppFi owned approximately 13.5% of the OppFi Units and controls OppFi-LLC as the sole manager of OppFi-LLC in accordance with the terms of the Third Amended and Restated Limited Liability Company Agreement of OppFi-LLC (“OppFi A&R LLCA”). All remaining OppFi Units (“Retained OppFi Units”) are beneficially owned by the Members.
As of December 31, 2023, OppFi owned approximately 17.0% of the OppFi Units and controls OppFi-LLC as the sole manager of OppFi-LLC in accordance with the terms of the Third Amended and Restated Limited Liability Company Agreement of OppFi-LLC (“OppFi A&R LLCA”). All remaining OppFi Units (“Retained OppFi Units”) are beneficially owned by the Members.
OppFi’s financial technology platform focuses on helping these consumers build a better financial path. Customers on OppFi’s platform benefit from a highly automated, transparent, efficient, and fully digital experience. The banks that work with OppFi benefit from its turn-key, outsourced marketing, data science, and proprietary technology to digitally acquire, underwrite and service these consumers.
Customers on OppFi’s platform benefit from a highly automated, transparent, efficient, and fully digital experience. The banks that work with OppFi benefit from its turn-key, outsourced marketing, data science, and proprietary technology to digitally acquire, underwrite and service these consumers.
Customers who meet the underwriting criteria for multiple bank partners are referred to a specific bank partner randomly based on a computer algorithm and volume targets set with each bank partner. OppFi’s bank partners generally hold loans originated on our platform for typically two to three days following origination.
Customers who meet the underwriting criteria for multiple bank partners are referred to a specific bank partner randomly based on a computer algorithm and volume targets set with each bank partner. OppFi’s bank partners generally hold loans originated on our platform for typically two to three days following origination. OppFi acquires certain participation rights in such loans.
Customer Advocates serve customers by providing easy-to-understand information so that customers can make informed, financially responsible decisions. Customer Advocates are rewarded for both their outstanding customer service as well as their collections.
OppFi’s Customer Advocate team combines customer service with collections. Customer Advocates serve customers by providing easy-to-understand information so that customers can make informed, financially responsible decisions. Customer Advocates are rewarded for both their outstanding customer service as well as their collections.
OppFi’s ongoing compliance program seeks to comply with these requirements. State Licensing/Registration OppFi holds licenses, registrations, and similar filings so that OppFi can conduct business, including providing referral services and origination assistance to lenders on its platform and servicing and collecting loans, in all states and the District of Columbia where its activities require such licensure, registration or filing.
State Licensing/Registration OppFi holds licenses, registrations, and similar filings so that OppFi can conduct business, including providing referral services and origination assistance to lenders on its platform and servicing and collecting loans, in all states and the District of Columbia where its activities require such licensure, registration or filing.
Multi-Sided Ecosystem Through its hybrid funding model, OppFi generates value for all potential parties to a credit product offering. Consumers gain access to fair, transparent credit that is structured to rebuild financial health, Bank partners benefit from OppFi’s turn-key, outsourced marketing and digital acquisition and servicing, data, and proprietary technology.
Multi-Sided Ecosystem OppFi generates value for all potential parties on its platform. Consumers gain access to fair, transparent credit that is structured to rebuild financial health, Bank partners benefit from OppFi’s turn-key, outsourced marketing and digital acquisition and servicing, data, and proprietary technology.
OppFi believes the rule is common sense legislation and good for the industry. It is possible the rule, when enforced, could impact OppFi’s business or require it to obtain additional borrower consents or make additional disclosures on behalf of its bank partners.
Enforcement of the rule is stayed, pending resolution of the litigation. 16 Table of Contents OppFi believes the rule is common sense legislation and good for the industry. It is possible the rule, when enforced, could impact OppFi’s business or require it to obtain additional borrower consents or make additional disclosures on behalf of its bank partners.
In addition to compliance with federal laws, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by the National Automated Clearinghouse Association, or NACHA. While NACHA guidelines are not laws, failure to comply with them may nevertheless result in commercial harm to its business.
In addition to compliance with federal laws, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by NACHA. While NACHA guidelines are not laws, failure to comply with them may nevertheless result in commercial harm to OppFi’s business.
These inbound calls are prioritized and routed to the appropriate team member based on delinquency status and customer request. When capacity exists, OppFi also outbound dials delinquent customers. The dialing strategy and pace prioritizes customers who are most likely to cure while also maximizing Customer Advocate efficiency to ensure high service levels for inbound calls.
These inbound calls are prioritized and routed to the appropriate team member based on delinquency status and customer request. 8 Table of Contents When capacity exists, OppFi also outbound dials delinquent customers. The dialing strategy and pace prioritizes customers by delinquency ordered least to most delinquent while also maximizing Customer Advocate efficiency to ensure high service levels for inbound calls.
Commitment to Customer Service OppFi is nationally recognized and awarded for its exceptional customer service. OppFi maintains a 4.6/5.0 star rating on Trustpilot with more than 3,600 reviews, making OppLoans one of the top consumer-rated financial platforms online, and an A+ rating from the Better Business Bureau (BBB).
Commitment to Customer Service OppFi is nationally recognized for its exceptional customer service. OppFi maintained a 4.5/5.0 star rating on Trustpilot with more than 4,100 reviews, making OppLoans one of the top consumer-rated financial platforms online, and an A- rating from the Better Business Bureau (BBB), as of December 31, 2023.
OppFi’s policies are designed to support compliance with the Bankruptcy Code as OppFi services and collects loans. 17 Table of Contents Small Dollar Loan Rule In 2017, the CFPB proposed a rule regulating small dollar loans which applies to lenders (such as our bank partners) making covered loans, defined as: (i) consumer loans with a term of 45 days or less; (ii) longer-term consumer balloon payment loans; and (iii) consumer loans that exceed 45 days in term with a “cost of credit” that exceeds 36% APR in which the lender obtains a leveraged payment mechanism (i.e., the lender has the right to transfer money from a consumer’s account).
Small Dollar Loan Rule In 2017, the CFPB issued a rule regulating small dollar loans which applies to lenders (such as our bank partners) making covered loans, defined as: (i) consumer loans with a term of 45 days or less; (ii) longer-term consumer balloon payment loans; and (iii) consumer loans that exceed 45 days in term with a “cost of credit” that exceeds 36% APR in which the lender obtains a leveraged payment mechanism (i.e., the lender has the right to transfer money from a consumer’s account).
With OppU, both customers and non-customers can learn what it takes to build credit as well as how to budget and manage their finances. OppFi also currently services customers for its SalaryTap and OppFi Card products. SalaryTap is a payroll deduction secured installment loan product.
OppU, a financial education initiative, provides free, standards-aligned courses intended to teach financial literacy. With OppU, both customers and non-customers can learn what it takes to build credit as well as how to budget and manage their finances. OppFi also currently services customers for its SalaryTap and OppFi Card products. SalaryTap is a payroll deduction secured installment loan product.
For the year ended December 31, 2022, approximately 17.7% of loans originated on the OppFi platform were generated by search engine optimization (“SEO”), email marketing, and customer referrals.
For the year ended December 31, 2023, approximately 18.3% of loans originated on the OppFi platform were generated by search engine optimization, email marketing, and customer referrals.
From inception through December 31, 2022, OppFi has facilitated more than $4.4 billion in gross loan issuance covering more than 2.6 million loans. 5 Table of Contents OppFi’s primary products are offered by its OppLoans lending platform. Customers on this platform are U.S. consumers, who are employed, have bank accounts, and generally earn median wages.
From inception through December 31, 2023, OppFi has facilitated more than $5.8 billion in gross loan issuance covering more than 3.4 million loans. OppFi’s primary product is offered by its OppLoans platform. Customers on this platform are generally U.S. consumers, who are employed, have bank accounts, and earn median wages.
Because personal loans often serve as a replacement for credit cards, OppFi also competes with the convenience and ubiquity that credit cards represent. Within the bank partnership model, OppFi competes with a variety of technology companies that aim to help banks with the digital transformation of their business, particularly with respect to all-digital lending.
Because personal loans often serve as a replacement for credit cards, the OppFi platform competes with the convenience and ubiquity that credit cards represent. OppFi competes with a variety of tech-enabled specialty finance companies that aim to help banks with the digital transformation of their business, particularly with respect to all-digital lending.
As of December 31, 2022, OppFi had served more than 1 million unique customers since its inception. OppFi’s net promoter score (“NPS”) of 82 for the year ended December 31, 2022, far exceeds the industry average NPS of 44 1 for banks and is reflective of its commitment to providing a best-in-class customer service experience.
As of December 31, 2023, OppFi had served more than 1 million unique customers since its inception. OppFi’s net promoter score (NPS) was 79 for the year ended December 31, 2023 and is reflective of its commitment to providing a best-in-class customer service experience.
OppFi has shifted towards the bank partner model as the percentage of Total Net Originations by OppFi’s bank partners has increased from 91% for the year ended December 31, 2021 to 95% for the year ended December 31, 2022.
During 2023, OppFi shifted completely to the bank partner model as the percentage of Total Net Originations by OppFi’s bank partners increased from 95% for the year ended December 31, 2022 to 98% for the year ended December 31, 2023.
There have also been recent judicial decisions that could affect the collectability of loans sold by OppFi’s bank partners after origination and the exposure of loan purchasers to potential fines or other penalties for usury violations.
There have also been recent judicial decisions that could affect the collectability of loans sold by OppFi’s bank partners after origination and the exposure of loan purchasers to potential fines or other penalties for usury violations. See the section titled “Risk Factors” for more information about recent case law developments.
OppFi maintains an A+ rating from the Better Business Bureau (BBB) and a 4.6/5.0 star rating on Trustpilot with more than 3,600 reviews. For the years ended December 31, 2022 and 2021, total revenue was approximately $453 million and $351 million, respectively, representing period-over-period total revenue growth of approximately 29%.
OppFi maintained an A- rating from the Better Business Bureau (BBB) and a 4.5/5.0 star rating with more than 4,100 Trustpilot reviews, as of December 31, 2023. 6 Table of Contents For the years ended December 31, 2023 and 2022, total revenue was approximately $509 million and $453 million, respectively, representing period-over-period total revenue growth of approximately 12%.
Bankruptcy Code Under the Bankruptcy Code, OppFi is in certain circumstances prohibited by the automatic stay, reorganization plan and discharge provisions, among others, in seeking enforcement of debts against parties who have filed for bankruptcy protection.
Bankruptcy Code Under the Bankruptcy Code, OppFi is in certain circumstances prohibited by the automatic stay, reorganization plan and discharge provisions, among others, in seeking enforcement of debts against parties who have filed for bankruptcy protection. OppFi’s policies are designed to support compliance with the Bankruptcy Code as OppFi services and collects loans.
OppFi also seeks to identify and establish new strategic partnerships that can increase its reach to the 60 million underserved consumers lacking access, or choice, in credit. OppFi is also evaluating corporate development opportunities to diversify its overall business by potentially acquiring businesses in adjacent categories, inclusive of new customer types and new products that fit OppFi’s mission.
OppFi also seeks to evaluate and test new products or features that can increase its reach to the 63 million credit marginalized U.S. consumers. OppFi is evaluating corporate development opportunities to diversify its overall business by potentially acquiring businesses in adjacent categories, inclusive of new customer types and new products that fit OppFi’s mission.
With respect to new borrowers, OppFi applies the customer identification and verification program rules and screen names against the list of specially designated nationals maintained by the U.S. Department of the Treasury and Office of Foreign Assets Control (“OFAC”).
With respect to new borrowers, OppFi applies the customer identification and verification program rules and screen names against the list of specially designated nationals maintained by OFAC.
OppFi’s primary mission is to facilitate financial inclusion and credit access to the 60 million everyday Americans who lack access to traditional credit with digital specialty finance products and an unwavering commitment to its customers.
OppFi’s primary mission is to facilitate financial inclusion and credit access to the 63 million everyday Americans who are credit marginalized, through its products and an unwavering commitment to its customers.
OppFi has determined that alternative metrics outside of FICO scores can be reliably used to determine a consumer’s true ability and willingness to repay. Many non-bank lenders utilize non-FICO based alternative methods to determine creditworthiness. Applicants are evaluated based on metrics such as consistency of income, types of previous loans, previous repayment patterns and employment status, among many others.
Many non-bank lenders utilize non-FICO based alternative methods to determine creditworthiness. Applicants are evaluated based on metrics such as consistency of income, types of previous loans, previous repayment patterns and employment status, among many others.
OppFi generated net income of approximately $3 million and $90 million for the years ended December 31, 2022 and 2021, respectively. 6 Table of Contents Market Opportunity Significant Percentage of U.S. Consumers Have Non-Prime Credit, Lack Sufficient Savings, and Live Paycheck-to-Paycheck.
OppFi generated net income of approximately $39 million and $3 million for the years ended December 31, 2023 and 2022, respectively. Market Opportunity Significant Percentage of U.S. Consumers Are Credit Marginalized, Have Non-Prime Credit, Lack Sufficient Savings, and Live Paycheck-to-Paycheck Approximately 63 million U.S. consumers are credit marginalized, according to a study published by PYMNTS and Sezzle in 2023.
Many top lenders use the FICO score among other quantifiable metrics and qualifying rules to determine a potential borrower’s creditworthiness, and these criteria often result in adverse selection—potentially overlooking consumers who are otherwise willing and able to repay while simultaneously accepting consumers who are not. Many U.S. Middle Income, Credit-Challenged Consumers Lack Access to Credit or Credit at Choice.
Many top lenders use the FICO score among other quantifiable metrics and qualifying rules to determine a potential borrower’s creditworthiness, and these criteria often result in adverse selection—potentially overlooking consumers who are otherwise willing and able to repay while simultaneously accepting consumers who are not. Traditional Banks Have Been Slow to Adopt Digital Technology for Consumer Lending.
With its OppLoans lending platform, OppFi facilitates the issuance of fair, transparent, digital specialty finance products structured to rebuild financial health for the approximately 60 million Americans that lack traditional credit access or choice.
With its OppLoans platform, OppFi facilitates the issuance of fair, transparent, digital specialty finance products structured to rebuild financial health for the approximately 63 million U.S. consumers that are credit marginalized.
Additionally, as OppFi serves consumers across the United States without brick-and-mortar stores, OppFi does not have any costs associated with physical stores and the personnel needed to operate them. Bank Partner Model OppFi employs two models, bank partner and direct.
Additionally, as OppFi serves consumers across the United States without brick-and-mortar stores, OppFi does not have any costs associated with physical stores and the personnel needed to operate them. Bank Partner Model Bank partners use the OppFi platform to provide loan products to consumers where OppFi facilitates the process and the loan products are funded directly by the bank.
Regulatory oversight of OppFi’s business may change over time. By way of example, California has enacted legislation to create a “mini-CFPB” agency, which seeks to emulate the CFPB with respect to its enforcement and supervisory capabilities as well as require additional state registration for certain covered persons.
By way of example, in California the DFPI is considered a “mini-CFPB” agency, because it seeks to emulate the CFPB with respect to its enforcement and supervisory capabilities as well as require additional state registration for certain covered persons.
OppFi has entered into separate agreements with each of its three bank partners. OppFi’s agreements with its bank partners are nonexclusive, generally have 60-month terms and certain agreements automatically renew, subject to certain early termination provisions and minimum fee amounts, and do not include any minimum origination obligations or origination limits.
OppFi’s agreements with its bank partners are nonexclusive, generally have 60-month terms and certain agreements automatically renew, subject to certain early termination provisions and minimum fee amounts, and do not include any minimum origination obligations or origination limits. OppFi’s bank partners generally retain approval rights on all aspects of the program and are primarily responsible for regulatory and compliance oversight.
Consumers typically receive quick credit decisions, after submitting their applications through OppFi’s fully digital platform. Approximately 85% of all credit decisions are automated. • Same-day funding service . OppFi offers a same-day funding service in collaboration with its partner banks.
After the approximately five-minute application process submitted through OppFi’s fully digital platform, consumers typically receive quick credit decisions. Approximately 88% of all credit decisions were automated in the year ended December 31, 2023. • Same-day funding service . OppFi offers a same-day funding service in collaboration with its partner banks.
Based on publicly available actions, the FTC’s primary focus has been with respect to financial technology company marketing and disclosure practices. For instance, in September 2020, the FTC filed a complaint against a collection firm for illegal debt collection practices including use of deceptive robocalling and misrepresenting their association with a law firm.
For instance, in September 2020, the FTC filed a complaint against a collection firm for illegal debt collection practices including use of deceptive robocalling and misrepresenting their association with a law firm.
OppFi’s nationwide presence allows it to increase awareness, directly contributing to organic growth, as well as the growth and success of bank partners. Customers have proven to be loyal and highly satisfied, which in turn drives additional growth through referrals. Integrated and Efficient Multi-Channel Marketing Approach OppFi utilizes an integrated multi-channel marketing strategy to reach potential customers.
Customers have proven to be loyal and highly satisfied, which in turn drives additional growth through referrals. 10 Table of Contents Integrated and Efficient Multi-Channel Marketing Approach OppFi utilizes an integrated multi-channel marketing strategy to reach potential customers.
See the section titled “ Risk Factors ” for more information about recent case law developments. 18 Table of Contents State Disclosure and Lending Practice Requirements The loans originated on OppFi’s platform by its bank partners may be subject to state laws and regulations that impose requirements related to loan disclosures and terms, credit discrimination, credit reporting, debt collection, and unfair or deceptive business practices.
State Disclosure and Lending Practice Requirements The loans originated on OppFi’s platform by its bank partners may be subject to state laws and regulations that impose requirements related to loan disclosures and terms, credit discrimination, credit reporting, debt collection, and unfair or deceptive business practices. OppFi’s ongoing compliance program seeks to comply with these requirements.
This relationship allows OppFi’s bank partners to leverage OppFi’s digital acquisition, machine learning underwriting and highly-rated customer service capabilities, which they would otherwise need to develop in-house. OppFi’s bank partners use their own capital to originate loans. OppFi’s bank partners are FinWise Bank (“Finwise”), First Electronic Bank (“FEB”), and Capital Community Bank (“CCB”).
OppFi manages many aspects of the loan life cycle on behalf of its bank partners, including customer acquisition, underwriting and loan servicing. This relationship allows OppFi’s bank partners to leverage OppFi’s digital acquisition, machine learning underwriting and highly-rated customer service capabilities, which they would otherwise need to develop in-house. OppFi’s bank partners use their own capital to originate loans.
OppFi acquires participation rights in such loans ranging from 95% to 100% of the loan. OppFi and its bank partners each pay or reimburse each other for certain fees and costs that are immaterial in amount.
OppFi and its bank partners each pay or reimburse each other for certain fees and costs that are immaterial in amount.
Unlike payday loans, earned wage access and similar credit products that typically do not provide transparency, fairness, and ability to repay guidelines, OppFi is dedicated to offering the best possible product and service through its platform.
Unlike payday loans and similar credit products that typically do not provide transparency, fairness, and ability to repay guidelines, OppFi is dedicated to offering the best possible product and service through its platform. The average installment loan facilitated by OppFi with its OppLoans platform is approximately $1,500, payable in installments and for an average contractual term of 11 months.
Contrarily, OppFi has successfully serviced the non-prime consumer with its fully digital platform, driven by a scalable and modern technology stack, as well as proprietary risk models that are continually developed through iterative data collection and analytics. This platform provides OppFi with exceptional scalability, cost efficiency, marketing effectiveness, customization, and a best-in-class customer experience.
OppFi’s Competitive Advantages Digitally-Native Solution Consumers are increasingly shifting towards digital products and services. OppFi has successfully serviced the non-prime consumer with its fully digital platform, driven by a scalable and modern technology stack, as well as proprietary risk models that are continually developed through iterative data collection and analytics.
In the year ended December 31, 2022, approximately 95% of OppFi’s net originations were generated from loans originated by its bank partners and facilitated by the OppFi platform. Finwise, FEB and CCB began originating loans on the OppFi platform in January 2018, May 2020 and October 2020, respectively.
OppFi’s bank partners are FinWise Bank (Finwise), First Electronic Bank (FEB), and Capital Community Bank (CCB). 9 Table of Contents In the year ended December 31, 2023, approximately 98% of OppFi’s net originations were generated from loans originated by its bank partners and facilitated by the OppFi platform.

… 60 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

187 edited+37 added−37 removed601 unchanged
Biggest changeIn particular, certain laws, regulations and rules we or our bank partners are subject to include: • state lending laws and regulations that require certain parties to hold licenses or other government approvals or filings in connection with specified activities, and impose requirements related to loan disclosures and terms, fees and interest rates, credit discrimination, credit reporting, servicemember relief, debt collection, repossession, unfair or deceptive business practices and consumer protection, as well as other state laws relating to privacy, information security, conduct in connection with data breaches and money transmission; • the Truth-in-Lending Act and Regulation Z promulgated thereunder, and similar state laws, which require certain disclosures to borrowers regarding the terms and conditions of their loans and credit transactions, require creditors to comply with certain lending practice restrictions, limit the ability of a creditor to impose certain loan terms and impose disclosure requirements in connection with credit card origination; • the Equal Credit Opportunity Act and Regulation B promulgated thereunder, and similar state fair lending laws, which prohibit creditors from discouraging or discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act; • the Fair Credit Reporting Act and Regulation V promulgated thereunder, imposes certain obligations on users of consumer reports and those that furnish information to consumer reporting agencies, including obligations relating to obtaining consumer reports, using consumer reports, taking adverse action on the basis of information from consumer reports, addressing risks of identity theft and fraud and protecting the privacy and security of consumer reports and consumer report information; • Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive acts or practices in or affecting commerce, and Section 1031 of the Dodd-Frank Act, which prohibits unfair, deceptive or abusive acts or practices in connection with any consumer financial product or service, and analogous state laws prohibiting unfair, deceptive or abusive acts or practices; • the Credit Practices Rule which prohibits lenders from using certain contract provisions that the Federal Trade Commission has found to be unfair to consumers, requires lenders to advise consumers who co-sign obligations about their potential liability if the primary obligor fails to pay and prohibits certain late charges; • the Fair Debt Collection Practices Act and similar state debt collection laws, which provide guidelines and limitations on the conduct of third-party debt collectors (and some limitation on creditors collecting their own debts) in connection with the collection of consumer debts; • the Gramm-Leach-Bliley Act and Regulation P promulgated thereunder, which includes limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial institutions to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information and requires financial institutions to disclose certain privacy notices and practices with respect to information sharing with affiliated and unaffiliated entities as well as to safeguard personal borrower information, and other privacy laws and regulations; • the Bankruptcy Code, which limits the extent to which creditors may seek to enforce debts against parties who have filed for bankruptcy protection; • the Servicemembers Civil Relief Act, which allows military members to suspend or postpone certain civil obligations, requires creditors to reduce the interest rate to 6% on loans to military members under certain circumstances, and 50 Table of Contents imposes restrictions on enforcement of loans to servicemembers, so that the military member can devote his or her full attention to military duties; • the Military Lending Act, which requires those who lend to “covered borrowers”, including members of the military and their dependents, to only offer Military APRs (a specific measure of all-in-cost-of-credit) under 36%, prohibits arbitration clauses in loan agreements, and prohibits certain other loan agreement terms and lending practices in connection with loans to military servicemembers, among other requirements, and for which violations may result in penalties including voiding of the loan agreement; • the Electronic Fund Transfer Act and Regulation E promulgated thereunder, which provide guidelines and restrictions on the electronic transfer of funds from consumers’ bank accounts, including a prohibition on a creditor requiring a consumer to repay a credit agreement in preauthorized (recurring) electronic fund transfers and disclosure and authorization requirements in connection with such transfers; • the Telephone Consumer Protection Act and the regulations promulgated thereunder, which impose various consumer consent requirements and other restrictions in connection with telemarketing activity and other communication with consumers by phone, fax or text message, and which provide guidelines designed to safeguard consumer privacy in connection with such communications; • the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 and the Telemarketing Sales Rule and analogous state laws, which impose various restrictions on marketing conducted use of email, telephone, fax or text message; • the Electronic Signatures in Global and National Commerce Act and similar state laws, particularly the Uniform Electronic Transactions Act, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures and which require creditors and loan servicers to obtain a consumer’s consent to electronically receive disclosures required under federal and state laws and regulations; • the Right to Financial Privacy Act and similar state laws enacted to provide the financial records of financial institution customers a reasonable amount of privacy from government scrutiny; • the Bank Secrecy Act and the USA PATRIOT Act, which relate to compliance with anti-money laundering, borrower due diligence, transaction monitoring and reporting and record-keeping policies and procedures; • the Executive Orders and regulations promulgated by the Office of Foreign Assets Control under the U.S.
Biggest changeIn particular, certain laws, regulations and rules we or our bank partners are subject to include: • state lending laws and regulations that require certain parties to hold licenses or other government approvals or filings in connection with specified activities, and impose requirements related to loan disclosures and terms, fees and interest rates, credit discrimination, credit reporting, servicemember relief, debt collection, repossession, unfair or deceptive business practices and consumer protection, as well as other state laws relating to privacy, information security, conduct in connection with data breaches and money transmission; • the Truth-in-Lending Act and Regulation Z promulgated thereunder, and similar state laws, which require certain disclosures to borrowers regarding the terms and conditions of their loans and credit transactions, require creditors to comply with certain lending practice restrictions, limit the ability of a creditor to impose certain loan terms and impose disclosure requirements in connection with credit card origination; • the Equal Credit Opportunity Act and Regulation B promulgated thereunder, and similar state fair lending laws, which prohibit creditors from discouraging or discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act; • the Fair Credit Reporting Act and Regulation V promulgated thereunder, imposes certain obligations on users of consumer reports and those that furnish information to consumer reporting agencies, including obligations relating to obtaining consumer reports, using consumer reports, taking adverse action on the basis of information from consumer reports, addressing risks of identity theft and fraud and protecting the privacy and security of consumer reports and consumer report information; • Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive acts or practices in or affecting commerce, and Section 1031 of the Dodd-Frank Act, which prohibits unfair, deceptive or abusive acts or practices in connection with any consumer financial product or service, and analogous state laws prohibiting unfair, deceptive or abusive acts or practices; • the Credit Practices Rule which prohibits lenders from using certain contract provisions that the Federal Trade Commission has found to be unfair to consumers, requires lenders to advise consumers who co-sign obligations about their potential liability if the primary obligor fails to pay and prohibits certain late charges; • the Fair Debt Collection Practices Act and similar state debt collection laws, which provide guidelines and limitations on the conduct of third-party debt collectors (and some limitation on creditors collecting their own debts) in connection with the collection of consumer debts; • the Gramm-Leach-Bliley Act and Regulation P promulgated thereunder, which includes limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial institutions to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information and requires financial institutions to disclose certain privacy notices and practices with respect to information sharing with affiliated and unaffiliated entities as well as to safeguard personal borrower information, and other privacy laws and regulations; • state financial privacy laws in California, Vermont and a limited number of other states that require financial institutions to obtain opt-in consent before sharing a consumer’s nonpublic financial information with nonaffilaited third parties; • limited provisions of the California Consumer Privacy Act (CCPA), including provisions enforceable by California’s new privacy agency and its Department of Justice that require specific privacy policy disclosures and give 47 Table of Contents consumers the right to opt out of the sale or sharing of personal information for certain behavioral advertising purposes, and which also includes a private right of action for negligent data breaches, all of which are subject to civil and administrative penalties and statutory damages (for private right of action) assessed on a per-consumer or per-incident basis, in addition to actual damages and injunctive relief; • the Bankruptcy Code, which limits the extent to which creditors may seek to enforce debts against parties who have filed for bankruptcy protection; • the Servicemembers Civil Relief Act, which allows military members to suspend or postpone certain civil obligations, requires creditors to reduce the interest rate to 6% on loans to military members under certain circumstances, and imposes restrictions on enforcement of loans to servicemembers, so that the military member can devote his or her full attention to military duties; • the Military Lending Act, which requires those who lend to “covered borrowers”, including members of the military and their dependents, to only offer Military APRs (a specific measure of all-in-cost-of-credit) under 36%, prohibits arbitration clauses in loan agreements, and prohibits certain other loan agreement terms and lending practices in connection with loans to military servicemembers, among other requirements, and for which violations may result in penalties including voiding of the loan agreement; • the Electronic Fund Transfer Act and Regulation E promulgated thereunder, which provide guidelines and restrictions on the electronic transfer of funds from consumers’ bank accounts, including a prohibition on a creditor requiring a consumer to repay a credit agreement in preauthorized (recurring) electronic fund transfers and disclosure and authorization requirements in connection with such transfers; • the Telephone Consumer Protection Act and the regulations promulgated thereunder, which impose various consumer consent requirements and other restrictions in connection with telemarketing activity and other communication with consumers by phone, fax or text message, and which provide guidelines designed to safeguard consumer privacy in connection with such communications; • the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 and the Telemarketing Sales Rule and analogous state laws, which impose various restrictions on marketing conducted use of email, telephone, fax or text message; • the Electronic Signatures in Global and National Commerce Act and similar state laws, particularly the Uniform Electronic Transactions Act, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures and which require creditors and loan servicers to obtain a consumer’s consent to electronically receive disclosures required under federal and state laws and regulations; • the Right to Financial Privacy Act and similar state laws enacted to provide the financial records of financial institution customers a reasonable amount of privacy from government scrutiny; • the Bank Secrecy Act and the USA PATRIOT Act, which relate to compliance with anti-money laundering, borrower due diligence, transaction monitoring and reporting and record-keeping policies and procedures; • the Executive Orders and regulations promulgated by the Office of Foreign Assets Control under the U.S.
In addition, a number of participants in the consumer financial services industry, ourselves included, have been the subject of putative class action lawsuits, state attorney general actions and other state regulatory actions and federal regulatory enforcement actions, including actions relating to alleged unfair, deceptive or abusive acts or practices, violations of state licensing and lending laws, including state usury and disclosure laws and allegations of noncompliance with various state and federal laws and regulations relating to originating, servicing and collecting consumer finance loans and other consumer financial services and products.
In addition, a number of participants in the consumer financial services industry, ourselves included, have been the subject of putative class action lawsuits, state attorney general actions and other state regulatory enforcement actions and federal regulatory enforcement actions, including actions relating to alleged unfair, deceptive or abusive acts or practices, violations of state licensing and lending laws, including state usury and disclosure laws and allegations of noncompliance with various state and federal laws and regulations relating to originating, servicing and collecting consumer finance loans and other consumer financial services and products.
These provisions provide, among other things, that the Company shall not engage in any business combination (as such term is defined in the Charter), at any point in time at which the Class A Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, with any interested stockholder (which, as defined in the Charter, shall not include SCG or any of its affiliates, or any person that acquires (other than in a registered public offering) directly from SCG or 64 Table of Contents any of its successors, any “group”, or any member of any such group, of which such persons are a member of under Rule 13d-5 of the Exchange Act beneficial ownership of fifteen percent (15%) or more of the then outstanding voting stock of the Company) for a period of three years following the time that such stockholder became an interested stockholder, unless: (i) prior to such time, the Board approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; or (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the Company outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (A) persons who are directors and also officers of the Company and (B) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; (iii) at or subsequent to such time, the applicable business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock of the Company that is not owned by the interested stockholder; or (iv) the stockholder became an interested stockholder inadvertently and (A) as soon as practicable divested itself of ownership of sufficient shares so that the stockholder ceased to be an interested stockholder and (B) was not, at any time within the three-year period immediately prior to a business combination between the Company and such stockholder, an interested stockholder but for the inadvertent acquisition of ownership, which provision of the Charter may only be amended by the affirmative vote of at least 66 2/3% of all then outstanding shares of Class A Common Stock of the Company.
These provisions provide, among other things, that the Company shall not engage in any business combination (as such term is defined in the Charter), at any point in time at which the Class A Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, with any interested stockholder (which, as defined in the Charter, shall not include SCG or any of its affiliates, or any person that acquires (other than in a registered public offering) directly from SCG or any of its successors, any “group”, or any member of any such group, of which such persons are a member of under Rule 13d-5 of the Exchange Act beneficial ownership of fifteen percent (15%) or more of the then outstanding voting stock of the Company) for a period of three years following the time that such stockholder became an interested stockholder, unless: (i) prior to such time, the Board approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; or (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the Company outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (A) persons who are directors and also officers of the Company and (B) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; (iii) at or subsequent to such time, the applicable business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock of the Company that is not owned by the interested stockholder; or (iv) the stockholder became an interested stockholder inadvertently and (A) as soon as practicable divested itself of ownership of sufficient shares so that the stockholder ceased to be an interested stockholder and (B) was not, at any time within the three-year period immediately prior to a business combination between the Company and such stockholder, an interested stockholder but for the inadvertent acquisition of ownership, which provision of the Charter may 61 Table of Contents only be amended by the affirmative vote of at least 66 2/3% of all then outstanding shares of Class A Common Stock of the Company.
The risks we face in connection with acquisitions include: • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • utilization of our financial resources for acquisitions or investments that may fail to realize the anticipated benefits; • inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; • coordination of technology, product development and sales and marketing functions and integration of administrative systems; • transition of the acquired company’s borrowers to our systems; 36 Table of Contents • retention of employees from the acquired company; • regulatory risks, including maintaining good standing with existing regulatory bodies or receiving any necessary approvals, as well as being subject to new regulators with oversight over an acquired business; • attracting financing; • cultural challenges associated with integrating employees from the acquired company into our organization; • the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; • potential write-offs of loans or intangibles or other assets acquired in such transactions that may have an adverse effect on our results of operations in a given period; • liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property or increase our risk for liability; and • litigation, regulatory criticisms, customer claims or other liabilities in connection with the acquired company.
The risks we face in connection with acquisitions include: 33 Table of Contents • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • utilization of our financial resources for acquisitions or investments that may fail to realize the anticipated benefits; • inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; • coordination of technology, product development and sales and marketing functions and integration of administrative systems; • transition of the acquired company’s borrowers to our systems; • retention of employees from the acquired company; • regulatory risks, including maintaining good standing with existing regulatory bodies or receiving any necessary approvals, as well as being subject to new regulators with oversight over an acquired business; • attracting financing; • cultural challenges associated with integrating employees from the acquired company into our organization; • the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies; • potential write-offs of loans or intangibles or other assets acquired in such transactions that may have an adverse effect on our results of operations in a given period; • liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property or increase our risk for liability; and • litigation, regulatory criticisms, customer claims or other liabilities in connection with the acquired company.
These international activities are subject to inherent risks that are beyond our control, including: • risks related to government regulation or required compliance with local laws; • local licensing and reporting obligations; • difficulties in developing, staffing and simultaneously managing a number of varying foreign operations as a result of distance, language and cultural differences; 48 Table of Contents • different, uncertain, overlapping or more stringent local laws and regulations; • political and economic instability, tensions, security risks and changes in international diplomatic and trade relations; • state or federal regulations that restrict offshoring of business operational functions or require offshore partners to obtain additional licenses, registrations or permits to perform services on our behalf; • geopolitical events, including natural disasters, public health issues, epidemics or pandemics, acts of war, and terrorism; • the impact of, and response of local governments to, the COVID-19 pandemic; • compliance with applicable U.S. laws and foreign laws related to consumer protection, intellectual property, privacy, data security, corruption, money laundering, and export/trade control; • misconduct by our outsourcing partners and their employees or even unsubstantiated allegations of misconduct; • risks due to lack of direct involvement in hiring and retaining personnel; and • potentially adverse tax developments and consequences.
These international activities are subject to inherent risks that are beyond our control, including: • risks related to government regulation or required compliance with local laws; • local licensing and reporting obligations; 45 Table of Contents • difficulties in developing, staffing and simultaneously managing a number of varying foreign operations as a result of distance, language and cultural differences; • different, uncertain, overlapping or more stringent local laws and regulations; • political and economic instability, tensions, security risks and changes in international diplomatic and trade relations; • state or federal regulations that restrict offshoring of business operational functions or require offshore partners to obtain additional licenses, registrations or permits to perform services on our behalf; • geopolitical events, including natural disasters, public health issues, epidemics or pandemics, acts of war, and terrorism; • the impact of, and response of local governments to, the COVID-19 pandemic; • compliance with applicable U.S. laws and foreign laws related to consumer protection, intellectual property, privacy, data security, corruption, money laundering, and export/trade control; • misconduct by our outsourcing partners and their employees or even unsubstantiated allegations of misconduct; • risks due to lack of direct involvement in hiring and retaining personnel; and • potentially adverse tax developments and consequences.
Many state consumer financial regulatory requirements, including usury restrictions (other than the restrictions of the state in which a bank partner originating a particular loan is located) and many licensing requirements and substantive requirements under state consumer credit laws, are treated as inapplicable loans facilitated on our platform by our bank partners based on principles of federal preemption or express ex emptions provided in relevant state laws for certain types of financial institutions or loans they originate.
Many state consumer financial regulatory requirements, including usury restrictions (other than the restrictions of the state in which a bank partner originating a particular loan is located) and many licensing requirements and substantive requirements under state consumer credit laws, are treated as inapplicable to loans facilitated on our platform by our bank partners based on principles of federal preemption or express ex emptions provided in relevant state laws for certain types of financial institutions or loans they originate.
Moreover, if regulators conclude that we or our bank partners have not met the heightened standards for oversight of our third-party vendors, our bank partners could terminate their relationship with us or we or our bank partners could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist or other remedial actions, which could have an adverse effect on our business, financial condition and results of operations.
Moreover, if regulators conclude that we or our bank partners have not met the standards for oversight of our third-party vendors or their third-party vendors, our bank partners could terminate their relationship with us or we or our bank partners could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist or other remedial actions, which could have an adverse effect on our business, financial condition and results of operations.
In addition, non-compliance could subject us to damages, revocation of required licenses, class action lawsuits, administrative enforcement actions and civil and criminal liability, all of which would harm our business. Internet-based loan origination processes may give rise to greater risks than paper-based processes and may not always be allowed under state law.
In addition, non-compliance could subject us to civil penalties, damages, revocation of required licenses, class action lawsuits, administrative enforcement actions and civil and criminal liability, all of which would harm our business. Internet-based loan origination processes may give rise to greater risks than paper-based processes and may not always be allowed under state law.
In addition, evolving views regarding the use of alternative variables and machine learning in assessing credit risk and/or stated focus of the new Administration and CFPB leadership on fair lending could result in the CFPB taking actions that result in requirements to alter or cease offering affected financial products and services, making them less attractive and restricting our ability to offer them.
In addition, evolving views regarding the use of alternative variables and machine learning in assessing credit risk and/or stated focus of the Administration and CFPB leadership on fair lending could result in the CFPB taking actions that result in requirements to alter or cease offering affected financial products and services, making them less attractive and restricting our ability to offer them.
These risks and difficulties include our ability to: • improve the effectiveness and predictiveness of our machine learning models; • maintain and increase the volume of loans facilitated by our lending platform; • enter into new and maintain existing bank partnerships; • successfully maintain diverse and robust sources of capital to fund loans originated by us on our platform in certain states or fund our purchase of participation rights in the economic interests of loans originated by our bank partners on our platform; • successfully fund a sufficient quantity of our borrower loan demand with low cost bank funding to help keep interest rates offered to borrowers competitive; • successfully build our brand and protect our reputation from negative publicity; • increase the effectiveness of our marketing strategies, including our direct consumer marketing initiatives; • continue to expand the number of potential borrowers; • successfully adjust our proprietary machine learning models, products and services in a timely manner in response to changing macroeconomic conditions and fluctuations in the credit market; • respond to general economic conditions, including economic slowdowns, inflation, interest rate changes, recessions and tightening of credit markets; • comply with and successfully adapt to complex and evolving regulatory environments; • protect against increasingly sophisticated fraudulent borrowing and online theft; 22 Table of Contents • successfully compete with companies that are currently in, or may in the future enter, the business of providing online lending services to financial institutions or consumer financial services to borrowers; • enter into new markets and introduce new products and services; • effectively secure and maintain the confidentiality of the information received, accessed, stored, provided and used across our systems; • successfully obtain and maintain funding and liquidity to support continued growth and general corporate purposes; • attract, integrate and retain qualified employees; and • effectively manage and expand the capabilities of our operations teams, outsourcing relationships and other business operations.
These risks and difficulties include our ability to: • improve the effectiveness and predictiveness of our machine learning models; • maintain and increase the volume of loans facilitated by our specialty finance platform; • enter into new and maintain existing bank partnerships; • successfully maintain diverse and robust sources of capital to fund loans originated by us on our platform in certain states or fund our purchase of participation rights in the economic interests of loans originated by our bank partners on our platform; • successfully fund a sufficient quantity of our borrower loan demand with low cost bank funding to help keep interest rates offered to borrowers competitive; • successfully build our brand and protect our reputation from negative publicity; • increase the effectiveness of our marketing strategies, including our direct consumer marketing initiatives; • continue to expand the number of potential borrowers; • successfully adjust our proprietary machine learning models, products and services in a timely manner in response to changing macroeconomic conditions and fluctuations in the credit market; 20 Table of Contents • respond to general economic conditions, including economic slowdowns, inflation, interest rate changes, recessions and tightening of credit markets; • comply with and successfully adapt to complex and evolving regulatory environments; • protect against increasingly sophisticated fraudulent borrowing and online theft; • successfully compete with companies that are currently in, or may in the future enter, the business of providing online lending services to financial institutions or consumer financial services to borrowers; • enter into new markets and introduce new products and services; • effectively secure and maintain the confidentiality of the information received, accessed, stored, provided and used across our systems; • successfully obtain and maintain funding and liquidity to support continued growth and general corporate purposes; • attract, integrate and retain qualified employees; and • effectively manage and expand the capabilities of our operations teams, outsourcing relationships and other business operations.
Any event that leads to unauthorized access, use or disclosure of personal information or other sensitive information that we or our vendors maintain, including our own proprietary business information and sensitive information such as personal information regarding borrowers, loan applicants or employees, could disrupt our business, harm our reputation, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and 33 Table of Contents security of personal information.
Any event that leads to unauthorized access, use or disclosure of personal information or other sensitive information that we or our vendors maintain, including our own proprietary business information and sensitive information such as personal information regarding borrowers, loan applicants or employees, could disrupt our business, harm our reputation, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information.
For example, FICO has recently changed its methodology in calculating credit scores in a manner that potentially penalizes borrowers who take out personal loans to pay off or consolidate credit card debt. This change could negatively affect the overall demand for personal loans.
For example, FICO has changed its methodology in calculating credit scores in a manner that potentially penalizes borrowers who take out personal loans to pay off or consolidate credit card debt. This change could negatively affect the overall demand for personal loans.
In some cases, third-party vendors are one of a limited number of sources. For example, we rely on national consumer reporting agencies, such as Clarity Services, Inc., a part of Experian, for a large portion of the data used in our AI models.
In some cases, third-party vendors are one of a limited number of sources. For example, we rely on national consumer reporting agencies, such as Clarity Services, Inc., a part of Experian, for a large portion of the data used in our models.
If our machine learning models do not accurately reflect a borrower’s credit risk in such economic conditions, the performance of loans facilitated on our platform may be worse than anticipated; • our business is subject to a wide range of laws and regulations, many of which are evolving, and changes in such laws and regulations or the enforcement of such laws and regulations, and/or failure or perceived failure to comply with such laws and regulations, could harm our business, financial condition and results of operations; • substantially all of our revenue is derived from a single loan product, and it is thus particularly susceptible to fluctuations in the unsecured personal loan market.
If our models do not accurately reflect a borrower’s credit risk in such economic conditions, the performance of loans facilitated on our platform may be worse than anticipated; • our business is subject to a wide range of laws and regulations, many of which are evolving, and changes in such laws and regulations or the enforcement of such laws and regulations, and/or failure or perceived failure to comply with such laws and regulations, could harm our business, financial condition and results of operations; • substantially all of our revenue is derived from a single loan product, and it is thus particularly susceptible to fluctuations in the unsecured personal loan market.
The charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring any: (i) derivative action or proceeding; (ii) action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; (iii) action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or the charter or bylaws; or (iv) action asserting a claim against us, our directors, officers or employees governed by 59 Table of Contents the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following the determination), (B) that is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under the Securities Act as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction.
The charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring any: (i) derivative action or proceeding; (ii) action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; (iii) action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or the charter or bylaws; or (iv) action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following the determination), (B) that is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under the Securities Act as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction.
We are subject to or facilitate compliance with a variety of federal, state, and local laws, including those related to consumer protection and loan financings, and if we fail to comply with such laws, our business could be adversely affected.
We are subject to or facilitate compliance with a variety of federal, state, and local laws, including those related to consumer protection, privacy and loan financings, and if we fail to comply with such laws, our business could be adversely affected.
If a significant volume of prepayments occur that our AI models do not accurately predict, returns targeted by us, our bank partners and our capital sources would be adversely affected and our ability to attract new bank partners and capital sources would be negatively affected.
If a significant volume of prepayments occur that our models do not accurately predict, returns targeted by us, our bank partners and our capital sources would be adversely affected and our ability to attract new bank partners and capital sources would be negatively affected.
The COVID-19 pandemic has caused extreme societal, economic and financial market volatility, resulting in business shutdowns, an unprecedented reduction in economic activity and significant dislocation to businesses, the capital markets and the broader economy.
The COVID-19 pandemic caused extreme societal, economic and financial market volatility, resulting in business shutdowns, an unprecedented reduction in economic activity and significant dislocation to businesses, the capital markets and the broader economy.
If we are unable to conclude that our internal control over financial 39 Table of Contents reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our securities could decline, and we could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness in 36 Table of Contents our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our securities could decline, and we could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities.
Pursuant to the lock-up restrictions agreed to into in connection with the Investor Rights Agreement, beginning on the nine month anniversary of the Closing (unless earlier waived by the Company in its capacity as the sole manager of OppFi-LLC), or with respect to the Earnout Units, on such later date the Earnout Units are earned in accordance with the Business Combination Agreement, each Retained OppFi-LLC Unit (other than the Initial Shares) held by the Members may be exchanged, upon the exercise of such Members’ Exchange Rights, for either one share of Class A Common Stock or, at the election of the Company in its capacity as the sole manager of OppFi-LLC, the cash equivalent of the market value of one share of Class A Common 67 Table of Contents Stock, pursuant to the terms and conditions of the OppFi-LLC A&R LLCA.
Pursuant to the lock-up restrictions agreed to into in connection with the Investor Rights Agreement, beginning on the nine month anniversary of the Closing (unless earlier waived by the Company in its capacity as the sole manager of OppFi-LLC), or with respect to the Earnout Units, on such later date the Earnout Units are earned in accordance with the Business Combination Agreement, each Retained OppFi-LLC Unit (other than the Initial Shares) held by the Members may be exchanged, upon the exercise of such Members’ Exchange Rights, for either one share of Class A Common Stock or, at the election of the Company in its capacity as the sole manager of OppFi-LLC, the cash equivalent of the market value of one share of Class A Common Stock, pursuant to the terms and conditions of the OppFi-LLC A&R LLCA.
For example, the Gramm-Leach-Bliley Act includes limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial institutions to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information and requires financial institutions to disclose certain privacy notices and practices with respect to information sharing with affiliated and unaffiliated entities as well as to safeguard personal borrower information.
For example, the Gramm-Leach-Bliley Act or the GLBA includes limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial institutions to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information and requires financial institutions to disclose certain privacy notices and practices with respect to information sharing with affiliated and unaffiliated entities as well as to safeguard personal borrower information.
Our bank partners FinWise, First Electronic Bank (“FEB”) and Capital Community Bank (“CCB”) began originating loans on the OppFi platform in January 2018, May 2020 and October 2020, respectively.
Our primary bank partners FinWise, First Electronic Bank (“FEB”) and Capital Community Bank (“CCB”) began originating loans on the OppFi platform in January 2018, May 2020 and October 2020, respectively.
The outcome of pending and future matters could be material to our results of operations, financial condition and cash flows, and could materially adversely affect our business. 49 Table of Contents In addition, from time to time, through our operational and compliance controls, we identify compliance issues that require us to make operational changes and, depending on the nature of the issue, result in financial remediation to impacted borrowers.
The outcome of pending and future matters could be material to our results of operations, financial condition and cash flows, and could materially adversely affect our business. 46 Table of Contents In addition, from time to time, through our operational and compliance controls, we identify compliance issues that require us to make operational changes and, depending on the nature of the issue, result in financial remediation to impacted borrowers.
Alternatively, we or our capital sources may face litigation, government enforcement, or other challenge, for example, based on claims that rates and fees were lawful at origination and through any period during which the originating bank partner retained the loan and interests therein, but that subsequent purchasers were unable to enforce the loan pursuant to its contracted-for terms, or that certain 45 Table of Contents disclosures were not provided at origination because while such disclosures are not required of banks they may be required of non-bank lenders.
Alternatively, we or our capital sources may face litigation, government enforcement, or other challenge, for example, based on claims that rates and fees were lawful at origination and through any period during which the originating bank partner retained the loan and interests therein, but that subsequent purchasers were unable to enforce the loan pursuant to its contracted-for terms, or that certain disclosures were not provided at origination because while such disclosures are not required of banks they may be required of non-bank lenders.
Further, weaknesses in our disclosure controls and procedures and internal control over financial reporting have been discovered in the past and may be discovered in the future.
Further, other weaknesses in our disclosure controls and procedures and internal control over financial reporting have been discovered in the past and may be discovered in the future.
If we are nevertheless associated with such payday or small-dollar consumer loans, or if we are associated with increased criticism of non-payday loan programs involving relationships between bank originators and non-bank lending platforms and program managers, demand for loans facilitated on our platform could significantly decrease, which could cause our bank partners to reduce their origination volumes or terminate their arrangements with us, impede our ability to attract new bank partners or delay the onboarding of bank partners, impede our ability to attract capital sources or reduce the number of potential borrowers who use our platform.
If we are nevertheless associated with such payday or small-dollar consumer loans, or if we are associated with increased criticism of non-payday loan programs involving relationships between bank originators and specialty finance platforms and program managers, demand for loans facilitated on our platform could significantly decrease, which could cause our bank partners to reduce their origination volumes or terminate their arrangements with us, impede our ability to attract new bank partners or delay the onboarding of bank partners, impede our ability to attract capital sources or reduce the number of potential borrowers who use our platform.
That true lender status determines various loan program details, including that we do not hold licenses required solely for being the party that extends credit to consumers, and that loans facilitated on our platform by our bank partners may involve interest rates and structures (and certain fees and fees structures) permissible at origination only because the loan terms and lending practices are permissible only when the lender is a bank, and/or the disclosures provided to borrowers would be accurate and compliant only if the lender is a bank.
That true lender status determines various loan program details and how we operate our business, including that we do not hold licenses required solely for being the party that extends credit to consumers, and that loans facilitated on our platform by our bank partners may involve interest rates and structures (and certain fees and fees structures) permissible at origination only because the loan terms and lending practices are permissible only when the lender is a bank, and/or the disclosures provided to borrowers would be accurate and compliant only if the lender is a bank.
For example, consumer advocacy groups, politicians and certain government and media reports have, in the past, advocated governmental action to prohibit or severely restrict consumer loan arrangements where banks contract with a third-party platform such as ours to provide origination assistance services to bank customers.
For example, consumer advocacy groups, politicians and certain government and media reports have, in the past, advocated governmental action to prohibit or severely restrict consumer loan arrangements where banks contract with a third- arty platform such as ours to provide origination assistance services to bank customers.
In addition, any security compromise in our industry, whether actual or perceived, or information technology system disruptions, whether from attacks on our technology environment or from computer malware, natural disasters, terrorism, war and telecommunication and electrical failures, could interrupt our business or operations, harm our reputation, erode borrower confidence, negatively affect our ability to attract new borrowers, or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our business and results of operations.
In addition, any security compromise in our industry, whether actual or perceived, or information technology system disruptions, whether from attacks on our technology environment or from computer malware, natural disasters, terrorism, war and telecommunication and electrical failures, could interrupt our business or operations, harm our reputation, erode borrower 30 Table of Contents confidence, negatively affect our ability to attract new borrowers, or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our business and results of operations.
For example, during the year ended December 31, 2021, despite the outbreak and effects of the COVID-19 pandemic, our models indicated that the credit risk of our loan applicants remained flat during this period and government stimulus programs had positive effects on the credit performance of loans facilitated on our platform during this period.
For example, during the year ended December 31, 2021, despite the outbreak and effects of the COVID-19 pandemic, our models indicated that the credit risk of our loan applicants remained flat during this period a nd government stimulus programs had positive effects on the credit performance of loans facilitated on our platform during this period.
Midland Funding, LLC , 786 F.3d 246 (2d Cir. 2015), cert. denied, 136 S.Ct. 2505 (June 27, 2016), for example, the United States Court of Appeals for the Second Circuit held that the non-bank purchaser of defaulted credit card debt could not rely on preemption standards under the National Bank Act applicable to the originator of such debt in defense of usury claims.
Midland Funding, LLC , 786 F.3d 246 (2d Cir. 2015), cert. denied, 136 S.Ct. 2505 (June 27, 2016), for example, the United States Court of Appeals for the Second Circuit held that the non-bank purchaser of defaulted credit card 42 Table of Contents debt could not rely on preemption standards under the National Bank Act applicable to the originator of such debt in defense of usury claims.
These factors include interest rates, levels of inflation, unemployment levels, conditions in the housing market, immigration policies, gas prices, energy costs, government shutdowns, trade wars and delays in tax refunds, as well as events such as natural disasters, acts of war, terrorism, catastrophes and pandemics. Many new consumers on our platform have limited or no credit history.
These factors include interest rates, levels of inflation, unemployment levels, conditions in the housing market, immigration policies, gas prices, energy costs, government shutdowns, trade wars and delays in tax refunds, as well as events such as natural disasters, acts of war, terrorism, catastrophes and pandemics. 24 Table of Contents Many new consumers on our platform have limited or no credit history.
Search engines may also implement policies that restrict the ability of companies such as us to advertise their services and products, which could prevent us from appearing in a favorable location or any location in the organic rankings or paid search results when certain search terms are used by the consumer. Our brand promotion activities may not yield increased revenues.
Search engines may also implement policies that restrict the ability of companies such as us to advertise their services and products, which could prevent us from appearing in a favorable location or any location in the organic rankings or paid search results when certain search terms are used by the consumer. 32 Table of Contents Our brand promotion activities may not yield increased revenues.
We may face claims from third parties claiming ownership of, or demanding the release or license of, such modifications or derivative works (which could include our proprietary source code or AI models) or otherwise seeking to enforce the terms of the applicable open source license.
We may face claims from third parties claiming ownership of, or demanding the release or license of, such modifications or derivative works (which could include our proprietary source code) or otherwise seeking to enforce the terms of the applicable open source license.
If 44 Table of Contents we are unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, our ability to develop our platform containing that technology could be severely limited and our business could be harmed.
If we are unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, our ability to develop our platform containing that technology could be severely limited and our business could be harmed.
Our ability to realize, and benefit from, these tax savings depends on a number of assumptions, including that we will earn sufficient taxable income each year during the period over which the deductions arising from any such basis increases and payments are available and that there are no adverse changes in applicable law or regulations.
Our ability to realize, and benefit from, these tax 65 Table of Contents savings depends on a number of assumptions, including that we will earn sufficient taxable income each year during the period over which the deductions arising from any such basis increases and payments are available and that there are no adverse changes in applicable law or regulations.
To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid; however, nonpayment for a specified period and/or under certain circumstances may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement, as further described below.
To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid; however, nonpayment for a 63 Table of Contents specified period and/or under certain circumstances may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement, as further described below.
Due to the material weaknesses in our internal control over financial reporting, we have also concluded our disclosure controls and procedures were not effective as of December 31, 2022. As further described in “Item 9A.
Due to the material weaknesses in our internal control over financial reporting, we have also concluded our disclosure controls and procedures were not effective as of December 31, 2023. As further described in “Item 9A.
This includes loans originated by our bank partners. These loans also depend on the ACH system to collect amounts due by withdrawing funds from borrowers’ bank accounts when the borrower has provided authorization to do so.
This includes loans originated by our bank partners. We also depend on the ACH system to collect amounts due on loans by withdrawing funds from borrowers’ bank accounts when the borrower has provided authorization to do so.
So long as Schwartz Capital Group, LTHS Capital Group, or TGS Capital Group (f/k/a Todd Schwartz Capital Group), and any of their respective permitted transferees (collectively, the “SCG Holders”) and their affiliates maintain holdings of more than 50% of the voting power of our capital stock, we will be a “controlled company” within the meaning of NYSE corporate governance standards.
So long as Schwartz Capital Group, LTHS Capital Group, or TGS Capital Group (f/k/a Todd Schwartz Capital Group), and any of their respective permitted transferees (collectively, the “SCG Holders”) and their affiliates maintain holdings of more than 50% of the voting power of our capital stock, we will be a “controlled company” within the meaning of NYSE 59 Table of Contents corporate governance standards.
If we fail to efficiently service such loans and the costs incurred exceed the servicing fee charged, our results of operations would be adversely affected. 34 Table of Contents The soundness of other financial institutions or the financial services industry generally, such as actual concerns or events involving liquidity, defaults or non-performance, may adversely affect us.
If we fail to efficiently service such loans and the costs incurred exceed the servicing fee charged, our results of operations would be adversely affected. The soundness of other financial institutions or the financial services industry generally, such as actual concerns or events involving liquidity, defaults or non-performance, may adversely affect us.
Additionally, such models may not be able to effectively account for matters that are inherently difficult to 25 Table of Contents predict and beyond our control, such as macroeconomic conditions, credit market volatility and interest rate fluctuations, which often involve complex interactions between a number of dependent and independent variables and factors.
Additionally, such models may not be able to effectively account for matters that are inherently difficult to predict and beyond our control, such as macroeconomic conditions, credit market volatility and interest rate fluctuations, which often involve complex interactions between a number of dependent and independent variables and factors.
The current regulatory environment increased regulatory compliance efforts and enhanced regulatory enforcement have resulted in us undertaking significant time-consuming and expensive operational and compliance improvement efforts, and in some cases litigation to assert our rights under existing laws, which may delay or preclude our or our bank partners’ ability to provide certain new products and services.
The current regulatory environment of increased regulatory compliance efforts and enhanced regulatory enforcement has resulted in us undertaking significant time-consuming and expensive operational and compliance improvement efforts, and in some cases litigation to assert our rights under existing laws, which may delay or preclude our or our bank partners’ ability to provide certain new products and services.
Data from national credit bureaus and other consumer reporting agencies and other information that we receive from third parties about an applicant or borrower may be inaccurate or may not accurately reflect the applicant or borrower’s creditworthiness for a variety of reasons, including inaccurate reporting by creditors to the credit bureaus, errors, staleness or incompleteness.
Data from national credit bureaus and other consumer reporting agencies and other information that we receive from third parties about an applicant or borrower may be inaccurate or 40 Table of Contents may not accurately reflect the applicant or borrower’s creditworthiness for a variety of reasons, including inaccurate reporting by creditors to the credit bureaus, errors, staleness or incompleteness.
Our quarterly operating results may fluctuate significantly because of several factors, including: • profitability of our products, especially in new markets and due to seasonal fluctuations; • changes in interest rates; • impairment of assets; • macroeconomic conditions, including inflation and interest rate changes, both nationally and locally; • negative publicity relating to our products; • changes in consumer preferences and competitive conditions; and • expansion to new markets.
Our quarterly operating results may fluctuate significantly because of several factors, including: • profitability of our products, especially in new markets and due to seasonal fluctuations; • changes in interest rates; 58 Table of Contents • impairment of assets; • macroeconomic conditions, including inflation and interest rate changes, both nationally and locally; • negative publicity relating to our products; • changes in consumer preferences and competitive conditions; and • expansion to new markets.
The payments under the Tax Receivable Agreement are not conditioned upon continued ownership of the Company by the holders of units. The Members will not be required to reimburse us for any excess payments that may previously have been made under the Tax Receivable Agreement, for example, due to adjustments resulting from examinations by taxing authorities.
The payments under the Tax Receivable Agreement are not conditioned upon continued ownership of the Company by the holders of units. 64 Table of Contents The Members will not be required to reimburse us for any excess payments that may previously have been made under the Tax Receivable Agreement, for example, due to adjustments resulting from examinations by taxing authorities.
The Repurchase Program could affect the trading price of our securities and increase volatility, and any announcement of a pause in, or termination of, this program may result in a decrease in the trading price of our securities. In addition, this program could diminish our cash reserves.
A new repurchase program could affect the trading price of our securities and increase volatility, and any announcement of a pause in, or termination of, a program may result in a decrease in the trading price of our securities. In addition, a new repurchase program could diminish our cash reserves.
Accordingly, we are required to pay U.S. federal income taxes on our allocable share of the net taxable income of OppFi-LLC. Under the terms of the OppFi-LLC A&R LLCA, OppFi-LLC is obligated to make tax distributions to holders of OppFi-LLC Units (including us) calculated at certain assumed rates.
Accordingly, we are required to pay U.S. federal income taxes on our allocable share of the net taxable income of OppFi-LLC. Under the terms of the OppFi-LLC A&R LLCA, OppFi-LLC is obligated to 62 Table of Contents make tax distributions to holders of OppFi-LLC Units (including us) calculated at certain assumed rates.
If our actual taxable income were insufficient to fully utilize such tax benefits or there 69 Table of Contents were adverse changes in applicable law or regulations, we may be unable to realize all or a portion of these expected benefits and our cash flows and stockholders’ equity could be negatively affected.
If our actual taxable income were insufficient to fully utilize such tax benefits or there were adverse changes in applicable law or regulations, we may be unable to realize all or a portion of these expected benefits and our cash flows and stockholders’ equity could be negatively affected.
Continued growth could strain our ability to develop and improve our operational, technological, financial and management controls, enhance our reporting systems and procedures, recruit, train and retain highly skilled personnel and maintain user satisfaction. Any of the foregoing factors could negatively affect our business, financial condition and results of operations.
Continued growth could strain our ability to develop and improve our operational, technological, financial and management controls, enhance our reporting systems and procedures, 21 Table of Contents recruit, train and retain highly skilled personnel and maintain user satisfaction. Any of the foregoing factors could negatively affect our business, financial condition and results of operations.
The CFPB and other regulators have also issued regulatory guidance that has focused on the need for financial institutions to perform increased due diligence and ongoing monitoring of third-party vendor relationships, thus increasing the scope of management involvement in connection with using third-party vendors.
The CFPB and the prudential bank regulators have also issued regulatory guidance that has focused on the need for financial institutions to perform increased due diligence and ongoing monitoring of third-party vendor relationships, thus increasing the scope of management involvement in connection with using third-party vendors.
To the extent that any shares of Class A Common Stock are issued upon exercise of the Warrants or pursuant to our incentive plan or employee stock purchase plan, current stockholders may experience 57 Table of Contents substantial dilution, and to the extent any shares of Class A Common Stock are repurchased pursuant to the Repurchase Program, the relative ownership interest of the Members will increase.
To the extent that any shares of Class A Common Stock are issued upon exercise of the Warrants or pursuant to our incentive plan or employee stock purchase plan, current stockholders may experience substantial dilution, and to the extent any shares of Class A Common Stock are repurchased pursuant to the Repurchase Program, the relative ownership interest of the Members will increase.
Factors that may cause fluctuations in our quarterly financial results include: • our ability to improve the effectiveness and predictiveness of our machine learning models; • our ability to maintain relationships with existing bank partners and our ability to attract new bank partners; • our ability to maintain or increase loan volumes, and improve loan mix and the channels through which the loans, bank partners and loan funding are sourced; 24 Table of Contents • general economic conditions, including economic slowdowns, recessions and tightening of credit markets, including due the failures of banks or other financial institutions, the economic impact of the COVID-19 pandemic and any governmental response to the impact of the COVID-19 pandemic; • improvements to our machine learning models that negatively impact transaction volume, such as lower approval rates; • the timing and success of new products and services; • the effectiveness of our direct marketing and other marketing channels; • the amount and timing of operating expenses related to maintaining and expanding our business, operations and infrastructure, including acquiring new and maintaining existing bank partners and investors and attracting borrowers to our platform; • our cost of borrowing money and access to loan and participation right funding sources; • the number and extent of loans facilitated on our platform that are subject to loan modifications and/or temporary assistance due to disasters or emergencies; • the number and extent of prepayments of loans facilitated on our platform; • changes in the fair value of assets and liabilities on our balance sheet; • network outages or actual or perceived security breaches; • our involvement in litigation or regulatory enforcement efforts (or the threat thereof) or those that impact our industry generally; • the length of the onboarding process related to acquisitions of new bank partners; • changes in laws and regulations that impact our business; and • changes in the competitive dynamics of our industry, including consolidation among competitors or the development of competitive products by larger well-funded incumbents.
Factors that may cause fluctuations in our quarterly financial results include: • our ability to improve the effectiveness and predictiveness of our machine learning models; • our ability to maintain relationships with existing bank partners and our ability to attract new bank partners; • our ability to maintain or increase loan volumes, and improve loan mix and the channels through which the loans, bank partners and loan funding are sourced; • general economic conditions, including economic slowdowns, recessions and tightening of credit markets, including due the failures of banks or other financial institutions, the economic impact of the COVID-19 pandemic and any governmental response to the impact of the COVID-19 pandemic; • improvements to our machine learning models that negatively impact transaction volume, such as lower approval rates; • the timing and success of new products and services; • the effectiveness of our direct marketing and other marketing channels; • the amount and timing of operating expenses related to maintaining and expanding our business, operations and infrastructure, including acquiring new and maintaining existing bank partners and investors and attracting borrowers to our platform; • our cost of borrowing money and access to loan and participation right funding sources; • the number and extent of loans facilitated on our platform that are subject to loan modifications and/or temporary assistance due to disasters or emergencies; • the number and extent of prepayments of loans facilitated on our platform; • changes in the fair value of assets and liabilities on our balance sheet; • network outages or actual or perceived security breaches; • our involvement in litigation or regulatory enforcement efforts (or the threat thereof) or those that impact our industry generally; • the length of the onboarding process related to acquisitions of new bank partners; • changes in laws and regulations that impact our business; and • changes in the competitive dynamics of our industry, including consolidation among competitors or the development of competitive products by larger well-funded incumbents. 22 Table of Contents In addition, we experience significant seasonality in the demand for loans on our platform, which is generally lower in the first quarter.
Our models rely on a wide variety of data sources, including data collected from applicants and borrowers, credit bureau data and our credit 43 Table of Contents experience gained through monitoring the payment performance of borrowers over time. Under our agreements with our bank partners, we receive licenses to use data collected from loan applicants and borrowers.
Our models rely on a wide variety of data sources, including data collected from applicants and borrowers, credit bureau data and our credit experience gained through monitoring the payment performance of borrowers over time. Under our agreements with our bank partners, we receive licenses to use data collected from loan applicants and borrowers.
These increases in tax basis may increase (for income tax purposes) 66 Table of Contents depreciation and amortization deductions allocable to us and therefore reduce the amount of income or franchise tax that we would otherwise be required to pay in the future had such sales and exchanges never occurred.
These increases in tax basis may increase (for income tax purposes) depreciation and amortization deductions allocable to us and therefore reduce the amount of income or franchise tax that we would otherwise be required to pay in the future had such sales and exchanges never occurred.
We have identified a material weakness in our internal control over financial reporting and determined that our disclosure controls and procedures were ineffective as of December 31, 2022.
We have identified a material weakness in our internal control over financial reporting and determined that our disclosure controls and procedures were ineffective as of December 31, 2023.
If portions of our proprietary AI models are determined to be subject to an open source license, or if the license terms for the open source software that we incorporate change, we could be required to publicly release 42 Table of Contents the affected portions of our source code, re-engineer all or a portion of our model or change our business activities, any of which could negatively affect our business operations and potentially our intellectual property rights.
If portions of our proprietary models are determined to be subject to an open source license, or if the license terms for the open source software that we incorporate change, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our model or change our business activities, any of which could negatively affect our business operations and potentially our intellectual property rights.
The current annual percentage rates of the installment loans facilitated through our platform, for the year ended December 31, 2022 typically range from approximately 59% to 160%.
The current annual percentage rates of the installment loans facilitated through our platform, for the year ended December 31, 2023 typically range from approximately 59% to 160%.
In general, if an affiliate of a director, executive officer or significant stockholder, including 63 Table of Contents the SCG Holders and their affiliates, intends to engage in a transaction involving us, that director, executive officer or significant stockholder must report the transaction for consideration and approval by our audit committee.
In general, if an affiliate of a director, executive officer or significant stockholder, including the SCG Holders and their affiliates, intends to engage in a transaction involving us, that director, executive officer or significant stockholder must report the transaction for consideration and approval by our audit committee.
In particular, lending programs that involve originations by a bank in reliance on origination-related services being provided by non-bank lending platforms and/or program managers are subject to potential litigation and government enforcement claims based on “rent-a-charter” or “true lender” theories, particularly where such programs involve the subsequent sale of such loans or interests therein to the platform.
In particular, specialty finance programs that involve originations by a bank in reliance on origination-related services being provided by specialty finance platforms and/or program managers are subject to potential litigation and government enforcement claims based on “rent-a-charter” or “true lender” theories, particularly where such programs involve the subsequent sale of such loans or interests therein to the platform.
We are, and may in the future become, subject to litigation, claims, examinations, investigations, legal and administrative cases and proceedings, whether civil or criminal, or lawsuits by governmental agencies or private parties, which may affect our 35 Table of Contents results of operations.
We are, and may in the future become, subject to litigation, claims, examinations, investigations, legal and administrative cases and proceedings, whether civil or criminal, or lawsuits by governmental agencies or private parties, which may affect our results of operations.
Failure by our third-party vendors or our failure to comply with legal or regulatory requirements or other contractual requirements could have an adverse effect on our business. We have significant vendors that provide us with a number of services to support our platform.
Failure by our third-party vendors or our failure to comply with legal or regulatory requirements or other contractual requirements could have an adverse effect on our business. 41 Table of Contents We have significant vendors that provide us with a number of services to support our platform.
In addition, we, through our SPEs, have entered into warehouse credit facilities to partially finance the origination of loans by us on our platform or the purchase of participation rights in loans originated by our bank partners through our platform, which credit facilities are secured by the loans or participation rights.
In addition, we, through our SPEs, have entered into warehouse credit facilities to partially finance the origination of loans by us on our platform or the purchase of participation rights in loans originated by our bank partners through our 53 Table of Contents platform, which credit facilities are secured by the loans or participation rights.
The CFPB, which commenced operations in July 2011, has broad authority to create and modify regulations under federal consumer financial protection laws and regulations, such as the Truth in Lending Act and Regulation Z, ECOA and Regulation B, the Fair Credit Reporting Act, the Electronic Funds Transfer Act and Regulation E, among other regulations, and to enforce compliance with those laws.
The CFPB, which commenced operations in July 2011, has broad authority to create and modify regulations under federal consumer financial protection laws, such as Regulation Z (implementing the Truth in Lending Act), Regulation B (implementing ECOA), Regulation V (implementing the Fair Credit Reporting Act), and Regulation E (implementing the Electronic Fund Transfer Act), among other regulations, and to enforce compliance with those laws.
Such decreased demand could have a material adverse effect on our business, prospects, results of operations, financial condition or cash flows. Our models have not yet been extensively tested during down-cycle economic conditions.
Such decreased demand could have a material adverse effect on our business, prospects, results of operations, financial condition or cash flows. 25 Table of Contents Our models have not yet been extensively tested during down-cycle economic conditions.
The marketing channels that we employ may also become more crowded and saturated by other lending platforms, which may decrease the effectiveness of our marketing campaigns and increase borrower acquisition costs. Also, the methodologies, policies and regulations applicable to marketing channels may change.
The marketing channels that we employ may also become more crowded and saturated by other specialty finance platforms, which may decrease the effectiveness of our marketing campaigns and increase borrower acquisition costs. Also, the methodologies, policies and regulations applicable to marketing channels may change.
For example, in the case of the inquiry initiated by the DFPI with respect to Program Loans, we have sought declaratory and injunctive relief in response to action by the DFPI, the outcome of which is uncertain at this time.
For example, in the case of the inquiry initiated by 50 Table of Contents the DFPI with respect to Program Loans, we have sought declaratory and injunctive relief in response to action by the DFPI, the outcome of which is uncertain at this time.
In addition, compliance with certain regulatory requirements, including the Dodd-Frank Act, the Investment Company Act and the so-called “Volcker Rule,” may affect the type of transactions that we are able to complete.
In addition, compliance with certain regulatory 52 Table of Contents requirements, including the Dodd-Frank Act, the Investment Company Act and the so-called “Volcker Rule,” may affect the type of transactions that we are able to complete.
Higher default rates may also lead to lower demand by our bank partners and capital sources to fund loans facilitated by our platform, which would adversely affect our business, financial condition and results of operations.
Higher default rates may also lead to lower demand by our bank partners and 26 Table of Contents capital sources to fund loans facilitated by our platform, which would adversely affect our business, financial condition and results of operations.
Our Certificate of Incorporation (“Charter”) includes a forum selection clause, which could discourage claims or limit stockholders’ ability to make a claim against us, our directors, officers, other employees or stockholders. The Charter includes a forum selection clause.
Our Certificate of Incorporation (“Charter”) includes a forum selection clause, which could discourage claims or limit stockholders’ ability to make a claim against us, our directors, officers, other employees or stockholders. 56 Table of Contents The Charter includes a forum selection clause.
The SCG Holders and their affiliates collectively hold 86.5% of total voting power of all outstanding shares of Common Stock, voting together as a single class. Additionally, the Company has entered into the Investor Rights Agreement, pursuant to which the SCG Holders’ Representative has the right to nominate five directors to the Board.
The SCG Holders and their affiliates collectively hold 83.0% of total voting power of all outstanding shares of Common Stock, voting together as a single class. Additionally, the Company has entered into the Investor Rights Agreement, pursuant to which the SCG Holders’ Representative has the right to nominate five directors to the Board.
Such acquisitions or strategic alliances among our competitors or potential competitors could also make our competitors more adaptable to a rapidly evolving regulatory environment. To stay 31 Table of Contents competitive, we may need to increase our regulatory compliance expenditures or our ability to compete may be adversely affected. Our industry is driven by constant innovation.
Such acquisitions or strategic alliances among our competitors or potential competitors could also make our competitors more adaptable to a rapidly evolving regulatory environment. To stay competitive, we may need to increase our regulatory compliance expenditures or our ability to compete may be adversely affected. Our industry is driven by constant innovation.
We may also become subject to additional lawsuits, including class action lawsuits, or other challenges such as government enforcement or arbitration, against our bank partners or 30 Table of Contents us for loans originated by our bank partners on our platform or loans we service or have serviced, which we have been subject to in the past.
We may also become subject to additional lawsuits, including class action lawsuits, or other challenges such as government enforcement or arbitration, against our bank partners or us for loans originated by our bank partners on our platform or loans we service or have serviced, which we have been subject to in the past.
Recent financial, political and other events may increase the level of regulatory scrutiny on financial technology companies. Regulatory bodies may enact new laws or promulgate new regulations or view matters or interpret laws and regulations differently than they have in the past, or commence investigations or inquiries into our business practices.
Recent financial, political and other events may increase the level of regulatory scrutiny on nonbank financial institutions. Regulatory bodies may enact new laws or promulgate new regulations or view matters or interpret laws and regulations differently than they have in the past, or commence investigations or inquiries into our business practices.
As of December 31, 2022, more than 8% of our finance receivables portfolio was related to loans originated in the State of California, and if we become subject to the CFL interest rate cap of 36%, our bank partners’ ability to originate Program Loans in California could suffer.
As of December 31, 2023, more than 5% of our finance receivables portfolio was related to loans originated in the State of California, and if we become subject to the CFL interest rate cap of 36%, our bank partners’ ability to originate Program Loans in California could suffer.
Senate that would create a national cap of 36% APR on most consumer loans, and 18 states and Washington, D.C. have enacted interest rate caps on certain types of consumer loans.
Senate that would create a national cap of 36% APR on most consumer loans, and 18 states and Washington, D.C. have 48 Table of Contents enacted interest rate caps on certain types of consumer loans.
This positive performance continued through the middle of 2021. As the effects of stimulus wore off in the second half of 2021, it took time for the models to recognize the shift in loan performance.
Th is positive performance continued through the middle of 2021. As the effects of stimulus wore off in the second half of 2021, it took time for the models to recognize the shift in loan performance.
Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment.
Accordingly, we may amend the 60 Table of Contents terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment.
There can be no assurance that research, data accumulation and development by other companies will not result in AI models that are superior to our AI models or result in products superior to those we develop or that any technologies, products or services we develop will be preferred to any existing or newly-developed technologies, products or services.
There can be no assurance that research, data accumulation and development by other companies will not result in products superior to those we develop or that any technologies, products or services we develop will be preferred to any existing or newly-developed technologies, products or services.
Our corporate credit facilities consist of term loans and revolving loan facilities that we have drawn on to finance our operations and for other corporate purposes. As of December 31, 2022, we had approximately $345 million outstanding principal under these term loans and revolving credit facilities.
Our corporate credit facilities consist of term loans and revolving loan facilities that we have drawn on to finance our operations and for other corporate purposes. As of December 31, 2023, we had approximately $333 million outstanding principal under these term loans and revolving credit facilities.

… 181 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeOppFi believes that its facilities are adequate for its current needs and that, if necessary, additional facilities will be available to accommodate the expansion of its business. We do not own any real property. 70 Table of Contents
Biggest changeOppFi believes that its facilities are adequate for its current needs and that, if necessary, additional facilities will be available to accommodate the expansion of its business. We do not own any real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS See “Legal contingencies” of Note 16 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 71 Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS See “Legal contingencies” of Note 14 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 68 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−4 removed4 unchanged
Biggest changeThere was no repurchase activity during the fourth quarter of 2022. Securities Authorized for Issuance Under Equity Compensation Plans Information relating to equity compensation plans will be set forth in the Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders and is incorporated herein by reference.
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans Information relating to equity compensation plans will be set forth in the Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders and is incorporated herein by reference. The Definitive Proxy Statement will be filed with the SEC no later than 120 days after December 31, 2023. ITEM 6. [RESERVED]
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Stockholders The Company’s Class A Common Stock is traded on the New York Stock Exchange under the symbol “OPFI.” As of March 24, 2023, there were 26 stockholders of record of our Class A Common Stock and 1 stockholder of record of our Class V Voting Stock.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Stockholders The Company’s Class A Common Stock is traded on the New York Stock Exchange under the symbol “OPFI.” As of March 22, 2024, there were 32 stockholders of record of our Class A Common Stock and 1 stockholder of record of our Class V Voting Stock.
Issuer Purchases of Equity Securities On January 6, 2022, OppFi announced that its Board of Directors (“Board”) had authorized the Repurchase Program.
Issuer Purchases of Equity Securities On January 6, 2022, OppFi announced that its Board of Directors (“Board”) had authorized the Repurchase Program. The Repurchase Program expired in December 2023. There was no repurchase activity during the fourth quarter of 2023.
Removed
Repurchases under the Repurchase Program may be made from time to time, on the open market, in privately negotiated transactions, or by other methods, at the discretion of the management of the Company and in accordance with the limitations set forth in Rule 10b-18 promulgated under the Exchange Act and other applicable legal requirements.
Removed
The timing and amount of the repurchases will depend on market conditions and other requirements. The Repurchase Program does not obligate OppFi to repurchase any dollar amount or number of shares and the Repurchase Program may be extended, modified, suspended, or discontinued at any time.
Removed
For each share of Class A Common Stock that OppFi repurchases under the Repurchase Program, OppFi-LLC will redeem one Class A common unit of OppFi-LLC held by OppFi, decreasing the percentage ownership of OppFi-LLC by OppFi and relatively increasing the ownership by the Members. The Repurchase Program will expire in December 2023.
Removed
The Definitive Proxy Statement will be filed with the SEC no later than 120 days after December 31, 2022. ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

73 edited+11 added−25 removed36 unchanged
Biggest changeYear Ended December 31, Variance (in thousands, except share and per share data) Unaudited 2022 2021 % Net income $ 3,340 $ 89,795 (96.3) % (Benefit) provision for income taxes (277) 311 (189.1) Debt issuance cost amortization 2,372 2,310 2.7 Other addbacks and one-time expenses, net(a) 1,127 (8,452) (113.3) Adjusted EBT 6,562 83,964 (92.2) Less: pro forma taxes(b) (1,586) (18,145) (91.3) Adjusted net income 4,976 65,819 (92.4) Pro forma taxes(b) 1,586 18,145 (91.3) Depreciation and amortization 13,581 10,282 32.1 Interest expense 32,789 21,946 49.4 Business (non-income) taxes 934 665 40.5 Adjusted EBITDA $ 53,866 $ 116,857 (53.9) % Adjusted EPS $ 0.06 $ 0.78 Weighted average diluted shares outstanding 84,256,084 84,474,039 (a) For the year ended December 31, 2022, other addbacks and one-time expenses of $1.1 million included a $(9.4) million addback due to the change in fair value of the warrant liabilities, $0.1 million in income related to the sublease of Company office space, $0.1 million in expenses related to one-time legal costs, $2.0 million in expenses related to severance, $1.0 million in expenses related to retention, $3.6 million in expenses related to the impairment of OppFi Card finance receivables as a result of their reclassification as held for sale, $0.5 million in expenses related to the impairment of the operating lease right of use asset, and $3.4 million in stock-based compensation.
Biggest changeWe believe these adjustments provide investors with a comparative view of expenses that the Company expects to incur on an ongoing basis. 77 Table of Contents (in thousands, except share and per share data) Year Ended December 31, Variance (unaudited) 2023 2022 % Net income $ 39,479 $ 3,340 1082.0 % Income tax expense (benefit) 2,331 (277) 941.5 Debt issuance cost amortization 2,428 2,372 2.4 Other addbacks and one-time expenses, net(a) 12,790 1,180 983.9 Sublease income (318) (53) 500.0 Adjusted EBT 56,710 6,562 764.2 Less: pro forma taxes(b) (13,361) (1,586) 742.4 Adjusted net income 43,349 4,976 771.2 Pro forma taxes(b) 13,361 1,586 742.4 Depreciation and amortization 12,735 13,581 (6.2) Interest expense 44,322 32,789 35.2 Business (non-income) taxes 917 934 (1.8) Adjusted EBITDA $ 114,684 $ 53,866 112.9 % Adjusted earnings per share $ 0.51 $ 0.06 Weighted average diluted shares outstanding 85,051,304 84,256,084 (a) For the year ended December 31, 2023, other addbacks and one-time expenses, net of $12.8 million included a $5.0 million expense related to the change in fair value of the warrant liabilities, $4.1 million in expenses related to provision for credit losses on the OppFi Card finance receivables, $4.1 million in expenses related to stock-based compensation, $1.5 million in expenses related to corporate development, $0.9 million in expenses related to severance and retention, $0.3 million in expenses related to legal fees, a $(3.0) million addback related to the reclassification of OppFi Card finance receivables from assets held for sale to assets held for investment at amortized cost, and a $(0.1) million addback related to partial forgiveness of the secured borrowing payable.
In certain cases, our assessments, with respect to assumptions market participants would make, may be inherently difficult to determine, and the use of different assumptions could result in material changes to these fair value measurements. 86 Table of Contents Installment Finance Receivables : To derive the fair value, the Company generally utilizes discounted cash flow analyses that factor in estimated losses and prepayments over the estimated duration of the underlying assets.
In certain cases, our assessments, with respect to assumptions market participants would make, may be inherently difficult to determine, and the use of different assumptions could result in material changes to these fair value measurements. 83 Table of Contents Installment Finance Receivables : To derive the fair value, the Company generally utilizes discounted cash flow analyses that factor in estimated losses and prepayments over the estimated duration of the underlying assets.
The following describes the primary inputs to the discounted cash flow analyses that require significant judgement: • Discount rate: The discount rate utilized in the discounted cash flow analyses reflects our estimate of the rate of return that a market participant would require when investing in financial instruments with similar risk and return characteristics. • Servicing cost: The servicing cost percentage that is applied to portfolio’s expected cash flows reflects our estimate of the amount we would incur to service the underlying assets over the assets’ remaining lives.
The following describes the primary inputs to the discounted cash flow analyses that require significant judgment: • Discount rate: The discount rate utilized in the discounted cash flow analyses reflects our estimate of the rate of return that a market participant would require when investing in financial instruments with similar risk and return characteristics. • Servicing cost: The servicing cost percentage that is applied to portfolio’s expected cash flows reflects our estimate of the amount we would incur to service the underlying assets over the assets’ remaining lives.
Adjusted Net Income is a non-GAAP measure defined as our Adjusted EBT less pro forma taxes for comparison purposes. We believe that Adjusted EBT and Adjusted Net Income are important measures because they allows management, investors, and our board of directors to evaluate and compare our operating results from period-to-period by making the adjustments described below.
Adjusted Net Income is a non-GAAP measure defined as our Adjusted EBT less pro forma taxes for comparison purposes. We believe that Adjusted EBT and Adjusted Net Income are important measures because they allow management, investors, and our board of directors to evaluate and compare our operating results from period-to-period by making the adjustments described below.
NON-GAAP FINANCIAL MEASURES Comparison of the years ended December 31, 2022 and 2021 We believe that the provision of non-GAAP financial measures in this report, including Adjusted EPS, Adjusted EBITDA, Adjusted EBT, and Adjusted Net Income can provide useful measures for period-to-period comparisons of our business and useful information to investors and others in understanding and evaluating our operating results.
NON-GAAP FINANCIAL MEASURES Comparison of the years ended December 31, 2023 and 2022 We believe that the provision of non-GAAP financial measures in this report, including Adjusted EPS, Adjusted EBITDA, Adjusted EBT, and Adjusted Net Income can provide useful measures for period-to-period comparisons of our business and useful information to investors and others in understanding and evaluating our operating results.
The income also includes OppFi Inc.’s percentage interest in the income attributable to non-controlling interest of $(0.7) million, for net income attributable to OppFi Inc. of $7.1 million.
The loss also includes OppFi Inc.’s percentage interest in the income attributable to non-controlling interest of $7.1 million, for net loss attributable to OppFi Inc. of $1.0 million.
However, non-GAAP financial measures are not calculated in accordance with GAAP measures, should not be considered an alternative to any measure of financial performance calculated and presented in accordance with GAAP, and may not be comparable to the non-GAAP financial measures of other companies. 80 Table of Contents Adjusted EBT, Adjusted Net Income, and Adjusted EBITDA Adjusted EBT is a non-GAAP measure defined as our GAAP net income adjusted to eliminate the effect of certain items as shown below, including provision for income taxes, debt issuance cost amortization, and other addbacks and one-time expenses.
However, non-GAAP financial measures are not calculated in accordance with GAAP measures, should not be considered an alternative to any measure of financial performance calculated and presented in accordance with GAAP, and may not be comparable to the non-GAAP financial measures of other companies. 76 Table of Contents Adjusted EBT, Adjusted Net Income, and Adjusted EBITDA Adjusted EBT is a non-GAAP measure defined as our GAAP net income (loss) adjusted to eliminate the effect of certain items as shown below, including provision for income taxes, debt issuance cost amortization, other addbacks and one-time expenses and sublease income.
Finance receivables are charged off at the earlier of the time when accounts reach 90 days past due on a recency basis, when we receive notification of a customer bankruptcy, or when finance receivables are otherwise deemed uncollectible.
Finance receivables are charged off at the earlier of the time 71 Table of Contents when accounts reach 90 days past due on a recency basis, when we receive notification of a customer bankruptcy, or when finance receivables are otherwise deemed uncollectible.
Management believes that the critical accounting policies and estimates listed below require OppFi to make difficult, subjective, or complex judgments about matters that are inherently uncertain: – Valuation of installment finance receivables accounted for under the fair value option; – Determination of the allowance for credit losses; and – Valuation of the public and private warrants.
Management believes that the critical accounting policies and estimates listed below require OppFi to make difficult, subjective, or complex judgments about matters that are inherently uncertain: – Valuation of installment finance receivables accounted for under the fair value option; and – Valuation of the public and private warrants.
Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because they are non-recurring items (such as transaction-related costs with respect to our business combination), non-cash expenditures (such as depreciation and amortization, changes in the fair value of warrant liabilities, and expenses related to stock compensation), or are not related to our underlying business performance (such as interest expense).
Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because they are non-recurring items (such as severance), non-cash expenditures (such as depreciation and amortization, changes in the fair value of warrant liabilities, and expenses related to stock compensation), or are not related to our underlying business performance (such as interest expense).
(1) Adjusted EPS and Adjusted Net Income are non-Generally Accepted Accounting Principles (“GAAP”) financial measures. For information regarding our uses and definitions of these measures and for reconciliations to the most directly comparable United States GAAP measures, see the section titled “ Non-GAAP Financial Measures” below.
(1) Adjusted EPS and Adjusted Net Income are not prepared in accordance with the United States Generally Accepted Accounting Principles (“GAAP”). For information regarding our uses and definitions of these measures and for reconciliations to the most directly comparable United States GAAP measures, see the section titled “ Non-GAAP Financial Measures” below.
(b) Assumes a tax rate of 24.17% for the year ended December 31, 2022 and a tax rate of 21.61% for the year ended December 31, 2021, reflecting the U.S. federal statutory rate of 21% and a blended statutory rate for state income taxes, in order to allow for a comparison with other publicly traded companies. 81 Table of Contents Adjusted Earnings Per Share Adjusted EPS is defined as adjusted net income divided by weighted average diluted shares outstanding, which represent shares of both classes of common stock outstanding, excluding 25,500,000 shares related to earnout obligations and including the impact of restricted stock units, performance stock units, and the employee stock purchase plan.
(b) Assumes the entire Company is a C-Corp with a tax rate of 23.56% for the year ended December 31, 2023 and a tax rate of 24.17% for the year ended December 31, 2022, reflecting the U.S. federal statutory rate of 21% and a blended statutory rate for state income taxes, in order to allow for a comparison with other publicly traded companies. 78 Table of Contents Adjusted Earnings Per Share Adjusted EPS is defined as adjusted net income divided by weighted average diluted shares outstanding, which represent shares of both classes of common stock outstanding, excluding 25,500,000 shares related to earnout obligations and including the impact of restricted stock units, performance stock units, and the employee stock purchase plan.
This warrant liability arose with respect to warrants issued in connection with the initial public offering of FGNA and is subject to re-measurement at each balance sheet date. Other Income Other income totaled $0.1 million for the year ended December 31, 2022 and $0.0 million for the year ended December 31, 2021.
These warrant liabilities arose with respect to warrants issued in connection with the initial public offering of FGNA and is subject to re-measurement at each balance sheet date. Other Income Other income totaled $0.4 million for the year ended December 31, 2023 and $0.1 million for the year ended December 31, 2022.
This model utilizes unobservable inputs, including expected volatility, risk-free interest rate, and expected term. These inputs may be influenced by several factors that can change significantly and are difficult to predict. These estimates are inherently risky and require significant judgment on the part of management.
This model utilizes observable inputs such as risk-free interest rate and common stock price and unobservable inputs, including expected volatility and dividend yield. These inputs may be influenced by several factors that can change significantly and are difficult to predict. These estimates are inherently risky and require significant judgment on the part of management.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OVERVIEW OppFi is a mission-driven fintech platform that helps everyday Americans gain access to credit with digital specialty finance products. The Company’s platform powers banks to offer accessible lending products through its proprietary technology and top-rated customer experience.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OVERVIEW OppFi is a tech-enabled, mission-driven specialty finance platform that broadens the reach of community banks to extend credit access to everyday Americans . The Company’s platform powers banks to offer accessible lending products through its proprietary technology and top-rated customer experience.
OppFi’s primary mission is to facilitate financial inclusion and credit access to the 60 million everyday Americans who lack access to traditional credit with digital specialty finance products and an unwavering commitment to its customers. 72 Table of Contents OppFi works with banks to facilitate short-term lending options for everyday Americans who lack access to mainstream financial products.
OppFi’s primary mission is to facilitate financial inclusion and credit access to the 63 million everyday Americans who are credit marginalized with digital specialty finance products and an unwavering commitment to its customers. OppFi works with banks to facilitate short-term credit options for everyday Americans who lack access to mainstream financial products.
The income also includes OppFi Inc.’s percentage interest in the income attributable to non-controlling interest of $2.7 million, for net income attributable to OppFi Inc. of $25.6 million.
The income also includes OppFi Inc.’s percentage interest in the loss attributable to non-controlling interest of $0.7 million, for net income attributable to OppFi Inc. of $7.1 million.
These liabilities are subjected to remeasurement at each balance sheet date and are recorded at fair value. We value Public Warrants at market price based on a quoted price in the marketplace. For Private Placement Warrants, Private Units Warrants and Underwriter Warrants, we estimate the fair value using a Monte Carlo simulation model.
These liabilities are subjected to remeasurement at each balance sheet date and are recorded at fair value. We value Public Warrants at market price based on the observable traded price in the marketplace. For Private Placement Warrants, Private Units Warrants and Underwriter Warrants, we estimate the fair value using a Black-Scholes-Merton option-pricing model.
The following table presents auto approval rate as of December 31, 2022 and 2021: Year Ended December 31, Change 2022 2021 % Auto-approval rate 67.8 % 60.0 % 13.0 % Auto-approval rate increased by 13.0% as of December 31, 2022 to 67.8%, from 60.0% as of December 31, 2021, driven by the continued application of algorithmic automation projects that streamline frictional steps of the origination process. 76 Table of Contents RESULTS OF OPERATIONS Comparison of the years ended December 31, 2022 and 2021 The following table presents our consolidated results of operations for the years ended December 31, 2022 and 2021 (in thousands, except number of shares and per share data).
The following table presents auto approval rate for the years ended December 31, 2023 and 2022: Year Ended December 31, Change 2023 2022 % Auto-approval rate 71.9 % 65.3 % 10.1 % Auto-approval rate increased by 10.1% for the year ended December 31, 2023 to 71.9% from 65.3% for the year ended December 31, 2022, driven by the continued application of algorithmic automation projects that streamline frictional steps of the origination process. 72 Table of Contents RESULTS OF OPERATIONS Comparison of the years ended December 31, 2023 and 2022 The following table presents our consolidated results of operations for the years ended December 31, 2023 and 2022 (in thousands, except number of shares and per share data).
For the year ended December 31, 2021, the underlying income or expense components that are attributable to OppFi Inc. include gain on change in fair value of warrant liabilities of $26.4 million and tax benefit of $0.2 million, partially offset by payroll and stock compensation expense of $2.5 million, general and administrative expense of $1.1 million, and board fees of $0.2 million, for total income attributable to OppFi Inc. of $22.8 million.
For the year ended December 31, 2023, the underlying income or expense components that are attributable to OppFi Inc. include the loss on change in fair value of warrant liabilities of $5.0 million, tax expense of $2.1 million, general and administrative expense of $0.6 million, and board fees of $0.4 million, for total loss attributable to OppFi Inc. of $8.1 million.
The following is a summary of OppFi’s borrowings as of December 31, 2022 and 2021 (in thousands): Borrowing December 31, December 31, Interest Rate as of Maturity Purpose Borrower(s) Capacity 2022 2021 December 31, 2022 Date Secured borrowing payable Opportunity Funding SPE II, LLC $ 756 $ 756 $ 22,443 15.00% — (1) Senior debt Revolving line of credit Opportunity Funding SPE III, LLC $ — $ — $ 119,000 LIBOR plus 6.00% January 2024 Revolving line of credit Opportunity Funding SPE V, LLC; Opportunity Funding SPE VII, LLC (Tranche A) 75,000 37,500 45,900 SOFR plus 7.36% April 2024 Revolving line of credit Opportunity Funding SPE V, LLC; Opportunity Funding SPE VII, LLC (Tranche B) 125,000 121,647 — SOFR plus 6.75% June 2026 Revolving line of credit Opportunity Funding SPE VI, LLC — — 30,600 LIBOR plus 7.25% April 2023 Revolving line of credit Opportunity Funding SPE IV, LLC; SalaryTap Funding SPE, LLC 7,500 — 7,500 SOFR plus 0.11% plus 3.85% February 2024 Revolving line of credit Opportunity Funding SPE IX, LLC 150,000 91,871 — SOFR plus 7.50% December 2026 Revolving line of credit Gray Rock SPV, LLC 75,000 44,716 — SOFR plus 7.25% April 2025 Total revolving lines of credit 432,500 295,734 203,000 Term loan, net OppFi-LLC 50,000 48,954 48,578 LIBOR plus 10.00% March 2025 Total senior debt $ 482,500 $ 344,688 $ 251,578 Note payable OppFi-LLC $ 1,616 $ 1,616 $ — 7.07% July 2023 (1) Maturity date extended indefinitely until borrowing capacity is depleted. 85 Table of Contents LIBOR Transition In July 2017, the FCA, which regulates LIBOR, announced its intention to stop compelling banks to submit rates for the calculation of LIBOR after 2021.
The following is a summary of OppFi’s borrowings as of December 31, 2023 and 2022 (in thousands): Borrowing December 31, December 31, Interest Rate as of Maturity Purpose Borrower(s) Capacity 2023 2022 December 31, 2023 Date Secured borrowing payable Opportunity Funding SPE II, LLC $ — $ — $ 756 15.00 % — Senior debt Revolving line of credit Opportunity Funding SPE V, LLC; Opportunity Funding SPE VII, LLC (Tranche A) $ — $ — $ 37,500 SOFR plus 7.36% April 2024 Revolving line of credit Opportunity Funding SPE V, LLC (Tranche B) $ 125,000 $ 103,400 $ 121,647 SOFR plus 6.75% June 2026 Revolving line of credit Opportunity Funding SPE V, LLC (Tranche C) $ 125,000 $ 37,500 $ — SOFR plus 7.50% July 2027 Revolving line of credit Opportunity Funding SPE IV, LLC; SalaryTap Funding SPE, LLC $ — $ — $ — SOFR plus 0.11% plus 3.85% February 2024 Revolving line of credit Opportunity Funding SPE IX, LLC $ 150,000 $ 93,871 $ 91,871 SOFR plus 7.50% December 2026 Revolving line of credit Gray Rock SPV, LLC $ 75,000 $ 48,442 $ 44,716 SOFR plus 7.25% April 2025 Total revolving lines of credit $ 475,000 $ 283,213 $ 295,734 Term loan, net OppFi-LLC $ 50,000 $ 49,454 $ 48,954 LIBOR plus 10.00% March 2025 Total senior debt $ 525,000 $ 332,667 $ 344,688 Notes payable Financed insurance premium OppFi-LLC $ — $ — $ 1,616 7.07 % July 2023 Financed insurance premium OppFi-LLC $ 1,449 $ 1,449 $ — 9.70 % June 2024 Total notes payable $ 1,449 $ 1,449 $ 1,616 82 Table of Contents LIBOR Transition In July 2017, the FCA, which regulates LIBOR, announced its intention to stop compelling banks to submit rates for the calculation of LIBOR after 2021.
This was an increase of $12.4 million when compared to net cash provided by financing activities of $48.8 million for the year ended December 31, 2021, primarily due to a decrease in member distributions and payment of capitalized transaction costs related to the Business Combination, partially offset by an increase in net payments of secured borrowing payable and decrease in net advances of senior debt. 84 Table of Contents Financing Arrangements Our corporate credit facilities consist of term loans and revolving loan facilities that we have drawn on to finance our operations and for other corporate purposes.
This was an increase of $88.8 million when compared to net cash provided by financing activities of $61.3 million for the year ended December 31, 2022, primarily due to an increase in member distributions and net payments of senior debt and notes payable, partially offset by a decrease in net payments of secured borrowings payable. 81 Table of Contents Financing Arrangements Our corporate credit facilities consist of term loans and revolving loan facilities that we have drawn on to finance our operations and for other corporate purposes.
For the year ended December 31, 2021, total provision consists of gross charge-offs incurred in the period, net of recoveries, plus the change in the allowance for credit losses for our SalaryTap and OppFi Card products.
Provision for credit losses on finance receivables consists of gross charge-offs incurred in the period, net of recoveries, plus the change in allowance for credit losses for our SalaryTap and OppFi Card products.
We also earn revenue from referral fees related primarily to our turn-up program, which represented 0.2 % of total revenue for the year ended December 31, 2022. 77 Table of Contents Total revenue increased by $102.3 million, or 29.2%, to $452.9 million for the year ended December 31, 2022 from $350.6 million for the year ended December 31, 2021.
We also earn revenue from referral fees related primarily to our turn-up program, which represented 0.3% of total revenue for the year ended December 31, 2023. 73 Table of Contents Total revenue increased by $56.1 million, or 12.4%, to $508.9 million for the year ended December 31, 2023 from $452.9 million for the year ended December 31, 2022.
The following table presents net charge-offs as a percentage of average receivables for the years ended December 31, 2022 and 2021: Year Ended December 31, Change 2022 2021 % Net charge-offs as % of average receivables 61.7 % 37.5 % 64.5 % Net charge-offs as a percentage of average receivables increased by 64.5% to 61.7% for the year ended December 31, 2022, from 37.5% for the year ended December 31, 2021.
The following table presents net charge-offs as a percentage of average receivables for the years ended December 31, 2023 and 2022: Year Ended December 31, Change 2023 2022 % Net charge-offs as % of average receivables 55.4 % 61.9 % (10.5) % Net charge-offs as a percentage of average receivables decreased by 10.5% to 55.4% for the year ended December 31, 2023 from 61.9% for the year ended December 31, 2022.
The 6.3% decrease was driv en by an increase in delinquent loans in the portfolio as a result of lower quality loans originated prior to credit adjustments implemented earlier in 2022 that were not accruing interest and an increase in enrollment in our hardship and assistance programs, which provide payment relief due to natural disasters, loss of income, increase in expenses, or other unpredictable events such as COVID-19.
The 6.1% increase was driv en by a decrease in delinquent loans in the portfolio that were not accruing interest and a decrease in enrollment in our hardship and assistance programs, which provide payment relief due to natural disasters, loss of income, increase in expenses, or other unpredictable events such as COVID-19, as well as a relative shift away from states with lower interest rates.
The fair value mark decreased primarily due to an increase in the loss rate as a result of an increase in delinquent loans in the portfolio, as well as an increase in the discount rate, partially offset by an increase in the weighted average interest rate of the portfolio.
The fair value mark decreased primarily due to an increase in the default rate, partially offset by an increase in the weighted average interest rate of the portfolio.
Change in fair value totaled $234.0 million for the year ended December 31, 2022, which was comprised of $232.3 million of net charge-offs and a fair market value adjustment of $1.7 million, up from $86.0 million for the year ended December 31, 2021, which was comprised of $103.4 million of net charge-offs partially offset by a fair market value adjustment of $17.4 million.
Change in fair value totaled $231.4 million for the year ended December 31, 2023, which was comprised of $220.9 million of net charge-offs and a fair market value adjustment of $10.5 million, down from $234.0 million for the year ended December 31, 2022, which was comprised of $232.3 million of net charge-offs and a fair market value adjustment of $1.7 million.
Other income includes the income related to the Company subleasing one floor of its office space. Income Before Income Taxes Income before income taxes is the sum of (loss) income from operations, the gain on forgiveness of PPP Loan, the change in fair value of warrant liability, and other income.
For the year ended December 31, 2022, other income includes the income related to the Company subleasing one floor of its office space. Income Before Income Taxes Income before income taxes is the sum of income (loss) from operations, the change in fair value of warrant liabilities, and other income.
The following table presents average yield for the years ended December 31, 2022 and 2021: Year Ended December 31, Change 2022 2021 % Average yield 118.9 % 126.9 % (6.3) % Average yield decreased to 118.9% for the year ended December 31, 2022, from 126.9% for the year ended December 31, 2021.
The following table presents average yield for the years ended December 31, 2023 and 2022: Year Ended December 31, Change 2023 2022 % Average yield 127.3 % 120.0 % 6.1 % Average yield increased to 127.3% for the year ended December 31, 2023 from 120.0% for the year ended December 31, 2022.
(Loss) Income from Operations (Loss) income from operations is the difference between net revenue and expenses. Total income from operations decreased by $63.6 million, or 111.1%, to $(6.3) million for the year ended December 31, 2022, from $57.3 million for the year ended December 31, 2021.
Income (Loss) from Operations Income (loss) from operations is the difference between net revenue and expenses. Total income from operations increased by $52.7 million to $46.4 million for the year ended December 31, 2023 from loss from operations of $6.3 million for the year ended December 31, 2022.
The following table presents our unrestricted cash and undrawn debt as of December 31, 2022 and 2021 (in thousands): December 31, 2022 December 31, 2021 Unrestricted cash $ 16,239 $ 25,064 Undrawn debt $ 136,800 $ 158,100 As of December 31, 2022, OppFi had $16.2 million in unrestricted cash, a decrease of $8.8 million from December 31, 2021.
The following table presents our unrestricted cash and undrawn debt as of December 31, 2023 and 2022 (in thousands): December 31, 2023 December 31, 2022 Unrestricted cash $ 31,791 $ 16,239 Undrawn debt $ 192,333 $ 136,800 As of December 31, 2023, OppFi had $31.8 million in unrestricted cash, an increase of $15.6 million from December 31, 2022.
Income Tax (Benefit) Expense OppFi Inc. recorded an income tax benefit of $0.3 million for the year ended December 31, 2022, an increase of $0.6 million from income tax expense of $0.3 million for the year ended December 31, 2021.
Income Tax Expense (Benefit) OppFi Inc. recorded an income tax expense of $2.3 million for the year ended December 31, 2023, an increase of $2.6 million from income tax benefit of $0.3 million for the year ended December 31, 2022. This increase was largely attributed to the change in fair value of warrant liabilities.
Net Revenue Net revenue is equal to total revenue less the change in fair value and total provision costs. Total net revenue decreased by $46.7 million, or 17.7%, to $217.0 million for the year ended December 31, 2022 from $263.7 million for the year ended December 31, 2021.
Net Revenue Net revenue is equal to total revenue less the change in fair value and total provision costs. Total net revenue increased by $56.2 million, or 25.9%, to $273.2 million for the year ended December 31, 2023 from $217.0 million for the year ended December 31, 2022. This increase was mainly due to the increase in total revenue.
The increase in expenses was primarily related to elevated interest expense as a result of increased debt draws to support higher receivables balances and a rising interest rate environment, higher direct marketing costs to drive higher new originations, higher payment processing fees as a result of higher volume, and further investment in technology infrastructure.
The increase in expenses was primarily related to elevated interest expense as a result of increased debt draws to support higher receivables balances and a rising interest rate environment and higher professional fees related to accounting, legal, and staffing matters.
Current liabilities decreased by $6.1 million as of December 31, 2022 compared to December 31, 2021, driven by the decrease in accrued expenses of $6.4 million.
Current liabilities decreased by $3.1 million as of December 31, 2023 compared to December 31, 2022 driven by a decrease in accounts payable of $1.9 million and a decrease in accrued expenses of $1.2 million.
The following table presents total net originations (defined as gross originations net of transferred balance on refinanced loans), percentage of net originations by bank partners, and percentage of net originations by new loans for the years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, Change 2022 2021 $ % Total net originations $ 758,208 $ 595,079 $ 163,129 27.4 % Percentage of net originations by bank partners 94.6 % 90.6 % N/A 4.4 % Percentage of net originations by new loans 51.5 % 46.2 % N/A 11.5 % Net originations increased to $758.2 million for the year ended December 31, 2022, from $595.1 million for the year ended December 31, 2021.
The following table presents total net originations (defined as gross originations net of transferred balance on refinanced loans), percentage of net originations by bank partners, and percentage of net originations by new loans for the years ended December 31, 2023 and 2022 (in thousands): 70 Table of Contents Year Ended December 31, Change 2023 2022 $ % Total net originations $ 747,839 $ 752,918 $ (5,079) (0.7) % Percentage of net originations by bank partners 97.7 % 94.6 % N/A 3.3 % Percentage of net originations by new loans 43.6 % 51.2 % N/A (14.8) % Net originations decreased to $747.8 million for the year ended December 31, 2023 from $752.9 million for the year ended December 31, 2022.
Other liabilities increased by $18.9 million as of December 31, 2022 compared to December 31, 2021, driven by the addition of an operating lease liability of $16.6 million and an increase in the tax receivable agreement liability of $2.4 million.
Other liabilities decreased by $2.1 million as of December 31, 2023 compared to December 31, 2022 driven by a decrease in the operating lease liability of $1.5 million and a decrease in the tax receivable agreement liability of $0.6 million.
At the Closing, FGNA changed its name to “OppFi Inc.” OppFi’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”) and redeemable warrants exercisable for Class A Common Stock (“Public Warrants”) are listed on the New York Stock Exchange (“NYSE”) under the symbols “OPFI” and “OPFI WS,” respectively.
At the Closing, FGNA changed its name to “OppFi Inc.” OppFi’s Class A Common Stock and Public Warrants are listed on the NYSE under the symbols “OPFI” and “OPFI WS,” respectively.
Unless the context otherwise requires, all references in this section to “OppFi” or the “Company” refers to Opportunity Financial, LLC (“OppFi-LLC”) and its subsidiaries prior to the closing (the “Closing”) of the Business Combination, or to OppFi Inc. and its subsidiaries from and after the Business Combination.
Unless the context otherwise requires, all references in this section to “OppFi” or the “Company” refer OppFi-LLC and its subsidiaries prior to the Closing, or to OppFi Inc. and its subsidiaries from and after the Closing. See Item 1. “Business” for more information.
The following tables and related discussion set forth key financial and operating metrics for the Company’s operations as of and for the years ended December 31, 2022 and 2021. All key performance metrics include the three products on the OppFi platform and are not shown separately as contributions from SalaryTap and OppFi Card were de minimis.
The following tables and related discussion set forth key financial and operating metrics for the Company’s operations as of and for the years ended December 31, 2023 and 2022. The key performance metrics presented are for the OppLoans product only and exclude the SalaryTap and OppFi Card products.
Net income attributable to OppFi Inc. decreased by $18.5 million, or 72.2%, to $7.1 million for the year ended December 31, 2022, from $25.6 million for the year ended December 31, 2021. Net income attributable to OppFi Inc. represents the income solely attributable to stockholders of OppFi Inc.
Net loss attributable to OppFi Inc. was $1.0 million for the year ended December 31, 2023, down from net income attributable to OppFi Inc. of $7.1 million for the year ended December 31, 2022. Net (loss) income attributable to OppFi Inc. represents the income solely attributable to stockholders of OppFi Inc.
Additionally, credit adjustments decelerated origination growth in the second half of the year and therefore impacted the denominator of the net charge-off rate. Auto-Approval Rate Auto-approval rate is calculated by taking the number of approved loans that are not decisioned by a loan advocate or underwriter (auto-approval) divided by the total number of loans approved.
Auto-Approval Rate Auto-approval rate is calculated by taking the number of approved loans that are not decisioned by a loan advocate or underwriter (auto-approval) divided by the total number of loans approved.
As of December 31, 2022, OppFi had an additional $136.8 million of unused debt capacity under its financing facilities for future availability, representing a 28% overall undrawn capacity, a decrease from $158.1 million as of December 31, 2021. The reduction in undrawn debt was primarily due to funding of receivables growth.
As of December 31, 2023, OppFi had an additional $192.3 million of unused debt capacity under its financing facilities for future availability, representing a 37% overall undrawn capacity, an increase from $136.8 million as of December 31, 2022.
This was an increase of $117.8 million when compared to net cash used in investing activities of $199.5 million for the year ended December 31, 2021, due to higher finance receivables originated and acquired, partially offset by higher finance receivables repaid and recovered.
Investing Activities Net cash used in investing activities was $244.3 million for the year ended December 31, 2023. This was a decrease of $73.0 million when compared to net cash used in investing activities of $317.2 million for the year ended December 31, 2022, mainly due to lower finance receivables originated and acquired and higher finance receivables repaid and recovered.
Financing Activities Net cash provided by financing activities was $61.3 million for the year ended December 31, 2022.
Financing Activities Net cash used in financing activities was $27.6 million for the year ended December 31, 2023.
The following table presents ending receivables as of December 31, 2022 and 2021 (in thousands): Change 2022 2021 $ % Ending receivables $ 402,910 $ 337,529 $ 65,381 19.4 % Ending receivables increased to $402.9 million as of December 31, 2022 from $337.5 million as of December 31, 2021.
The following table presents ending receivables as of December 31, 2023 and 2022 (in thousands): As of December 31, Change 2023 2022 $ % Ending receivables $ 416,463 $ 402,180 $ 14,283 3.6 % Ending receivables increased to $416.5 million as of December 31, 2023 from $402.2 million as of December 31, 2022.
Income before income tax decreased by $87.0 million, or 96.6%, to $3.1 million for the year ended December 31, 2022, from $90.1 million for the year ended December 31, 2021.
Income before income tax increased by $38.7 million to $41.8 million for the year ended December 31, 2023 from $3.1 million for the year ended December 31, 2022.
The increase was due to higher receivables balances throughout the year, which was driven by both higher beginning balances and origination growth. Change in Fair Value and Total Provision Commencing on January 1, 2021, we elected the fair value option on the OppLoan installment product.
The increase was due to higher average receivables balances throughout the year as well as stronger payment activity driving a higher yield on the balances. Change in Fair Value and Provision for Credit Losses on Finance Receivables Commencing on January 1, 2021, we elected the fair value option on the OppLoans installment product.
Total Net Originations We measure originations to assess the growth trajectory and overall size of our loan portfolio. There is a direct correlation between origination growth and revenue growth. We include both bank partner originations as well as those originated by us directly. Loans are considered to be originated when the contract is signed between us and the prospective borrower.
We include both bank partner originations as well as those originated by us directly. OppFi ended its direct lending program during 2023 and exclusively utilizes a bank partner model, as of December 31, 2023. Loans are considered to be originated when the contract is signed between us and the prospective borrower.
Future cash flows are discounted using a rate of return that we believe a market participant would require based on the risk characteristics of the loans.
Future cash flows are discounted using a rate of return that we believe a market participant would require based on the risk characteristics of the loans. We did not elect the fair value option on our SalaryTap and OppFi Card finance receivables, which are carried at amortized cost, net of allowance for credit losses.
Net Income Net income decreased by $86.5 million, or 96.3%, to $3.3 million for the year ended December 31, 2022, from $89.8 million for the year ended December 31, 2021. Net Income Attributable to OppFi Inc.
Net Income Net income increased by $36.1 million to $39.5 million for the year ended December 31, 2023, from $3.3 million for the year ended December 31, 2022 for all of the reasons stated above. Net (Loss) Income Attributable to OppFi Inc.
Year Ended December 31, (unaudited) 2022 2021 Weighted average Class A Common Stock outstanding 13,913,626 13,218,119 Weighted average Class V Voting Stock outstanding 95,724,487 96,746,990 Elimination of earnouts at period end (25,500,000) (25,500,000) Dilutive impact of restricted stock units 105,928 8,930 Dilutive impact of performance stock units 9,492 — Dilutive impact of employee stock purchase plan 2,551 — Weighted average diluted shares outstanding 84,256,084 84,474,039 Year Ended December 31, (unaudited) 2022 2021 Adjusted net income (in thousands) $ 4,976 $ 65,819 Weighted average diluted shares outstanding 84,256,084 84,474,039 Adjusted EPS $ 0.06 $ 0.78 82 Table of Contents LIQUIDITY AND CAPITAL RESOURCES To date, the funds received from operating income and our ability to obtain lending commitments have provided the liquidity necessary for us to fund our operations.
Year Ended December 31, (unaudited) 2023 2022 Weighted average Class A common stock outstanding 16,391,199 13,913,626 Weighted average Class V voting stock outstanding 93,857,926 95,724,487 Elimination of earnouts at period end (25,500,000) (25,500,000) Dilutive impact of restricted stock units 261,595 105,928 Dilutive impact of performance stock units 40,584 9,492 Dilutive impact of employee stock purchase plan — 2,551 Weighted average diluted shares outstanding 85,051,304 84,256,084 (in thousands, except share and per share data) Year Ended December 31, 2023 Year Ended December 31, 2022 (unaudited) $ Per Share $ Per Share Weighted average diluted shares outstanding 85,051,304 84,256,084 Net income $ 39,479 $ 0.46 $ 3,340 $ 0.04 Income tax expense (benefit) 2,331 0.03 (277) — Debt issuance cost amortization 2,428 0.03 2,372 0.03 Other addbacks and one-time expenses, net 12,790 0.15 1,180 0.01 Sublease income (318) — (53) — Adjusted EBT 56,710 0.67 6,562 0.08 Less: pro forma taxes (13,361) (0.16) (1,586) (0.02) Adjusted net income 43,349 $ 0.51 4,976 $ 0.06 79 Table of Contents LIQUIDITY AND CAPITAL RESOURCES To date, the funds received from operating income and our ability to obtain lending commitments have provided the liquidity necessary for us to fund our operations.
This was an increase of $76.0 million when compared to net cash provided by operating activities of $167.3 million for the year ended December 31, 2021.
This was an increase of $52.8 million when compared to net cash provided by operating activities of $243.3 million for the year ended December 31, 2022. Cash provided by operating activities increased mainly due to higher net income and less gain from the change in fair value of warrant liabilities compared to the prior year.
There are no assurances regarding the timing or conclusion of a potential sale of OppFi Card finance receivables. 73 Table of Contents HIGHLIGHTS Our financial results as of and for the year ended December 31, 2022 are summarized below: • Basic and diluted earnings per share (“EPS”) of $0.51 and $0.05 for the year ended December 31, 2022, respectively; • Adjusted EPS (1) of $0.06 for the year ended December 31, 2022; • Net originations increased 27% to $758.2 million from $595.1 million for the years ended December 31, 2022 and 2021, respectively; • Ending receivables increased 19% to $402.9 million from $337.5 million as of December 31, 2022 and 2021, respectively; • Total revenue increased 29% to $452.9 million from $350.6 million for the years ended December 31, 2022 and 2021, respectively; • Net income decreased 96% to $3.3 million from $89.8 million for the years ended December 31, 2022 and 2021 respectively; and • Adjusted net income (1) decreased 92% to $5.0 million from $65.8 million for the years ended December 31, 2022 and 2021, respectively.
HIGHLIGHTS Our financial results as of and for the year ended December 31, 2023 are summarized below: • Basic and diluted loss per share of $0.06 and $0.06 for the year ended December 31, 2023, respectively; • Adjusted earnings per share (“Adjusted EPS”) (1) of $0.51 for the year ended December 31, 2023; • Ending receivables increased 4% to $416.5 million from $402.2 million as of December 31, 2023 and 2022, respectively; • Total revenue increased 12% to $508.9 million from $452.9 million for the years ended December 31, 2023 and 2022, respectively; • Net income of $39.5 million for the year ended December 31, 2023, an increase of $36.1 million from $3.3 million for the year ended December 31, 2022; and • Adjusted net income (“Adjusted Net Income”) (1) of $43.3 million for the year ended December 31, 2023, an increase of $38.4 million from $5.0 million for the year ended December 31, 2022.
Year Ended December 31, Change 2022 2021 $ % Interest and loan related income $ 451,448 $ 349,029 $ 102,419 29.3 % Other revenue 1,411 1,539 (128) (8.3) Total revenue 452,859 350,568 102,291 29.2 Change in fair value of finance receivables (233,959) (85,960) (147,999) 172.2 Provision for credit losses on finance receivables (1,940) (929) (1,011) 108.8 Net revenue 216,960 263,679 (46,719) (17.7) Expenses: Sales and marketing 54,407 52,622 1,785 3.4 Customer operations 42,314 40,260 2,054 5.1 Technology, products, and analytics 33,439 27,442 5,997 21.9 General, administrative, and other 57,980 61,842 (3,862) (6.2) Total expenses before interest expense 188,140 182,166 5,974 3.3 Interest expense 35,162 24,256 10,906 45.0 Total expenses 223,302 206,422 16,880 8.2 (Loss) income from operations (6,342) 57,257 (63,599) (111.1) Change in fair value of warrant liability 9,352 26,405 (17,053) (64.6) Gain on forgiveness of PPP loan — 6,444 (6,444) (100.0) Other income 53 — 53 — Income before income taxes 3,063 90,106 (87,043) (96.6) Income tax (benefit) expense (277) 311 (588) (189.1) Net income 3,340 89,795 (86,455) (96.3) Less: net (loss) income attributable to noncontrolling interest (3,758) 64,241 (67,999) (105.8) Net income attributable to OppFi Inc. $ 7,098 $ 25,554 $ (18,456) (72.2) % Earnings per share attributable to OppFi Inc.: Earnings per common share: Basic $ 0.51 $ 1.93 Diluted $ 0.05 $ 0.48 Weighted average common shares outstanding: Basic 13,913,626 13,218,119 Diluted 84,256,084 84,474,039 Total Revenue Total revenue consists mainly of revenue earned from interest on receivables from outstanding loans based only on the interest method.
Year Ended December 31, Change 2023 2022 $ % Interest and loan related income $ 505,430 $ 451,448 $ 53,982 12.0 % Other revenue 3,519 1,411 2,108 149.4 Total revenue 508,949 452,859 56,090 12.4 Change in fair value of finance receivables (231,419) (233,959) 2,540 (1.1) Provision for credit losses on finance receivables (4,348) (1,940) (2,408) 124.1 Net revenue 273,182 216,960 56,222 25.9 Expenses: Sales and marketing 46,222 54,407 (8,185) (15.0) Customer operations 41,559 42,314 (755) (1.8) Technology, products, and analytics 39,161 33,439 5,722 17.1 General, administrative, and other 53,135 57,980 (4,845) (8.4) Total expenses before interest expense 180,077 188,140 (8,063) (4.3) Interest expense 46,750 35,162 11,588 33.0 Total expenses 226,827 223,302 3,525 1.6 Income (loss) from operations 46,355 (6,342) 52,697 830.9 Change in fair value of warrant liabilities (4,976) 9,352 (14,328) (153.2) Other income 431 53 378 713.2 Income before income taxes 41,810 3,063 38,747 1265.0 Income tax expense (benefit) 2,331 (277) 2,608 941.5 Net income 39,479 3,340 36,139 1082.0 Less: net income (loss) attributable to noncontrolling interest 40,484 (3,758) 44,242 1177.3 Net (loss) income attributable to OppFi Inc. $ (1,005) $ 7,098 $ (8,103) (114.2) % (Loss) earnings per share attributable to OppFi Inc.: (Loss) earnings per common share: Basic $ (0.06) $ 0.51 Diluted $ (0.06) $ 0.05 Weighted average common shares outstanding: Basic 16,391,199 13,913,626 Diluted 16,391,199 84,256,084 Total Revenue Total revenue consists mainly of revenue earned from interest on receivables from outstanding loans based on the interest method.
This decrease was due to lower net revenue and higher expenses for the year ended December 31, 2022 as a result of the reasons discussed above. 78 Table of Contents Gain on Forgiveness of PPP Loan Gain on forgiveness of PPP Loan for the year ended December 31, 2021 included the gain from an unsecured loan of $6.4 million in connection with the U.S.
This increase was due to higher net revenue outweighing higher total expenses for the year ended December 31, 2023 as a result of the reasons discussed above. 74 Table of Contents Change in Fair Value of Warrant Liabilities Change in fair value of warrant liabilities totaled $(5.0) million for the year ended December 31, 2023 and $9.4 million for the year ended December 31, 2022.
The increase for the year ended December 31, 2022 is a result of the 75 Table of Contents cumulative effects of elevated inflation and the charge off of lower quality loans originated prior to credit adjustments implemented earlier in 2022.
The decrease for the year ended December 31, 2023 is a combination of the lower quality loans originated prior to credit adjustments midway through 2022 having charged off and higher quality loans being originated following the credit adjustments.
For the year ended December 31, 2021, other addbacks and one-time expenses of $(8.5) million included a $(26.4) million addback due to the change in fair value of the warrant liabilities, a $(6.4) million addback due to the gain on forgiveness of PPP Loan, $6.6 million in public company readiness costs prior to the Business Combination, $5.3 million in expenses related to one-time legal, accounting, and other costs related to the Business Combination, $4.2 million in expenses related to warrant valuation, $3.0 million in expenses related to severance, $0.6 million in management and board fees, $1.8 million in recruiting and salary expense, and $3.0 million in profit interest and stock compensation.
For the year ended December 31, 2022, other addbacks and one-time expenses, net of $1.2 million included a $(9.4) million addback related to the change in fair value of the warrant liabilities, a $3.6 million expense related to the impairment of OppFi Card finance receivables as a result of their reclassification as held for sale, $3.4 million in expenses related to stock-based compensation, $3.0 million in expenses related to severance and retention, a $0.5 million expense related to the impairment of the operating lease right of use asset, and $0.1 million in expenses related to legal fees.
Cash Flows The following table presents cash provided by (used in) operating, investing and financing activities during the years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, Change 2022 2021 $ % Net cash provided by operating activities $ 243,297 $ 167,346 $ 75,951 45.4 % Net cash used in investing activities (317,244) (199,470) (117,774) (59.0) Net cash provided by financing activities 61,255 48,829 12,426 (25.4) Net (decrease) increase in cash and restricted cash $ (12,692) $ 16,705 $ (29,397) (176.0) % Operating Activities Net cash provided by operating activities was $243.3 million for the year ended December 31, 2022.
Cash Flows The following table presents cash provided by (used in) operating, investing and financing activities during the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, Change 2023 2022 $ % Net cash provided by operating activities $ 296,146 $ 243,297 $ 52,849 21.7 % Net cash used in investing activities (244,292) (317,244) 72,952 (23.0) Net cash (used in) provided by financing activities (27,581) 61,255 (88,836) (145.0) Net increase (decrease) in cash and restricted cash $ 24,273 $ (12,692) $ 36,965 291.2 % 80 Table of Contents Operating Activities Net cash provided by operating activities was $296.1 million for the year ended December 31, 2023.
OppFi’s financial technology platform focuses on helping these consumers build a better financial path. Customers on OppFi’s platform benefit from a highly automated, transparent, efficient, and fully digital experience. The banks that work with OppFi benefit from its turn-key, outsourced marketing, data science, and proprietary technology to digitally acquire, underwrite and service these consumers.
The banks that work with OppFi benefit from its turn-key, outsourced marketing, data science, and proprietary technology to digitally acquire, underwrite and service these consumers. 69 Table of Contents OppFi’s primary products are offered by its OppLoans platform. Customers on this platform are U.S. consumers, who are employed, have bank accounts, and generally earn median wages.
The 19.4% increase was primarily driven by growth in originations in 2022. Ending receivables as of December 31, 2022 do not include OppFi Card receivables due to their reclassification as held for sale. Average Yield Average yield represents interest income from the period as a percent of average receivables. Receivables are defined as the unpaid principal balances of loans.
The 3.6% increase was primarily driven by a higher receivables balance to begin the year in 2023 relative to 2022 as well as a healthier portfolio leading to less charge-offs year over year. Average Yield Average yield represents interest income from the period as a percent of average receivables. Receivables are defined as the unpaid principal balances of loans.
Total net originations by our bank partners increased to 94.6% for the year ended December 31, 2022, from 90.6% for the year ended December 31, 2021.
Despite greater application volume, the 0.7% decrease was driven by relatively tighter credit standards with the qualified rate (defined as qualified applications over total applications) dropping year over year. Total net originations by our bank partners increased to 97.7% for the year ended December 31, 2023 from 94.6% for the year ended December 31, 2022.
This decrease was due to the rise in gross charge-offs, which offset higher total revenues. Expenses Expenses include costs related to salaries and employee benefits, interest expense and amortized debt issuance costs, sales and marketing, customer operations, technology, products, and analytics, and other general and administrative expenses.
Expenses Expenses include costs related to salaries and employee benefits, interest expense and amortized debt issuance costs, sales and marketing, customer operations, technology, products, and analytics, and general, administrative, and other expenses. Expenses increased by $3.5 million, or 1.6%, to $226.8 million for the year ended December 31, 2023 from $223.3 million for the year ended December 31, 2022.
Despite the overall increase in expenses, expenses as a percent of total revenue decreased from 58.9% to 49.3% for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to headcount reductions and vendor savings implemented in the first half of 2022.
The increase was partially offset by lower direct marketing costs resulting from lower total originations as well as a relative shift in originations towards lower-cost refinance loans. Despite the overall increase in expenses, expenses as a percent of total revenue decreased from 49.3% to 44.6% for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Total debt increased by $73.0 million as of December 31, 2022 compared to December 31, 2021, driven by an increase in utilization of revolving lines of credit of $93.1 million and new notes payable related to insurance premium financing of $1.6 million, which was partially offset by lower secured borrowing payables of $21.7 million.
Total debt decreased by $12.9 million as of December 31, 2023 compared to December 31, 2022 driven by a decrease in utilization of revolving lines of credit of $12.0 million, paydown of the secured borrowing payable of $0.8 million, and a decrease in notes payable of $0.2 million.
Including total financing commitments of $482.5 million, and cash on the balance sheet of $49.7 million, OppFi had approximately $532.2 million in funding capacity as of December 31, 2022.
The increase in undrawn debt was driven primarily by the increase in capacity of the revolving credit agreement with affiliates of Atalaya Capital Management in July 2023 . Including total financing commitments of $525.0 million, and cash on the balance sheet of $73.9 million, OppFi had approximately $598.9 million in funding capacity as of December 31, 2023.
Total equity increased by $1.3 million as of December 31, 2022 compared to December 31, 2021, driven by net income and stock-based compensation, partially offset by treasury stock as a result of repurchases made under the Company’s share repurchase program.
Warrant liabilities increased by $5.0 million due to the increase in the valuation of the warrants as of December 31, 2023 compared to December 31, 2022. Total stockholders’ equity increased by $34.9 million as of December 31, 2023 compared to December 31, 2022 driven by net income and stock-based compensation.
Total provision increased by $1.0 million, or 108.8%, to $1.9 million for the year ended December 31, 2022 from $0.9 million for the year ended December 31, 2021 due to the increase in gross charge-offs on the SalaryTap product from its launch.
Provision for credit losses on finance receivables increased by $2.4 million to $4.3 million for the year ended December 31, 2023, from $1.9 million for the year ended December 31, 2022. Provision for credit losses on finance receivables for the year ended December 31, 2023 increased due to higher charge-offs throughout the year, particularly due to the OppFi Card portfolio.
Finance receivables at fair value increased by $73.4 million as of December 31, 2022 compared to December 31, 2021 due to high demand and origination volume for the year ended December 31, 2022. Finance receivables at amortized cost decreased by $3.6 million primarily due to the reclassification of OppFi Card finance receivables as held for sale under other assets.
Finance receivables at amortized cost, net decreased by $0.5 million as of December 31, 2023 compared to December 31, 2022 due to the continued rundown of OppFi Card and SalaryTap finance receivables.
Prior to the consummation of the Business Combination on July 20, 2021, there was no income attributable to OppFi Inc. as OppFi-LLC was the only reportable entity. 79 Table of Contents Condensed Balance Sheets Comparison of the years ended December 31, 2022 and 2021 The following table presents our condensed balance sheet as of December 31, 2022 and 2021 (in thousands): Year Ended December 31, Change 2022 2021 $ % Assets Cash and restricted cash $ 49,670 $ 62,362 $ (12,692) (20.4) % Finance receivables at fair value 457,296 383,890 73,406 19.1 Finance receivables at amortized cost, net 643 4,220 (3,577) (84.8) Other assets 72,230 51,634 20,596 39.9 Total assets $ 579,839 $ 502,106 $ 77,733 15.5 % Liabilities and stockholders’ equity Current liabilities $ 29,558 $ 35,695 $ (6,137) (17.2) % Other liabilities 42,183 23,272 18,911 81.3 Total debt 347,060 274,021 73,039 26.7 Warrant liability 1,888 11,240 (9,352) (83.2) Total liabilities 420,689 344,228 76,461 22.2 Total stockholders’ equity 159,150 157,878 1,272 0.8 Total liabilities and stockholders’ equity $ 579,839 $ 502,106 $ 77,733 15.5 % Total cash and restricted cash decreased by $12.7 million as of December 31, 2022 compared to December 31, 2021, driven by an increase in originated loans relative to the timing of received payments.
For the year ended December 31, 2022, the Company’s outstanding shares of Class V Voting Stock were included in computing the diluted earnings per share as the inclusion of these shares had a dilutive effect under the if-converted method. 75 Table of Contents Condensed Balance Sheets Comparison of the years ended December 31, 2023 and 2022 The following table presents our condensed balance sheet as of December 31, 2023 and 2022 (in thousands): Year Ended December 31, Change 2023 2022 $ % Assets Cash and restricted cash $ 73,943 $ 49,670 $ 24,273 48.9 % Finance receivables at fair value 463,320 457,296 6,024 1.3 Finance receivables at amortized cost, net 110 643 (533) (82.9) Other assets 64,170 72,230 (8,060) (11.2) Total assets $ 601,543 $ 579,839 $ 21,704 3.7 % Liabilities and stockholders’ equity Current liabilities $ 26,448 $ 29,558 $ (3,110) (10.5) % Other liabilities 40,086 42,183 (2,097) (5.0) Total debt 334,116 347,060 (12,944) (3.7) Warrant liabilities 6,864 1,888 4,976 263.6 Total liabilities 407,514 420,689 (13,175) (3.1) Total stockholders’ equity 194,029 159,150 34,879 21.9 Total liabilities and stockholders’ equity $ 601,543 $ 579,839 $ 21,704 3.7 % Total cash and restricted cash increased by $24.3 million as of December 31, 2023 compared to December 31, 2022 driven by an increase in received payments relative to originations.
Each of our credit facilities provides for the replacement of LIBOR as discussed above in “Financing Arrangements.” We do not expect the replacement of LIBOR to have any effect on our liquidity or the financial terms of our credit facilities.
Each of our credit facilities, except for the senior secured multi-draw term loan, provided for the replacement of LIBOR as discussed above in “Financing Arrangements.” As of December 31, 2023, all of our LIBOR-based credit facilities, except for the senior secured multi-draw term loan, have been transitioned to the SOFR.
OppFi’s primary products are offered by its OppLoans lending platform. Customers on this platform are U.S. consumers, who are employed, have bank accounts, and generally earn median wages. The average installment loan facilitated by OppFi is approximately $1,500, payable in installments and with an average contractual term of 11 months.
The average installment loan facilitated by OppFi is approximately $1,500, payable in installments and with an average contractual term of 11 months. Neither SalaryTap nor OppFi Card contributed meaningfully to OppFi’s results during the year ended December 31, 2023. On the Closing Date, OppFi completed the Business Combination.
Removed
Neither SalaryTap nor OppFi Card contributed meaningfully to OppFi’s results during the year ended December 31, 2022.
Added
OppFi’s specialty finance platform focuses on helping these consumers rebuild their financial health. Customers on OppFi’s platform benefit from a highly automated, transparent, efficient, and fully digital experience.
Removed
On July 20, 2021 (“Closing Date”), OppFi completed a business combination pursuant to the Business Combination Agreement (“Business Combination Agreement”), dated as of February 9, 2021, by and among FG New America Acquisition Corp.
Added
Prior period metrics currently presented may differ slightly than previously reported due to the exclusion of SalaryTap and OppFi Card. Total Net Originations We measure originations to assess the growth trajectory and overall size of our loan portfolio. There is a direct correlation between origination growth and revenue growth.
Removed
(“FGNA”), OppFi-LLC, a Delaware limited liability company, OppFi Shares, LLC (“OFS”), a Delaware limited liability company, and Todd Schwartz (“Members’ Representative”), in his capacity as the representative of the members of OppFi-LLC (“Members”) immediately prior to the closing (“Closing”) of the transactions contemplated by the Business Combination Agreement (“Business Combination”).
Added
The 3.3% increase is due to our origination mix continuing to shift towards a servicing / facilitation model for bank partners from a direct origination model. Total net originations of new loans as percentage of total loans decreased to 43.6% for the year ended December 31, 2023 from 51.2% for the year ended December 31, 2022.
Removed
Following the Closing, OppFi is organized in an “Up-C” structure in which substantially all of the assets and the business of the Company are held by OppFi-LLC and its subsidiaries, and OppFi’s only direct assets consist of Class A common units of OppFi-LLC (“OppFi Units”).

… 29 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Item 305(e) of Regulation S-K, we are not required to provide this information. 87 Table of Contents
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Item 305(e) of Regulation S-K, we are not required to provide this information. 84 Table of Contents

Other OPFI 10-K year-over-year comparisons