In a Nutshell: Consumers with low credit scores often struggle to receive favorable loans from lenders. Through OppLoans.com, OppFi helps those would-be borrowers find appealing loans so they can avoid high-interest, last resort options, like payday and tribal lenders. The company provides some of the strongest consumer protections in the industry, including eliminating fees, completely transparent pricing, reports to all 3 major credit bureaus to facilitate building credit, and provides a unique service that seeks to help customers find a better rate. OppFi’s loans are also provided by a bank partner, so the loans facilitated by OppFi are protected by federal and state regulators.
28% of American consumers–60 million people–carry a credit score of 669 or less. These consumers are classified as having poor or fair credit by FICO. This means that they are at greater risk of “becom[ing] seriously delinquent in the future,” according to Experian.
Because of the heightened risk of delinquency or default, many lenders, particularly “Main Street” banks and credit unions, do not offer credit to these consumers. However, individuals with poor or fair credit are often the ones that have the greatest need for credit.
According to Motley Fool, 49% of Americans could not cover an emergency $400 expense. This often means that those consumers who do face situations where they need a short-term, small dollar loan to help them get through an emergency situation have very limited options.
“Around 620 (credit score) seems to be the magical line in the sand. Bigger banks do not want to work with you if your score is below that, and credit score is generally their only point in assessment,” said Todd Schwartz, Founder and Chief Executive Officer of OppFi, the technology platform that empowers banks to help fair credit borrowers gain access to credit. “We haven’t seen any indication that banks, credit unions or others are making a serious effort to serve this market–this is where we fill the void.”
OppFi works primarily with consumers who have a poor credit score, but otherwise have a strong financial background. For example, they are employed, typically earning around $50,000 per year, and can afford to repay. OppFi’s credit assessment does not conduct a “hard” credit pull, but uses data to assess borrower risk.
“People with low credit scores may still be creditworthy, and a credit score should not be the sole factor that determines whether a consumer can get a loan. These 60 million consumers should not be relegated to payday lenders and other last resort lenders,” Todd said.
An Alternative to Markets of Last Resort
OppFi set out to fill a gap in the market and has become one of the largest providers in the market thanks to its strong customer service and competitive rates.
“We have more than 15,000 A+ ratings on Google and other search engines” Todd pointed out. “Customers tell us they had this three-digit black mark, but after using our products, they could pay medical expenses for their kids or fix their cars. The company gets hundreds of examples of feedback like this every day from customers,” Todd said.
“Customers appreciate that we provide an alternative option beyond payday and tribal lenders.”
“We have disrupted this market,” Todd continued, “and tapped an underserved niche by providing credit-worthy consumers with more affordable loans.”
The company started as a direct lender, and over time has become a servicer on behalf of banks.
“The banks we partner with are regulated at the federal and state level,” said Todd. “That in and of itself provides strong consumer protections to our customers.”
“However, we go well above and beyond what the law requires. We provide transparency, we don’t charge any fees, we assess a consumer’s ability to pay to help ensure that consumers can afford their payments, and we even help applicants try to find better loan products through our competitors.”
Industry-Leading Consumer Protections
In addition to their market-disrupting model and focus on credit-worthy customers that are shut out from other options, OppFi has established industry-leading consumer protections that are designed to help consumers find the best product for them – even if it is not a loan through OppFi – and get through the payment process smoothly and with better credit than when they started.
For example, when a consumer applies for a loan through OppFi, they send the applicant to a group of lenders that may be able to offer better rates than OppFi can. If that does not work, OppFi determines if the customer is a suitable candidate for their loans.
To do so, OppFi assesses the applicants’ ability to repay a loan because they do not want to trap consumers in a cycle of debt. Most payday lenders skip this step – they would rather find a consumer that rolls over than one who pays and moves on.
In addition, OppFi’s flagship product is a transparent, fully amortized loan with no fees, including no late or NSF fees.
“We believe that it is important that consumers are able to get fully transparent, affordable loans with no hidden fees,” said Todd. “Other lenders may offer ‘lower rates’ but those often include hidden fees that they use to milk consumers. We believe that consumers should understand the payments they face upfront.”
The company also ensures its clients have access to high quality service. Customers can connect via its website or chat with representatives on the phone.
“We’ve always had the philosophy that we will do business how you want to do it,” Todd told us.
In addition, OppU, the free financial literacy site provided by OppFi, hosts more than a million visitors a year. “Empowering consumers with the tools they need to make sound credit and financial decisions, even if they are not our customers, is something we strongly believe in,” said Todd.
OppFi Fosters Credit Growth for Consumers
OppFi does not intend for users to rely on its products for a lifetime. Instead, the company offers products that can improve credit scores. Then, clients can use their improved credit to secure lower-fee and lower-interest loans elsewhere.
“We report to the credit bureaus because we want to empower consumers and help hem improve their financial situation. Ultimately, we want our clients to improve their financial health and access lower mainstream products over time,” said Todd.
OppFi has already helped hundreds of thousands of consumers improve their credit scores. The company’s found that “consumers who paid off their loans with OppFi experienced a 37-point average Vantage Score® increase.”
As consumers and the economy continue to face high inflation and turmoil, Todd said he is concerned that even more individuals will encounter credit access challenges. Instead of turning to payday and other predatory lenders, he expects that they will discover OppFi.
“With inflation and a higher cost of living, people need access to credit that will ultimately get them back to the mainstream. We will help them build their financial health and get back there,” he said.
“Consumers with poor credit are not relegated to the predatory lenders of the world,” concluded Todd. “OppFi has demonstrated that there is a path forward for consumers to obtain the emergency credit that they need with strong consumer protections and lower rates, and then move on with their lives.”