Oportun Financial Corp 10-Q for FY2026 Q2
Oportun Financial Corp (OPRT)
10-Q
2026-08-06
For: 2026-06-30
View Original
Added on
August 06, 2026
About this 10-Q
Oportun Financial Corp filed this 10-Q on August 6, 2026, covering the quarter ended June 30, 2026 (FY2026 Q2).
Headline figures
Quarter ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $233.23M
- down 0.5% from $234.35M a year earlier
- Net income
- $8.54M
- up 24.1% from net income of $6.88M a year earlier
- Diluted EPS
- $0.17
- up 21.4% from $0.14 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended June 30, 2026
or
For the transition period from ___________ to ___________
Commission File Number 001-39050
(Exact Name of Registrant as Specified in its Charter)
| State or Other Jurisdiction of Incorporation or Organization | I.R.S. Employer Identification No. | ||||||||||
| Address of Principal Executive Offices | Zip Code | ||||||||||
(650 ) 810-8823
Registrant’s Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | ☒ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of registrant’s common stock outstanding as of July 30, 2026 was 45,987,253 .
| TABLE OF CONTENTS | ||||||||
| PART I ‑ FINANCIAL INFORMATION | ||||||||
| PART II ‑ OTHER INFORMATION | ||||||||
2
PART I ‑ FINANCIAL INFORMATION
Item 1. Financial Statements
OPORTUN FINANCIAL CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data)
| June 30, | December 31, | |||||||||||||
| 2026 | 2025 | |||||||||||||
| Assets | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||
| Loans receivable at fair value | ||||||||||||||
| Capitalized software and other intangibles, net | ||||||||||||||
| Right of use assets - operating | ||||||||||||||
| Other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and stockholders' equity | ||||||||||||||
| Liabilities | ||||||||||||||
| Secured financing | $ | $ | ||||||||||||
| Asset-backed notes at fair value | ||||||||||||||
| Asset-backed borrowings at amortized cost | ||||||||||||||
Corporate financing | ||||||||||||||
| Lease liabilities | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Stockholders' equity | ||||||||||||||
Common stock, $ | ||||||||||||||
| Common stock, additional paid-in capital | ||||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
Treasury stock at cost, | ( | ( | ||||||||||||
| Total stockholders’ equity | ||||||||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||||||||
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
3
OPORTUN FINANCIAL CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | ||||||||||||||||||||||
| Non-interest income | ||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||
| Net decrease in fair value | ( | ( | ( | ( | ||||||||||||||||||||||
| Net revenue | ||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Technology and facilities | ||||||||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||||||||
| Personnel | ||||||||||||||||||||||||||
| Outsourcing and professional fees | ||||||||||||||||||||||||||
| General, administrative and other | ||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
Income before taxes | ||||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
Net income attributable to common stockholders | $ | $ | $ | $ | ||||||||||||||||||||||
| Share data: | ||||||||||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
4
OPORTUN FINANCIAL CORPORATION
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(in thousands, except share data)
| For the Six Months Ended June 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Additional Paid-in Capital | Shares | Par Value | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – March 31, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | ( | ( | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – June 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
5
OPORTUN FINANCIAL CORPORATION
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(in thousands, except share data)
| For the Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Additional Paid-in Capital | Shares | Par Value | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options, net of shares withheld | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units, net of shares withheld | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | ( | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
6
OPORTUN FINANCIAL CORPORATION
Condensed Consolidated Statements of Cash Flow (Unaudited)
(in thousands)
| Six Months Ended June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Cash flows from operating activities | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Fair value adjustment, net | ||||||||||||||
| Origination fees for loans receivable at fair value, net | ( | ( | ||||||||||||
| Gain on loan sales | ( | ( | ||||||||||||
| Stock-based compensation expense | ||||||||||||||
| Other, net | ||||||||||||||
| Originations of loans sold and held for sale | ( | ( | ||||||||||||
| Proceeds from sale of loans | ||||||||||||||
Changes in operating assets and liabilities | ||||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Cash flows from investing activities | ||||||||||||||
Originations and purchases of loans held for investment | ( | ( | ||||||||||||
| Repayments of loan principal | ||||||||||||||
| Capitalization of system development costs | ( | ( | ||||||||||||
| Other, net | ( | ( | ||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities | ||||||||||||||
| Borrowings under secured financing | ||||||||||||||
| Repayments of secured financing | ( | ( | ||||||||||||
| Repayments of asset-backed notes at fair value | ( | ( | ||||||||||||
| Borrowings under asset-backed borrowings at amortized cost | ||||||||||||||
Repayments of asset-backed borrowings at amortized cost | ( | ( | ||||||||||||
Repayments of corporate financing | ( | ( | ||||||||||||
| Payments of deferred financing costs | ( | ( | ||||||||||||
| Net payments related to stock-based activities | ( | ( | ||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||
| Net increase in cash and cash equivalents and restricted cash | ||||||||||||||
| Cash and cash equivalents and restricted cash, beginning of period | ||||||||||||||
| Cash and cash equivalents and restricted cash, end of period | $ | $ | ||||||||||||
| Supplemental disclosure of cash flow information | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||
| Total cash and cash equivalents and restricted cash | $ | $ | ||||||||||||
| Cash paid for income taxes, net of refunds | $ | $ | ||||||||||||
| Cash paid for interest | $ | $ | ||||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | ||||||||||||
| Supplemental disclosures of non-cash investing and financing activities | ||||||||||||||
| Right of use assets obtained in exchange for operating lease obligations | $ | $ | ||||||||||||
| Non-cash investments in capitalized assets | $ | $ | ||||||||||||
| Non-cash financing activities | $ | $ | ||||||||||||
See Notes to the Condensed Consolidated Financial Statements (Unaudited).
7
OPORTUN FINANCIAL CORPORATION
Notes to the Condensed Consolidated Financial Statements (Unaudited)
June 30, 2026
| 1. | Organization and Description of Business | ||||
Oportun Financial Corporation (together with its subsidiaries unless the context indicates otherwise, "Oportun," or the "Company") is a mission driven financial services company that puts its members’ financial goals within reach. With intelligent borrowing, savings, and budgeting capabilities, the Company empowers members with the confidence to build a better financial future. Oportun takes a holistic approach to serving its members and views as its purpose to responsibly meet their current capital needs, help improve their financial profiles, increase their financial awareness and put them on a path to a financially healthy life. Oportun offers access to a comprehensive suite of products, offered either directly or through partners, including unsecured and secured lending, and savings. The Company is headquartered in San Mateo, California. The Company has been certified by the United States Department of the Treasury as a Community Development Financial Institution since 2009.
| 2. | Summary of Significant Accounting Policies | ||||
Basis of Presentation ‑ The Company meets the Securities and Exchange Commission's ("SEC") definition of a “Smaller Reporting Company”, and therefore qualifies for the SEC's reduced disclosure requirements for smaller reporting companies. The accompanying condensed and consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These statements are unaudited and reflect all normal, recurring adjustments that are, in management's opinion, necessary for the fair presentation of results. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 27, 2026, as amended (the "Annual Report").
Use of Estimates ‑ The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates and assumptions.
Accounting Policies - There have been no changes to the Company's significant accounting policies from those described in Part II, Item 8 - Financial Statements and Supplementary Data in the Annual Report, except for the new accounting pronouncements subsequently adopted as noted below.
Recently Adopted Accounting Standards
There have been no accounting standards adopted during the three months ended June 30, 2026.
Accounting Standards to be Adopted
Income Statement - In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires disaggregated disclosure of income statement expenses for public business entities (PBEs). The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The ASU is effective for all PBEs for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the effect of the new guidance on its Condensed Consolidated Statement of Operations.
Internally Developed Software - In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU eliminates the prior “project stage” model and clarifies that capitalization begins when management authorizes and commits funding for a project and completion is probable; it also relocates website-development guidance into Subtopic 350-40 and requires entities to apply the PP&E disclosure requirements in ASC 360-10 to capitalized internal-use software. The ASU is effective for annual periods beginning after December 15, 2027, including interim periods within those annual periods; early adoption is permitted. Entities may adopt prospectively, retrospectively, or under a modified transition approach. The Company is evaluating the effect of this guidance on its accounting for and disclosures of internal-use software.
Interim Reporting - In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This ASU intends to improve the navigability of the guidance in ASC 270 and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides “interim financial statements and notes in accordance with GAAP.” The ASU also addresses the form and content of such financial statements, adds lists to ASC 270 of the interim disclosures required by all other Codification topics, and establishes a principle under which an entity must “disclose events since the end of the last annual reporting period that have a material impact on the entity.” As the Board stated in the proposed guidance and reiterates in the ASU, the amendments are not intended to “change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements.” The ASU is effective for interim reporting periods within annual reporting periods beginning after
8
December 15, 2027; early adoption is permitted. Entities may adopt prospectively, or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the effect of this guidance on its interim reporting.
Codification Improvements - In December 2025, the FASB issued ASU 2025-12 “Codification Improvements” to address suggestions received from stakeholders on the Accounting Standards Codification and to make other incremental improvements to U.S. GAAP. The update represents changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. The amendments make the Codification easier to understand and apply. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years; early adoption is permitted. The Company is evaluating the effect of this guidance on its results of operations, financial position and disclosures.
| 3. | Earnings per Share | ||||
Basic and diluted earnings per share are calculated as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands, except share and per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
Net income attributable to common stockholders | $ | $ | $ | $ | ||||||||||||||||||||||
Basic weighted-average common shares outstanding (1) | ||||||||||||||||||||||||||
| Weighted average effect of dilutive securities: | ||||||||||||||||||||||||||
| Restricted stock units | ||||||||||||||||||||||||||
| Diluted weighted-average common shares outstanding | ||||||||||||||||||||||||||
| Earnings per share: | ||||||||||||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||||||||||||
(1) The outstanding and exercisable warrants issued with an exercise price of $0.01
The following common share equivalent securities have been excluded from the calculation of diluted weighted-average common shares outstanding because the effect is anti-dilutive for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Stock options | ||||||||||||||||||||||||||
| Restricted stock units | ||||||||||||||||||||||||||
| Total anti-dilutive common share equivalents | ||||||||||||||||||||||||||
| 4. | Variable Interest Entities | ||||
For all variable interest entities (“VIEs”) in which the Company is involved, it assesses whether it is the primary beneficiary of the VIE on an ongoing basis. In circumstances where the Company has both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive the benefits of the VIE that could be significant, it would conclude that it is the primary beneficiary of the VIE, and it consolidates the VIE. In situations where the Company is not deemed to be the primary beneficiary of the VIE, it does not consolidate the VIE and only recognizes its interests in the VIE. See Note 8, Borrowings for additional information on the secured borrowing under the caption of asset-backed borrowings at amortized cost.
Consolidated VIEs
As part of the Company’s overall funding strategy, the Company transfers a pool of designated loans receivable to wholly owned special-purpose subsidiaries to collateralize certain asset-backed financing transactions. For these VIEs where the Company has determined that it is the primary beneficiary because it has the power to direct the activities that most significantly impact the VIEs’ economic performance and the obligation to absorb the losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs, the VIEs assets and related liabilities are consolidated with the results of the Company. Such power arises from the Company’s contractual right to service the loans receivable securing the VIEs’ asset-backed debt obligations. The Company has an obligation to absorb losses or the right to receive benefits that are potentially significant to the VIEs because it retains the residual interest of each asset-backed financing transaction in the form of an asset-backed certificate. Accordingly, the Company includes the VIEs’ assets, including the assets securing the financing transactions, and related liabilities in its condensed consolidated financial statements.
Each consolidated VIE issues a series of asset-backed securities that are supported by the cash flows arising from the loans receivable securing such debt. Cash inflows arising from such loans receivable are distributed monthly to the transaction’s lenders and related service providers in
9
accordance with the transaction’s contractual priority of payments. The creditors of the VIEs above have no recourse to the general credit of the Company as the primary beneficiary of the VIEs and the liabilities of the VIEs can only be settled by the respective VIE’s assets. The Company retains the most subordinated economic interest in each financing transaction through its ownership of the respective residual interest in each VIE. The Company has no obligation to repurchase loans receivable that initially satisfied the financing transaction’s eligibility criteria but subsequently became delinquent or a defaulted loans receivable.
The following table represents the assets and liabilities of consolidated VIEs recorded on the Company’s Condensed Consolidated Balance Sheets (Unaudited):
| June 30, | December 31, | |||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| Consolidated VIE assets | ||||||||||||||
| Restricted cash | $ | $ | ||||||||||||
Loans Receivable at Fair Value | ||||||||||||||
| Total VIE assets | ||||||||||||||
| Consolidated VIE liabilities | ||||||||||||||
Secured financing (1) | ||||||||||||||
| Asset-backed notes at fair value | ||||||||||||||
Asset-backed borrowings at amortized cost | ||||||||||||||
| Total VIE liabilities | $ | $ | ||||||||||||
| 5. | |||||
Other Loan Sales - From time to time the Company has entered into agreements to sell certain populations of its personal loans, including non-performing loans originated as held for investment. The sold loans are accounted for under the fair value option. The loan sales qualify for sale accounting treatment and the Company derecognizes these loans from its Condensed Consolidated Balance Sheets (Unaudited) upon sale.
Whole Loan Sale Program ‑ The Company enters into whole loan sale agreements with third parties in which the Company agrees to sell newly originated unsecured personal loans and secured personal loans. The originations of loans sold and held for sale during the three months ended June 30, 2026 was $25.9 million and the Company recorded a gain on sale of $1.4 million and servicing revenue of $1.5 million. The originations of loans sold and held for sale during the three months ended June 30, 2025 was $39.9 million and the Company recorded a gain on sale of $1.5 million and servicing revenue of $1.8 million.
The originations of loans sold and held for sale during the six months ended June 30, 2026 was $51.7 million and the Company recorded a gain on sale of $2.8 million and servicing revenue of $3.2 million. The originations of loans sold and held for sale during the six months ended June 30, 2025 was $72.2 million and the Company recorded a gain on sale of $3.0 million and servicing revenue of $3.5 million.
6. | |||||
Capitalized software, net consists of the following:
| June 30, | December 31, | |||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| Capitalized software, net: | ||||||||||||||
| System development costs | $ | $ | ||||||||||||
| Acquired developed technology | ||||||||||||||
| Accumulated amortization | ( | ( | ||||||||||||
| Total capitalized software, net | $ | $ | ||||||||||||
Capitalized software, net
Amortization of system development costs and acquired developed technology for the three months ended June 30, 2026 and 2025 was $7.3 million and $9.0 million, respectively. System development costs capitalized in the three months ended June 30, 2026 and 2025 were $6.3 million and $6.6 million, respectively.
Amortization of system development costs and acquired developed technology for the six months ended June 30, 2026 and 2025 was $14.9 million and $18.3 million, respectively. System development costs capitalized in the six months ended June 30, 2026 and 2025 were $12.9 million and $12.4 million, respectively.
10
Intangible Assets
The gross carrying amount and accumulated amortization, in total and by major intangible asset class are as follows:
| June 30, | December 31, | |||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| Intangible assets: | ||||||||||||||
| Member relationships | $ | $ | ||||||||||||
| Trademarks | ||||||||||||||
| Other | ||||||||||||||
| Accumulated amortization | ( | ( | ||||||||||||
| Total intangible assets, net | $ | $ | ||||||||||||
Amortization of intangible assets was $1.2 2.4
Expected future amortization expense for intangible assets as of June 30, 2026 is as follows:
| (in thousands) | Fiscal Years | |||||||
| 2026 (remaining six months) | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| 2031 | ||||||||
| Thereafter | ||||||||
Total (1) | $ | |||||||
(1) Excludes indefinite lived intangible assets.
| 7. | |||||
Other assets consist of the following:
| June 30, | December 31, | |||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| Fixed assets | ||||||||||||||
| Total fixed assets | $ | $ | ||||||||||||
| Accumulated depreciation | ( | ( | ||||||||||||
| Total fixed assets, net | $ | $ | ||||||||||||
| Other Assets | ||||||||||||||
| Prepaid expenses | $ | $ | ||||||||||||
Deferred tax assets, net | ||||||||||||||
| Current tax assets | ||||||||||||||
| Receivable from banking partner | ||||||||||||||
| Derivative asset | ( | |||||||||||||
| Other | ||||||||||||||
| Total other assets | $ | $ | ||||||||||||
Fixed Assets
Depreciation and amortization expense related to fixed assets for the three months ended June 30, 2026 and 2025 was $0.3 million and $0.5 million, respectively, and for the six months ended June 30, 2026 and 2025 was $0.5 million, and $1.1 million, respectively.
11
| 8. | |||||
Secured Financing
The following table presents information regarding the Company's Secured Financing facilities:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||
| Variable Interest Entity | Facility Amount | Maturity Date | Balance | Balance | ||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| Oportun PLW Trust | $ | September 1, 2028 | $ | $ | ||||||||||||||||||||||||||||
Oportun PLW II Trust | August 1, 2028 | |||||||||||||||||||||||||||||||
Oportun PLW III Trust | April 1, 2028 | |||||||||||||||||||||||||||||||
Oportun PLW IV Trust | October 1, 2029 | |||||||||||||||||||||||||||||||
| Oportun PLW V Trust | July 1, 2030 | |||||||||||||||||||||||||||||||
| Total secured financing | $ | $ | $ | |||||||||||||||||||||||||||||
Weighted average interest rate of the Secured financing is SOFR + 2.89 % as June 30, 2026
PLW V Facility
On June 30, 2026, in connection with the closing of the Personal Loan Warehouse V Facility (PLW V), Oportun PLW V Trust, a subsidiary of the Company, entered into a loan and security agreement with certain lenders from time to time party thereto, and Wilmington Trust, National Association as collateral agent, administrative agent, paying agent, securities intermediary and depositary bank (the "PLW V Facility"). The PLW V Facility has a total commitment of $50.0 million. The facility has a three-year revolving period with a final maturity on July 1, 2030.
Asset-backed Notes at Fair Value
The following tables present information regarding asset-backed notes at fair value:
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
Variable Interest Entity(3) | Initial amount issued (1) | Initial collateral balance(2) | Current balance (1) | Current collateral balance (2) | Weighted average interest rate | Original revolving period | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||
| Asset-backed notes recorded at fair value: | ||||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust (Series 2021-C) | % | |||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust (Series 2021-B) | % | |||||||||||||||||||||||||||||||||||||
| Total asset-backed notes recorded at fair value | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
Variable Interest Entity(3) | Initial amount issued (1) | Initial collateral balance(2) | Current balance (1) | Current collateral balance (2) | Weighted average interest rate | Original revolving period | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||
| Asset-backed notes recorded at fair value: | ||||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust (Series 2021-C) | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||||
| Oportun Issuance Trust (Series 2021-B) | % | |||||||||||||||||||||||||||||||||||||
| Total asset-backed notes recorded at fair value | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
(1)The current balances are measured at fair value for asset-backed notes recorded at fair value.
(2)Includes the unpaid principal balance of loans receivable, the balance of required reserve funds, cash, cash equivalents and restricted cash pledged by the Company.
(3)Maturity dates for Asset-backed Notes at Fair Value are not reflected in the above tables as the related securitizations provide for variable monthly repayments that may result in repayment prior to the stated maturity dates.
12
Asset-backed Borrowings at Amortized Cost
The following table represents information regarding the Company's asset-backed notes and asset-backed borrowings at amortized cost:
June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
Asset-backed Borrowings at Amortized Cost(5) | Initial amount (1) | Initial collateral balance(2) | Current balance (1) | Current collateral balance (2) | Weighted average interest rate(3) | Original revolving period | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||
Oportun Issuance Trust 2026-A | % | |||||||||||||||||||||||||||||||||||||
Oportun Issuance Trust 2025-D | % | |||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust 2025-C | % | |||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust 2025-B | % | |||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust 2024-2 | % | N/A | ||||||||||||||||||||||||||||||||||||
Other Asset Backed Borrowings (4) | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
| Total asset-backed borrowings at amortized cost: | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
Asset-backed Borrowings at Amortized Cost(5) | Initial amount (1) | Initial collateral balance(2) | Current balance (1) | Current collateral balance (2) | Weighted average interest rate(3) | Original revolving period | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust 2025-D | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||||
| Oportun Issuance Trust 2025-C | % | |||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust 2025-B | % | |||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust 2025-A | % | |||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust 2024-2 | % | N/A | ||||||||||||||||||||||||||||||||||||
| Oportun Issuance Trust 2024-1 | % | N/A | ||||||||||||||||||||||||||||||||||||
Other Asset Backed Borrowings (4) | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
| Total asset-backed borrowings at amortized cost: | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
(1)Initial amount issued includes any notes retained by the Company as applicable. The current balances are measured at amortized cost.
(2)Includes the unpaid principal balance of loans receivable, the balance of required reserve funds, cash, cash equivalents and restricted cash pledged by the Company.
(3)Weighted average interest rate excludes notes retained by the Company. There were no notes retained by the Company as of June 30, 2026.
(4)Consists of forward flow whole loan sales that do not qualify as sales for accounting purposes.
(5)Maturity dates for Asset-backed Borrowings at Amortized Cost are not reflected in the above tables as the related securitizations provide for variable monthly repayments that may result in repayment prior to the stated maturity dates.
Corporate Financing
The following table presents information regarding the Company's Corporate financing:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||
| Entity | Original Balance | Maturity Date | Interest Rate | Balance (1) | Balance (1) | |||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
Oportun Financial Corporation | November 14, 2028 | |||||||||||||||||||||||||||||||
Total Corporate Financing | $ | $ | $ | |||||||||||||||||||||||||||||
(1)Balances are measured at amortized cost. As of June 30, 2026 and December 31, 2025, the outstanding principal balance was $135.0 million and $165.0 million, respectively.
13
On October 23, 2024, the Company entered into a Credit Agreement with certain affiliates of Neuberger and McLaren Harbor LLC, pursuant to which the Company borrowed $235 million of senior secured term loans (the “Credit Agreement” and the “Term Loans”). The funding of the Term Loans (the “Term Loan Closing”) was subject to certain closing conditions, including the repayment of the Acquisition Financing and the Company's then existing senior secured term loans under the credit agreement dated as of September 14, 2022, by and among the Company, Wilmington Trust, National Association, and the lenders party thereto, as amended ("Original Credit Agreement"), in addition to the completion of the sale of the Company's credit cards receivable portfolio, which occurred on November 12, 2024. The Term Loan Closing occurred on November 14, 2024, and the Original Credit Agreement was extinguished, paid in full, and the Acquisition Financing was terminated and the associated outstanding loan balance was repaid in full.
The Credit Agreement contains certain representations, warranties and covenants, as well as indemnification obligations, in respect of the Company and certain of its subsidiaries, subject to specified exceptions and qualifications contained in the Credit Agreement.
During the three months ended June 30, 2026, the Company made voluntary principal prepayments of $30.0 million, reducing the outstanding principal balance. In connection with the prepayments, the Company incurred prepayment premiums totaling $1.5 million and recognized losses on the partial extinguishment of debt totaling $3.6 million, both of which were recorded in Interest expense.
The obligations under the Credit Agreement are secured by the assets of the Company and certain of its subsidiaries guaranteeing the Term Loans, including pledges of the equity interests of certain subsidiaries that are directly or indirectly owned by the Company, subject to customary exceptions.
Under the Credit Agreement, the Company issued warrants, at an exercise price of $0.01 per share, to affiliates of Neuberger and McLaren Harbor LLC to purchase 4,853,006 shares of the Company’s common stock. See Note 10, Stockholders' Equity for additional information on warrants issued by the Company.
The Credit Agreement contains financial covenants requiring the maintenance of minimum liquidity and a maximum adjusted EBITDA-based corporate leverage covenant, together with other customary affirmative and negative covenants, representations and warranties and events of default.
Debt Covenants - As of June 30, 2026, and December 31, 2025, the Company was in compliance with all covenants and requirements of the Secured financing, Corporate financing facilities and asset-backed notes.
| 9. | |||||
Other liabilities consist of the following:
| June 30, | December 31, | |||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued compensation | ||||||||||||||
| Accrued expenses | ||||||||||||||
| Accrued interest | ||||||||||||||
| Amount due to whole loan buyer | ||||||||||||||
| Current tax liabilities | ||||||||||||||
| Other | ||||||||||||||
| Total other liabilities | $ | $ | ||||||||||||
14
| 10. | |||||
Preferred Stock - The board of directors of the Company (the “Board”) has the authority, without further action by the Company's stockholders, to issue up to 100,000,000 no
Common Stock - As of June 30, 2026 and December 31, 2025, the Company was authorized to issue 1,000,000,000 0.0001 46,222,056 and 45,950,033 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock. As of December 31, 2025, 44,709,065 and 44,437,042 shares were issued and outstanding, respectively, and 272,023 shares were held in treasury stock.
Warrants - In 2023, pursuant to the Original Credit Agreement, the Company issued detachable warrants to the lenders to purchase an aggregate of 4,193,453 shares of the Company’s common stock at an exercise price of $0.01 per share. On November 14, 2024, pursuant to the Credit Agreement, the Company issued additional detachable warrants to the lenders to purchase 4,853,006 shares of the Company’s common stock at an exercise price of $0.01 . In May 2025 and June 2026, 6,363,671 and 94,413 warrants were exercised, respectively, to purchase common stock. As of June 30, 2026 and December 31, 2025, the Company had outstanding and exercisable detachable warrants of 2,588,375 , and 2,682,788 , respectively.
| 11. | |||||
The Company's stock-based plans are described and informational disclosures are provided in the Notes to the Consolidated Financial Statements included in the Annual Report.
Stock-based Compensation - Total stock-based compensation expense included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Technology and facilities | $ | $ | $ | $ | ||||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||||||||
| Personnel | ||||||||||||||||||||||||||
Total stock-based compensation (1) | $ | $ | $ | $ | ||||||||||||||||||||||
(1) Amounts shown are net of $0.2 million and $0.3 million of capitalized stock-based compensation for the three and six months ended June 30, 2026, respectively, and net of $0.2 million and $0.4 million of capitalized stock-based compensation for the three and six months ended June 30, 2025, respectively.
As of June 30, 2026, and December 31, 2025, the Company’s total unrecognized compensation cost related to unvested stock-based option awards granted to employees was insignificant and $0.2 million, respectively, and was expected to be recognized over a weighted-average vesting period of less than one year 21.0 million and $20.8 million, respectively, which will be recognized over a weighted average vesting period of approximately 2.0 years and 1.8 years, respectively.
| 12. | |||||
Interest Income - Total interest income included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||
| Interest on loans | $ | $ | $ | $ | ||||||||||||||||||||||
| Fees on loans | ||||||||||||||||||||||||||
| Total interest income | ||||||||||||||||||||||||||
15
Non-interest Income - Total non-interest income included in the Condensed Consolidated Statements of Operations (Unaudited) is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Non-interest income | ||||||||||||||||||||||||||
| Servicing fees | $ | $ | $ | $ | ||||||||||||||||||||||
| Subscription revenue | ||||||||||||||||||||||||||
Interest on member accounts | ||||||||||||||||||||||||||
Gain on loan sales and other | ||||||||||||||||||||||||||
| Total non-interest income | $ | $ | $ | $ | ||||||||||||||||||||||
| 13. | |||||
For the three and six months ended June 30, 2026 and 2025, the Company calculates its year-to-date income tax expense (benefit) by applying the estimated annual effective tax rate to the year-to-date income from operations before income taxes and adjusts the income tax expense (benefit) for discrete tax items recorded in the period.
During the three and six months ended June 30, 2026, the Company recorded income tax expense of $7.1 million and $8.3 million, respectively, related to continuing operations, representing an effective tax rate of 45.4 % and 43.3 %, respectively. Income tax expense for the three and six months ended June 30, 2025 was $3.2 million and $6.6 million, representing an effective income tax rate of 32.0 % and 28.5 %, respectively.
Income tax expense increased by $3.9 million or 119.3 %, from $3.2 million expense for the three months ended June 30, 2025 to $7.1 million expense for the three months ended June 30, 2026, primarily as a result of having increased pretax income, resolving a state tax settlement, and increasing the reserve for unrecognized tax benefits for the three months ended June 30, 2026. Income tax expense increased by $1.7 million or 25.3 %, from $6.6 million for the six months ended June 30, 2025 to $8.3 million for the six months ended June 30, 2026, primarily as a result of resolving a state tax settlement and increasing the reserve for unrecognized tax benefits for the six months ended June 30, 2026. The Company's effective tax rates for the three and six months ended June 30, 2026 and 2025 differ from the statutory tax rates primarily due to the impacts of resolving a state tax settlement, increasing the reserve for unrecognized tax benefits, the research and development tax credit, and stock-based compensation.
In December 2021, the Organization for Economic Co-operation and Development Inclusive Framework on Base Erosion Profit Shifting released Model Global Anti-Base Erosion rules (“Model Rules”) under Pillar Two. The Model Rules set forth the “common approach” for a Global Minimum Tax at 15 percent for multinational enterprises with a turnover of more than 750 million euros. Rules under Pillar Two were effective from January 1, 2024. Pillar Two rules did not have a material impact on the Company's Condensed Consolidated Statements of Operations (Unaudited).
| 14. | |||||
Financial Instruments at Fair Value
The table below compares the fair value of loans receivable and asset-backed notes to their contractual balances for the periods shown:
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||
| (in thousands) | Unpaid Principal Balance | Fair Value | Unpaid Principal Balance | Fair Value | ||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Loans Receivable at Fair Value | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Asset-backed notes | $ | $ | $ | $ | ||||||||||||||||||||||
The Company calculates the fair value of the asset-backed notes using independent pricing services and broker price indications, which are based on quoted prices for identical or similar notes, which are Level 2 input measures.
The Company primarily uses a discounted cash flow model to estimate the fair value of Level 3 instruments based on the present value of estimated future cash flows. This model uses inputs that are inherently judgmental and reflect management’s best estimates of the assumptions a market participant would use to calculate fair value. The following tables present quantitative information about the significant unobservable inputs used for the Company’s Level 3 fair value measurements for Loans Receivable at Fair Value. The personal loans receivable balance at fair value as of June 30, 2026, consists of $2,465.0 million of unsecured personal loans receivable and $271.7 million of secured personal loans receivable.
16
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
Personal Loans Receivable | Minimum | Maximum | Weighted Average (2) | Minimum | Maximum | Weighted Average (2) | ||||||||||||||||||||||||||||||||
Remaining cumulative charge-offs (1) | ||||||||||||||||||||||||||||||||||||||
Remaining cumulative prepayments (1) | ||||||||||||||||||||||||||||||||||||||
| Average life (years) | ||||||||||||||||||||||||||||||||||||||
| Discount rate | ||||||||||||||||||||||||||||||||||||||
(2) Unobservable inputs were weighted by outstanding principal balance, which are grouped by risk (type of customer, original loan maturity terms).
Fair value adjustments related to financial instruments where the fair value option has been elected are recorded through earnings for the six months ended June 30, 2026 and 2025. Certain unobservable inputs may (in isolation) have either a directionally consistent or opposite impact on the fair value of the financial instrument for a given change in that input. When multiple inputs are used within the valuation techniques for loans, a change in one input in a certain direction may be offset by an opposite change from another input.
For personal loans receivable, the Company developed an internal model to estimate the fair value of loans receivable held for investment. To generate future expected cash flows, the model combines receivable characteristics with assumptions about borrower behavior based on the Company’s historical loan performance. These cash flows are then discounted using a required rate of return that management estimates would be used by a market participant.
The Company had derivative instruments in connection with its bank partnership program with Pathward, N.A. ("Pathward") related to excess interest proceeds it expected to receive on loans retained by Pathward. Based on the agreement underlying the bank partnership program, for all loans originated and retained by Pathward, Pathward received a fixed interest rate. Under an amendment dated September 26, 2025 to the program agreement, the Company purchases 100 % of Pathward originated loans and has purchased all loans previously owned by Pathward. As a result, the derivative instrument as of December 31, 2025 was $(1.2 ) million; there was no outstanding derivative balance as of June 30, 2026.
For the derivative, the Company used a base set of cash flows derived from historical data and management assumptions. From this base set of cash flows, funds that were projected to be released to the Company according to the contractual terms outlined in the waterfall agreement were calculated on an aggregate basis then discounted at a rate that was representative of equity yield.
The table below presents a reconciliation of Loans Receivable at Fair Value on a recurring basis using significant unobservable inputs:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Balance – beginning of period | $ | $ | $ | $ | ||||||||||||||||||||||
| Principal disbursements | ||||||||||||||||||||||||||
Principal and interest payments from members | ( | ( | ( | ( | ||||||||||||||||||||||
| Gross charge-offs | ( | ( | ( | ( | ||||||||||||||||||||||
| Net increase (decrease) in fair value | ( | ( | ||||||||||||||||||||||||
| Balance – end of period | $ | $ | $ | $ | ||||||||||||||||||||||
17
Financial Instruments Disclosed But Not Carried at Fair Value
The following table presents the carrying value and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and the level within the fair value hierarchy:
| June 30, 2026 | ||||||||||||||||||||||||||||||||
| Carrying value | Estimated fair value | Estimated fair value | ||||||||||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Restricted cash | ||||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Accounts payable | ||||||||||||||||||||||||||||||||
| Secured financing (Note 8) | ||||||||||||||||||||||||||||||||
Asset-backed borrowings at amortized cost (Note 8) | ||||||||||||||||||||||||||||||||
| Corporate financing (Note 8) | ||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Carrying value | Estimated fair value | Estimated fair value | ||||||||||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Restricted cash | ||||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Accounts payable | ||||||||||||||||||||||||||||||||
| Secured financing (Note 8) | ||||||||||||||||||||||||||||||||
| Asset-backed borrowings at amortized cost (Note 8) | ||||||||||||||||||||||||||||||||
| Corporate financing (Note 8) | ||||||||||||||||||||||||||||||||
The Company uses the following methods and assumptions to estimate fair value:
•Cash, cash equivalents, restricted cash and accounts payable ‑ The carrying values of certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash and accounts payable, approximate Level 1 fair values of these financial instruments due to their short-term nature.
•Secured financing and corporate financing ‑ The fair values of the Secured financing and Corporate financing facilities have been calculated using discount rates equivalent to the weighted-average market yield of comparable debt securities, which is a Level 2 input measure.
•Asset-backed borrowings at amortized cost ‑ The fair values of the asset-backed borrowings at amortized cost include both securitizations carried at amortized cost and secured borrowings. We obtain indicative pricing on comparable debt securities for securitizations carried at amortized cost, which is a Level 2 input measure. Fair values of secured borrowings included in the asset-backed borrowings at amortized cost have been calculated by discounting the contractual cash flows at the interest rate the Company estimates such arrangement would bear if executed in the current market, which is a Level 3 input measure.
There were no
| 15. | |||||
Leases - The Company’s leases are primarily for real property consisting of retail locations and office space and have remaining lease terms of less than 6 years.
The Company has elected the practical expedient to keep leases with terms of 12 months or less off the balance sheet as no recognition of a lease liability and a right-of-use asset is required. Operating lease expense is recognized on a straight-line basis over the lease term in “Technology and facilities” in the Condensed Consolidated Statements of Operations (Unaudited).
All of the Company’s existing lease arrangements are classified as operating leases. At the inception of a contract, the Company determines if the contract is or contains a lease. At the commencement date of a lease, the Company recognizes a lease liability equal to the present value of the lease payments and a right-of-use asset representing the Company’s right to use the underlying asset for the duration of the lease term. The Company’s leases include options to extend or terminate the arrangement at the end of the original lease term. The Company generally does not include renewal or termination options in its assessment of the leases unless extension or termination for certain assets is deemed to be reasonably certain. Variable lease payments and short-term lease costs were deemed immaterial. The Company’s leases do not provide an explicit rate. The Company uses its contractual borrowing rate to determine lease discount rates.
18
As of June 30, 2026, maturities of lease liabilities, excluding short-term leases and leases on a month-to-month basis, were as follows:
| (in thousands) | Operating Leases | |||||||||||||
| Lease expense | ||||||||||||||
| 2026 (remaining six months) | $ | |||||||||||||
| 2027 | ||||||||||||||
| 2028 | ||||||||||||||
| 2029 | ||||||||||||||
| 2030 | ||||||||||||||
| 2031 | ||||||||||||||
| Thereafter | ||||||||||||||
| Total lease payments | ||||||||||||||
| Imputed interest | ( | |||||||||||||
| Total leases | $ | |||||||||||||
| Sublease income | ||||||||||||||
| 2026 (remaining six months) | $ | ( | ||||||||||||
| 2027 | ( | |||||||||||||
| 2028 | ||||||||||||||
| 2029 | ||||||||||||||
2030 and thereafter | ||||||||||||||
| Total lease payments | ( | |||||||||||||
| Imputed interest | ||||||||||||||
| Total sublease income | $ | ( | ||||||||||||
| $ | ||||||||||||||
| Weighted average remaining lease term | ||||||||||||||
| Weighted average discount rate | % | |||||||||||||
As of December 31, 2025, maturities of lease liabilities, excluding short-term leases and leases on a month-to-month basis, were as follows:
| (in thousands) | Operating Leases | |||||||||||||
| Lease expense | ||||||||||||||
| 2026 | ||||||||||||||
| 2027 | ||||||||||||||
| 2028 | ||||||||||||||
| 2029 | ||||||||||||||
| 2030 | ||||||||||||||
Thereafter | ||||||||||||||
| Total lease payments | ||||||||||||||
| Imputed interest | ( | |||||||||||||
| Total leases | $ | |||||||||||||
| Sublease income | ||||||||||||||
| 2026 | ( | |||||||||||||
| 2027 | ( | |||||||||||||
| 2028 | ||||||||||||||
| 2029 | ||||||||||||||
| 2030 | ||||||||||||||
| Total lease payments | ( | |||||||||||||
| Imputed interest | ||||||||||||||
| Total sublease income | $ | ( | ||||||||||||
| $ | ||||||||||||||
| Weighted average remaining lease term | ||||||||||||||
| Weighted average discount rate | % | |||||||||||||
Rental expenses under operating leases for the three and six months ended June 30, 2026, were $2.3 million, and $4.5 million, respectively, and for the three and six months ended June 30, 2025, were $2.5 million, and $5.0 million, respectively.
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Purchase Commitment ‑ The Company has commitments to purchase information technology and communication services in the ordinary course of business, with various terms through 2029. These amounts are not reflective of the Company’s entire anticipated purchases under the related agreements; rather, they are determined based on the non-cancelable amounts to which the Company is contractually obligated. The Company’s purchase obligations are $15.2 million for the remainder of 2026, $10.7 million in 2027, $4.3 million in 2028, with no material obligations in or beyond 2029.
Bank Partnership Program and Servicing Agreement - The Company entered into a Program Management Agreement with Column National Association ("Column"), a national banking association, on June 30, 2026, establishing a new bank partnership lending program. Under the agreement, Column will originate certain unsecured personal loans for consumers in select states, and the Company will provide the platform and related services, including marketing, application processing, fraud-prevention, servicing and program-administration services, subject to Column’s oversight and control and compliance with applicable law. The agreement permits the Company to purchase loans originated by Column, other than loans retained by Column, and includes certain exclusivity, compliance, oversight, audit, reporting, reserve, information-security, indemnification, termination and wind-down provisions. The agreement has an initial term of four years and renews automatically for successive one-year periods unless either party provides timely notice of non-renewal. As of and for the three and six months ended June 30, 2026, the Company had no loan purchases or other transactions to report under this program.
The Company entered into a bank partnership program with Pathward, on August 11, 2020, which was subsequently amended and restated effective August 11, 2025. Effective October 1, 2025, the Company began purchasing from Pathward 100 % of all newly originated loans. The amendment also required the Company to acquire Pathward’s existing retained loan portfolio, with an initial purchase of loans that are current or <30 days delinquent on October 3, 2025, totaling approximately $115.0 million of unpaid principal and accrued interest. The remaining portfolio was purchased on February 4, 2026. Lending under the partnership was launched in August 2021 and as of June 30, 2026, the Company has a commitment to purchase an additional $45.8 million of program loans based on originations through June 30, 2026.
Unfunded Loan Commitments - Unfunded loan commitments at June 30, 2026 and December 31, 2025 were insignificant.
Mexico Value-added Tax - In October 2023, the Company's Mexico subsidiary received notice from Mexico's Servicio de Administración Tributaria, the Mexican federal tax authority, for claims related to the alleged underpayment of value-added tax, including inflationary adjustments, fines and penalties for tax years 2017-2019. The Company disputes that there were underpayments in any of those years, and intends to pursue all available administrative and legal avenues of appeal to assert its position. No accrual related to this matter has been recorded as of June 30, 2026, as the Company believes it is not probable to be incurred.
Litigation
| 16. | |||||
On June 16, 2023, the Company entered into a forward flow whole loan sale agreement with Neuberger to sell up to $300.0 million of its personal loan originations over the subsequent twelve months. On April 26, 2024, the agreement was amended to extend the term and revised the commitment amount to $370.9 million of personal loan originations. The Company has fulfilled its commitment under the agreement and will continue to service these loans. As part of this agreement, during the six months ended June 30, 2026, and as of December 31, 2025, no
In addition, on April 2, 2025, the Company entered into a loan and security agreement with Neuberger, and certain other lenders, which was amended on October 8, 2025. The amended PLW III facility has a two-year revolving period with a final maturity of April 1, 2028 and a borrowing capacity of $187.5 million. See Note 8, Borrowings, for additional information regarding our secured financings
The following table represents the interest income earned from our loans receivable portfolio and interest expense on our debt instruments recorded on the Company’s Condensed Consolidated Statements of Operations (Unaudited) related to transactions with Neuberger.
20
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
Interest income | ||||||||||||||||||||||||||
Secured borrowings | ||||||||||||||||||||||||||
Total interest income | $ | $ | $ | $ | ||||||||||||||||||||||
Interest expense | ||||||||||||||||||||||||||
| Corporate financing | $ | $ | $ | $ | ||||||||||||||||||||||
Secured borrowings | ( | ( | ||||||||||||||||||||||||
Secured financing | ||||||||||||||||||||||||||
Total interest expense | $ | $ | $ | $ | ||||||||||||||||||||||
As of June 30, 2026 and December 31, 2025, Loans Receivable at Fair Value underlying the Secured borrowing were $57.4 million and $103.5 million, respectively, and Loans Receivable at Fair Value underlying the Secured financing were $14.9 million and $8.1 million respectively. The Company had Asset-backed borrowings at amortized cost of $65.8 million, Corporate financing of $119.9 million, and Secured financing of $13.2 million due to Neuberger as of June 30, 2026 and $116.9 million, $71.8 million and $7.2 million, respectively, due as of December 31, 2025. The Company also had an insignificant amount of Interest and fee receivable, net and Other liabilities in its Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2026, related to these transactions.
| 17. | |||||
Segments are defined as components of an enterprise for which discrete financial information is available and evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance.
The Company’s Chief Executive Officer is considered to be the CODM. The Company has one reportable segment. The segment provides unsecured and secured borrowings, savings and budgeting products to its members. The Company derives revenue within North America and manages the business activities on a consolidated basis. Interest income is derived from the Company's lending products and includes loan interest and associated fees, while non-interest income is largely driven by the Company's savings product and includes subscription revenue, and interest on member accounts.
Net income is the primary measure of segment profit and loss reviewed by CODM to assess business performance and strategy on allocation of resources, such as new product development and management’s compensation. The CODM also uses Net Income to review and approve the Company’s operating budget and financial forecasts.
Net income is reported on the unaudited Condensed Consolidated Statement of Operations as consolidated net income. The measure of segment assets is presented on the unaudited Condensed Consolidated Balance Sheets as Total Assets.
| 18. | |||||
None.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
An index to our management's discussion and analysis follows:
| Topic | ||||||||
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this report and the audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2025 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, on February 27, 2026, as amended. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Forward-Looking Statements
This report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These forward-looking statements include, but are not limited to, statements about:
•our future financial performance, including our expectations regarding our revenue, our operating expenses and our ability to achieve and maintain profitability;
•our ability to increase the volume of loans we make;
•our ability to manage loan non-performance, delinquencies and charge-off rates, and identify high-quality originations;
•our ability to effectively estimate the fair value of our loans receivable held for investment and our asset-backed notes;
•our expectations regarding the effect of and trends in fair value mark-to-market adjustments on our loan portfolio and asset-backed notes;
•our expectations and management of future growth, including expanding our markets served, member base and product and service offerings, and realizing the benefits and synergies from acquisitions;
•our ability to successfully adjust our proprietary credit risk models and products in response to changing macroeconomic conditions and fluctuations in the credit market;
•our ability to successfully manage our interest rate spread against our cost of capital;
•our expectations regarding the sufficiency of our cash to meet our operating and cash expenditures;
•our plans for and our ability to successfully maintain our diversified funding strategy, including warehouse facilities, loan sales and securitization transactions;
•our ability to obtain any additional financing, any advances on our secured financing facilities, or any refinancing of our debt;
•our expectations to manage our loan purchase obligations with our current partners;
•our ability to realize the expected benefits from reductions in workforce and other streamlining measures, including our estimate of the changes and expenditures;
•our expectations regarding our costs and seasonality;
22
•our ability to successfully build our brand and protect our reputation from negative publicity;
•our ability to increase the effectiveness of our marketing efforts;
•our ability to grow market share in existing markets or any new markets we may enter;
•our ability to continue to expand our demographic focus;
•our ability to maintain or expand our relationships with our current partners, including bank partners, and our plans to acquire additional partners using our Lending as a Service model;
•our ability to provide an attractive and comprehensive member experience, and further our position as a financial services company;
•our ability to maintain the terms on which we lend to our borrowers;
•our ability to manage fraud risk, including regulatory intervention and impacts on our brand reputation;
•our ability to develop our technology, including our digital platform, and to successfully implement, maintain, and adapt artificial intelligence and machine learning capabilities (“A.I.”);
•our ability to effectively secure and maintain the confidentiality of the information provided and utilized across our systems;
•our ability to detect and protect our systems against unauthorized access, use or disclosure of sensitive information;
•our ability to successfully compete with companies that are currently in, or may in the future enter, the markets in which we operate;
•our ability to attract, integrate and retain qualified employees;
•our ability to manage impacts from, and uncertainties regarding, current and future actions that may be taken by activist stockholders;
•the effect of macroeconomic conditions on our business, including the impact of tariffs and other non-tariff trade barriers, immigration patterns and policies, fluctuating interest rates, and inflation;
•our ability to effectively manage and expand the capabilities of our contact centers, outsourcing relationships and other business operations abroad; and
•our ability to successfully adapt to complex and evolving regulatory environments, including those related to A.I., and managing potential exposure in connection with new and pending investigations, proceedings and other contingencies.
Forward-looking statements are based on our management’s current expectations, estimates, forecasts, and projections about our business and the industry in which we operate and on our management’s beliefs and assumptions. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate we have conducted exhaustive inquiry into, or review of, all potentially available relevant information. We anticipate that subsequent events and developments may cause our views to change. Forward-looking statements do not guarantee future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” and elsewhere in this report. We also operate in a rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. As a result, any or all of our forward-looking statements in this report may turn out to be inaccurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material.
You should read this report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect.
These forward-looking statements speak only as of the date of this report. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. We qualify all of our forward-looking statements by these cautionary statements.
As used in this report, the terms “Oportun Financial Corporation,” “Oportun,” “Company,” “we,” “us,” and “our” mean Oportun Financial Corporation and its subsidiaries unless the context indicates otherwise.
Overview
We are a mission-driven financial services company that puts our members’ financial goals within reach. With intelligent borrowing, savings, and budgeting capabilities, we empower members with the confidence to build a better financial future. By intentionally designing our products to help solve the financial health challenges facing people in the U.S., we believe our business is well positioned for significant growth in the future. We take a holistic approach to serving our members and view it as our purpose to responsibly meet their current capital needs, help grow our members’ financial profiles, increase their financial awareness and put them on a path to a financially healthy life. In our 21-year lending history, we have extended more than $22.7 billion in responsible credit through more than 8.3 million lending products. We have been certified as a Community Development Financial Institution by the U.S. Department of the Treasury since 2009.
We offer access to a suite of financial products, offered either directly or through partners, including unsecured and secured lending and savings.
23
Our financial products allow us to meet our members where they are and assist them with their overall financial health, resulting in opportunities to present multiple relevant products to our members. Our credit products include unsecured and secured personal loans. We also offer automated savings, through our Set & Save product. Consumers are able to become members and access our products through the Oportun Mobile App and the Oportun.com website, which are our primary channels for onboarding and serving members. As of June 30, 2026, our personal lending products are also available over the phone or through our 125 retail locations, and 459 of our Lending as a Service partner locations.
Credit Products
Personal Loans - Our personal loan is a simple-to-understand, affordable, unsecured, fully amortizing installment loan with fixed payments throughout the life of the loan. Our loans do not have prepayment penalties or balloon payments, and range in size from $300 to $10,000 with terms of 12 to 54 months. Generally, loan payments are structured on a bi-weekly or semi-monthly basis to coincide with our members' receipt of income. As part of our underwriting process, we verify income for all applicants and only approve loans that meet our ability-to-pay criteria. We charge fixed interest rates on our loans, which vary based on the amount disbursed, applicable state law, and other factors. As of June 30, 2026, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 38 months and 35.4%, respectively. The average loan size for loans we originated during the three months ended June 30, 2026 was $3,365. As of June 30, 2026, we originated unsecured personal loans in 41 states, primarily through our partnership with Pathward, N.A. (“Pathward”).
Secured Personal Loans - We also offer a personal installment loan product secured by an automobile, which we refer to as secured personal loans. Our secured personal loans range in size from $2,525 to $18,500 with terms ranging from 24 to 64 months. The average loan size for secured personal loans we originated during the three months ended June 30, 2026 was $6,585. As of June 30, 2026, for all active loans in our portfolio and at time of disbursement, the weighted average term and APR at origination was 45 months and 33.1%, respectively. As part of our underwriting process, we evaluate the collateral value of the vehicle, verify income for all applicants and only approve loans that meet our ability-to-pay criteria. Our secured personal loans are currently offered in 8 states and we are in the process of expanding into other states.
Set & Save
Savings – Our Set & Save product is designed to understand a member’s cash flows and save the right amount on a regular basis to effortlessly achieve savings goals. Members link their bank account with the platform and Set & Save utilizes machine learning to analyze a member’s transaction activity and build forecasts of the member’s future cash flows to make small, frequent savings decisions according to the member’s financial goals in a personalized manner. Since 2015, our savings product has helped members save more than $13.2 billion and helped our members save an average of more than $1,800 annually.
The funds in these savings accounts are owned by members of our products and are not the assets of the Company. Therefore, these funds are not included in the Condensed Consolidated Balance Sheets (Unaudited).
Lending as a Service
We leverage our proprietary credit scoring and underwriting model to partner with other consumer brands and expand our member base. For example, we have partnered with DolFinTech in certain of their locations where they provide us with information for potential members and we are able to offer loans through our existing channels by phone, online, or in our retail locations. In addition, we have entered into a collaboration with Western Union. As part of these programs, Oportun originates, underwrites, and services the loan. We believe we will be able to offer our Lending as a Service Lead Generation program to additional partners with a much faster lead-to-market time, expanding our membership base while offering a true Oportun service experience.
Capital Markets Funding
To fund our growth at a low and efficient cost, we have built a diversified and well-established capital markets funding program, which allows us to partially hedge our exposure to rising interest rates or credit spreads by locking in our interest expense. We have issued one-, two- and three-year fixed rate bonds which have provided us committed capital to fund future loan originations. Since 2015, we have participated in 28 sponsored or co-sponsored amortizing and revolving bond offerings in the asset-backed securities market, all of which include tranches that have been rated investment grade.
Additionally, we have entered into certain agreements with institutional investors to sell a portion of our loans as part of structured and whole loan agreements. Refer to Liquidity and Capital Resources in Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for information regarding these transactions.
Key Financial and Operating Metrics
We monitor and evaluate the following key metrics in order to measure our current performance, develop and refine our growth strategies, and make strategic decisions.
The following table and related discussion set forth key financial and operating metrics for our operations as of and for the three months ended June 30, 2026 and 2025.
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As of or for the Three Months Ended June 30, | As of or for the Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands of dollars) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
Key Financial and Operating Metrics | ||||||||||||||||||||||||||
| Aggregate Originations | $ | 487,747 | $ | 480,761 | $ | 904,660 | $ | 950,156 | ||||||||||||||||||
| Portfolio Yield | 33.3 | % | 32.8 | % | 32.7 | % | 32.9 | % | ||||||||||||||||||
30+ Day Delinquency Rate | 4.0 | % | 4.4 | % | 4.0 | % | 4.4 | % | ||||||||||||||||||
Annualized Net Charge-Off Rate | 12.0 | % | 11.9 | % | 12.3 | % | 12.0 | % | ||||||||||||||||||
Other Metrics | ||||||||||||||||||||||||||
Managed Principal Balance at End of Period | $ | 2,777,701 | $ | 2,939,765 | $ | 2,777,701 | $ | 2,939,765 | ||||||||||||||||||
Owned Principal Balance at End of Period | $ | 2,613,384 | $ | 2,636,407 | $ | 2,613,384 | $ | 2,636,407 | ||||||||||||||||||
Average Daily Principal Balance | $ | 2,642,958 | $ | 2,666,793 | $ | 2,682,049 | $ | 2,685,899 | ||||||||||||||||||
See “Glossary” at the end of Part II of this report for formulas and definitions of our key performance metrics.
Aggregate Originations
Aggregate Originations increased to $487.7 million for the three months ended June 30, 2026 from $480.8 million for the three months ended June 30, 2025, representing an 1.5% increase.
Aggregate Originations decreased to $904.7 million for the six months ended June 30, 2026 from $950.2 million for the six months ended June 30, 2025, representing an 4.8% decrease. The decrease is primarily driven by lower originations from new customers as a result of credit tightening in response to macro-economic and geopolitical factors.
Portfolio Yield
Portfolio yield increased to 33.3% for the three months ended June 30, 2026, from 32.8% for the three months ended June 30, 2025, and decreased to 32.7% for the six months ended June 30, 2026, from 32.9% for the six months ended June 30, 2025.
30+ Day Delinquency Rate
Our 30+ Day Delinquency Rate improved to 4.0% from 4.4% as of June 30, 2026 and 2025, respectively
Annualized Net Charge-Off Rate
Annualized Net Charge-Off Rate for the three months ended June 30, 2026 and 2025 was 12.0% and 11.9%, respectively, up 12 basis points. Higher costs for food, fuel, and rent along with macro-economic and geopolitical uncertainty have continued to put pressure on our members through June 30, 2026. The increase was also primarily attributable to a higher proportion of loans originated to new members during the first half of 2025.
Annualized Net Charge-Off Rate for the six months ended June 30, 2026 and 2025 was 12.3% and 12.0%, respectively, up 30 basis points. The increase was also primarily attributable to a higher proportion of loans originated to new members during the first half of 2025.
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Historical Credit Performance
Due to credit tightening in response to the COVID-19 pandemic and government stimulus payments, our Annualized Net Charge-off Rate was 6.8% in 2021, lower than our historical norms. Our Annualized Net Charge-off Rate increased to 10.1% in 2022 primarily due the impact of historically high inflation, the cessation of COVID-19 stimulus payments and a higher mix of first-time borrowers in 2021 and the first half of 2022. In response to this increase, in the second half of 2022 and continuing throughout 2023 and 2024, we tightened our credit underwriting standards and focused lending towards returning members to improve credit outcomes. The Annualized Net Charge-Off Rate for the three months ended June 30, 2026 and 2025 was 12.0% and 11.9%, respectively; the increase was primarily attributable to a higher percentage of new loan disbursements in the fourth quarter of 2024 and the first and second quarters of 2025. On a dollar basis, for the three months ended June 30, 2026, Net Charge-offs increased by $0.1 million, while our Average Daily Principal Balance decreased by 0.9%, when compared to the three months ended June 30, 2025. We evaluate our loan portfolio and charge a loan off at the earlier of when the loan is determined to be uncollectible or when loans are 120 days contractually past due.
*Numbers shown reflect year-to-date amounts for the six months ended June 30, for the indicated fiscal year.
In addition to monitoring our loss and delinquency performance on an owned portfolio basis, we also monitor the performance of our loans by the period in which the loan was disbursed, generally years or quarters, which we refer to as a vintage. We calculate net lifetime loan loss rate by vintage as a percentage of original principal balance. Net lifetime loan loss rates equal the net lifetime loan losses for a given year through June 30, 2026, divided by the total origination loan volume for that year.
The below chart and table show our net lifetime loan loss rate for each annual vintage of our personal loan product since 2015, excluding loans originated from July 2017 to August 2020 and beginning December 2023 under a loan program for borrowers who did not meet the qualifications for our core loan origination program; 100% of those loans were sold pursuant to a whole loan sale agreement.
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| Year of Origination | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dollar weighted average original term for vintage in months | 24.2 | 26.3 | 29.0 | 30.0 | 32.0 | 33.3 | 37.8 | 39.2 | 35.6 | 33.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net lifetime loan losses as of June 30, 2026 as a percentage of original principal balance | 8.0% | 8.2% | 9.8% | 10.8% | 9.0% | 18.4% | 22.4%* | 15.7%* | 9.8%* | 2.1%* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding principal balance as of June 30, 2026 as a percentage of original amount disbursed | —% | —% | —% | —% | 0.1% | 0.6% | 3.1% | 15.6% | 36.1% | 78.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
* Vintage is not yet fully mature from a loss perspective.
The following discussion summarizes the primary factors driving changes in cumulative net lifetime loan losses by annual vintage reflected in the table above.
•2016, 2017 and 2018 vintages. Cumulative net lifetime loan losses increased, in part, due to delays in tax refunds in 2017 and 2019, the effects of natural disasters, including Hurricane Harvey, and the longer duration of the loans.
•2018 and 2019 vintages. These vintages were adversely affected by the COVID-19 pandemic.
•2021 vintage. Charge-offs have exceeded those of prior vintages, primarily due to a higher proportion of loan disbursements to new members.
•2022 vintage. We tightened credit, reduced loan size and loan term, and began reducing loan volumes to new and returning members.
•2023 vintage. We implemented additional tightening measures and further shortened average term length, which contributed to stronger performance of the 2023 vintages relative to the 2022 vintages over comparable periods.
Seasonality
Our quarterly results of operations may not necessarily be indicative of the results for the full year or the results for any future periods. We experience significant seasonality in demand for our loans, which is generally lower in the first quarter. The seasonal slowdown is primarily attributable to high loan demand around the holidays in the fourth quarter and the general increase in our borrowers’ available cash flow in the first quarter, including from cash received from tax refunds, temporarily reducing our borrowers’ borrowing needs.
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Results of Operations
The following tables and related discussion set forth our Condensed Consolidated Statements of Operations (Unaudited) for each of the three and six months ended June 30, 2026 and 2025.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands of dollars) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
| Interest income | $ | 219,274 | $ | 218,281 | $ | 434,939 | $ | 438,502 | ||||||||||||||||||
| Non-interest income | 13,954 | 16,065 | 27,053 | 31,748 | ||||||||||||||||||||||
| Total revenue | 233,228 | 234,346 | 461,992 | 470,250 | ||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||
| Interest expense | 41,933 | 59,538 | 89,912 | 116,941 | ||||||||||||||||||||||
| Total net decrease in fair value | (85,663) | (70,257) | (171,557) | (142,929) | ||||||||||||||||||||||
| Net revenue | 105,632 | 104,551 | 200,523 | 210,380 | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Technology and facilities | 32,293 | 36,649 | 66,433 | 73,086 | ||||||||||||||||||||||
| Sales and marketing | 17,593 | 18,077 | 33,542 | 37,959 | ||||||||||||||||||||||
| Personnel | 24,510 | 20,247 | 50,038 | 41,212 | ||||||||||||||||||||||
| Outsourcing and professional fees | 9,650 | 9,701 | 18,354 | 17,713 | ||||||||||||||||||||||
| General, administrative and other | 5,966 | 9,769 | 12,975 | 17,143 | ||||||||||||||||||||||
| Total operating expenses | 90,012 | 94,443 | 181,342 | 187,113 | ||||||||||||||||||||||
| Income before taxes | 15,620 | 10,108 | 19,181 | 23,267 | ||||||||||||||||||||||
| Income tax expense | 7,084 | 3,231 | 8,300 | 6,623 | ||||||||||||||||||||||
| Net income | $ | 8,536 | $ | 6,877 | $ | 10,881 | $ | 16,644 | ||||||||||||||||||
Total revenue
Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 219,274 | $ | 218,281 | $ | 993 | 0.5 | % | $ | 434,939 | $ | 438,502 | $ | (3,563) | (0.8) | % | ||||||||||||||||||||||||||||||||||
| Non-interest income | 13,954 | 16,065 | (2,111) | (13.1) | % | 27,053 | 31,748 | (4,695) | (14.8) | % | ||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 233,228 | $ | 234,346 | $ | (1,118) | (0.5) | % | $ | 461,992 | $ | 470,250 | $ | (8,258) | (1.8) | % | ||||||||||||||||||||||||||||||||||
| Percentage of total revenue: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | 94.0 | % | 93.1 | % | 94.1 | % | 93.2 | % | ||||||||||||||||||||||||||||||||||||||||||
| Non-interest income | 6.0 | % | 6.9 | % | 5.9 | % | 6.8 | % | ||||||||||||||||||||||||||||||||||||||||||
| Total revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||
Interest Income. Total interest income increased by $1.0 million, or 0.5%, from $218.3 million for the three months ended June 30, 2025 to $219.3 million for the three months ended June 30, 2026.
Total interest income decreased by $3.6 million, or 0.8%, from $438.5 million for the six months ended June 30, 2025 to $434.9 million for the six months ended June 30, 2026. This decrease was primarily due to a decrease in portfolio yield of 22 basis points in the six months ended June 30, 2026 compared to the six months ended June 30, 2025, driven by a reduction in billed interest, partially offset by an increase in origination fees.
Non-interest income. Total non-interest income decreased by $2.1 million, or 13.1%, from $16.1 million for the three months ended June 30, 2025 to $14.0 million for the three months ended June 30, 2026. This decrease is primarily due to a $2.1 million decrease in servicing fees related to our Pathward program.
Total non-interest income decreased by $4.7 million, or 14.8%, from $31.7 million for the six months ended June 30, 2025 to $27.1 million for the six months ended June 30, 2026. This decrease is primarily due to a $3.9 million decrease in servicing fees related to our Pathward program and $1.0 million decrease related to interest earned on our Set & Save product; this was partially offset by other factors.
See Note 2, Summary of Significant Accounting Policies, and Note 12, Revenue, of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further discussion on our interest income, non-interest income and revenue.
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Interest expense
Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Interest expense | $ | 41,933 | $ | 59,538 | $ | (17,605) | (29.6) | % | $ | 89,912 | $ | 116,941 | $ | (27,029) | (23.1) | % | ||||||||||||||||||||||||||||||||||
| Percentage of total revenue | 18.0 | % | 25.4 | % | 19.5 | % | 24.9 | % | ||||||||||||||||||||||||||||||||||||||||||
| Cost of Debt | 6.3 | % | 8.6 | % | 6.7 | % | 8.4 | % | ||||||||||||||||||||||||||||||||||||||||||
Interest expense decreased by $17.6 million, or 29.6%, from $59.5 million for the three months ended June 30, 2025 to $41.9 million for the three months ended June 30, 2026. Our interest expense decrease is primarily due to a 228 basis point decrease in our Cost of Debt driven by improvements from revised cash flow estimates in our Asset-backed borrowings at amortized cost, reductions of higher-cost Asset-backed borrowings at amortized cost, and continued paydowns of the Corporate financing. Our Average Daily Debt Balance decreased from $2.78 billion for the three months ended June 30, 2025 to $2.67 billion for the three months ended June 30, 2026, a decrease of 4.1%.
Interest expense decreased by $27.0 million, or 23.1%, from $116.9 million for the six months ended June 30, 2025 to $89.9 million for the six months ended June 30, 2026. The decrease was driven by a 172 basis point decrease in our Cost of Debt, partially offset by a decline in our Average Daily Debt Balance. Our Average Daily Debt Balance decreased from $2.81 billion for the six months ended June 30, 2025 to $2.71 billion for the six months ended June 30, 2026, a decrease of 3.3%. The cost of debt has decreased primarily due to improvements from revised cash flow estimates in our Asset-backed borrowings at amortized cost, reduction of higher-cost and issuance of lower-cost Asset-backed borrowings at amortized cost, fewer draws on our Secured financing, and continued paydowns of the Corporate financing.
See Note 8, Borrowings, in the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further information on our Interest expense and our Secured financing and asset-backed notes.
Total net decrease in fair value
Total net decrease in fair value reflects changes in fair value of loans receivable held for investment and asset-backed notes at fair value on an aggregate basis and is based on a number of factors, including benchmark interest rates, credit spreads, remaining cumulative charge-offs and borrower payment rates. Increases in the fair value of loans increase Net Revenue. Conversely, decreases in the fair value of loans decrease Net Revenue. Increases in the fair value of asset-backed notes decrease Net Revenue. Decreases in the fair value of asset-backed notes increase Net Revenue. As of December 31, 2025, we also had a derivative instrument related to our bank partnership program with Pathward. Changes in the fair value of the derivative instrument are reflected in the total fair value mark-to-market adjustment below.
Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Fair value mark-to-market adjustment: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value mark-to-market adjustment on Loans Receivable at Fair Value | $ | (5,588) | $ | 9,087 | $ | (14,675) | * | $ | (6,256) | $ | 21,456 | $ | (27,712) | * | ||||||||||||||||||||||||||||||||||||
Fair value mark-to-market adjustment on asset-backed notes at fair value | (1,029) | (3,371) | 2,342 | * | (2,458) | (11,256) | 8,798 | * | ||||||||||||||||||||||||||||||||||||||||||
| Fair value mark-to-market adjustment on derivatives | — | 18 | (18) | * | 1,248 | 450 | 798 | * | ||||||||||||||||||||||||||||||||||||||||||
| Total fair value mark-to-market adjustment | (6,617) | 5,734 | (12,351) | * | (7,466) | 10,650 | (18,116) | * | ||||||||||||||||||||||||||||||||||||||||||
Charge-offs, net of recoveries on Loans Receivable at Fair Value | (79,046) | (78,960) | (86) | * | (163,940) | (160,253) | (3,687) | * | ||||||||||||||||||||||||||||||||||||||||||
| Net settlements on derivative instruments | — | 2,968 | (2,968) | * | (151) | 6,673 | (6,824) | * | ||||||||||||||||||||||||||||||||||||||||||
| Total net decrease in fair value | $ | (85,663) | $ | (70,258) | $ | (15,405) | * | $ | (171,557) | $ | (142,930) | $ | (28,627) | * | ||||||||||||||||||||||||||||||||||||
| Percentage of total revenue: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value mark-to-market adjustment | (2.8) | % | 2.4 | % | (1.6) | % | 2.3 | % | ||||||||||||||||||||||||||||||||||||||||||
Charge-offs, net of recoveries on Loans Receivable at Fair Value | (33.9) | % | (33.7) | % | (35.5) | % | (34.1) | % | ||||||||||||||||||||||||||||||||||||||||||
| Total net increase (decrease) in fair value | (36.7) | % | (31.2) | % | (37.1) | % | (31.8) | % | ||||||||||||||||||||||||||||||||||||||||||
| Discount rate | 6.30 | % | 7.03 | % | 6.30 | % | 7.03 | % | ||||||||||||||||||||||||||||||||||||||||||
| Remaining cumulative charge-offs | 12.22 | % | 11.96 | % | 12.22 | % | 11.96 | % | ||||||||||||||||||||||||||||||||||||||||||
| Average life in years | 1.04 | 1.08 | 1.04 | 1.08 | ||||||||||||||||||||||||||||||||||||||||||||||
* Not meaningful
Net decrease in fair value for the three months ended June 30, 2026 was $85.7 million. This amount represents $79.0 million of charge-offs, net of recoveries on Loans Receivable at Fair Value and a total fair value mark-to-market decrease of $6.6 million. The total fair value mark-to-market adjustment consists of a $(5.6) million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) a increase in the discount rate from
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6.24% as of March 31, 2026 to 6.30% as of June 30, 2026, partially offset by (b) an decrease in remaining cumulative charge-offs from 12.29% as of March 31, 2026 to 12.22% as of June 30, 2026. The $1.0 million mark-to-market loss on asset-backed notes is due to amortization of the principal balance and tighter credit spreads, partially offset by higher medium-term interest rates.
Net decrease in fair value for the three months ended June 30, 2025 was $70.3 million. This amount represents $79.0 million of charge-offs, net of recoveries on Loans Receivable at Fair Value, a total fair value mark-to-market increase of $5.7 million, and $3.0 million increase related to the Pathward excess interest. The total fair value mark-to-market adjustment consists of a $9.1 million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) a decrease in the discount rate from 7.69% as of March 31, 2025 to 7.03% as of June 30, 2025, partially offset by (b) an increase in remaining cumulative charge-offs from 11.83% as of March 31, 2025 to 11.96% as of June 30, 2025. The $3.4 million mark-to-market loss on asset-backed notes is due to lower medium-term interest rates and tighter credit spreads.
Net decrease in fair value for the six months ended June 30, 2026 was $171.6 million. This amount represents a total fair value mark-to-market decrease of $7.5 million, and $163.9 million of charge-offs, net of recoveries on Loans Receivable at Fair Value. The total fair value mark-to-market adjustment consists of a $(6.3) million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) a increase in discount rate from 6.26% as of December 31, 2025 to 6.30% as of June 30, 2026, partially offset by (b) an decrease in remaining cumulative charge-offs from 12.28% as of December 31, 2025 to 12.22% as of June 30, 2026, and (c) a decrease in average life from 1.06 years as of December 31, 2025 to 1.04 years as of June 30, 2026. The $2.5 million mark-to-market loss on asset-backed notes is due amortization of the principal balance and tighter credit spreads, partially offset by higher medium-term interest rates.
Net decrease in fair value for the six months ended June 30, 2025 was $142.9 million. This amount represents a total fair value mark-to-market increase of $10.7 million, and $160.3 million of charge-offs, net of recoveries on Loans Receivable at Fair Value. The total fair value mark-to-market adjustment consists of a $21.5 million mark-to-market adjustment on Loans Receivable at Fair Value due to (a) a decrease in discount rate from 7.92% as of December 31, 2024 to 7.03% as of June 30, 2025, partially offset by (b) an increase in remaining cumulative charge-offs from 11.68% as of December 31, 2024 to 11.96% as of June 30, 2025, and (c) a decrease in average life from 1.11 years as of December 31, 2024 to 1.08 years as of June 30, 2025. The $11.3 million mark-to-market loss on asset-backed notes is due to lower medium-term interest rates and tighter credit spreads.
Charge-offs, net of recoveries
Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Total charge-offs, net of recoveries | $ | 79,046 | $ | 78,960 | $ | 86 | 0.1 | % | $ | 163,940 | $ | 160,253 | $ | 3,687 | 2.3 | % | ||||||||||||||||||||||||||||||||||
| Average Daily Principal Balance | $ | 2,642,958 | $ | 2,666,793 | $ | (23,835) | (0.9) | % | $ | 2,682,049 | $ | 2,685,899 | $ | (3,850) | (0.1) | % | ||||||||||||||||||||||||||||||||||
| Annualized Net Charge-Off Rate | 12.0 | % | 11.9 | % | 12.3 | % | 12.0 | % | ||||||||||||||||||||||||||||||||||||||||||
Charge-Offs, net of recoveries increased by $0.1 million for the three months ended June 30, 2026 and increased by $3.7 million for the six months ended June 30, 2026. The Annualized Net Charge-Off Rate increase for the six months ended June 30, 2026 was primarily attributable to a higher percentage of new loan disbursements in the fourth quarter of 2024 and the first and second quarters of 2025. Consistent with our charge-off policy, we evaluate our loan portfolio and charge a loan off at the earlier of when the loan is determined to be uncollectible or when the loan is 120 days contractually past due. We employ collection strategies and tools to help members make ongoing payments against their loans, with new efforts launched that: expanded the frequency and content of our digital and telephony communications; broadened eligibility for collection tools that help members address payment difficulties; and eased member access to those collection tools via new online and mobile app self-enrollment capability, supported by a new collections strategy system that enables centralized, faster, and more-targeted application of strategies.
Operating expenses
Operating expenses consist of technology and facilities, sales and marketing, personnel, outsourcing and professional fees, and general, administrative and other expenses. We anticipate operating expenses to be substantially flat in 2026 as compared to 2025.
Technology and facilities
Technology and facilities expense is the largest segment of our operating expenses, representing the costs required to build and maintain our multi-channel platform, and consists of three components. The first component comprises costs associated with our technology, engineering, information security, cybersecurity, platform development, maintenance, and end user services, including fees for consulting, legal and other services as a result of our efforts to grow our business, as well as personnel expenses. The second component includes rent for retail and corporate locations, utilities, insurance, telephony costs, property taxes, equipment rental expenses, licenses and fees, and depreciation and amortization. Lastly, the third component includes all software licenses, subscriptions, and technology service costs to support our corporate operations, excluding sales and marketing.
Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Technology and facilities | $ | 32,293 | $ | 36,649 | $ | (4,356) | (11.9) | % | $ | 66,433 | $ | 73,086 | $ | (6,653) | (9.1) | % | ||||||||||||||||||||||||||||||||||
| Percentage of total revenue | 13.8 | % | 15.6 | % | 14.4 | % | 15.5 | % | ||||||||||||||||||||||||||||||||||||||||||
Technology and facilities expense decreased by $4.4 million, or 11.9%, from $36.6 million for the three months ended June 30, 2025 to $32.3
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million for the three months ended June 30, 2026. The decrease is primarily due to a $1.9 million decrease driven by reduced amortization costs in internally developed software, $1.5 million decrease in technology services and software costs, and $0.7 million decrease due to our strategy to lower contractor spending.
Technology and facilities expense decreased by $6.7 million, or 9.1%, from $73.1 million for the six months ended June 30, 2025 to $66.4 million for the six months ended June 30, 2026. The decrease is primarily due to a $5.1 million decrease primarily driven by reduced amortization and increased capitalization of costs relating to internally developed software and $1.2 million decrease due to our strategy to lower contractor spending.
Sales and marketing
Sales and marketing expenses consist of two components and represents the costs to acquire our members. The first component is comprised of the expense to acquire a member through various paid marketing channels including direct mail, digital marketing, and brand marketing. The second component is comprised of the costs associated with our telesales, lead generation and retail operations, including personnel expenses, but excluding costs associated with retail locations.
Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages and CAC) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 17,593 | $ | 18,077 | $ | (484) | (2.7) | % | $ | 33,542 | $ | 37,959 | $ | (4,417) | (11.6) | % | ||||||||||||||||||||||||||||||||||
| Percentage of total revenue | 7.5 | % | 7.7 | % | 7.3 | % | 8.1 | % | ||||||||||||||||||||||||||||||||||||||||||
Customer Acquisition Cost (“CAC”) | $ | 127 | $ | 115 | $ | 12 | 10.4 | % | $ | 130 | $ | 127 | $ | 3 | 2.4 | % | ||||||||||||||||||||||||||||||||||
Sales and marketing expenses to acquire our members decreased by $0.5 million, or 2.7%, from $18.1 million for the three months ended June 30, 2025 to $17.6 million for the three months ended June 30, 2026. As a result of our decrease in number of loans originated, partially offset by our decrease in our Sales and marketing expense, during the three months ended June 30, 2026, our CAC increased by 10.4% from $115 for the three months ended June 30, 2025 to $127 for the three months ended June 30, 2026.
Sales and marketing expenses to acquire our members decreased by $4.4 million, or 11.6%, from $38.0 million for the six months ended June 30, 2025 to $33.5 million for the six months ended June 30, 2026. The decrease was primarily attributable to a decrease in our direct mail marketing and lower marketing analytic costs. Primarily as a result of our decrease in number of loans originated, partially offset by our decrease in our Sales and marketing expense, during the six months ended June 30, 2026, our CAC increased by 2.4% from $127 for the six months ended June 30, 2025 to $130 for the six months ended June 30, 2026.
Personnel
Personnel expense represents compensation and benefits that we provide to our employees, and include salaries, wages, bonuses, commissions, related employer taxes, medical and other benefits provided and stock-based compensation expense for all of our staff with the exception of our telesales, lead generation, and retail operations which are included in sales and marketing expenses, and technology which is included in technology and facilities.
Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Personnel | $ | 24,510 | $ | 20,247 | $ | 4,263 | 21.1 | % | $ | 50,038 | $ | 41,212 | $ | 8,826 | 21.4 | % | ||||||||||||||||||||||||||||||||||
| Percentage of total revenue | 10.5 | % | 8.6 | % | 10.8 | % | 8.8 | % | ||||||||||||||||||||||||||||||||||||||||||
Personnel expense increased by $4.3 million, or 21.1%, from $20.2 million for the three months ended June 30, 2025 to $24.5 million for the three months ended June 30, 2026, primarily due to executive transition costs and increased wages, salaries, bonuses.
Personnel expense increased by $8.8 million, or 21.4%, from $41.2 million for the six months ended June 30, 2025 to $50.0 million for the six months ended June 30, 2026, primarily due to executive transition costs and increased wages, salaries, and bonuses driven by increased headcount related to internal collections.
Outsourcing and professional fees
Outsourcing and professional fees consist of costs for various third-party service providers and contact center operations, primarily for the sales, customer service, collections and store operation functions. Professional fees also include the cost of legal and audit services, credit reports, recruiting, cash transportation, collection services and fees and consultant expenses. Direct loan origination expenses related to application processing are expensed when incurred. In addition, outsourcing and professional fees include any financing expenses, including legal and underwriting fees, related to our asset-backed notes at fair value.
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Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Outsourcing and professional fees | $ | 9,650 | $ | 9,701 | $ | (51) | (0.5) | % | $ | 18,354 | $ | 17,713 | $ | 641 | 3.6 | % | ||||||||||||||||||||||||||||||||||
| Percentage of total revenue | 4.1 | % | 4.1 | % | 4.0 | % | 3.8 | % | ||||||||||||||||||||||||||||||||||||||||||
Outsourcing and professional fees decreased by $0.1 million, or 0.5%, from the three months ended June 30, 2025 to the three months ended June 30, 2026.
Outsourcing and professional fees increased by $0.6 million, or 3.6%, from $17.7 million for the six months ended June 30, 2025 to $18.4 million for the six months ended June 30, 2026. The increase is primarily attributable to a $1.0 million increase in professional services primarily relating to CEO search and $0.6 million increase in debt recovery and court filing fees; partially offset by $1.0 million decrease in debt financing fees.
General, administrative and other
General, administrative and other expense includes non-compensation expenses for employees, who are not a part of the technology and sales and marketing organization, which include travel, lodging, meal expenses, political and charitable contributions, office supplies, printing and shipping. Also included are franchise taxes, bank fees, foreign currency gains and losses, transaction gains and losses, litigation reserve, acquisition-related expenses, and shareholder activism.
Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| General, administrative and other | $ | 5,966 | $ | 9,769 | $ | (3,803) | (38.9) | % | $ | 12,975 | $ | 17,143 | $ | (4,168) | (24.3) | % | ||||||||||||||||||||||||||||||||||
| Percentage of total revenue | 2.6 | % | 4.2 | % | 2.8 | % | 3.6 | % | ||||||||||||||||||||||||||||||||||||||||||
General, administrative and other expense decreased by $3.8 million, or 38.9%, from $9.8 million for the three months ended June 30, 2025 to $6.0 million for the three months ended June 30, 2026, primarily due to a $2.4 million decrease related to shareholder activism expenses and $0.8 million decrease in fees paid from loan purchases as part of our bank partnership program.
General, administrative and other expense decreased by $4.2 million, or 24.3%, from $17.1 million for the six months ended June 30, 2025 to $13.0 million for the six months ended June 30, 2026, primarily due to a $2.5 million decrease related to shareholder activism expenses and $1.5 million decrease in fees paid from loan purchases as part of our bank partnership program.
Income taxes
Income taxes consist of U.S. federal, state and foreign income taxes, if any. For the periods ended June 30, 2026 and 2025, we recognized tax expense attributable to U.S. federal, state and foreign income taxes.
Three Months Ended June 30, | Period-to-period Change | Six Months Ended June 30, | Period-to-period Change | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | $ | 7,084 | $ | 3,231 | $ | 3,853 | 119.3 | % | $ | 8,300 | $ | 6,623 | $ | 1,677 | 25.3 | % | ||||||||||||||||||||||||||||||||||
| Percentage of total revenue | 3.0 | % | 1.4 | % | 1.8 | % | 1.4 | % | ||||||||||||||||||||||||||||||||||||||||||
| Effective tax rate | 45.4 | % | 32.0 | % | 43.3 | % | 28.5 | % | ||||||||||||||||||||||||||||||||||||||||||
Income tax expense increased by $3.9 million or 119%, from $3.2 million for the three months ended June 30, 2025 to $7.1 million for the three months ended June 30, 2026, primarily due to higher pre-tax income, resolving a state tax settlement, and increasing the reserve for unrecognized tax benefits.
Income tax expense increased by $1.7 million or 25%, from $6.6 million for the six months ended June 30, 2025 to $8.3 million for the six months ended June 30, 2026, primarily due to resolving a state tax settlement and increasing the reserve for unrecognized tax benefits.
Valuation Allowance. As of June 30, 2026, we have $61.3 million of U.S. net deferred tax assets, of which $58.7 million is related to the tax-effected net operating losses, tax credits, and other carryforwards that can be used to offset future U.S. taxable income. Certain of these carryforwards will expire if they are not used within a specified timeframe. At this time, we consider it more likely than not that we will have sufficient U.S. taxable income in the future that will allow us to realize these net deferred tax assets. However, it is possible that some, or all, of these tax attributes could ultimately expire unused. Therefore, if we are unable to generate sufficient U.S. taxable income from our operations, a valuation allowance to reduce the U.S. net deferred tax assets may be required, which would materially increase income tax expense in the period in which the valuation allowance is recorded.
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On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its impact on our consolidated financial statements.
See Note 2, Summary of Significant Accounting Policies, and Note 13, Income Taxes, of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for further discussion on our income taxes.
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Fair Value Estimate Methodology for Loans Receivable at Fair Value
Summary
Fair value is an electable option under GAAP to account for any financial instruments, including loans receivable and debt. It differs from amortized cost accounting in that loans receivable and debt are recorded on the balance sheet at fair value rather than on a cost basis. Under the fair value option credit losses are recognized through income as they are incurred rather than through the establishment of an allowance and provision for losses. The fair value of instruments under this election is updated at the end of each reporting period, with changes since the prior reporting period reflected in the Condensed Consolidated Statements of Operations (Unaudited) as net increase (decrease) in fair value which impacts Net Revenue. Changes in interest rates, credit spreads, realized and projected credit losses and cash flow timing will lead to changes in fair value and therefore impact earnings. These changes in the fair value of the Loans Receivable at Fair Value may be partially offset by changes in the fair value of the asset-backed notes where the fair value option has been elected, depending upon the relative duration of the instruments.
Fair Value Estimate Methodology for Loans Receivable at Fair Value
We calculate the fair value of Loans Receivable at Fair Value using a model that projects and discounts expected cash flows. The fair value is a function of:
•Portfolio yield;
•Average life;
•Prepayments;
•Remaining cumulative charge-offs; and
•Discount rate.
Portfolio yield is the expected interest and fees collected from the loans as an annualized percentage of outstanding principal balance. Portfolio yield is based upon (a) the contractual interest rate, reduced by expected delinquencies and interest charge-offs and (b) late fees, net of late fee charge-offs based upon expected delinquencies. Origination fees are not included in portfolio yield for personal loans since they are recognized into income at origination.
Average life is the time-weighted average of expected principal payments divided by outstanding principal balance. The timing of principal payments is based upon the contractual amortization of loans, adjusted for the impact of prepayments, Good Customer Program refinances, and charge-offs.
For personal loans, prepayments are the expected remaining cumulative principal payments that will be repaid earlier than contractually required over the life of the loan, divided by the outstanding principal balance.
Remaining cumulative charge-offs is the expected net principal charge-offs over the remaining life of the loans, divided by the outstanding principal balance.
For personal loans, the discount rate is determined by using the Weighted Average Capital Cost, which was calculated using the Capital Asset Pricing Model method, also considering several components of financing, debt and equity.
Components of Fair Value Mark-to-Market Adjustment (in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
Fair value mark-to-market adjustment on Loans Receivable at Fair Value (1) | $ | (5,588) | $ | 9,087 | $ | (6,256) | $ | 21,456 | ||||||||||||||||||
| Fair value mark-to-market adjustment on asset-backed notes | (1,029) | (3,371) | (2,458) | (11,256) | ||||||||||||||||||||||
| Fair value mark-to-market adjustment on derivatives | — | 18 | $ | 1,248 | $ | 450 | ||||||||||||||||||||
| Total fair value mark-to-market adjustment | $ | (6,617) | $ | 5,734 | $ | (7,466) | $ | 10,650 | ||||||||||||||||||
(1) The fair value mark-to-market adjustment on Loans Receivable at Fair Value excludes mark-to-market adjustments associated with loans sold. See the section titled Net decrease in fair value in the Results of Operations section for additional information regarding the fair value mark on loans sold.
Non-GAAP Financial Measures
We believe that the provision of non-GAAP financial measures in this report, including Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Adjusted Operating Expense, Adjusted Operating Expense Ratio, and Adjusted Return on Equity, can provide useful measures for period-to-period comparisons of our core business and useful information to investors and others in understanding and evaluating our operating results. However, non-GAAP financial measures are not calculated in accordance with United States generally accepted accounting principles, or GAAP, and should not be considered as an alternative to any measures of financial performance calculated and presented in accordance with GAAP. There are limitations related to the use of these non-GAAP financial measures versus their most directly comparable GAAP measures, which include the following:
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▪Other companies, including companies in our industry, may calculate these measures differently, which may reduce their usefulness as a comparative measure.
▪These measures do not consider the potentially dilutive impact of stock-based compensation.
▪Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements.
▪Although the fair value mark-to-market adjustment is a non-cash adjustment, it does reflect our estimate of the price a third party would pay for our loans receivable held for investment or our asset-backed notes.
▪Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us.
Reconciliations of non-GAAP to GAAP measures can be found below.
Adjusted EBITDA
We define Adjusted EBITDA as our net income, adjusted to eliminate the effect of certain items as described below. We believe that Adjusted EBITDA is an important measure because it allows management, investors and our Board to evaluate and compare operating results, including return on capital and operating efficiencies, from period to period, by making the adjustments described below. In addition, it provides a useful measure for period-to-period comparisons of our business, as it removes the effect of income taxes, certain non-cash items, variable charges and timing differences.
•We believe it is useful to exclude the impact of income tax expense, as reported, because historically it has included irregular income tax items that do not reflect ongoing business operations.
•We believe it is useful to exclude depreciation and amortization and stock-based compensation expense because they are non-cash charges.
•We believe it is useful to exclude the impact of interest expense associated with our corporate financing facilities, including the senior secured term loan and the residual financing facility, as we view this expense as related to our capital structure rather than our funding.
•We exclude the impact of certain non-recurring charges because we do not believe that these items reflect ongoing business operations. Other non-recurring charges include litigation reserve, impairment charges, workforce optimization expenses, shareholder activism costs, debt amendment, extinguishment, and warrant amortization costs.
•We also exclude fair value mark-to-market adjustments on the loans receivable portfolio and asset-backed notes carried at fair value because these adjustments do not impact cash.
The following table presents a reconciliation of net income to Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
Adjusted EBITDA (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
Net income | $ | 8,536 | $ | 6,877 | $ | 10,881 | $ | 16,644 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Income tax expense | 7,084 | 3,231 | 8,300 | 6,623 | ||||||||||||||||||||||
Interest on corporate financing | 5,992 | 9,437 | 12,962 | 19,166 | ||||||||||||||||||||||
| Depreciation and amortization | 8,823 | 10,715 | 17,823 | 21,783 | ||||||||||||||||||||||
| Stock-based compensation expense | 2,554 | 2,708 | 5,522 | 5,539 | ||||||||||||||||||||||
| Other non-recurring charges | 8,958 | 3,956 | 14,970 | 5,618 | ||||||||||||||||||||||
| Fair value mark-to-market adjustment | 6,617 | (5,734) | 7,466 | (10,650) | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 48,564 | $ | 31,190 | $ | 77,924 | $ | 64,723 | ||||||||||||||||||
Adjusted Net Income
We define Adjusted Net Income as net income adjusted to eliminate the effect of certain items as described below. We believe that Adjusted Net Income is an important measure of operating performance because it allows management, investors, and our Board to evaluate and compare our operating results, including return on capital and operating efficiencies, from period to period, excluding the after-tax impact of non-cash, stock-based compensation expense and certain non-recurring charges.
•We believe it is useful to exclude the impact of income tax expense (benefit), as reported, because historically it has included irregular income tax items that do not reflect ongoing business operations. We also include the impact of normalized income tax expense by applying a normalized statutory tax rate.
•We believe it is useful to exclude the impact of certain non-recurring charges because we do not believe that these items reflect our ongoing business operations. Other non-recurring charges include litigation reserve, impairment charges, workforce optimization expenses, shareholder activism costs, debt amendment, extinguishment and warrant amortization costs.
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•We believe it is useful to exclude stock-based compensation expense because it is a non-cash charge.
•We also exclude the fair value mark-to-market adjustment on our asset-backed notes carried at fair value.
The following table presents a reconciliation of net income to Adjusted Net Income for the three and six months ended June 30, 2026 and 2025:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| Adjusted Net Income (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
Net income | $ | 8,536 | $ | 6,877 | $ | 10,881 | $ | 16,644 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Income tax expense | 7,084 | 3,231 | 8,300 | 6,623 | ||||||||||||||||||||||
| Stock-based compensation expense | 2,554 | 2,708 | 5,522 | 5,539 | ||||||||||||||||||||||
| Other non-recurring charges | 8,958 | 3,956 | 14,970 | 5,618 | ||||||||||||||||||||||
Mark-to-market adjustment on asset-backed notes | 1,029 | 3,371 | 2,458 | 11,256 | ||||||||||||||||||||||
Adjusted income before taxes | 28,161 | 20,143 | 42,131 | 45,680 | ||||||||||||||||||||||
| Normalized income tax expense | 7,603 | 5,439 | 11,375 | 12,334 | ||||||||||||||||||||||
| Adjusted Net Income | $ | 20,558 | $ | 14,704 | $ | 30,756 | $ | 33,346 | ||||||||||||||||||
| Income tax rate | 27.0 | % | 27.0 | % | 27.0 | % | 27.0 | % | ||||||||||||||||||
(1) Income tax rate for the three and six months ended June 30, 2026 and 2025 is based on a normalized statutory rate.
Adjusted Earnings Per Share (“Adjusted EPS”)
Adjusted Earnings Per Share is a non-GAAP financial measure that allows management, investors, and our Board to evaluate the operating results, operating trends, and profitability of the business in relation to diluted adjusted weighted-average shares outstanding.
The following table presents a reconciliation of Diluted EPS to Diluted Adjusted EPS for the three and six months ended June 30, 2026 and 2025. For the reconciliation of net income to Adjusted Net Income, see the immediately preceding table “Adjusted Net Income.”
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands, except share and per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
Diluted earnings per share | $ | 0.17 | $ | 0.14 | $ | 0.22 | $ | 0.35 | ||||||||||||||||||
| Adjusted EPS | ||||||||||||||||||||||||||
| Adjusted Net Income | $ | 20,558 | $ | 14,704 | $ | 30,756 | $ | 33,346 | ||||||||||||||||||
| Basic weighted-average common shares outstanding | 48,419,607 | 46,571,524 | 47,930,598 | 46,037,084 | ||||||||||||||||||||||
| Weighted average effect of dilutive securities: | ||||||||||||||||||||||||||
| Stock options | — | — | — | — | ||||||||||||||||||||||
| Restricted stock units | 976,417 | 1,321,648 | 1,019,512 | 1,431,371 | ||||||||||||||||||||||
| Diluted adjusted weighted-average common shares outstanding | 49,396,024 | 47,893,172 | 48,950,110 | 47,468,455 | ||||||||||||||||||||||
| Adjusted Earnings Per Share | $ | 0.42 | $ | 0.31 | $ | 0.63 | $ | 0.70 | ||||||||||||||||||
Return on Equity and Adjusted Return on Equity
We define Adjusted Return on Equity as annualized Adjusted Net Income divided by average stockholders’ equity. Average stockholders’ equity is an average of the beginning and ending stockholders’ equity balance for each period. We believe Adjusted Return on Equity is an important measure because it allows management, investors and our Board to evaluate the profitability of the business in relation to stockholders’ equity and how efficiently we generate income from stockholders' equity.
The following table presents a reconciliation of Return on Equity to Adjusted Return on Equity as of and for the three and six months ended June 30, 2026 and 2025. For the reconciliation of net income to Adjusted Net Income, see the immediately preceding table “Adjusted Net Income.”
| As of or for the Three Months Ended June 30, | As of or for the Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Return on Equity | 8.5 | % | 7.4 | % | 5.5 | % | 9.2 | % | ||||||||||||||||||
| Adjusted Return on Equity | ||||||||||||||||||||||||||
| Adjusted Net Income | $ | 20,558 | $ | 14,704 | $ | 30,756 | $ | 33,346 | ||||||||||||||||||
| Average stockholders' equity | $ | 401,708 | $ | 371,044 | $ | 398,608 | $ | 364,899 | ||||||||||||||||||
| Adjusted Return on Equity | 20.5 | % | 15.9 | % | 15.6 | % | 18.4 | % | ||||||||||||||||||
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Adjusted Operating Expense and Adjusted Operating Expense Ratio
We define Adjusted Operating Expense as total operating expenses adjusted to exclude stock-based compensation expense and certain non-recurring charges. Other non-recurring charges include litigation reserve, impairment charges, workforce optimization expenses, shareholder activism costs, and debt amendment costs. We define Adjusted Operating Expense Ratio as Adjusted Operating Expense divided by Average Daily Principal Balance. We believe Adjusted Operating Expense is an important measure because it allows management, investors and our Board to evaluate and compare its operating costs from period to period, excluding the impact of non-cash, stock-based compensation expense and certain non-recurring charges. We believe Adjusted Operating Expense Ratio is an important measure because they allow management, investors and our Board to evaluate how efficiently we are managing costs relative to revenue and Average Daily Principal Balance.
The following table presents a reconciliation of Operating Expense to Adjusted Operating Expense and Operating Expense Ratio to Adjusted Operating Expense Ratio for the three and six months ended June 30, 2026 and 2025:
| As of or for the Three Months Ended June 30, | As of or for the Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
Operating Expense Ratio | 13.7 | % | 14.2 | % | 13.6 | % | 14.0 | % | ||||||||||||||||||
Adjusted Operating Expense Ratio | ||||||||||||||||||||||||||
| Total operating expense | 90,012 | 94,443 | 181,342 | 187,113 | ||||||||||||||||||||||
| Stock-based compensation expense | (2,554) | (2,708) | (5,522) | (5,539) | ||||||||||||||||||||||
| Other non-recurring charges | (3,330) | (3,181) | (6,454) | (4,106) | ||||||||||||||||||||||
| Total adjusted operating expenses | $ | 84,128 | $ | 88,554 | $ | 169,366 | $ | 177,468 | ||||||||||||||||||
Average Daily Principal Balance | $ | 2,642,958 | $ | 2,666,793 | $ | 2,682,049 | $ | 2,685,899 | ||||||||||||||||||
Adjusted Operating Expense Ratio | 12.8 | % | 13.3 | % | 12.7 | % | 13.3 | % | ||||||||||||||||||
Liquidity and Capital Resources
To date, we fund the majority of our operating liquidity and operating needs through a combination of cash flows from operations, securitizations, secured borrowings, Corporate financing and structured and whole loan sales. We may utilize these or other sources in the future. Our material cash requirements relate to funding our lending activities, our debt service obligations, our operating expenses, and investments in the long-term growth of the Company.
We generally target liquidity levels to support at least twelve months of our expected net cash outflows, including new originations, without access to our Corporate financing facility or equity markets. Elevated and fluctuating interest rates, credit trends and other macroeconomic and geopolitical conditions could continue to have an impact on market volatility which could adversely impact our business, liquidity, and capital resources. Future decreases in cash flows from operations resulting from delinquencies, defaults, and losses would decrease the cash available for the capital uses described above. We may incur additional indebtedness or issue equity in order to meet our capital spending and liquidity requirements, as well as to fund growth opportunities that we may pursue.
The following table summarizes our total liquidity reserves:
| June 30, 2026 | ||||||||||||||||||||
| (in thousands) | Total capacity | Amount borrowed/utilized | Remaining available capacity | |||||||||||||||||
| Cash and cash equivalents | $ | 139,590 | N/A | $ | 139,590 | |||||||||||||||
| Restricted cash | 72,839 | N/A | 72,839 | |||||||||||||||||
| Secured financing | 1,189,091 | 308,620 | 880,471 | |||||||||||||||||
Whole loan forward flow agreements | 50,000 | 29,568 | 20,432 | |||||||||||||||||
| Total liquidity | $ | 1,451,520 | $ | 338,188 | $ | 1,113,332 | ||||||||||||||
Cash and cash flows
The following table summarizes our cash and cash equivalents, restricted cash and cash flows for the periods indicated:
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| Six Months Ended June 30, | ||||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| Cash, cash equivalents and restricted cash | $ | 212,429 | $ | 228,222 | ||||||||||
| Cash provided by (used in) | ||||||||||||||
| Operating activities | 213,044 | 205,505 | ||||||||||||
| Investing activities | (42,141) | (107,862) | ||||||||||||
| Financing activities | (157,408) | (84,046) | ||||||||||||
Our cash is held for working capital purposes and originating loans. Our restricted cash principally represents collections held in our securitizations and is applied currently after month-end to pay principal, interest expense, and satisfy any amount due to whole loan buyers with any excess amounts returned to us.
Operating Activities
Our net cash provided by operating activities was $213.0 million and $205.5 million for the six months ended June 30, 2026 and 2025, respectively. Cash flows from operating activities primarily include net income or losses adjusted for (i) non-cash items included in net income or loss, including depreciation and amortization expense, goodwill impairment charges, fair value adjustments, net, origination fees for loans at fair value, net, gain on loan sales, stock-based compensation expense and deferred tax provision, net, (ii) originations of loans sold and held for sale, and proceeds from sale of loans and (iii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of various payments. The $7.5 million increase in our net cash provided by operating activities is primarily driven by a $28.6 million increase in our fair value adjustment, net, $13.6 million increase in our origination fees for Loans Receivable at Fair Value, net, and $20.5 million increase in our originations of loans sold and held for sale. These were partially offset by $22.3 million decrease due to proceeds from the sale of loans, a $5.8 million decrease in our net income, $12.8 million decrease relating to our change in other assets and other liabilities, and $14.9 million decrease in relating to Asset-Backed Borrowings at Amortized Cost.
Investing Activities
Our net cash used in investing activities was $42.1 million for the six months ended June 30, 2026 and net cash used in investing activities was $107.9 million for the six months ended June 30, 2025. Our investing activities consist primarily of loan originations and loan repayments. We invest in purchases of property and equipment and incur system development costs. Purchases of property and equipment, and capitalization of system development costs may vary from period to period due to the timing of the expansion of our operations, the addition of employee headcount and the development cycles of our system development. The change in our net cash provided by investing activities is primarily due to $88.1 million less in originations and purchases of loans held for investment. This was partially offset by $21.7 million lower loan repayments.
Financing Activities
Our net cash used in financing activities was $157.4 million and $84.0 million for the six months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026, net cash used in financing activities was primarily driven by amortization payments on our Asset-backed borrowings at amortized cost, asset-backed notes at fair value, and repayments on our Corporate financing; partially offset by borrowings under our Asset-backed borrowings at amortized cost, net borrowings on our secured financing, and net payments related to stock-based activities.
Sources of Funds
Debt and Available Credit
Asset-Backed Securitizations
As of June 30, 2026, we had $2.1 billion of outstanding asset-backed notes. Our securitizations utilize special purpose entities which are also VIEs that meet the requirements to be consolidated in our financial statements. For more information regarding our VIEs and asset-backed securitizations, see Note 4, Variable Interest Entities and Note 8, Borrowings, respectively, of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.
Our ability to utilize our asset-backed securitizations as described herein is subject to compliance with various requirements including eligibility criteria for the loan collateral and covenants and other requirements. As of June 30, 2026, we were in compliance with all covenants and requirements of all our asset-backed notes.
Secured Financings
As of June 30, 2026, we maintained five secured warehouse financing facilities with aggregate commitments of approximately $1,189.1 million and approximately $880.5 million of contractual undrawn capacity. The facilities have staggered revolving periods extending through 2029, and during the second quarter of 2026, we entered into the PLW V Facility, which has a final maturity in 2030. Borrowings under the facilities generally bear interest at floating rates based on Term SOFR and are secured by eligible personal loan receivables. Availability under the facilities is subject to borrowing-base limitations, collateral eligibility and concentration requirements, performance triggers, covenants and other customary conditions; accordingly, actual borrowing availability may be less than contractual undrawn capacity. See Note 8, Borrowings, for additional information regarding our secured financings.
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Asset-Backed Borrowings at Amortized Cost
On February 9, 2026, we issued $485.0 million of Series 2026-A asset-backed notes secured by a pool of our unsecured and secured personal installment loans (the “2026-A Securitization”). The 2026-A Securitization included five classes of fixed rate notes. The notes were offered and sold in a private placement in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, and were priced with a weighted average yield of 5.32% per annum and a weighted average coupon of 5.25% per annum.
On February 9, 2026, we redeemed series 2025-A asset-backed notes in the amount of $425.1 million. The asset-backed notes were carried at amortized cost, and the unamortized costs were recognized in the Condensed Consolidated Statements of Operations (Unaudited) as part of the interest expense.
On January 8, 2026, we redeemed series 2024-1 asset-backed notes in the amount of $28.7 million. The asset-backed notes were carried at amortized cost, and the unamortized costs were recognized in the Condensed Consolidated Statements of Operations (Unaudited) as part of the interest expense.
On October 17, 2025, we issued $441.2 million of Series 2025-D asset-backed notes secured by a pool of its unsecured and secured personal installment loans (the “2025-D Securitization”). The 2025-D Securitization included five classes of fixed rate notes. The notes were offered and sold in a private placement in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, and were priced with a weighted average yield of 5.77% per annum and a weighted average coupon of 5.69% per annum.
On August 21, 2025, we issued $538.5 million of Series 2025-C asset-backed notes secured by a pool of unsecured and secured personal installment loans (the "2025-C Securitization"). The 2025-C Securitization included five classes of fixed rate notes. The notes were offered and sold in a private placement in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, and were priced with a weighted average yield of 5.29% per annum and weighted average coupon of 5.23% per annum.
On June 5, 2025, we issued $439.3 million of Series 2025-B asset-backed notes secured by a pool of unsecured and secured personal installment loans (the "2025-B Securitization"). The 2025-B Securitization included five classes of fixed rate notes. The notes were offered and sold in a private placement in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, and were priced with a weighted average yield of 5.67% per annum and weighted average coupon of 5.57% per annum.
On January 16, 2025, we issued $425.1 million of Series 2025-A asset-backed notes secured by a pool of our unsecured and secured personal installment loans (the "2025-A Securitization"). The 2025-A Securitization included five classes of fixed rate notes. The notes were offered and sold in a private placement in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, and were priced with a weighted average yield of 6.95% per annum and weighted average coupon of 6.15% per annum.
On August 29, 2024, we issued $223.3 million of series 2024-2 asset-backed notes secured by a pool of our unsecured and secured personal installment loans (the "2024-2 Securitization"). The 2024-2 Securitization included four classes of fixed rate notes. The notes were offered and sold in a private placement in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, and were priced with a weighted average yield of 8.22% per annum and weighted average coupon of 8.07% per annum.
On February 13, 2024, we issued $199.5 million of Series 2024-1 asset-backed notes secured by a pool of our unsecured and secured personal installment loans (the "2024-1 Securitization"). The 2024-1 Securitization included four classes of fixed rate notes. The notes were offered and sold in a private placement in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, and were priced with a weighted average yield of 8.60% per annum and weighted average coupon of 8.43% per annum.
On October 19, 2023, we entered into a Receivables Loan and Security Agreement (the “Receivables Loan and Security Agreement”) 2023-A, pursuant to which the Company borrowed $197.4 million. Borrowings under the Receivables Loan and Security Agreement accrue interest at a weighted average interest rate equal to 10.05%. On November 10, 2025, we redeemed the 2023-A financing transaction. The financing was carried at amortized cost, and the unamortized costs were recognized in the Condensed Consolidated Statements of Operations (Unaudited) as part of the Interest Expense.
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On August 3, 2023 and April 26, 2024, we entered into separate forward flow whole loan sale agreements with institutional investors to sell up to $400.0 million and $150.0 million of personal loan originations, respectively. No loans were transferred under either agreement during the six months ended June 30, 2026, as our sale commitments had been previously satisfied, but we do continue to service any loans transferred. Although each arrangement is structured as a whole loan sale and we would continue to service any loans transferred, the transfers do not qualify as sales for accounting purposes. As a result, the related loan assets remain on our balance sheet and the cash proceeds are recorded as secured borrowings within asset-backed borrowings at amortized cost, with interest expense recognized over the term.
Corporate Financing
We previously entered into the Original Credit Agreement, as defined below, which provided for a senior secured term loan with an initial borrowing capacity of up to $150.0 million and was subsequently amended to increase total borrowing capacity by up to an additional $75.0 million and modify certain terms (including the interest rate structure and certain covenant and repayment provisions). On November 14, 2024, the Original Credit Agreement (as amended) was terminated and the outstanding term loan was repaid in full in connection with the Credit Agreement described below.
On October 23, 2024, we entered into a Credit Agreement with certain affiliates of Neuberger and McLaren Harbor LLC as lenders, and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent, pursuant to which we borrowed $235 million through a senior secured term loan (the “Credit Agreement” and the “Term Loan”). The Term Loan bears interest at (a) a cash rate of 12.50% per annum plus (b) an amount payable in cash or in kind, at our option, equal to 2.50% and is scheduled to mature on November 14, 2028. On November 14, 2024, we repaid in full the Original Credit Agreement, as amended. Certain prepayments under the Credit Agreement are subject to a prepayment premium. The obligations under the Credit Agreement are secured by our assets and certain of subsidiaries guaranteeing the loan, including pledges of the equity interests of certain subsidiaries that are directly or indirectly owned by us, subject to customary exceptions. The Credit Agreement contains several financial covenants; these covenants are included together with other customary affirmative and negative covenants (including reporting requirements), representations and warranties and events of default.
Under the Credit Agreement, we were required to repay a combined $12.5 million and $27.5 million of the Term Loan, prior to July 31, 2025 and January 31, 2026, respectively. As of June 30, 2026, we have fully repaid the required $12.5 million and $27.5 million of principal. In addition, the Company made additional prepayments of $20 million, not subject to a prepayment premium, and $10 million subject to a prepayment premium. Voluntary prepayment of the Term Loans in excess of certain thresholds and with certain other exceptions as set forth in the Credit Agreement, will be subject to a prepayment premium. As of December 31, 2025, the Company has made a total of $30.0 million of voluntary prepayments of principal, along with a total of $0.5 million in prepayment premiums. During the second quarter of 2026, we made additional voluntary prepayments of $30.0 million, which were subject to prepayment penalties totaling $1.5 million.
As of June 30, 2026, we were in compliance with all covenants and requirements on our outstanding debt and available credit. For more information regarding our Secured financing and Corporate financing, see Note 8, Borrowings of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.
Other loan sales
From time to time, we may enter into agreements to sell certain populations of our personal loans receivables, including non-performing loans originated as held for investment. For the six months ended June 30, 2026, we did not sell any such loans. For further information of these sales, see Note 5, Loans Held for Sale and Loans Sold of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.
Whole loan sales
In November 2022, we entered into a forward flow whole loan sale agreement with an institutional investor. Pursuant to this agreement, we have a commitment to sell a minimum of $2.0 million of our unsecured loan originations each month, with an option to sell up to $4.2 million each month, subject to certain eligibility criteria. The agreement is set to expire in December 2026, after being extended in December 2025.
In November 2023, we entered into a forward flow whole loan sale agreement with an institutional investor, under which we expect to sell approximately $100 million of our secured and unsecured personal loans in fiscal year 2026, subject to certain eligibility criteria. This agreement is scheduled to expire in November 2026.
The originations of loans sold and held for sale during the six months ended June 30, 2026 were $51.7 million. For further information on the whole loan sale transactions, see Note 5, Loans Held for Sale and Loans Sold of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.
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Bank Partnership Program and Servicing Agreement
On June 30, 2026, through our subsidiary Oportun, Inc., we entered into a Program Management Agreement with Column National Association, a national banking association, establishing a new bank partnership lending program. Under the agreement, Column may originate certain unsecured personal loans for consumers in select states, and we will provide the platform and related services, including marketing, application processing, fraud-prevention, servicing and program-administration services, subject to Column’s oversight and control and compliance with applicable law. The agreement permits us to purchase loans originated by Column, other than loans retained by Column, and includes certain exclusivity, compliance, oversight, audit, reporting, reserve, information-security, indemnification, termination and wind-down provisions. The agreement has an initial term of four years and renews automatically for successive one-year periods unless either party provides timely notice of non-renewal.
On August 11, 2020 we entered into a bank partnership program with Pathward, N.A., which was subsequently amended and restated, effective August 11, 2025. Under the program, we were obligated to purchase an increasing percentage of loans originated by Pathward, N.A. based on thresholds specified in the agreements. Per our September 26, 2025 agreement, we purchase 100% of Pathward originated loans and have purchased all loans previously owned by Pathward.
Contractual Obligations and Commitments
The material cash requirements for our contractual and other obligations primarily include those related our outstanding borrowings under our asset-backed notes, Secured financing, corporate and retail leases, and purchase commitments for technology used in the business. See Note 8, Borrowings and Note 15, Leases, Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for more information.
Liquidity Risks
We believe that our existing cash balance, anticipated positive cash flows from operations and available borrowing capacity under our credit facilities will be sufficient to meet our anticipated cash operating expense and capital expenditure requirements through at least the next 12 months. We do not have any significant unused sources of liquid assets. If our available cash balances are insufficient to satisfy our liquidity requirements, we will seek additional debt or equity financing and we may have to take additional actions to decrease expenses, curtail the origination of loans, and our ability to continue to support our growth and to respond to challenges could be impacted. In a higher interest rate environment, our ability to issue additional equity or incur debt may be impaired and our borrowing costs may increase. If we raise additional funds through the issuance of additional debt, the agreements governing such debt could contain covenants that would restrict our operations and such debt would rank senior to shares of our common stock. The sale of equity may result in dilution to our stockholders and those securities may have rights senior to those of our common stock. We may require additional capital beyond our currently anticipated amounts and additional capital may not be available on reasonable terms, or at all.
Critical Accounting Policies and Significant Judgments and Estimates
Our Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our condensed and consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K dated December 31, 2025, filed with the Securities and Exchange Commission on February 27, 2026, as amended ("2025 Form 10-K"), under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations. For additional information about our critical accounting policies and estimates, see the disclosure included in our 2025 Form 10-K.
Recently Issued Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report for a discussion of recent accounting pronouncements and future application of accounting standards.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a "Smaller Reporting Company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. This evaluation was conducted under the supervision of, and with the participation of our management, including our Chief Executive Officer and our Principal Financial and Principal Accounting Officer. Based on our evaluation, our Chief Executive Officer and our Principal Financial and Principal Accounting Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at the reasonable assurance level.
Inherent Limitations on Effectiveness of Controls
There are inherent limitations to the controls and effectiveness of any system of disclosure controls and procedures. These limitations include the possibility of human error, the circumvention or overriding of the controls and procedures and reasonable resource constraints. In addition, because we have designed our system of controls based on certain assumptions, which we believe are reasonable, about the likelihood of future events, our system of controls may not achieve its desired purpose under all possible future conditions. Accordingly, our disclosure controls and procedures provide reasonable assurance, but not absolute assurance, of achieving their objectives.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II ‑ OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may bring or be subject to other legal proceedings and claims in the ordinary course of business, including legal proceedings with third parties asserting infringement of their intellectual property rights, consumer litigation, and regulatory proceedings. Other than as described in this report, we are not presently a party to any legal proceedings that, if determined adversely to us, we believe would individually or taken together have a material adverse effect on our business, financial condition, cash flows or results of operations.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. Any of the following risks could have an adverse effect on our business, financial condition, liquidity, results of operations and prospects. These risks could cause the trading price of our common stock to decline, which could cause you to lose all or part of your investment. You should carefully consider these risks, all of the other information in this report, including our condensed and consolidated financial statements, the notes thereto and the sections entitled “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and general economic and business risks before making a decision to invest in our common stock. While we believe the risks described below include all material risks currently known by us, it is possible that these may not be the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
Summary of Risk Factors
See the following principal risks and other risks that may make an investment in our common stock speculative or risky:
Business, Financial and Operational Risks
•If we do not compete effectively in our target markets, our results of operations could be harmed.
•We may not be able to effectively manage the growth of our business.
•Our business may be adversely affected by disruptions in the credit markets and changes to interest rates on our borrowings.
•We currently rely on Pathward to originate a substantial portion of our loans. If our relationship with Pathward terminates, or if Pathward were to suspend, limit, or cease its operations or loan origination activities for any reason, and we are unable to engage another originating bank partner on a timely basis or at all, our business, results of operations and financial condition would be materially and adversely affected.
•Our results of operations and future prospects depend on our ability to retain existing members and attract new members.
•We have elected the fair value option and we use estimates in determining the fair value of our loans and our asset-backed notes. If our estimates prove incorrect, we may be required to write down the value of these assets or write up the value of these liabilities, which could adversely affect our results of operations.
•Our current level of interest rate spread may decline in the future. Any material reduction in our interest rate spread could adversely affect our results of operations.
•Our results of operations and financial condition and our borrowers’ ability to make payments on their loans have been and may be adversely affected by economic conditions and other factors that we cannot control.
•Our risk management efforts may not be effective, which may expose us to market risks that harm our results of operations.
•We may change our corporate strategies or underwriting and servicing practices, which may adversely affect our business.
•We rely extensively on models in managing many aspects of our business. If our models contain errors or are otherwise ineffective, our business could be adversely affected.
•If we are unable to collect payments and service the loans we make to members, our net charge-off rates may exceed expected loss rates, and our business and results of operations may be harmed.
•Our quarterly results are likely to fluctuate significantly and may not fully reflect the underlying performance of our business.
•We are, and intend in the future to continue, developing our financial products and services, and our failure to accurately predict their demand or growth could have an adverse effect on our business.
•The success and growth of our business depends upon our ability to continuously innovate and develop our products and technologies.
•Stockholder activism could disrupt our business, cause us to incur significant expenses, hinder execution of our business strategy, and impact our stock price.
•Negative publicity or public perception of our company or our industry could adversely affect our reputation, business, and results of operations.
•Competition for our highly skilled employees is intense, and we may not be able to attract and retain the employees we need to support the growth of our business.
•If we lose the services of any of our key management personnel, our business could suffer.
•Our success and future growth depend on our branding and marketing efforts.
•Any acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures, and other transactions could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm our business, and negatively impact our results of operations.
•Fraudulent activity could negatively impact our business, brand and reputation and require us to continue to take steps to reduce fraud risk.
•Security breaches and incidents may harm our reputation, adversely affect our results of operations, and expose us to liability.
•Any significant disruption in our computer systems and critical third-party vendors may impair the availability of our websites, applications, products or services, or otherwise harm our business.
•We are, and intend in the future to continue, expanding into new geographic regions, and our failure to comply with applicable laws or regulations, or accurately predict demand or growth, related to these geographic regions could have an adverse effect on our business.
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•We are exposed to geographic concentration risk.
•Our proprietary credit risk models rely in part on the use of third-party data to assess and predict the creditworthiness of our members, and if we lose the ability to license or use such third-party data, or if such third-party data contain inaccuracies, it may harm our results of operations.
•A deterioration in the financial condition of counterparties, including financial institutions, could expose us to credit losses, limit access to liquidity or disrupt our business.
•Our vendor relationships subject us to a variety of risks, and the failure of third parties to comply with legal or regulatory requirements or to provide various services that are important to our operations could have an adverse effect on our business.
•Our mission to provide inclusive, affordable financial services that empower our members to build a better future may conflict with the short-term interests of our stockholders or may not provide the long-term benefits that we expect and may adversely impact our business operations, results of operations, and financial condition.
•If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus on the mission that contribute to our business.
•Our international operations involve inherent risks which could result in harm to our business.
Funding and Liquidity Risks
•We have incurred substantial debt and may issue debt securities or otherwise incur substantial debt in the future, which may adversely affect our financial condition and negatively impact our operations.
•A breach of early payment triggers or covenants or other terms of our agreements with lenders could result in an early amortization, default, and/or acceleration of the related funding facilities.
•Our securitizations and structured and whole loan sales may expose us to certain risks, and we can provide no assurance that we will be able to conduct such transactions in the future, which may require us to seek more costly financing.
•We may need to raise additional funds in the future, including through equity, debt, or convertible debt financings, to support business growth and those funds may not be available on acceptable terms, or at all.
Intellectual Property Risks
•It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection.
•We have been, and may in the future be, sued by third parties for alleged infringement of their proprietary rights.
•Our credit risk models, A.I. capabilities, and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.
•Some aspects of our business processes include open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Industry and Regulatory Risks
•The financial services industry is highly regulated. Changes in regulations or in the way regulations are applied to our business could adversely affect our business.
•Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses and reputational harm.
•Internet-based and electronic signature-based loan origination processes may give rise to greater risks than paper-based processes.
•The CFPB has broad authority to regulate consumer financial services, creating uncertainty as to how the agency’s actions or the actions of any other new agency could impact our business.
•The collection, storage, use, disclosure, and other processing of personal information is an area of increasing complexity and scrutiny.
•Our bank partnership products may lead to regulatory risk and may increase our regulatory burden.
•Anti-money laundering, anti-terrorism financing and economic sanctions laws could have adverse consequences for us.
Business, Financial and Operational Risks
If we do not compete effectively in our target markets, our results of operations could be harmed.
The industries in which we compete are highly competitive, continuously changing, highly innovative, and increasingly subject to regulatory scrutiny and oversight. Our current and potential future competition primarily includes other consumer finance companies, financial technology companies, technology platforms, neobanks, challenger banks, and financial institutions, as well as other nonbank lenders serving consumers who do not have access to mainstream credit, including online marketplace lenders, point-of-sale lending, payday lenders, and auto title lenders and pawn shops focused on underserved borrowers. We may compete with others in the market who may in the future provide offerings similar to or competitive with ours, particularly companies who may provide lending, money management and other services through a platform similar to our platform.
Many of our current or potential competitors have significantly more access to low-cost capital as well as more financial, technical, marketing, and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their platforms and distribution channels. As such, many of our competitors can leverage their size, robust networks, financial wherewithal, brand awareness, pricing power and technological assets to compete with us. In addition, our potential competitors also include smaller, earlier-stage companies with more versatile technology platforms, increased operational efficiencies, and greater brand recognition than us. To the extent new entrants gain market share, the use of our products and services would decline. Our long-term success depends on our ability to compete effectively against existing and potential competitors that seek to provide banking and financial technology products and services. If we fail to compete effectively against these competitors, our revenues, results of operations, prospects for future growth and overall business will be materially and adversely affected.
We may not be able to effectively manage the growth of our business.
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We are required to continuously develop and adapt our operations, systems, and infrastructure in response to the increasing sophistication of the consumer financial services market, evolving fraud and information security landscape, and regulatory developments relating to existing and planned business operations. Although we have experienced rapid growth in our business and operations in the past, many economic and other factors outside of our control, including general economic and market conditions, public health outbreaks, consumer and commercial credit availability, the imposition of tariffs and other non-tariff trade barriers, increased energy and commodity price volatility, inflation, fluctuating interest rates, unemployment, and consumer debt levels, may adversely affect our ability to sustain revenue growth consistent with recent history and we cannot assure you that our business will grow at our historical growth rates. In addition, in the past, the growth and expansion of our business has placed significant demands on our management, operational, risk management, technology, marketing, compliance and finance and accounting infrastructure, and resulted in increased expenses, and we may not be able to increase our revenue sufficiently to offset such higher expenses. Overall revenue growth depends on a number of factors, including our ability to increase the origination volume of our products and services, attract new members and retain existing members, build our brand, manage our remote-first workforce, all while managing our business systems, operations and expenses. If we are unable to accomplish these tasks, our future growth may be harmed.
In addition, we have previously engaged in a series of cost-saving measures in response to challenging macroeconomic and geopolitical conditions, including workforce reductions and other operational streamlining measures, and may engage in further cost-saving measures in the future. Projections of the effectiveness of any cost-saving measures or other benefits associated with such measures were based on then-current business operations and market dynamics, and could be materially impacted by various factors, including significant economic, competitive and other uncertainties. If we fail to achieve some or all of the expected benefits of these decisions, our future growth, operating results, cash flows, and financial condition may be adversely affected.
Our business may be adversely affected by disruptions in the credit markets and changes to interest rates on our borrowings.
We depend on securitization transactions, warehouse facilities and other forms of debt financing, as well as whole loan and structured loan sales, in order to finance the principal amount of most of the loans we make to our members. See more information about our outstanding debt in Note 8, Borrowings to the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report. However, there is no assurance that these sources of capital will continue to be available in the future on terms favorable to us or at all. The availability of debt financing and other sources of capital depends on numerous factors, many of which are outside of our control. Conditions in the credit markets may experience disruption or deterioration, including as a result of fluctuating interest rates, which could make it difficult for us to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms. The debt capital available to us in the future, if available at all, may bear a higher interest rate and may be available only on terms and conditions less favorable than those of our existing debt and such debt may need to be incurred in an elevated interest rate environment. Events of default or breaches of financial, performance or other covenants, as a result of the underperformance of certain pools of loans underpinning our securitizations or other debt facilities, could reduce or terminate our access to funding from institutional investors. Such events could also result in default rates at a higher interest rate and therefore increase our cost of capital. In addition, our ability to access future capital may be impaired because our interests in our financed pools of loans are “first loss” interests and so these interests will only be realized to the extent all amounts owed to investors or lenders and service providers under our securitizations and debt facilities are paid in full. In the event of a sudden or unexpected shortage or restriction on the availability of funds, we cannot be sure that we will be able to maintain the necessary levels of funding to retain current levels of originations without incurring higher funding costs, a reduction in the term of funding instruments or increasing the rate of whole loan sales, or be able to access funding at all. If we are unable to arrange financing on favorable terms, our business may be adversely affected and we may not be able to grow our business as planned and we may have to curtail new originations and reduce credit lines to cardholders.
We currently rely on Pathward to originate a substantial portion of our loans. If our relationship with Pathward terminates, or if Pathward were to suspend, limit, or cease its operations or loan origination activities for any reason, and we are unable to engage another originating bank partner on a timely basis or at all, our business, results of operations and financial condition would be materially and adversely affected.
As of June 30, 2026, we relied on Pathward to originate a substantial portion of our loan originations, with the remaining loans being originated directly by us under our lending and servicing licenses across 2 states in the United States. In the three months ended June 30, 2026 and 2025, Pathward originated approximately 99% and 97% of aggregate personal loan originations, respectively.
In 2025, we entered into an amended and restated program agreement to extend our partnership with Pathward through 2029, which replaced the prior agreement in its entirety and governs the ongoing terms of our relationship. The amended and restated program agreement has an initial term of four years and will automatically renew for successive two-year periods following the initial four-year term, unless either party provides notice of its intent to not renew.
We or Pathward may terminate our arrangement immediately upon a material breach by the other party and failure to cure such breach within a cure period, if any representations or warranties are found to be false and such error is not cured within a cure period, bankruptcy or insolvency of either party, receipt of an order or judgment by a governmental entity, a material adverse effect, or a change of control. If our bank partnership arrangement with Pathward were to be suspended or limited, including a reduction in the volume of loans that Pathward chooses to originate, or if Pathward ceased its operations or otherwise terminated its relationship with us, our business, financial condition and results of operations would be adversely affected. If we need to enter into alternative arrangements with a different bank to replace or supplement our existing arrangement, we may not be able to negotiate a comparable alternative arrangement in a timely manner or at all and transitioning loan originations to a new bank may result in delays in the issuance of new loans. In addition, if we are unable to enter into an alternative arrangement with a different bank to fully replace or supplement our relationship with Pathward, we would potentially need to obtain additional state licenses to enable us to originate loans directly in the states where Pathward originates loans, as well as comply with other state and federal laws, which would be costly and time consuming, and there can be no assurances that any such licenses could be obtained in a timely manner or at all. For a further discussion of the risks and regulations applicable to our bank partnership with Pathward, see “Risk Factors—Our bank partnership products may lead to regulatory risk and may increase our regulatory burden, —We are, and intend in the future to continue, expanding into new geographic regions, and our failure to comply with
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applicable laws or regulations, or accurately predict demand or growth, related to these geographic regions could have an adverse effect on our business, —Security breaches and incidents may harm our reputation, adversely affect our results of operations, and expose us to liability.”
Our results of operations and future prospects depend on our ability to retain existing members and attract new members.
We operate in a rapidly changing and highly competitive industry and our results of operations and future prospects depend on, among other things, continued growth of our member base, our ability to increase the activity of our members, including use of additional products or services we offer, and our ability to attract members in a cost-effective manner. Our member retention rates may decline or fluctuate due to various factors, including pricing changes (including as a result of fluctuating interest rates), our expansion into new products and markets or changes to or sunsetting of existing products, our members' ability to obtain alternative funding sources based on their credit history with us, and new members we acquire in the future may be less loyal than our current member base. If our member retention rates decline and we are not able to attract new members in numbers sufficient to grow our business, this may adversely affect our business, results of operations and future prospects.
In particular, it is important that we continue to ensure that our members with loans remain loyal to us and we continue to extend loans to members who have successfully repaid their previous loans. As of June 30, 2026 and 2025, members with repeat loans comprised 80% and 77%, respectively, of our Owned Principal Balance at End of Period. If our repeat loan rates decline, we may not realize consistent or improved operating results from our existing member base.
We have elected the fair value option and we use estimates in determining the fair value of our loans and our asset-backed notes. If our estimates prove incorrect, we may be required to write down the value of these assets or write up the value of these liabilities, which could adversely affect our results of operations.
Our ability to measure and report our financial position and results of operations is influenced by the need to estimate the impact or outcome of future events on the basis of information available at the time of the issuance of the financial statements. We use estimates, assumptions, and judgments when certain financial assets and liabilities are measured and reported at fair value. Fair values and the information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices and/or other observable inputs provided by independent third-party sources, when available. During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain assets if trading becomes less frequent or market data becomes less observable. In such cases, certain asset valuations may require significant judgment, and may include inputs and assumptions that require greater estimation, including credit quality, liquidity, interest rates, and other relevant inputs. If actual results differ from our judgments, estimates or assumptions, then it may have a material adverse impact on our financial condition, results of operations or cash flows. Management has processes in place to monitor these judgments, estimates and assumptions, including review by our internal valuation committee, but these processes may not ensure that our judgments and assumptions are correct.
We use estimates and assumptions in determining the fair value of our loans receivable held for investment and asset-backed notes. Our Loans Receivable at Fair Value represented 87% of our total assets and our Asset-backed notes at Fair Value represented 5% of our total liabilities as of June 30, 2026. The fair value of our loans receivable held for investment are determined using Level 3 inputs and the fair value of our asset-backed notes are determined using Level 2 inputs. Changes to these inputs could significantly impact our fair value measurements. Valuations are highly dependent upon the reasonableness of our assumptions and the predictability of the relationships that drive the results of our valuation methodologies. In addition, a variety of factors such as changes in the interest rate environment and the credit markets, changes in average life, higher than anticipated delinquency and default levels or financial market illiquidity, may ultimately affect the fair values of our loans receivable and asset-backed notes. Material differences in these ultimate values from those determined based on management’s estimates and assumptions may require us to adjust the value of certain assets and liabilities, including in a manner that is not comparable to others in our industry, which could adversely affect our results of operations.
Our current level of interest rate spread may decline in the future. Any material reduction in our interest rate spread could adversely affect our results of operations.
We earn over 90% of our revenue from interest payments on the loans we make to our members. Financial institutions and other funding sources provide us with the capital to fund a substantial portion of the principal amount of our loans to members and charge us interest on funds that we borrow. In the event that the spread between the interest rate at which we lend to our members and the rate at which we borrow from our lenders decreases, our Net Revenue will decrease. Interest rates continue to fluctuate, which may increase our interest expense and cost of funds and may result in lower operating margins. The interest rates we charge to our members and pay to our lenders could each be affected by a variety of factors, including our ability to access capital markets, the volume of loans we make to our members, product mix, competition and regulatory limitations.
Market interest rate changes have had, and may continue to have, an adverse effect on our business forecasts and expectations and are highly sensitive to many macroeconomic factors beyond our control, such as the imposition of tariffs and non-tariff trade barriers, inflation, recession, the state of the credit markets, global economic disruptions, unemployment and the fiscal and monetary policies of the federal government and its agencies. Factors outside our control, including interest rate changes and widening credit spreads, have required, and may continue to require us to make adjustments to the fair value of our loans receivable held for investment or our asset-backed notes, which may in turn adversely affect our results of operations or lead to volatility in our Net Revenue. For example, elevated interest rates decrease the fair value of our loans receivable held for investment, which decreases Net Revenue, but also decreases the fair value of our asset-backed notes, which increases Net Revenue. Because the duration and fair value of our loans and asset-backed notes are different, the respective changes in fair value may not fully offset each other resulting in a negative impact on Net Revenue and increasing the volatility of our results of operations. Reductions in our interest rate spread have had and could continue to have an adverse effect on our business, results of operations, cash flows, and financial condition. We do not currently hedge our interest rate exposure associated with our debt financing or fair market valuation of our loans.
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Our results of operations and financial condition and our borrowers’ ability to make payments on their loans have been and may be adversely affected by economic conditions and other factors that we cannot control.
Key macroeconomic conditions historically have affected our business, results of operations and financial condition, and are likely to affect them in the future. Poor economic conditions reduce the demand and usage of our credit products and adversely affect the ability and willingness of members to pay amounts owed to us, increasing delinquencies, bankruptcies, and charge-offs and negatively impacting the fair value of our loans. They may also impact our ability to make accurate credit assessments or lending decisions. Many of these factors are outside our control and include: general economic conditions or outlook, unemployment levels, housing markets, immigration patterns and policies, including enforcement practices, gas prices, energy costs, tariffs and other non-tariff trade barriers, inflation, government shutdowns, delays in tax refunds, financial distress caused by recent or potential bank failures, volatility or disruption in the capital markets, changes in interest rates, and other macroeconomic circumstances as well as events such as natural disasters, acts of war, terrorism, public health outbreaks or adverse health developments, political instability, social unrest, and catastrophes. For example, the current U.S. administration has imposed significant new tariffs on imports from numerous trading partners; such tariffs and retaliatory measures by those trading partners have adversely impacted trade relations and created general market instability, and such effects may continue. If any of these factors negatively affect our members or if we are unable to mitigate the risks associated with them, our business, financial condition and results of operations could be adversely affected.
The U.S. has recently experienced historically high levels of inflation, which may increase our expenses and adversely impact our borrowers' ability to make payments on their loans. Increased interest rates have also had, and may continue to have, an adverse impact on the spending levels of consumers and their ability and willingness to borrow money. Higher interest rates often lead to higher payment obligations, which may reduce the ability of consumers to remain current on their obligations and, therefore, lead to increased delinquencies, defaults, consumer bankruptcies and charge-offs, and decreasing recoveries, all of which could have an adverse effect on our business. Further adverse changes in inflation and interest rates, including as a result of tariffs and other non-tariff trade barriers, could negatively impact consumer and business confidence, and adversely affect the economy as well as our business and results of operations. There can be no assurance that our forecasts of economic conditions, our assessments and monitoring of credit risk, and our efforts to mitigate credit risk through risk-based pricing, appropriate loan underwriting, management of loan delinquencies and charge-off rates are, or will be, sufficient to prevent an adverse impact to our business and financial results.
We recorded a net income of $25.2 million for the year ended December 31, 2025, primarily due to a net decrease in fair value and decreased operating expenses, and we recorded a net loss of $78.7 million for the year ended December 31, 2024, primarily due to a net decrease in fair value and increased cost of debt. We also experienced net losses prior to 2024.
We have in the past and may in the future take actions to streamline our operations, and such cost reduction efforts may adversely affect us in unforeseen ways, including interfering with our ability to achieve our business objectives; challenging our ability to effectively manage all aspects of our business operations; causing concerns from current and potential employees, vendors, partners and other third parties with whom we do business; and increasing the likelihood of turnover of other key employees, all of which may have an adverse impact on our business. Our plans may also change as we continue to refocus on reducing operating costs and streamlining operations. These actions may take more time than we currently estimate and we may not be able to achieve the cost-efficiencies sought.
Our members with credit products may be particularly negatively impacted by worsening economic conditions that place financial stress on these members resulting in loan defaults or charge-offs. Furthermore, many of our members have limited or no credit history and such borrowers have historically been, and may in the future be, disproportionately affected by adverse macroeconomic conditions. In addition, the imposition of tariffs and other non-tariff trade barriers, increased energy and commodity price volatility, inflation, fluctuating interest rates, unemployment, bankruptcy, major medical expenses, divorce, death, or other issues that affect our members have and could continue to affect our members’ willingness or ability to make payments on their loans. Our business is currently heavily concentrated on consumer lending and, as a result, we are more susceptible to fluctuations and risks particular to U.S. consumer credit than a company with a more diversified lending portfolio. If our members default under a loan receivable held directly by us, we will experience loss of principal and anticipated interest payments. Our servicing costs may also increase without a corresponding increase in our interest on loans.
Decreases in consumer demand for automobiles and declining values of vehicles securing outstanding secured personal loans would weaken collateral coverage for secured personal loans and increase the amount of loss in the event of default. Significant increases in the inventory of used vehicles may also depress the prices at which repossessed vehicles may be sold or delay the timing of these sales. Consequently, if a vehicle securing a secured personal loan is repossessed while the used car auction market is depressed, the sale proceeds for such vehicle may be lower than expected, resulting in higher than expected losses.
Our risk management efforts may not be effective, which may expose us to market risks that harm our results of operations.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, monitor, manage and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk, and other market-related risks, as well as regulatory and operational risks related to our business, assets, and liabilities. Our risk management policies, procedures and models may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified, or identify additional risks that arise in the future.
As our loan mix changes and as our product offerings evolve, our risk management strategies may not always adapt to such changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. Other of our methods for managing risk depend on the evaluation of information regarding markets, members or other matters that are publicly available or otherwise accessible to us. While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such outcomes. If our risk management efforts are ineffective, we could suffer losses that could harm our business, financial condition, and results of operations.
We may change our corporate strategies or underwriting and servicing practices, which may adversely affect our business.
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As our business grows and evolves, we have changed, and may in the future change, certain aspects of our corporate strategies or any of our underwriting guidelines without notice to our stockholders. Any changes in strategy or our underwriting or servicing practices could impact our business in any number of ways, including impacting our member mix, product and service offerings, risk profile of our loan portfolio, and operational and regulatory compliance requirements. We may also decide to modify our strategy with respect to whole loan sales, including increasing or decreasing the number of loans sold. We continue to evaluate our business strategies and underwriting and servicing practices and will continue to make changes to adapt to changing economic conditions, regulatory requirements and industry practices. Additionally, a change in our underwriting and servicing practices may reduce our credit spread and may increase our exposure to interest rate risk, default risk and liquidity risk.
We rely extensively on models in managing many aspects of our business. If our models contain errors or are otherwise ineffective, our business could be adversely affected.
Our ability to attract members and to build trust in our credit products is significantly dependent on our ability to effectively evaluate a member’s creditworthiness and likelihood of default. In deciding whether to extend credit to prospective members, we rely heavily on our proprietary credit risk models, which are statistical models built using third-party alternative data, credit bureau data, application data and our credit experience gained through monitoring the performance of our members over time. These models are built using forms of A.I., such as machine learning; however, the credit models do not use generative A.I., and once approved and implemented, remain static. If our credit risk models fail to adequately predict the creditworthiness of our members or their ability to repay their loans due to programming or other errors, or if any portion of the information pertaining to the potential member is incorrect, incomplete or becomes stale (whether by fraud, negligence or otherwise), and our systems do not detect such errors, inaccuracies or incompleteness, or any of the other components of our credit decision process described herein fails, we may experience higher than forecasted loan losses. Also, if we are unable to access certain third-party data used in our credit risk models, or access to such data is limited through new regulation or otherwise, our ability to accurately evaluate potential members may be compromised and our ability to continue to improve our A.I. models may be adversely affected. Credit and other information that we receive from third parties about a member may also be inaccurate or may not accurately reflect the member’s creditworthiness, which may adversely affect our loan pricing and approval process, resulting in mispriced loans, incorrect approvals or denials of loans. In addition, this information may not always be complete, up-to-date or properly evaluated. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures or available information indicate.
Our reliance on our credit risk models and other models in other aspects of our business, including valuation, pricing, collections management, marketing targeting models, fraud prevention, liquidity and capital planning, direct mail and telesales, and savings and investing algorithms may prove in practice to be less predictive than we expect for a variety of reasons, including as a result of errors in constructing, interpreting or using the models or the use of inaccurate assumptions (including failures to update assumptions appropriately in a timely manner). We rely on our credit risk models and other models to develop and manage our products and services. Our assumptions may be inaccurate, and our models may not be as predictive as expected for many reasons, in particular because they often involve matters that are inherently difficult to predict and beyond our control, such as macroeconomic conditions, credit market volatility, the interest rate environment, and human behavior, and they often involve complex interactions between a number of dependent and independent variables and factors. In particular, even if the general accuracy of our valuation models is validated, valuations are highly dependent upon the reasonableness of our assumptions and the predictability of the relationships that drive the results of the models. The errors or inaccuracies in our models may be material and could lead us to make wrong or sub-optimal decisions in managing our business.
Additionally, if we make errors in the development, validation or implementation of any of the models or tools we use to underwrite the loans that we then securitize or sell to investors, those investors may experience higher delinquencies and losses. We may also be subject to liability to those investors if we misrepresented the characteristics of the loans sold because of those errors. Moreover, future performance of our members’ loans could differ from past experience because of macroeconomic factors, policy actions by regulators, lending by other institutions or reliability of data used in the underwriting process. To the extent that past experience has influenced the development of our underwriting procedures and proves to be inconsistent with future events, delinquency rates and losses on loans could increase. Errors in our models or tools and an inability to effectively forecast loss rates could also inhibit our ability to sell loans to investors or draw down on borrowings under our warehouse and other debt facilities, which could limit new origination growth and harm our financial performance. Additionally, the use of A.I. is relatively new and the regulatory framework is evolving and remains uncertain. Any negative regulatory or public scrutiny based upon this could adversely affect our business and reputation.
If we are unable to collect payments and service the loans we make to members, our net charge-off rates may exceed expected loss rates, and our business and results of operations may be harmed.
Our unsecured personal loans, which comprise a significant portion of our overall portfolio, are not secured by any collateral, not guaranteed or insured by any third party and not backed by any governmental authority in any way. We are therefore limited in our ability to collect on these loans if a member is unwilling or unable to repay them for any reason.
We currently act as servicer with respect to the unsecured and secured consumer loans, by our bank partners, and for parties to whom we have sold our loans, including the loans that are sold as part of whole loan sales, contributed to asset-backed securitizations, and pledged in connection with warehouse credit facilities. Our ability to adequately service our loans is dependent on our ability to maintain appropriate staffing levels and sufficiently train new member services and collections staff, contact our members when they default, and leverage technologies to service and collect amounts owed with respect to loans. Additionally, our member services and collections staff are dependent upon maintaining adequate information technology, telephony, and internet connectivity such that they can complete their job functions. The majority of our contact center staff work remotely. If our contact center operations become constrained for any reason, the effectiveness of our collection activities may be reduced.
Our net charge-off rate depends on the collectability of our loans and if we experience an unexpected significant increase in the number of members who fail to repay their loans or an increase in the principal amount of the loans that are not repaid, our revenue and results of operations could be adversely affected. Furthermore, personal unsecured loans are generally dischargeable in bankruptcy. If we experience an unexpected,
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significant increase in the number of members who successfully discharge their debt in a bankruptcy action, our results of operations could be adversely affected.
We incorporate our estimate of lifetime loan losses in our measurement of fair value for our loans receivable held for investment. While this evaluation process uses historical and other objective information, the classification of loans and the forecasts and establishment of loan losses and fair value are also dependent on our subjective assessment based upon our experience and judgment. Our methodology for establishing our fair value is based on the guidance in Accounting Standards Codification, 820 and 825, and, in part, on our historic loss experience. If member behavior changes as a result of economic conditions and if we are unable to predict how economic conditions and other factors impacting collectability may affect our estimate of lifetime loan losses, the fair value may be reduced for our Loans Receivable at Fair Value, which will decrease Net Revenue. Our calculations of fair value are estimates, and if these estimates are inaccurate, our results of operations could be adversely affected. Neither state regulators nor federal regulators regulate our calculations of fair value, and unlike traditional banks, we are not subject to periodic review by bank regulatory agencies of our loss estimates or our calculations of fair value. In addition, because our debt financings include delinquency triggers as predictors of losses, increased delinquencies or losses may reduce or terminate our access to debt financing.
Our quarterly results are likely to fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly results of operations are likely to vary significantly in the future and period-to-period comparisons of our results of operations may not be meaningful, due to factors such as our election of the fair value option and the evolving and uncertain nature of current macroeconomic conditions. Accordingly, the results for any one quarter are not necessarily an accurate indication of future performance. Our quarterly financial results may fluctuate due to a variety of factors, some of which are outside of our control and, as a result, may not fully reflect the underlying performance of our business. Factors that may cause fluctuations in our quarterly financial results include:
•loan volumes, product and loan mix and the channels through which our loans are originated;
•the number and extent of prepayments of loans;
•the effectiveness of our direct marketing and other marketing channels;
•the effectiveness of our proprietary credit risk models;
•the timing and success of new products and origination channels;
•the amount and timing of operating expenses and capital expenditures, including those related to member acquisition, development of our products and services, and maintenance and expansion of our business, operations and infrastructure;
•net charge-off rates;
•adjustments to the fair value of assets and liabilities on our balance sheet;
•our involvement in litigation or regulatory enforcement efforts (or the threat thereof) or those that impact our industry generally;
•changes in laws and regulations that impact our business;
•our borrowing costs and access to the capital markets; and
•general economic, industry, and market conditions, including economic slowdowns, recessions, the imposition of tariffs and other non-tariff trade barriers, increased energy and commodity price volatility, fluctuating interest and inflation rates, and tightening of credit markets and recent or potential bank failures.
In addition, we experience significant seasonality in demand for our loans, which is generally lower in the first quarter. The seasonal slowdown is primarily attributable to high loan demand around the holidays in the fourth quarter and the general increase in our members’ available cash flows in the first quarter, including cash received from tax refunds, which temporarily reduces their borrowing needs. While our growth has obscured this seasonality from our overall financial results, we expect our results of operations to continue to be affected by such seasonality in the future.
We are, and intend in the future to continue, developing our financial products and services, and our failure to accurately predict their demand or growth could have an adverse effect on our business.
We are, and intend in the future to continue, developing our financial products and services. As a result, we may invest resources in developing new tools, features, services, products and other offerings. New initiatives are inherently risky, as each involves unproven business strategies and new financial products and services with which we have limited or no prior development or operating experience.
We can provide no assurance that we will be able to develop, commercially market, scale, and achieve acceptance of, or success with, our products and services. Our development efforts with respect to these initiatives could distract management from current operations and could divert capital and other resources from other growth initiatives important to our business. In addition, our investment of resources to develop products and services may either be insufficient, result in expenses that are excessive considering revenue originated from these products and services, or may not be able to attract new members or retain existing members. Failure to accurately predict demand or growth with respect to our products and services could adversely impact our business, and these products and services may not become profitable, and even if they are profitable, operating margins of some new products may not be as high as the margins we have experienced historically or we may not be able to achieve target margins.
We have previously invested resources to develop, launch and sustain our products and services and subsequently decided to discontinue certain of these products and services in order to strategically realign our resources. We may not be able to effectively discontinue a product or service and we may fail to realize all of the anticipated benefits of discontinuing any of our products or services, including the need to devote significant attention and resources to any discontinuation, which may disrupt our business or may not be achieved within the anticipated time frame, or at all. In addition, product or service introductions may not always be successful. For example, in 2023, we announced the sunsetting of our checking account product, the sunsetting of our partnership with Sezzle, and the discontinuation of our investing and retirement products, in order to strategically realign our resources to focus on other products, as well as to reduce our expenses and simplify our business. Further, on September 24, 2024, we signed a definitive agreement to sell our credit cards receivable portfolio, and we completed the sale of our credit cards receivable portfolio on November 12, 2024. Failure to achieve the anticipated benefits from the discontinuation or sale of these products could adversely affect our results of operations.
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The success and growth of our business depends upon our ability to continuously innovate and develop our products and technologies.
The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. Developing and incorporating new technologies, including A.I., into our products and services may require significant investment, take considerable time, and ultimately may not be successful. The rapid evolution of A.I. may require us to allocate additional resources to help implement A.I. in order to minimize unintended or harmful impacts, and may also require us to make additional investments in the development of models or other systems, which may be costly. We have and will continue to develop and incorporate A.I. solutions and features into our models and our business, and these solutions and features may become more important to our operations, future growth or competitiveness over time. We may rely on A.I. solutions and features to help drive future growth and efficiency in our business, but there can be no assurance that we will realize the desired or anticipated benefits from A.I. in a timely or cost-effective manner. If we are not able to effectively implement technology-driven products and services as quickly as competitors or be successful in marketing these products and services to our members and strategic partners, demand for our products and services may decrease. Furthermore, our technology may become obsolete or uncompetitive, and there is no guarantee that we will be able to successfully develop, obtain or use new technologies to adapt our models and systems.
As with many disruptive innovations, new technologies present risks and challenges that could affect their adoption, and therefore our business. A.I. and related technologies are subject to public debate and heightened regulatory scrutiny. Any negative publicity or negative public perception of A.I. and related technologies could negatively impact demand for our products and services or hinder our ability to attract new members and strategic partners. The regulatory framework for A.I. and machine learning technologies is evolving and remains uncertain. Additionally, numerous U.S. states have proposed, and in certain cases enacted, legislation restricting the use of A.I. or imposing obligations in connection with its use, including by addressing forms of automated decision-making. For example, on September 23, 2025, the California Privacy Protection Agency’s regulations under the CCPA, which address, among other matters, obligations for businesses that use automated decision-making for “significant decisions” about California consumers, were approved. These regulations became effective January 1, 2026, with phased compliance deadlines relating to automated decision-making commencing in 2027. In addition, the California Privacy Protection Agency has begun coordinating with state attorneys general to enhance enforcement and policy development around privacy and artificial intelligence, underscoring that A.I. governance remains a priority area of focus for both state and federal regulators. It is likely that new laws and regulations will be adopted, or existing laws and regulations may be interpreted in new ways, that would affect our business, products and services and the way in which we use A.I., including with respect to fair lending laws. Our success will depend on our ability to develop and incorporate new technologies and adapt to technological changes and evolving laws, regulations, and industry standards, and we may be required to implement substantial changes to our processes and procedures, and to incur substantial costs, to make these adaptations. If we are unable to do so in a timely or cost-effective manner, our business could be harmed.
Stockholder activism could disrupt our business, cause us to incur significant expenses, hinder execution of our business strategy, and impact our stock price.
We have been and may in the future be subject to stockholder activism, which can arise in a variety of predictable or unpredictable situations, and can result in substantial costs, disrupt our business and operations, and divert management’s and our Board’s attention and resources away from our business. Additionally, stockholder activism could give rise to perceived uncertainties as to our long-term business, financial forecasts, future operations, and strategic planning, harm our reputation, adversely affect our relationships with our business partners, and make it more difficult to attract and retain qualified personnel. We may also be required to incur significant fees and other expenses related to activist matters, including for third-party advisors that would be retained by us to assist in navigating activist situations. Our stock price could fluctuate due to trading activity associated with various announcements, developments, and share purchases over the course of an activist campaign or otherwise be adversely affected by the events, risks, and uncertainties related to any such stockholder activism.
Negative publicity or public perception of our company or our industry could adversely affect our reputation, business, and results of operations.
Negative publicity about our industry or our company, including the terms of the consumer loans, effectiveness of our proprietary credit risk models, privacy and security practices, originations, marketing, servicing and collections, use of A.I., and other business practices or initiatives, litigation, regulatory compliance and the experience of members, even if inaccurate, could adversely affect our reputation and the confidence in our brands and business model or lead to changes in our business practices. We regularly engage with media outlets and consumer advocates, taking their feedback into account as we assess and refine our business practices and policies; based on those interactions, we have made and may continue to make adjustments to better serve our members and stakeholders. Despite our responsiveness to the inquiries, certain media outlets and consumer advocates chose to and have continued to highlight the very past practices that we had already modified. The proliferation of social media may increase the likelihood that negative public opinion will impact our reputation and business. Our reputation is very important to attracting new members and retaining existing members. While we believe that we have a good reputation and that we provide members with a superior experience, there can be no assurance that we will continue to maintain a good relationship with members.
In addition, negative perception may result in our being subject to more restrictive laws and regulations and potential investigations, enforcement actions and lawsuits. If there are changes in the laws affecting any of our products, or our marketing and servicing, or if we become subject to such investigations, enforcement actions and lawsuits, our financial condition and results of operations would be adversely affected. Entry into new products, as well as into the banking business or new origination channels, such as bank partnerships, and other partnerships, could lead to negative publicity or draw additional scrutiny.
Harm to our reputation can also arise from many other sources, including employee or former employee misconduct, misconduct by outsourced service providers or other counterparties, failure by us or our partners to meet minimum standards of service and quality, and inadequate protection of member information and compliance failures and claims. Our reputation may also be harmed if we fail to maintain our certification as a Community Development Financial Institution.
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Competition for our highly skilled employees is intense, and we may not be able to attract and retain the employees we need to support the growth of our business.
Competition for highly skilled personnel, particularly engineering and data analytics personnel, is extremely intense across the country and is likely to continue to increase. We have experienced and expect to continue to face difficulty identifying and hiring qualified personnel in many areas. We may not be able to hire or retain such personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. For example, changes to U.S. immigration policies, particularly to H-1B and other visa programs, and restrictions on travel could restrain the flow of technical and professional talent into the U.S. and may inhibit our ability to hire qualified personnel. In particular, employee candidates, specifically in high-technology industries, often consider the value of any equity they may receive in connection with their employment, so significant volatility or a further decline in the price of our stock may adversely affect our recruitment strategies. Further, the reductions in force could negatively impact employee morale and make it more difficult to attract, retain and hire new talent. Our failure to attract and retain suitably qualified individuals could have an adverse effect on our ability to operate our business and achieve our corporate strategies.
In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to serve our members could be adversely affected.
If we lose the services of any of our key management personnel, our business could suffer.
Our future success significantly depends on the continued service and performance of our key management personnel. Competition for these employees is intense and we may not be able to replace, attract and retain key personnel. We do not maintain key-man insurance for our senior management team. The loss of the service of our senior management team or key team members, and the process to replace any of them, or the inability to attract additional qualified personnel as needed, all of which would involve significant time and expense, could harm our business and impact our ability to recruit and retain personnel. Our key management personnel are at-will employees and, therefore, they could terminate their employment with us at any time. Competition for executive management is high, and it may take months to find a candidate that meets our requirements. Such recruiting efforts could divert the attention of our existing management team. Accordingly, the loss of one or more of our key management personnel could have an adverse effect on our business. If the management team, including any new hires that we make, fails to work together effectively and to execute our plans and strategies on a timely basis then our business and future growth prospects could be harmed.
Changes in our executive management team resulting from the hiring or departure of executives, including key personnel or members of senior management, could disrupt our operations and impact our ability to attract, integrate, retain and motivate employees, and have an adverse effect on our business. In particular, it could adversely impact our internal control environment, divert employee and management attention from ongoing business activities and strategic objectives, negatively affect employee morale and retention, and damage company culture. There can be no assurance that any of our other key personnel will remain with us, that the costs associated with retaining current key personnel and hiring new key personnel will be favorable or acceptable to us or that new key personnel will be as successful as their predecessors.
Our success and future growth depend on our branding and marketing efforts.
If our marketing efforts are not successful or if we are unsuccessful in developing our brand marketing campaigns, our ability to attract and retain members, attract new strategic partners and grow our business may be negatively impacted. If any of our current marketing channels becomes less effective, if we are unable to continue to use any of these channels, if the cost of using these channels significantly increases or if we are not successful in generating new channels, we may not be able to attract new members in a cost-effective manner or increase the activity of our existing members. If we are unable to recover our marketing costs, including through increases in the size, value or overall number of credit products we originate, or through our savings product, it could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Any acquisitions, strategic investments, entries into new businesses, joint ventures, divestitures, and other transactions could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm our business, and negatively impact our results of operations.
Our success will depend, in part, on our ability to grow our business. In some circumstances, we may determine to do so through the acquisition of complementary businesses and technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to successfully complete identified acquisitions. We have previously acquired, and in the future, may acquire, complementary assets or businesses. Further, the full benefits of acquisitions, including anticipated growth opportunities, may not be realized as expected or may not be achieved within the anticipated time frame, or at all. 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 members to our systems;
•retention of employees from the acquired company;
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•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;
•acquisitions could result in dilutive issuances of equity securities or the incurrence of debt;
•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, security weaknesses and incidents, 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, claims or other liabilities in connection with the acquired company.
We have previously divested certain assets and product lines and we may continue to do so in the future. For example, on November 12, 2024, we completed the sale of our credit cards receivable portfolio. If we decide to sell assets or product lines, we may have difficulty obtaining terms acceptable to us in a timely manner, or at all. Additionally, we may experience difficulty separating out portions of, or entire, product lines, incur potential loss of revenue or experience negative impact on margins, or we may not achieve the desired strategic and financial benefits. Such potential transactions may also delay achievement of our strategic objectives, cause us to incur additional expenses, potentially disrupt customer or employee relationships, and expose us to unanticipated or ongoing obligations and liabilities, including as a result of our indemnification obligations. Further, during the pendency of a divestiture, we may be subject to risks related to a decline in the business, loss of employees, customers, or vendors and the risk that the transaction may not close, any of which would have a material adverse effect on the assets or product lines to be divested and the Company. If a divestiture is not completed for any reason, we may not be able to find another buyer on the same terms, and we may have incurred significant costs without the corresponding benefit.
Our failure to address these risks or other problems encountered in connection with our future acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities and harm our business generally.
Fraudulent activity could negatively impact our business, brand and reputation and require us to continue to take steps to reduce fraud risk.
Third parties have, and we expect that they will likely continue to attempt to commit fraud by, among other things, fraudulently obtaining credit products or creating fictitious accounts using stolen identities or personal information and making transactions with stolen financial instruments. We are subject to the risk of fraudulent activity associated with customers and third parties handling customer information and we have been subject to fraudulent activity in the past. Third parties may also seek to engage in abusive schemes or fraud attacks that are often difficult to detect and may be deployed at a scale that would otherwise not be possible in physical transactions. Risks associated with each of these include theft of funds and other monetary loss, the effects of which could be compounded if not detected quickly. Fraudulent activity may not be detected until well after it occurs and the severity and potential impact may not be fully known for a substantial period of time after it has been discovered. Measures to detect and reduce the risk of fraud and abusive behavior are complex, require continuous monitoring and enhancements, and may not be effective in detecting and preventing fraud, particularly new and continually evolving forms of fraud or in connection with new or expanded product offerings. If these measures do not succeed, our business could be materially adversely impacted.
Despite our efforts, the possibility of fraudulent or other malicious activities and human error or malfeasance cannot be eliminated entirely and will evolve as new and emerging technology is deployed, including the increasing use of personal mobile and computing devices that are outside of our network and control environments. These mobile technologies may be more susceptible to the fraudulent activities of organized criminals, perpetrators of fraud, hackers, terrorists and others. Additionally, increasing our product and service offerings may introduce opportunities for fraudulent activity that we have not previously experienced. Numerous and evolving fraud schemes and misuse of our products and services could subject us to significant costs and liabilities, require us to change our business practices, cause us to incur significant remediation costs, lead to loss of member confidence in, or decreased use of, our products and services, damage our reputation and brands, divert the attention of management from the business, result in litigation (including class action litigation), and lead to increased regulatory scrutiny and possibly regulatory investigations and intervention, any of which could have a material adverse impact on our business.
Security breaches and incidents may harm our reputation, adversely affect our results of operations, and expose us to liability.
We are increasingly dependent on information systems, services and infrastructure to operate our business. In the ordinary course of our business, we collect, process, transmit and store large amounts of sensitive information, including personal information, credit information and other sensitive data of our members and potential members. It is critical that we do so in a manner designed to maintain the confidentiality, integrity and availability of such sensitive information. Our reputation and ability to attract, retain and serve our members is dependent upon the reliable performance and security of our technology infrastructure and those of third parties that we utilize in our operations. These systems may be subject to damage or interruption from, among other things, earthquakes, adverse weather conditions, other natural disasters, terrorist attacks, rogue employees, power loss, telecommunications failures, technological errors or outages, and cybersecurity risks. Like other financial and technology services firms, we have been and continue to be the subject of actual or attempted unauthorized access, mishandling or misuse of information, computer viruses, ransomware or other malware, and cyber-attacks that could obtain or disclose confidential information, destroy data, disrupt or degrade service, threaten the integrity and availability of our systems, distributed denial of service attacks, social engineering, security breaches and incidents, and infiltration, exfiltration or other similar events. Our adoption of remote working arrangements for our corporate and many of our contact center employees may result in increased consumer or employee privacy, security, and fraud concerns arising from the increased electronic transfer and
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other online activity. For example, our employees are accessing our servers remotely through home or other networks to perform their job responsibilities and such security systems may be less secure than those used in our offices, which may subject us to increased security risks, including cybersecurity-related events, and expose us to risks of data or financial loss and associated disruptions to our business operations. Techniques used in cybersecurity attacks to obtain unauthorized access, disable or sabotage information technology systems change frequently, as data breaches and other cybersecurity events have become increasingly commonplace, including as a result of the intensification of state-sponsored cybersecurity attacks during periods of geopolitical conflict, such as the ongoing conflicts in Ukraine and escalation of hostilities in the Middle East. We have seen, and will continue to see, industry-wide vulnerabilities, which could affect our or other parties’ systems. We also have incorporated A.I. technologies into our platform, and may continue to incorporate additional A.I. technologies into our platform in the future. Our use of A.I. technologies may create additional cybersecurity risks or increase cybersecurity risks, including risks of security breaches and incidents. Further, certain A.I. technologies may be used to identify and exploit security vulnerabilities, and otherwise may be used in connection with certain cybersecurity attacks, resulting in heightened risks of security breaches and incidents and of more impactful security breaches and incidents.
While we regularly monitor data flow inside and outside the company, attackers have become very sophisticated in the way they conceal access to systems, and we may not be aware that we have been attacked or otherwise have suffered a security breach or incident. Any event that leads to unauthorized access, use, destruction, or disclosure of personal information or other sensitive information that we maintain, including our own proprietary business information and sensitive information such as personal information regarding our members 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 data, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information.
We also face indirect technology, cybersecurity and operational risks relating to the members and other third parties with whom we do business or upon whom we rely, or whose technology we use to facilitate or enable our business activities, including suppliers, vendors, payment processors, and parties who have access to confidential information due to our agreements with them. The use of bank partnerships could leave us exposed to additional information security risks arising from the interaction between our and any partners’ information technology infrastructure, and the sharing between us of member information. We cannot guarantee that our systems and networks, or those of any third parties with whom we do business, have not been breached or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to any of our systems and networks. Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, contractors, third-party vendors, business partners, or by malicious third parties. 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 technical errors, computer malware, natural disasters, terrorism, war, geopolitical conflicts, or telecommunication or electrical failures, could interrupt our business or operations, harm our reputation, erode borrower confidence, negatively affect our ability to attract new members, or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our business and results of operations.
Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and our vendors may be unable to anticipate these techniques or to implement adequate preventative measures. Any failure or perceived failure by us, or the third parties with whom we do business, to comply with our privacy, confidentiality, or cybersecurity-related legal or other obligations to third parties, or any security breaches impacting us, our third-party providers or partners, or any security incidents or other events that result in the unauthorized access, release, destruction, or transfer of sensitive information, which could include personal information, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others. In addition, a security breach or incident could cause third parties to lose trust in us or subject us to claims by third parties that we have breached our privacy- and confidentiality-related obligations. Any belief by members or others that a security breach or other incident has affected us, even if a security breach or other incident has not affected us or any of our third-party providers or partners, could have any or all of the foregoing impacts on us, including harm to our reputation. Even the perception of inadequate security may harm our reputation and negatively impact our ability to attract and retain members. Moreover, security incidents and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the types described above. Due to the nature of security incidents, we cannot fully guarantee that our security measures intended to protect our systems and data will successfully prevent service interruptions or security incidents.
We incur significant costs to detect and prevent security breaches and other security-related incidents, and as we continuously explore cost-saving initiatives and technology reworks to enhance operational efficiency, the integration of new technologies, upgrades, or modifications undertaken for the purpose of cost-savings could create unforeseen challenges that may impact the robustness of our security infrastructure and result in significant legal and financial exposure and/or reputational harm. While these endeavors are aimed at improving various efficiencies of our business, they may inadvertently expose our security systems to vulnerabilities that could be exploited by malicious actors, leading to unauthorized access, data breaches or other security incidents. Any event that leads, or is believed to have led, to unauthorized access to, or use, loss, corruption, disclosure or other processing of our data 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 litigation, regulatory investigation and oversight, or mandatory corrective action; require us to verify the correctness of database contents; or otherwise subject us to liability under laws and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs for us to address the incident and in an effort to prevent further breaches or incidents, and result in significant legal and financial exposure and/or reputational harm. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity.
We cannot ensure that any limitations of liability provisions in any agreements with third parties would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular cybersecurity claim. We maintain errors, omissions, and cyber liability insurance policies covering certain security and privacy damages. However, we cannot be certain that our coverage will continue to be available on economically reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our business and financial condition.
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Our retail locations also process physical member loan documentation that contain confidential information about our members, including financial and personal information. We retain physical records in various storage locations outside of our retail locations. The loss or theft of, or other unauthorized access to or use of, member information and data from our retail locations or other storage locations could subject us to additional regulatory scrutiny, possible civil litigation and possible financial liability and losses.
Any significant disruption in our computer systems and critical third-party vendors may impair the availability of our websites, applications, products or services, or otherwise harm our business.
Our ability to deliver products and services, and otherwise operate our business and comply with applicable laws, depends on the efficient and uninterrupted operation of our computer systems and third-party data centers, as well as third-party providers. Our computer systems, including those provided by third-party providers and partners, may encounter service interruptions at any time due to system or software failure, natural disasters, severe weather conditions, health epidemics or pandemics, terrorist attacks, cyber-attacks, computer viruses, ransomware or other malware, physical or electronic break-ins, technical errors, insider threats, power outages or other events. Any of these occurrences may interrupt the availability, or reduce or adversely affect the functionality of our websites, applications, products or services, including our ability to service our loans, process loan applications, and provide digital financial services to our members. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. Additionally, our reliance on third-party providers may mean that we are not able to resolve operational problems internally or on a timely basis, as our operations will depend upon such third-party providers communicating appropriately and responding swiftly to their own service disruptions.
The implementation of technology changes and upgrades to maintain current and integrate new systems may cause service interruptions, transaction processing errors or system conversion delays and may cause us to fail to comply with applicable laws, all of which could have a material adverse effect on our business. We expect that new technologies and business processes applicable to the financial services industry will continue to emerge and that these new technologies and business processes may be better than those we currently use. There is no assurance that we will be able to successfully adopt new technology as critical systems and applications become obsolete and better ones become available. A failure to maintain and/or improve current technology and business processes, address capacity constraints, upgrade our systems and continually develop our technology and infrastructure, could disrupt our operations or cause our products and services to be less competitive.
In addition, the software that we have developed to use in our daily operations is highly complex and may contain undetected technical errors that could cause our computer systems to fail. For example, each loan that we make involves our proprietary automated underwriting process and depends on the efficient and uninterrupted operation of our computer systems. Any failure of our computer systems involving our automated underwriting process and any technical or other software errors pertaining to this automated underwriting process could compromise our ability to accurately evaluate potential members, which could result in significant claims and liability and negative publicity. Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any of our losses.
We are, and intend in the future to continue, expanding into new geographic regions, and our failure to comply with applicable laws or regulations, or accurately predict demand or growth, related to these geographic regions could have an adverse effect on our business.
We intend to continue expanding into new geographic regions, including through strategic partnerships or through our bank partnership programs. In addition, each of the new states where we do not currently operate may have different laws and regulations that apply to our products and services. As such, we expect to be subject to significant additional legal and regulatory requirements, including various federal and state consumer lending laws. We have limited experience in managing risks and the compliance requirements attendant to these additional legal and regulatory requirements in new geographies or related to strategic partnerships. The costs of compliance and any failure by us to comply with such regulatory requirements in new geographies could harm our business. If our partners decide to or are no longer able to provide their services, we could incur temporary disruptions in our loan transactions or we may be unable to do business in certain states or certain locations.
We are exposed to geographic concentration risk.
The geographic concentration of our loan originations may expose us to an increased risk of loss due to risks associated with certain regions. Certain regions of the U.S. from time to time will experience weaker economic conditions and higher unemployment and, consequently, will experience higher rates of delinquency and loss than on similar loans nationally. In addition, natural, man-made disasters or health epidemics or public health outbreaks in specific geographic regions may result in higher rates of delinquency and loss in those areas. A significant portion of our outstanding receivables originated in certain states, and within the states where we operate, originations are generally more concentrated in and around metropolitan areas and other population centers. Therefore, economic conditions, natural, man-made disasters, health epidemics or public health outbreaks, public policies that have the effect of drawing financial-services companies into contentious political or social issues, or other factors affecting these states or areas in particular could adversely impact the delinquency and default experience of the receivables and could adversely affect our business. Further, the concentration of our outstanding receivables in one or more states would have a disproportionate effect on us if governmental authorities in any of those states take action against us or take action affecting how we conduct our business.
As of June 30, 2026, 35.7%, 26.6%, 12.4%, 6.7% and 4.9% of our Owned Principal Balance at End of Period related to members from California, Texas, Florida, Illinois and New Jersey, respectively. If any of the events noted in these risk factors were to occur in or have a disproportionate impact in regions where we operate or plan to commence operations, it may negatively affect our business in many ways, including increased delinquencies and loan losses or a decrease in future originations.
Our proprietary credit risk models rely in part on the use of third-party data to assess and predict the creditworthiness of our members, and if we lose the ability to license or use such third-party data, or if such third-party data contain inaccuracies, it may harm our results of operations.
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We rely on our proprietary credit risk models, which are statistical models built using third-party alternative data, credit bureau data, application data and our credit experience gained through monitoring the payment performance of our members over time. If we are unable to access certain third-party data used in our credit risk models, or our access to such data is limited through new regulation or otherwise, our ability to accurately evaluate potential members will be compromised, and we may be unable to effectively predict probable credit losses inherent in our loan portfolio, which would negatively impact our results of operations. Third-party data sources, including credit bureau data and other alternative data sources, are aggregated by our risk engine to be used in our credit risk models to score applicants, make credit decisions, and in our verification processes to confirm member-reported information. If the information that we receive from third parties about a member is inaccurate or does not accurately reflect the member’s creditworthiness, this may cause us to provide loans to higher risk members than we intended through our underwriting process and/or inaccurately price the loans we make. In addition, this information may not always be complete, up-to-date or properly evaluated. For example, in some cases, information from third parties has a lag, such as credit reports that do not reflect delinquencies until the end of the month during which a borrower becomes 30 days delinquent, or where a customer may have lost his or her job in the course of applying or shortly after receiving a loan. In the case of many buy-now-pay-later products available on the market, such products are often not reported to or by the credit bureaus. Further, regulators may require banks and other lenders to not report certain negative performance data, such as medical debt, to the credit bureaus. As a result, credit bureau data may prove less reliable in predicting credit risk for borrowers.
We use numerous third-party data sources and multiple credit factors within our proprietary credit risk models, which helps mitigate, but does not eliminate, the risk of an inaccurate individual report. In addition, there are risks that the costs of our access to third-party data may increase or our terms with such third-party data providers could worsen. In recent years, well-publicized allegations involving the misuse or inappropriate sharing of personal information have led to expanded governmental scrutiny of practices relating to the safeguarding of personal information and the use or sharing of personal data by companies in the U.S. and other countries. That scrutiny has in some cases resulted in, and could in the future lead to, the adoption of stricter laws and regulations relating to the use and sharing of personal information. These types of laws and regulations could prohibit or significantly restrict our third-party data sources from sharing information, or could restrict our use of personal data when developing our proprietary credit risk models, or for fraud prevention purposes. These restrictions could also inhibit our development or marketing of certain products or services, or increase the costs of offering them to members or reduce the effectiveness of credit models at predicting credit outcomes or preventing fraud.
We follow procedures to verify a member’s identity and address which are designed to minimize fraud. These procedures may include visual inspection of applicant identification documents to ensure authenticity, review of paystubs or bank statements for proof of income and employment, and review of analysis of information from credit bureaus, fraud detection databases and other alternative data sources for verification of identity, employment, income and other debt obligations. If any of the information that is considered in the loan review process is inaccurate, whether intentional or not, and such inaccuracy is not detected prior to loan funding, the loan may have a greater risk of default than expected. If any of our procedures are not followed, or if these procedures fail, fraud may occur. Additionally, there is a risk that following the date of the loan application, a member may have defaulted on, or become delinquent in the payment of, a pre-existing debt obligation, taken on additional debt, lost his or her job or other sources of income or experienced other adverse financial events. Fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negatively impact our results of operations, brand and reputation and require us to take additional steps to reduce fraud risk, which could increase our costs.
A deterioration in the financial condition of counterparties, including financial institutions, could expose us to credit losses, limit access to liquidity or disrupt our business.
We have entered into, and may in the future enter into, financing and derivative transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, hedge funds, and other financial institutions. Furthermore, the operations of U.S. and global financial services institutions are interconnected, and a decline in the financial condition of one or more financial services institutions, or the perceived lack of creditworthiness of such financial institutions, may expose us to credit losses or defaults, limit access to liquidity or otherwise disrupt our business. As such, our financing and derivative transactions expose us to the risk of counterparty default, which can be exacerbated during periods of market illiquidity.
Our vendor relationships subject us to a variety of risks, and the failure of third parties to comply with legal or regulatory requirements or to provide various services that are important to our operations could have an adverse effect on our business.
We have vendors that, among other things, provide us with key services, including financial, technology and other services to support our loan origination, servicing and other activities. Our expansion into new channels, products or markets may introduce additional third-party service providers, strategic partners and other third parties on which we may become reliant. For example, in connection with the secured personal loan product, we work with third parties that provide information and/or services in connection with valuation, title management and title processing, repossessions, and remarketing. These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by our partner banks' federal bank regulators (the Federal Reserve Board, the Office of Comptroller of the Currency and the Federal Deposit Insurance Corporation) and our consumer financial services regulators, including state regulators, the CFPB, and requirements under the FTC’s Safeguards Rule to impose and oversee contractual information security obligations on certain qualifying third parties, which could increase the scope of management involvement and decrease the benefit that we receive from using third-party vendors. We could be adversely impacted to the extent our vendors and partners fail to comply with the legal requirements applicable to the particular products or services being offered. Moreover, if our bank partners or their regulators conclude that we have not met the heightened standards for oversight of our third-party vendors, we could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist or other remedial actions. In addition, the prudential regulators have issued regulatory guidance focused on the need for financial institutions to perform increased due diligence and ongoing monitoring of relationships with third-party service providers. In 2024, following the bankruptcy of a fintech platform, regulators have expanded expectations for third-party oversight by banks engaged in bank partnership programs. If regulators conclude that our bank partners have not met the heightened standards for oversight of their third-party service providers, any resulting regulatory action could have an adverse effect on their ability to fulfill their contractual obligations to us which could adversely affect our business, financial condition and results of operations.
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In some cases, third-party vendors are the sole source, or one of a limited number of sources, of the services they provide to us. Most of our vendor agreements are terminable on little or no notice, and if our current vendors were to stop or were unable to continue providing services to us on acceptable terms, we may be unable to procure alternatives from other vendors in a timely and efficient manner on acceptable terms or at all. If any third-party vendor fails to provide the services we require, due to factors outside our control, we could be subject to regulatory enforcement actions, suffer economic and reputational harm and incur significant costs to resolve any such disruptions in service. For a further discussion of the risks applicable to our partnership with Pathward, see “Risk Factors—We currently rely on Pathward to originate a substantial portion of our loans. If our relationship with Pathward terminates, or if Pathward were to suspend, limit, or cease its operations or loan origination activities for any reason, and we are unable to engage another originating bank partner on a timely basis or at all, our business, results of operations and financial condition would be materially and adversely affected.”
Our mission to provide inclusive, affordable financial services that empower our members to build a better future may conflict with the short-term interests of our stockholders or may not provide the long-term benefits that we expect and may adversely impact our business operations, results of operations, and financial condition.
Our mission is to provide inclusive, affordable financial services that empower our members to build a better future. We have made and may continue to make decisions that we believe will benefit our members and therefore provide long-term benefits for our business, even if our decision negatively impacts our short-term results of operations. For example, we constrain the maximum rates we charge in order to further our goal of making our loans affordable for our target members. Our decisions may negatively impact our short-term financial results or not provide the long-term benefits that we expect and may adversely impact our business operations, results of operations, and financial condition.
If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus on the mission that contribute to our business.
We believe that a critical component of our success is our corporate culture and our deep commitment to our mission. We believe this mission-based culture fosters innovation, encourages teamwork and cultivates creativity. Our mission defines our business philosophy as well as the emphasis that we place on our members, our people and our culture and is consistently reinforced to and by our employees. As we continue to evolve our business, including from the integration of employees and businesses acquired in connection with previous or future acquisitions or from our cost-saving measures, we may find it difficult to maintain these valuable aspects of our corporate culture and our long-term mission. Operating as a remote-first company may make it difficult for us to preserve our corporate culture and could negatively impact workforce morale and productivity. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork, and effectively focus on and pursue our mission and corporate objectives.
We are dependent on hiring an adequate number of hourly bilingual employees to run our business and are subject to government regulations concerning these and our other employees, including minimum wage laws.
Our workforce is comprised largely of bilingual employees who work on an hourly basis. In certain areas where we operate, there is significant competition for hourly bilingual employees and the lack of availability of an adequate number of hourly bilingual employees could adversely affect our operations. In addition, we are subject to applicable rules and regulations relating to our relationship with our employees, including minimum wage and break requirements, pay transparency, leave requirements, health benefits, unemployment and sales taxes, overtime and working conditions, and immigration status and policy changes for foreign work. We are from time to time subject to employment-related claims, including wage and hour claims. Further, legislated increases in the federal and state minimum wage, as well as increases in additional labor cost components, such as employee benefit costs, workers’ compensation insurance rates, and compliance costs and fines, as well as the cost of any potential litigation in connection with these regulations, would increase our labor costs.
Misconduct by our employees could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny and reputational harm.
Our reputation is critical to maintaining and developing relationships with our existing and potential members and third parties with whom we do business. There is a risk that our employees could be accused of or engage in misconduct that adversely affects our business, including fraud, redirection, misappropriation of member funds, improper execution of loan transactions, embezzlement and theft, disclosure of personal and business information and the failure to follow protocol when interacting with members that could lead us to suffer direct losses from the activity as well as serious reputational harm. Employee misconduct could also lead to regulatory sanctions and prompt regulators to allege or to determine based upon such misconduct that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect and deter violations of such rules. Misconduct by our employees, or even unsubstantiated allegations of misconduct, could harm our reputation and our business.
Our international operations involve inherent risks which could result in harm to our business.
As of June 30, 2026, we had 1,528 employees in Mexico, including employees related to our two contact centers. These employees provide certain English/Spanish bilingual support related to member-facing contact center activities, administrative and technology support of the contact centers and back-office support services. In addition, we have a technology development center in India, where we had 200 employees as of June 30, 2026. We have also previously engaged vendors that utilized employees or contractors based outside of the U.S. 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;
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•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;
•natural disasters, public health issues, epidemics or public health outbreaks, acts of war, and terrorism, and other events outside our control;
•compliance with applicable U.S. laws and foreign laws related to consumer protection, taxation, 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.
Violations of the complex foreign and U.S. laws, rules and regulations that apply to our international operations and offshore activities of our service providers may result in reputational harm, heightened regulatory scrutiny, fines, criminal actions or sanctions against us, our officers, our directors or our employees, as well as restrictions on the conduct of our business.
If we discover a material weakness in our internal control over financial reporting that we are unable to remedy or otherwise fail to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to report our financial results on a timely and accurate basis and the market price of our common stock may be adversely affected.
We have developed our disclosure controls, internal control over financial reporting and other procedures to ensure information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. To maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended and anticipate we will continue to expend significant resources, including accounting-related costs and significant management oversight. Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, including our cost-saving measures. If our internal controls are perceived as inadequate or we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.
Section 404 of the Sarbanes-Oxley Act requires our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. We are also required to have our independent registered public accounting firm attest to, and issue an opinion on, the effectiveness of our internal control over financial reporting. If we are unable to assert that our internal control over financial reporting is effective, or if, when required, our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which could subject us to sanctions or investigations by the SEC or other regulatory authorities, adversely affect our ability to access the credit markets and sell additional equity and commit additional financial and management resources to remediate deficiencies.
Because we receive cash in our retail locations through member loan repayments, we may be subject to theft and cash shortages due to employee errors.
Since our business requires us to receive cash in each of our retail locations, we are subject to the risk of theft (including by or facilitated by employees) and cash shortages due to employee errors. We have experienced theft and attempted theft in the past. Although we have implemented various procedures and programs to reduce these risks, maintain insurance coverage for theft and provide security measures for our facilities, we cannot make assurances that theft and employee error will not occur.
Our business is subject to the risks of natural disasters, public health crises and other catastrophic events, and to interruption by man-made problems.
A significant natural disaster, such as an earthquake, fire, hurricanes, flood or other catastrophic event (many of which are becoming more acute and frequent as a result of climate change), or interruptions by strikes, crime, terrorism, social unrest, cyber-attacks, computer viruses, internal or external system failures, telecommunications failures, a failure of banking or other financial institutions, pandemics or other public health crises, power outages or disruptions, political instability, geopolitical unrest, war, or other large-scale conflicts or unpredictable occurrences, could have an adverse effect on our business, results of operations and financial condition. For example, a significant natural disaster in Northern California or any other location in which we have offices or facilities or employees working remotely, could adversely affect our business operations, financial condition and prospects, and our insurance coverage may be insufficient to compensate us for losses that may occur.
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Our IT systems are backed up regularly to highly available, alternate data centers in a different region, and we have conducted disaster recovery testing of our mission critical systems. Despite any precautions we may take, however, the occurrence of a natural disaster or other unanticipated problems at our data centers could result in lengthy interruptions in our services. In addition, acts of war, terrorism, and other geopolitical unrest could cause disruptions in our business and lead to interruptions, delays or loss of critical data.
In addition, a large number of members make payments and apply for loans at our retail locations. If one or more of our retail locations becomes unavailable for any reason or other public health crisis, localized weather events, or natural or man-made disasters, our ability to conduct business and collect payments from members on a timely basis may be adversely affected, which could result in lower loan originations, higher delinquencies and increased losses. For example, during parts of the COVID-19 pandemic, we temporarily closed a few of our retail locations due to public health orders or other concerns, which we believe resulted in lower Aggregate Originations. While all of our retail locations are currently open, it is possible that we will have to temporarily close retail locations as necessary due to public health orders or other concerns relating to any public health crisis. The closure of retail locations could further adversely affect our loan originations, member experience, results of operations and financial condition.
The aforementioned risks may be further increased if our business continuity plans prove to be inadequate and there can be no assurance that both personnel and non-mission critical applications can be fully operational after a declared disaster within a defined recovery time. If our personnel, systems, or primary data center facilities are impacted, we may suffer interruptions and delays in our business operations. In addition, if these events impact our members or their ability to timely repay their loans, our business could be negatively affected.
In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business. While we seek to mitigate our business risks associated with climate change, there are inherent climate-related risks wherever business is conducted. Any of our primary locations may be vulnerable to the adverse effects of climate change. For example, our Bay Area headquarters has experienced and may continue to experience, climate-related events and at an increasing frequency, including floods, drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with the wildfires. Changing market dynamics, global policy developments and increasing frequency and impact of extreme weather events on critical infrastructure in the United States and elsewhere have the potential to disrupt our business, the business of our critical vendors, partners and members, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. In addition, changes in current and emerging legal and regulatory requirements with respect to climate change (e.g., carbon pricing) and other aspects of environmental, social and governance reporting (e.g., disclosure requirements) have resulted in and may continue to result in fluctuations in compliance requirements on our business, which may increase our operating costs and disrupt our business.
We may not maintain sufficient business interruption or property insurance to compensate us for potentially significant losses, including potential harm to our business that may result from interruptions in our ability to provide our financial products and services.
Unfavorable outcomes in legal proceedings may harm our business and results of operations.
We have been, and may in the future become, subject to litigation, claims, investigations, legal and administrative cases and proceedings, whether civil or criminal, or lawsuits by governmental agencies or private parties. If the results of any pending or future legal proceedings are unfavorable to us or if we are unable to successfully defend against third-party lawsuits, we may be required to pay monetary damages or fulfill our indemnification obligations or we may be subject to fines, penalties, injunctions or other censure. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues.
Health epidemics or other outbreaks may adversely impact our business and results of operations.
Our business could be adversely impacted by the effects of health epidemics or other outbreaks. For example, the COVID-19 pandemic and health and safety measures taken by governments and private industry in response to the COVID-19 pandemic significantly impacted worldwide economic activity and consumer behavior and created economic uncertainty. Worker shortages, supply chain issues, inflationary pressures, vaccine and testing requirements, the emergence of new health epidemics or outbreaks, and the reinstatement and subsequent lifting of restrictions and health and safety related measures in response to the emergence of new health epidemics or outbreaks have occurred in the past and may occur in the future.
We are unable to predict the future path or impact of any global or regional health epidemics or other outbreaks. An extended period of disruption as a result of a health epidemic or public health outbreaks may negatively impact us, as well as our members, vendors, and partners.
Funding and Liquidity Risks
We have incurred substantial debt and may issue debt securities or otherwise incur substantial debt in the future, which may adversely affect our financial condition and negatively impact our operations.
We have a substantial amount of indebtedness, which requires significant interest payments. From time to time, we may seek to obtain additional capital. We depend on securitization transactions, warehouse facilities and other forms of debt financing, as well as whole loan and structured loan sales, in order to finance the growth of our business and the origination of most of the loans we make to our members. Our outstanding borrowings or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate sufficient cash flow from operations to service our debt, we may need to adopt one or more alternatives to refinance our debt, dispose of assets or obtain necessary funds, including obtaining additional equity capital which could be on terms that may be onerous or highly dilutive.
We do not know whether we will be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.
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Our substantial level of indebtedness and the current constraints on our liquidity could have important consequences, including the following:
•we must use a substantial portion of our cash flow from operations to pay interest and principal on our debt, which reduces or will reduce funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, execution of growth strategies, and potential acquisitions;
•our ability to refinance such indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired;
•default and foreclosure on our and our subsidiaries’ assets if asset performance and our operating revenue are insufficient to repay debt obligations;
•mandatory repurchase obligations for any loans conveyed or sold into a debt financing or under a whole loan purchase facility if the representations and warranties we made with respect to those loans were not correct when made;
•acceleration of obligations to repay the indebtedness (or other outstanding indebtedness to the extent of cross default triggers), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios with respect to us or the loan portfolio securing our indebtedness or the maintenance of certain reserves or tangible net worth and do not obtain a waiver for such breach or renegotiate such covenant;
•inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
•inability to obtain necessary additional financing if changes in the characteristics of our loans or our collection and other loan servicing activities change and cease to meet conditions precedent for continued or additional availability under our debt financings;
•limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
•place us at a disadvantage compared to our competitors that have less debt;
•defaults based on loan portfolio performance or default in our collection and loan servicing obligations could result in our being replaced by a third-party or back-up servicer and notification to our members to redirect payments;
•downgrades or revisions of agency ratings for our debt financing;
•monitoring, administration and reporting costs and expenses, including legal, accounting and other monitoring reporting costs and expenses, required under our debt financings; and
•we may be more vulnerable to economic downturn and adverse developments in our business, including potential economic recession, inflation, and other factors outside our control.
Our ability to meet our expenses, to remain in compliance with our covenants under our debt instruments and to make future principal and interest payments in respect of our debt depends on, among other factors, our operating performance, competitive developments and financial market conditions, all of which are significantly affected by financial, business, economic and other factors. We are not able to control many of these factors. Given current industry and economic conditions, our cash flow may not be sufficient to allow us to pay principal and interest on our debt and meet our other obligations.
To the extent our relationship with lenders is negatively affected by disputes that may arise from time to time, it may be more difficult to seek covenant relief, if needed, or to raise additional funds in the future.
A breach of early payment triggers or covenants or other terms of our agreements with lenders could result in an early amortization, default, and/or acceleration of the related funding facilities.
The primary funding sources available to support the maintenance and growth of our business include, among others, asset-backed securitizations, revolving debt facilities (including the Secured financing), Corporate financing, and structured and whole loan sales. If we are unable to comply with various conditions precedent to availability under these facilities (including the eligibility of our loans), covenants and other specified requirements set forth in our agreements with our lenders, this could result in the early amortization, default and/or acceleration of our existing facilities. Such covenants and requirements include financial covenants, portfolio performance covenants and other events. The Corporate financing contains financial covenants requiring the maintenance of minimum liquidity and a maximum adjusted EBITDA-based corporate leverage covenant, together with other customary affirmative and negative covenants, and events of default. The obligations are secured by assets of the Company and its subsidiaries. Compliance with these covenants may limit our ability to take actions that might be to our advantage or to the advantage of our stockholders.
Our securitizations contain collateral performance threshold triggers related to the three-month average annualized gross charge-off or net charge-off rate which, if exceeded, would lead to early amortization. To support our collateral requirements under our financing agreements, we use a random selection process to take loans off our warehouse line to pledge to our securitizations. An inability to originate enough loans to meet the collateral requirements in our financing arrangements could result in the early amortization, default and/or acceleration of our existing facilities. Moreover, we currently act as servicer with respect to the unsecured consumer loans held by our subsidiaries. If we default in our servicing obligations or fail to meet certain financial covenants, an early amortization event or event of default could occur, and/or we could be replaced by our
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back-up servicer or another successor servicer. If the back-up servicer or successor servicer is not adequate, the collection and processing of repayments may be impaired.
During an early amortization period or if an event of default exists, principal and interest collections from the loans in our asset-backed facilities would be applied to repay principal under such facilities and principal collections would no longer be available on a revolving basis to fund purchases of newly originated loans. If an event of default exists under our revolving debt or loan sale facilities, the applicable lenders or purchasers’ commitments to extend further credit or purchase additional loans under the related facility would terminate. If collections were insufficient to repay the amounts due under our securitizations and our revolving debt facilities, the applicable lenders, trustees and noteholders could seek remedies, including against the collateral pledged under such facilities. Any of these events would negatively impact our liquidity, including our ability to originate new loans, and require us to rely on alternative funding sources. If we were unable to arrange new or alternative methods of financing on favorable terms, we might have to curtail the origination of loans, and we may be replaced by our back-up servicer or another successor servicer.
Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial ratios. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations. In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing. For more information on covenants, requirements and events, see Note 8, Borrowings to the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.
Our securitizations and structured and whole loan sales may expose us to certain risks, and we can provide no assurance that we will be able to conduct such transactions in the future, which may require us to seek more costly financing.
We have securitized, and may in the future securitize, certain of our loans to generate cash to originate new loans or pay our outstanding indebtedness. In each such transaction, we sell and convey a pool of loans to a special purpose entity ("SPE"). Concurrently, each SPE issues notes or certificates pursuant to the terms of an indenture. The securities issued by the SPE are secured by the pool of loans owned by the SPE. In exchange for the sale of a portion of the pool of loans to the SPE, we receive cash, which are the proceeds from the sale of the securities. We also contribute a portion of the pool of loans in consideration for the equity interests in the SPE. Subject to certain conditions in the indenture governing the notes issued by the SPE (or the agreement governing the SPE’s revolving loan), the SPE is permitted to purchase additional loans from us or distribute to us residual amounts received by it from the loan pool, which residual amounts are the cash amounts remaining after all amounts payable to service providers and the noteholders have been satisfied. We also have the ability to swap pools of loans with the SPE. Our equity interest in the SPE is a residual interest in that it entitles us as the equity owner of the SPE to residual cash flows, if any, from the loans and to any assets remaining in the SPE once the notes are satisfied and paid in full (or in the case of a revolving loan, paid in full and all commitments terminated). As a result of challenging credit and liquidity conditions, the value of the subordinated securities we retain in our securitizations might be reduced or, in some cases, eliminated.
The securitization market is subject to changing market conditions, and we may not be able to access this market when we would otherwise deem appropriate. For example, the securitization market has been volatile, driven by fluctuating rates, inflation, and recessionary concerns. Further, other matters, such as (i) accounting standards applicable to securitization transactions and (ii) capital and leverage requirements applicable to banks and other regulated financial institutions holding asset-backed securities, could result in decreased investor demand for securities issued through our securitization transactions, or increased competition from other institutions that undertake securitization transactions. In addition, compliance with certain regulatory requirements may affect the type of securitizations that we are able to complete.
Asset-backed securities and the securitization markets were heavily affected by the Dodd-Frank Act and have also been a focus of increased regulation by the SEC. For example, the Dodd-Frank Act mandates the implementation of rules requiring securitizers or originators to retain an economic interest in a portion of the credit risk for any asset that they securitize or originate. Furthermore, sponsors are prohibited from diluting the required risk retention by dividing the economic interest among multiple parties or hedging or transferring the credit risk the sponsor is required to maintain. Rules relating to securitizations rated by nationally-recognized statistical rating agencies require that the findings of any third-party due diligence service providers be made publicly available at least five business days prior to the first sale of securities, which has led and will continue to lead us to incur additional costs in connection with each securitization. In addition, some of the regulations to be implemented under the Dodd-Frank Act relating to securitization have not yet been finalized. Any new rules or changes to the Dodd-Frank Act (or the current rules thereunder) could adversely affect our ability and our cost to access the asset-backed securities market.
If it is not possible or economical for us to securitize our loans in the future, we would need to seek alternative financing to support our operations and to meet our existing debt obligations, which may not be available on commercially reasonable terms, or at all. If the cost of such alternative financing were to be higher than our securitizations, we would likely reduce the fair value of our loans receivable held for investment, which would negatively impact our results of operations.
The gain on sale generated by any of our structured or whole loan sales and servicing fees earned on sold loans represents additional liquidity. Demand for our loans at the current premiums may be impacted by factors outside our control, including availability of loan pools, demand by investors for loan assets and attractiveness of returns offered by competing investment alternatives offered by other loan originators with more attractive characteristics than our loan pools and loan purchaser interest. If we are unable to sell additional loans or obtain other financing, our revenue and liquidity may be negatively impacted and we may not be able to grow our business as planned and we may have to further curtail our originations.
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Our results of operations are affected by our ability to sell our loans for a premium over their net book value. Potential loan purchasers might reduce the premiums they are willing to pay, or even require a discount to principal balance, for the loans that they purchase during periods of economic slowdown or recession to compensate for any increased risks. A reduction in the sale price of the loans we sell under any future whole loan sale program would likely result in a reduction in the fair value of our Loans Receivable at Fair Value, which would negatively impact our results of operations. Any sustained decline in demand for our loans or increase in delinquencies, defaults or foreclosures may reduce the price we receive on future loan sales below our loan origination cost.
We may need to raise additional funds in the future, including through equity, debt, or convertible debt financings, to support business growth and those funds may not be available on acceptable terms, or at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new financial products and services, enhance our risk management model, improve our operating infrastructure, or acquire complementary businesses and technologies. Additionally, increases in our cost of funds and charge-offs may reduce our margins and require us to raise more capital to support our existing business and execute our corporate strategies. Accordingly, we may need to engage in equity, debt or convertible debt financings to secure additional funds. If we raise additional funds by issuing equity securities or securities convertible into equity securities, those securities may have rights, preferences or privileges senior to the rights of our common stock and our stockholders may experience dilution. Any large equity or equity-linked offering could also negatively impact our stock price. A number of factors, including market volatility or depressed valuations, trading prices in the equity markets, our financial condition and capital market conditions will impact our ability to obtain equity or debt financing.
Debt financing, if available, may have a high cost of funds and may involve covenants restricting our operations or our ability to incur additional debt. For example, our corporate lenders have previously and may in the future require warrants to boost their return, the issuance of which has been and may in the future be dilutive to our stockholders. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our stockholders and could also negatively impact our stock price. A number of factors, including market volatility or depressed valuations, trading prices in the equity markets, our financial condition and capital market conditions will impact our ability to obtain equity or debt financing. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could have an adverse effect on our business, results of operation and financial condition.
We maintain cash deposits in excess of federally insured limits. Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.
We regularly maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks that exceed the FDIC insurance limits. Bank failures, events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, or concerns or rumors about such events, may lead to liquidity constraints. For example, on March 10, 2023, Silicon Valley Bank failed and was taken into receivership by the FDIC. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership and on May 1, 2023, First Republic Bank was taken into receivership. While we primarily maintain cash deposits in large money center banks and did not maintain deposits at Silicon Valley Bank, Signature Bank, Silvergate Capital Corp. or First Republic Bank, the failure of a bank, or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, could adversely impact our liquidity and financial performance. There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. treasury, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis.
Intellectual Property Risks
It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection.
Our ability to offer our products and services to our members depends, in part, upon our proprietary technology. We may be unable to protect our proprietary technology effectively which would adversely affect our ability to compete with them. We rely on a combination of copyright, trade secret, trademark laws and other rights, as well as confidentiality procedures and contractual provisions to protect our proprietary technology, processes and other intellectual property and do not have patent protection. However, the steps we take to protect our intellectual property rights may be inadequate. For example, a third party may attempt to reverse engineer or otherwise obtain and use our proprietary technology without our consent. The pursuit of a claim against a third party for infringement of our intellectual property could be costly, and there can be no guarantee that any such efforts would be successful. Our failure to secure, protect and enforce our intellectual property rights could adversely affect our brand and business.
We have been, and may in the future be, sued by third parties for alleged infringement of their proprietary rights.
Our proprietary technology, including our credit risk models and A.I. algorithms, and their outputs, may infringe upon claims of third-party intellectual property, and we may face intellectual property challenges from such other parties. The expansion of our suite of financial products and services may create additional trademark risk. We may not be successful in defending against any such challenges or in obtaining licenses to avoid or resolve any intellectual property disputes. If we are unsuccessful, such claim or litigation could result in a requirement that we pay significant damages or licensing fees, which would negatively impact our financial performance. We may also be obligated to indemnify parties or pay substantial settlement costs, including royalty payments, and to modify applications or refund fees. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time consuming, and may divert the attention of our management and key personnel from our business operations.
Moreover, it has become common in recent years for individuals and groups to purchase intellectual property assets for the sole purpose of making claims of infringement and attempting to extract settlements from companies such as ours. Even in instances where we believe that claims
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and allegations of intellectual property infringement against us are without merit, defending against such claims is time consuming and expensive and could result in the diversion of time and attention of our management and employees. In addition, although in some cases a third party may have agreed to indemnify us for such costs, such indemnifying party may refuse or be unable to uphold its contractual obligations. In other cases, our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.
Our credit risk models, A.I. capabilities, and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.
Our credit risk models, A.I. capabilities, and internal systems rely on internally developed software that is highly technical and complex. In addition, our models, A.I. capabilities, and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors, bugs or other defects. Some errors may only be discovered after the code has been released for external or internal use. Errors, bugs or other defects within the software on which we rely may result in a negative experience for our members, or compromise our ability to protect member data or our intellectual property. Specifically, any defect in our credit risk models could result in the approval of unacceptably risky loans. Such defects could also result in reputational harm, increased regulatory scrutiny, fines or penalties, loss of members, loss of revenue, adjustments to the fair value of our loans receivable held for investment or our asset-backed notes, challenges in raising capital, or liability for damages, any of which could adversely affect our business, financial condition and results of operations.
Some aspects of our business processes include open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
We incorporate open source software into processes supporting our business. Such open source software may include software covered by licenses like the GNU General Public License and the Apache License. The terms of various open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that limits our use of the software, inhibits certain aspects of our systems and negatively affects our business operations.
Some open source licenses contain requirements that we make source code available at no cost for modifications or derivative works we create based upon the type of open source software we use. 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 credit risk models) or otherwise seeking to enforce the terms of the applicable open source license. If portions of our proprietary credit risk 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 and our intellectual property rights.
In addition to risks related to license requirements, the use of open source software can lead to greater risks than the use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to breach our website and systems that rely on open source software. Many of the risks associated with the use of open source software cannot be eliminated and could adversely affect our business.
Industry and Regulatory Risks
The financial services industry is highly regulated. Changes in regulations or in the way regulations are applied to our business could adversely affect our business.
We are subject to various federal, state and local regulatory regimes related to the financial services that we provide. The principal policy objectives of these regulatory regimes are to provide meaningful disclosures to consumers, to protect against unfair, deceptive and abusive acts or practices and to prevent discrimination. Laws and regulations, among other things, impose licensing and qualifications requirements; require various disclosures and consents; mandate or prohibit certain terms and conditions for various financial products; prohibit discrimination based on certain prohibited bases; prohibit unfair, deceptive or abusive acts or practices; require us to submit to examinations by federal and state regulatory regimes; and require us to maintain various policies, procedures and internal controls.
Federal and state agencies have broad enforcement powers over us, including powers to periodically examine and continuously monitor our operations and to investigate our business practices. These agencies have broad discretion to deem particular practices unfair, deceptive, abusive or otherwise not in accordance with the law. State attorneys general have a variety of legal mechanisms at their disposal to enforce state and federal consumer financial laws. For example, Section 1042 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") grants state attorneys general the ability to enforce the Dodd-Frank Act and regulations promulgated under the Dodd-Frank Act’s authority and to secure remedies against entities within their jurisdiction. State attorneys general also have a variety of legal mechanisms at their disposal to enforce state and federal consumer financial laws and have enforcement authority under state law with respect to unfair or deceptive practices. Generally, under these statutes, state attorneys general may conduct investigations, bring actions, and recover civil penalties or obtain injunctive relief against entities engaging in unfair, deceptive, or fraudulent acts. Attorneys general may also coordinate among themselves or with other regulators to enter into coordinated actions or settlements. Finally, several consumer financial laws like the Truth in Lending Act and Fair Credit Reporting Act grant enforcement or litigation authority to state attorneys general.
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Changes in laws or regulations, or the regulatory application or interpretation of the laws and regulations applicable to us, could adversely affect our ability to operate in the manner in which we currently conduct business, and may also make it more difficult or costly for us to originate additional loans, or for us to collect payments on our loans to members or otherwise operate our business by subjecting us, our service providers, or strategic partners, to additional licensing, registration and other regulatory requirements in the future.
Failure to comply with applicable laws and regulations could result in additional compliance requirements, limitations on our ability to collect or retain all or part of the principal of or interest on loans, fines or penalties, an inability to continue operations, modification in business practices, regulatory actions, loss of required licenses or registrations, potential impairment, voiding, or voidability of loans, rescission of contracts, civil and criminal liability and damage to our reputation. It could also result in a default or early amortization event under certain of our debt facilities and reduce or terminate availability of debt financing to us to fund originations. To the extent it is determined that any loan we make was not originated in accordance with all applicable laws as we are required to represent under our securitization and other debt facilities and in loan sales to investors, we could be obligated to repurchase for cash or swap for qualifying assets, any such loan determined not to have been originated in compliance with legal requirements. We may not have adequate liquidity and resources to make such cash repurchases or swap for qualifying assets.
Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses and reputational harm.
In the ordinary course of business, we have been named as a defendant in various legal actions, including class actions and other litigation. Generally, this litigation arises from the claims of violation of do-not-call, credit reporting, collection, and bankruptcy laws. We have in the past chosen to settle (and may in the future choose to settle) certain matters in order to avoid the time and expense of litigating them. Although none of the settlements have been material to our business, there is no assurance that, in the future, such settlements will not have a material adverse effect on our business. The complexity of the laws related to secured personal loans regarding vehicle titling, lien placement and repossession may enhance the risk of consumer litigation. Further, the origination of loans through bank partnerships may increase the risk of litigation or regulatory scrutiny including based on the "true lender" theory that seeks to recharacterize a lending transaction. State legislation requiring licensure and state restrictions including fee and rate limits on bank partner loans may also reduce profitability and/or increase regulatory and litigation risk. Additionally, platforms offering banking services and products through partners have also been challenged by federal and state regulators on a variety of claims.
Regulatory bodies may enact new laws or promulgate new regulations or view matters or interpret existing laws and regulations differently than in the past, or commence investigations or inquiries into our business practices. For example, in April 2022, the CFPB announced that it intended to examine non-bank financial companies that pose risks to consumers, and in November 2022, the Treasury Department issued a report encouraging the CFPB to increase its supervisory activity with respect to larger non-bank lenders. Since then, the CFPB has further modified its non-bank supervisory procedures (including in November 2022 and April 2024) and in September 2025 issued a final rule (effective October 27, 2025) that reinstates key pre-2022 procedural protections and signals a narrowing of the category of non-bank entities that may be designated for supervision. As a result, while the CFPB retains its supervisory authority over non-banks and could subject us to its supervisory process, the mechanics, scope and thresholds of that supervision are evolving, meaning regulatory scrutiny may move in either direction. If the CFPB decides to subject us to its supervisory process, it could significantly increase the level of regulatory scrutiny of our business practices. The direction of CFPB policy and enforcement priorities may continue to shift under future administrations or leadership, creating ongoing uncertainty regarding the interpretation and enforcement of federal consumer protection laws. Accordingly, the CFPB could promulgate rules, adopt different interpretations, or bring enforcement actions that materially impact our business.
Our involvement in any such matter could cause harm to our reputation and divert management attention from the operation of our business, even if the matters are ultimately determined in our favor. If resolved against us, legal actions could result in excessive verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our financial condition and how we operate our business.
In addition, a number of participants in the consumer financial services industry have been the subject of putative class action lawsuits, state attorney general actions and other state regulatory actions, 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 laws, actions alleging violations of the Americans with Disabilities Act, discrimination on the basis of race, ethnicity, gender or other prohibited bases, and allegations of noncompliance with various state and federal laws and regulations relating to originating and servicing consumer finance loans and other consumer financial services and products. The current federal and state regulatory environment, increased regulatory compliance efforts, and enhanced regulatory enforcement have resulted in significant operational and compliance costs and may prevent us from providing certain products and services. There is no assurance that these regulatory matters or other factors will not, in the future, affect how we conduct our business or adversely affect our business. In particular, legal proceedings brought under state consumer protection statutes or under several of the various federal consumer financial services statutes subject to the jurisdiction of the CFPB may result in a separate fine for each violation of the statute, which, particularly in the case of class action lawsuits, could result in damages substantially in excess of the amounts we earned from the underlying activities.
Some of our consumer financing agreements include arbitration clauses. If our arbitration agreements were to become unenforceable for any reason, we could experience an increase to our consumer litigation costs and exposure to potentially damaging class action lawsuits.
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 members. These self-identified issues and voluntary remediation payments could be significant, depending on the issue and the number of members impacted, and could generate litigation or regulatory investigations that subject us to additional risk.
Internet-based and electronic signature-based loan origination processes may give rise to greater risks than paper-based processes.
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We use internet-based loan processes to obtain application information, distribute certain legally required notices to applicants and borrowers, and to obtain electronically signed loan documents in lieu of paper documents with wet borrower signatures obtained in person. These processes may entail greater risks than would paper-based loan origination processes, including risks regarding the sufficiency of notice for compliance with consumer protection laws, risks that borrowers may challenge the authenticity of their signature or of the loan documents, risks that a court of law may not enforce electronically signed loan documents and risks that, despite controls, unauthorized changes are made to the electronic loan documents or electronic signature records are lost, corrupted, or deleted. If any of those factors were to cause any loans, or any of the terms of the loans, to be unenforceable against the borrowers, or impair our ability to service our loans, the value of our loan assets would decrease significantly to us and to our whole loan purchasers, securitization investors and warehouse lenders. In addition to increased default rates and losses on our loans, this could lead to the loss of whole loan purchasers and securitization investors and trigger terminations and amortizations under our debt warehouse facilities, each of which would materially adversely impact our business.
The CFPB has broad authority to regulate consumer financial services, creating uncertainty as to how the agency’s actions or the actions of any other new agency could impact our business.
The CFPB 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, the Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act and Regulation V, the Electronic Funds Transfer Act and Regulation E, and to enforce compliance with those laws. The CFPB is charged with the examination and supervision of certain participants in the consumer financial services market, including short-term, small dollar lenders, and larger participants in other areas of financial services. While historically, we have not been subject to CFPB supervisory authority, it is possible that we may become subject to additional regulatory scrutiny and compliance costs going forward through supervision by the CFPB. The CFPB may also request, through examination or investigation, reports concerning our organization, business conduct, markets and activities and if the CFPB were to determine that we were engaging in activities that pose risks to consumers, it may conduct on-site examinations of our business on a periodic basis.
In addition, the CFPB maintains an online complaint system that allows consumers to log complaints with respect to various consumer finance products, including the credit products we offer. This system could inform future CFPB decisions with respect to its regulatory, enforcement or examination focus. The CFPB also may issue requests for public input in certain areas of concern that may lead to increased regulatory scrutiny on us, our products and consumer finance industry and impose restrictions on fees and charges, thereby impacting results of our business.
Hello Digit, Inc. (“Digit”) received a CID from the CFPB in June 2020. The CID was disclosed and discussed during the acquisition process. The stated purpose of the CID was to determine whether Digit, in connection with offering its products or services, misrepresented the terms, conditions, or costs of the products or services in a manner that is unfair, deceptive, or abusive. While the Company believes that the business practices of the Company, including Digit, have been in full compliance with applicable laws, in the interest of resolving this matter, on August 11, 2022, Digit agreed to a consent order with the CFPB resolving such CID.
In addition, actions by regulatory bodies, including the CFPB, could result in requirements to alter or cease offering affected financial products and services, making them less attractive and restricting our ability to offer them. Regulatory bodies could also implement rules that restrict our effectiveness in servicing our financial products and services. Future regulatory actions against us or our competitors that discourage the use of our or their services or restrict our business activities could result in reputational harm and adversely affect our business. If the CFPB changes regulations that were adopted in the past by other regulators and transferred to the CFPB by the Dodd-Frank Act, or modifies through supervision or enforcement past regulatory guidance, or if the CFPB (or other regulators) interpret existing regulations in a different or stricter manner than they have been interpreted in the past by us, the industry or other regulators, our compliance costs and litigation exposure could increase materially. It is also possible that regulators could promulgate rules and bring enforcement actions that materially impact our business and the business of our lending partners.
The collection, storage, use, disclosure, and other processing of personal information is an area of increasing complexity and scrutiny.
We collect, store, use, disclose, and otherwise process a large volume of personal information about individuals (including members and employees). New laws and regulations concerning the processing of personal information continue to be vigorously debated and enacted at all levels of government across the United States and around the globe while existing laws, such as the Gramm-Leach-Bliley Act (“GLBA”) are being amended or reinterpreted to account for the rapidly evolving data economy. The California Consumer Privacy Act (“CCPA”), as augmented and otherwise amended by the California Privacy Rights Act of 2020, imposes significant requirements on businesses processing consumer personal information, principally around enabling and honoring consumer choices related to such processing. Regulations under the CCPA have now been finalized addressing, among other matters, the use of automated decision-making technology (“ADMT”) in “significant decisions”. The CCPA and other state comprehensive privacy laws enacted to date contain certain exemptions for personal information that is subject to the GLBA. In some cases, these laws also contain broader exemptions for entities, such as financial institutions, that are subject to the GLBA; however, these exemptions may not exempt us completely from these laws, and their scope and interpretation remain subject to uncertainty. Further, future laws may not include such exemptions. Violations of the CCPA can result in civil penalties assessed by the California Attorney General or the California Privacy Protection Agency and individual plaintiffs may pursue statutory damages in a private right of action for certain data breaches. Several U.S. states have already followed California’s lead in enacting comprehensive privacy legislation and others are likely to do so in the future. These developments reflect the continued evolution of state privacy regulation and the potential for expanding obligations on businesses that use consumer data. At the federal level, regulators, including the CFPB and FTC, have adopted, or are considering adopting, laws and regulations concerning personal information and data privacy and security. The FTC, for example, released its updated Standards for Safeguarding Customer Information (Safeguards Rule), effective June 9, 2023, which raises the bar for covered financial institutions’ information security programs through proscriptive requirements for accountability, oversight, risk assessments, encryption, and multi-factor authentication to protect all forms of customer information. Further, on October 22, 2024, the CFPB finalized the Section 1033 Rule on Personal Financial Data Rights, which requires certain financial institutions, and any party who controls or possesses information concerning a covered financial product or service, to provide financial data to consumers in a standardized electronic format through a consumer interface and limits collecting and maintaining data only as necessary to carry out transactions a consumer requests, prohibiting use of any information for targeted or behavioral advertising. The final rule has been challenged in the Eastern District Court of Kentucky. On July 29, 2025, the Eastern District of Kentucky issued an Order granting the stay of litigation requested by the
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CFPB while it works to promulgate a new rule-making process to revise the rule’s scope, definitions and timing. Compliance deadlines are uncertain since the CFPB has been enjoined from enforcing the rule and the April 1, 2026 deadline for the largest institutions has passed without action from the CFPB, and the rule’s ultimate substantive obligations could change materially. Because the substance and timing of the revised rule are uncertain at this time, it is possible it could adversely affect our business. The U.S. federal government also is contemplating federal privacy legislation. This patchwork of state and federal legislation and regulation may give rise to conflicts or differing views of personal privacy rights and of privacy, data protection, and security obligations to which we must adhere.
The rapidly evolving regulatory environment relating to privacy, data protection, and cybersecurity, along with increased scrutiny from consumers and their advocates and increased complexity in our organizational structure, demands careful attention to our own processing of personal information and processing by third parties acting on our behalf. For example, we’ve seen an increase in third-party arrangements, including, for example, with lead aggregators, bank partners, Lending as a Service partners and affiliate relationships. Our failure, or any failure by third parties with whom we do business, to comply with applicable laws or regulations or contractual obligations required by our business partners relating to privacy, data protection, or cybersecurity, and even a perceived failure, could damage our reputation, harm our ability to obtain market adoption, discourage existing and prospective members from using our products and services, require us to change our business practices, business partners or operational structure, or result in investigations, claims, or fines by governmental agencies and private plaintiffs, and other liabilities. Even in the absence of a challenge to our practices, we may incur substantial costs to implement new systems to comply with regulatory requirements, such as consumer requests concerning the processing of their personal information and to honor any choices that may be available to them by law.
Our bank partnership products may lead to regulatory risk and may increase our regulatory burden.
We currently have bank partnership programs with Pathward and Column banks to offer unsecured personal loans, secured personal loans, and provide deposit accounts, and other transaction services to our members. State and federal agencies have broad discretion in their interpretation of laws and their interpretation of requirements related to bank partnership programs and may elect to alter standards or the interpretation of the standards applicable to these programs. States are also introducing and passing legislation designed to examine these programs by defining who has the “predominant economic interest” in the loan transaction and prohibiting such entity from collecting interest and fees above state mandated caps. In addition, as a result of our bank partnerships, prudential bank regulators with supervisory authority over our partners have the ability to regulate aspects of our business. There has also been significant recent government enforcement action and litigation challenging the validity of such arrangements for lending products, including disputes seeking to recharacterize lending transactions on the basis that the non-bank party rather than the bank is the “true lender” or “de facto lender”, and in case law challenging the “valid when made” doctrine, which holds that based on federal preemption, state interest rate limitations are not applicable in the context of certain bank-non-bank partnership arrangements.
The uncertainty of the federal and state regulatory environments around bank partnership programs means that our efforts to launch products and services through bank partners may not ultimately be successful, or may be challenged by legislation or regulatory action. If the legal structure underlying our relationship with our bank partners were to be successfully challenged, we may be found to be in violation of state licensing requirements and state laws regulating interest rates and fees. In the event of such a challenge or if our arrangements with our bank partners were to change or end for any reason, we would need to rely on an alternative bank relationship, find an alternative bank relationship, rely on existing state licenses, obtain new state licenses, pursue a national bank charter, and/or be subject to the interest rate limitations of certain states. In addition, adverse orders or regulatory enforcement actions against our bank partners, even if unrelated to our business, could impose restrictions on their ability to continue to extend credit or on current terms. Regulation by federal and state regulators may also subject us to increased compliance, legal and operational costs, and could subject our business model to scrutiny and otherwise increase our regulatory burden, or may adversely affect our ability to expand our business.
Anti-money laundering, anti-terrorism financing and economic sanctions laws could have adverse consequences for us.
We maintain a compliance program designed to enable us to comply with all applicable anti-money laundering and anti-terrorism financing laws and regulations, including the Bank Secrecy Act and the USA PATRIOT Act and U.S. economic sanctions laws administered by the Office of Foreign Assets Control. This program includes policies, procedures, processes and other internal controls designed to identify, monitor, manage and mitigate the risk of money laundering and terrorist financing and engaging in transactions involving sanctioned countries, persons, and entities. These controls include procedures and processes to detect and report suspicious transactions, perform member due diligence, respond to requests from law enforcement, and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary instruments. Our failure to comply with anti-money laundering, economic and trade sanctions regulations, and similar laws could subject us to substantial civil and criminal penalties, or result in the loss or restriction of our state licenses, or liability under our contracts with third parties, which may significantly affect our ability to conduct some aspects of our business. Changes in this regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements, may significantly affect or change the manner in which we currently conduct some aspects of our business.
We may have to constrain our business activities to avoid being deemed an investment company under the Investment Company Act.
The Investment Company Act of 1940, as amended (the “Investment Company Act”) contains substantive legal requirements that regulate the way “investment companies” are permitted to conduct their business activities. We believe we have conducted, and we intend to continue to conduct, our business in a manner that does not result in our company being characterized as an investment company, including by relying on certain exemptions from registration as an investment company. We rely on guidance published by the SEC staff or on our analyses of such guidance to determine our qualification under these and other exemptions. To the extent that the SEC staff publishes new or different guidance with respect to these matters, we may be required to adjust our business operations accordingly. If we are deemed to be an investment company, we may attempt to seek exemptive relief from the SEC, which could impose significant costs and delays on our business. We may not receive such relief on a timely basis, if at all, and such relief may require us to modify or curtail our operations. If we are deemed to be an investment company, we may also be required to institute burdensome compliance requirements and our activities may be restricted.
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We are subject to governmental export and import controls that could subject us to liability, impair our ability to compete in international markets and adversely affect our business.
Although our business does not involve the commercial sale or distribution of hardware, software or technology, in the normal course of our business activities we may from time to time ship general commercial equipment outside the United States to our subsidiaries or affiliates for their internal use. In addition, we may export, transfer or provide access to software and technology to non-U.S. persons such as employees and contractors, as well as third-party vendors and consultants engaged to support our business activities. In all cases, the sharing of software and/or technology is solely for the internal use of the company or for the use by business partners to provide services to us, including software development. However, such shipments and transfers may be subject to U.S. and foreign regulations governing the export and import of goods, software and technology. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to significant sanctions, fines, penalties and reputational harm. Further, any change in applicable export, import or economic sanctions regulations or related legislation, shift in approach to the enforcement or scope of existing regulations or change in the countries, persons or technologies targeted by these regulations could adversely affect our business.
General Risk Factors
You may be diluted by the future issuance of additional common stock in connection with our equity incentive plans, acquisitions, financings, investments or otherwise.
Our amended and restated certificate of incorporation authorizes us to issue shares of common stock authorized but unissued and rights relating to common stock for the consideration and on the terms and conditions established by our Board in its sole discretion, whether in connection with acquisitions or otherwise. We have authorized a total of 19,222,629 shares for issuance under our 2019 Equity Incentive Plan with 10,782,817 shares, net of vested and exercised shares, remaining available for issuance, 3,076,776 shares for issuance under our 2019 Employee Stock Purchase Plan, and 2,305,000 shares authorized for issuance under our Amended and Restated 2021 Inducement Equity Incentive Plan with 1,784,444 shares, net of vested and exercised shares, remaining for issuance, each subject to adjustment in certain events. Any common stock that we issue, including under our existing equity incentive plans or other equity incentive plans that we may adopt in the future, or in connection with any acquisitions, financings, investments or otherwise, could dilute your percentage ownership.
The issuance of shares of our common stock upon exercise of our outstanding warrants issued in connection with our Corporate Financing, would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
As of June 30, 2026, warrants to purchase 2,588,375 shares of our common stock issued in connection with our Corporate financing, remain outstanding and exercisable. The exercise price of these warrants is $0.01 per share. To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to holders of our common stock and increase the number of shares eligible for resale in the public market. The fact that such warrants may be exercised or sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock.
The price of our common stock may be volatile, and you could lose all or part of your investment.
The trading price of our common stock has been and may continue to be volatile and will depend on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock, because you might be unable to sell your shares at or above the price you paid. Factors that could cause fluctuations in the trading price of our common stock include the following:
•failure to meet quarterly or annual guidance with regard to revenue, margins, earnings or other key financial or operational metrics;
•fluctuations in the trading volume of our share or the size of our public float;
•price and volume fluctuations in the overall stock market from time to time;
•changes in operating performance and market valuations of similar companies;
•failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
•the public’s reaction to our press releases, other public announcements, and filings with the SEC;
•speculation in the press or investment community;
•any major change in our management;
•sales of shares of our common stock by us or our stockholders;
•actual or anticipated fluctuations in our results of operations;
•actual or perceived security breaches or incidents impacting us or our third-party service providers;
•changes in prevailing interest rates;
•quarterly fluctuations in demand for our loans;
•actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;
•developments or disputes concerning our intellectual property or other proprietary rights;
•litigation, government investigations and regulatory actions;
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•passage of legislation or other regulatory developments that adversely affect us or our industry;
•general economic conditions, such as tariffs and other non-tariff trade barriers, fluctuating interest and inflation rates, recessions, tightening of credit markets and recent or potential bank failures;
•developments relating to any reductions in force or other streamlining measures; and
•other risks and uncertainties described in these risk factors.
If financial or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock is influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. If any of the analysts who cover us issue an adverse or misleading opinion regarding our stock price, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. In addition, analysts may establish and publish their own periodic projections for us. These projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not match the projections of these research analysts.
The enactment of tax reform legislation and differences in interpretation of tax laws and regulations could adversely impact our financial position and results of operations.
We operate in multiple jurisdictions and are subject to tax laws and regulations of the U.S. federal, state and local and non-U.S. governments. U.S. federal, state and local and non-U.S. tax laws and regulations are complex and subject to varying interpretations. Legislation or other changes in U.S. federal, state and local and non-U.S. tax laws, including recently enacted U.S. federal tax legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBB Act”), could increase our liability and adversely affect our after-tax profitability. We are currently evaluating the full impact of the OBBB Act on us. In addition, many countries and the Organisation for Economic Co-operation and Development (the “OECD”) have reached an agreement to implement a 15% global minimum tax (“Pillar Two”). However, on January 5, 2026, the OECD announced a side-by-side elective safe harbor that would exempt electing U.S.-parented multinationals from certain provisions of Pillar Two for fiscal years beginning on or after January 1, 2026, but does not provide an exemption from “qualified domestic minimum top-up taxes”, which have been implemented into the domestic laws in certain jurisdictions in which we operate. We will continue to monitor legislative and regulatory developments to assess the potential impacts that Pillar Two may have on our business, operating results and financial condition. Additionally, U.S. federal, state and local and non-U.S. tax authorities may interpret tax laws and regulations differently than we do and challenge tax positions that we have taken. This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing of these items. The differences in treatment may result in payment of additional taxes, interest or penalties that could have an adverse effect on our financial position and results of operations. Limitations may also apply under state law.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2025, we had federal net operating loss carryforwards of $150.9 million, all of which carry forward indefinitely. Additionally, we had state net operating loss carryforwards of $136.8 million which are set to begin expiring in 2031. As of December 31, 2025, we had federal and California research and development tax credit carryforwards of $19.6 million and $8.4 million, respectively. The federal research and development tax credit carryforwards expire beginning in 2041, and the California research and development tax credits are not subject to expiration. Realization of these net operating loss and research and development tax credit carryforwards depends on future income, and there is a risk that some of our existing carryforwards could expire unused or may be unavailable to fully offset future income tax liabilities, which could adversely affect our results of operations. Other limitations may also apply under state law. For example, California legislation limits the use of state net operating loss carryforwards and tax credits for tax years beginning on or after January 1, 2024, and before January 1, 2027. As a result of this legislation or other unforeseen reasons, we may not be able to utilize some or all of our net operating loss carryforwards and tax credits, even if we attain profitability.
In addition, under Sections 382 and 383 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in ownership by “5 percent shareholders” over a rolling three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research and development credit carryforwards, to offset its post-change income or taxes may be limited. We may experience ownership changes in the future as a result of shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and other pre-change attributes to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.
Our directors, officers, and principal stockholders have substantial control over our company, which could limit your ability to influence the outcome of key transactions, including a change of control.
Our directors, executive officers, and each of our 5% stockholders and their affiliates, in the aggregate, beneficially own a significant number of the outstanding shares of our common stock. As a result, these stockholders, if acting together, will be able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from yours, and they may vote in a way with which you disagree or which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.
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The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified Board members.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing standards of the Nasdaq Stock Market, and other applicable securities rules and regulations, including with regard to corporate governance practices and the establishment and maintenance of effective disclosure and financial controls. Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources.
In addition, changing laws, regulations and standards or interpretations thereof relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us.
Certain of our market opportunity estimates, growth forecasts, and key metrics could prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business.
Market opportunity estimates, growth forecasts and key metrics, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates and forecasts relating to the size and expected growth of our market opportunity may prove to be inaccurate. It is impossible to offer every loan product, term or feature that every member wants, and our competitors may develop and offer products, terms or features that we do not offer. The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of the individuals covered by our market opportunity estimates will generate any particular level of revenues. Even if the markets in which we compete meet our size estimates and growth forecasts, our business could fail to grow at expected rates, if at all, for a variety of reasons outside of our control. Furthermore, in order for us to successfully address this broader market opportunity, we will need to successfully expand into new geographic regions where we do not currently operate.
Our key metrics are calculated using internal company data and have not been validated by an independent third-party. We have in the past implemented, and may in the future implement, new methodologies for calculating these metrics which may result in the metrics from prior periods changing, decreasing or not being comparable to prior periods. As our business develops, we may revise or cease reporting metrics if we determine that such metrics are no longer appropriate measures of our performance. Our key metrics may also differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology. If investors or analysts do not perceive our metrics to be sufficient or accurate representations of our business, or if we discover material inaccuracies in our metrics, our stock price, reputation and prospects would be adversely affected.
Certain provisions in our charter documents and under Delaware law could limit attempts by our stockholders to replace or remove our Board, delay or prevent an acquisition of our company, and adversely affect the market price of our common stock.
Provisions in our amended and restated certificate of incorporation, and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our Board. These provisions include the following:
•our Board has the right to elect directors to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill Board vacancies;
•our stockholders may not act by written consent or call special stockholders’ meetings;
•our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
•stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the Board or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and
•our Board may issue, without stockholder approval, shares of undesignated preferred stock, which may make it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.
As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the Board has approved the transaction. Such provisions could allow our Board to prevent or delay an acquisition of our company.
Certain of our executive officers may be entitled, pursuant to the terms of their employment arrangements, to accelerated vesting of their stock options following a change of control of our company under certain conditions. In addition to the arrangements currently in place with some of our executive officers, we may enter into similar arrangements in the future with other officers. Such arrangements could delay or discourage a potential acquisition.
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Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a potential acquisition could limit the opportunity for our stockholders to receive a premium for their shares of our common stock in connection with such acquisition, and could also affect the price that some investors are willing to pay for our common stock.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware or the U.S. federal district courts will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, (4) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws, or (5) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act, creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition, and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sale of Equity Securities
We had no unregistered sales of our securities in the reporting period not previously reported.
Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers
During the three months ended June 30, 2026, none of our directors or officers adopted terminated
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GLOSSARY
Terms and abbreviations used in this report are defined below.
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| Term or Abbreviation | Definition | |||||||
| 30+ Day Delinquency Rate | Unpaid principal balance for our owned loans that are 30 or more calendar days contractually past due as of the end of the period divided by Owned Principal Balance as of such date | |||||||
| Adjusted EBITDA | Adjusted EBITDA is a non-GAAP financial measure calculated as net income (loss), adjusted to eliminate the effect of the following items: income tax expense (benefit), stock-based compensation expense, depreciation and amortization, interest expense from corporate financing facilities, including the senior secured term loan and the residual financing facility, certain non-recurring charges, and fair value mark-to-market adjustments | |||||||
| Acquisition Financing | Asset-backed floating rate variable funding note and asset-backed residual certificate secured by certain residual cash flows of the Company's securitizations. The Acquisition Financing was used to fund the cash consideration for the Digit acquisition and was terminated on November 14, 2024. | |||||||
| Adjusted Earnings Per Share ("EPS") | Adjusted EPS is a non-GAAP financial measure calculated by dividing Adjusted Net Income by diluted adjusted weighted-average common shares outstanding | |||||||
| Adjusted Net Income | Adjusted Net Income is a non-GAAP financial measure calculated by adjusting our net income (loss) to exclude income tax expense (benefit), stock-based compensation expense, mark-to-market on asset-backed notes at fair value and certain non-recurring charges | |||||||
Adjusted Operating Expense | Adjusted Operating Expense is a non-GAAP financial measure calculated by adjusting total operating expenses to exclude stock-based compensation expense and certain non-recurring charges | |||||||
Adjusted Operating Expense Ratio | Adjusted Operating Expense Ratio is a non-GAAP financial measure calculated as Adjusted Operating Expense divided by Average Daily Principal Balance | |||||||
| Aggregate Originations | Aggregate amount disbursed to borrowers during a specified period, including amounts originated by us through our Lending as a Service partners or under our bank partnership programs. Aggregate Originations exclude any fees in connection with the origination of a loan | |||||||
| Annualized Net Charge-Off Rate | Annualized loan principal losses (net of recoveries) divided by the Average Daily Principal Balance of owned loans receivables for the period | |||||||
| APR | Annual Percentage Rate | |||||||
| Average Daily Debt Balance | Average of outstanding debt principal balance at the end of each calendar day during the period | |||||||
| Average Daily Principal Balance | Average of outstanding principal balance of owned loans at the end of each calendar day during the period | |||||||
| Board | Oportun’s Board of Directors | |||||||
| Corporate financing | Senior secured term loan secured by the assets of the Company and certain of its subsidiaries guaranteeing the term loan, including pledges of the equity interests of certain subsidiaries that are directly or indirectly owned by the Company funded pursuant to the Credit Agreement, dated as of September 14, 2022, by and among the Company, Wilmington Trust, National Association, and the lenders party thereto (as amended), which was terminated on November 14, 2024, and the Credit Agreement, dated as of October 23, 2024, by and among the Company, Wilmington Savings Fund Society, FSB, and the lenders party thereto. | |||||||
| Cost of Debt | Annualized interest expense divided by Average Daily Debt Balance | |||||||
| Customer Acquisition Cost (or "CAC") | Sales and marketing expenses, which include the costs associated with various paid marketing channels, including direct mail, digital marketing and brand marketing and the costs associated with our telesales and retail operations divided by number of loans originated to new and returning borrowers during a period | |||||||
| GAAP | Generally Accepted Accounting Principles | |||||||
| Leverage | Average Daily Debt Balance, excluding Corporate financing, divided by Average Daily Principal Balance | |||||||
| Loans Receivable at Fair Value | All loans receivable held for investment. Loans Receivable at Fair Value include loans receivable on our unsecured and secured personal loan products balances | |||||||
| Managed Principal Balance at End of Period | Total amount of outstanding principal balance for all loans receivables, including loans sold, which we continue to service, at the end of the period. Managed Principal Balance at End of Period also includes loans and accounts originated under a bank partnership program that we service | |||||||
| Net Revenue | Net Revenue is calculated by subtracting interest expense from total revenue and adding the net increase (decrease) in fair value | |||||||
Operating Expense Ratio | Total operating expenses divided by Average Daily Principal Balance | |||||||
| Owned Principal Balance at End of Period | Total amount of outstanding principal balance for all loans receivables, excluding loans and receivables sold or loans retained by a bank partner, at the end of the period | |||||||
| Personal Loan Warehouse (or "PLW") | Revolving personal loan warehouse debt facilities, collateralized by unsecured personal loans and secured personal loans. Included as "Secured financing" on the Condensed Consolidated Balance Sheets (Unaudited). | |||||||
| Portfolio Yield | Annualized interest income as a percentage of Average Daily Principal Balance | |||||||
| Principal Balance | Original principal balance reduced by principal payments received and principal charge-offs to date for our personal loans. Purchases and cash advances, reduced by returns and principal payments received and principal charge-offs to date for our credit cards | |||||||
| Return on Equity | Annualized net income divided by average stockholders' equity for a period | |||||||
| Secured financing | Asset-backed revolving debt facilities, including the PLW facilities that are collateralized by unsecured personal loans and secured personal loans | |||||||
| Weighted Average Interest Rate | Annualized interest expense as a percentage of average debt | |||||||
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Item 6. Exhibits
| Incorporated by Reference | ||||||||||||||||||||||||||
| Exhibit | Description | Form | File No. | Exhibit | Filing Date | Filed Herewith | ||||||||||||||||||||
| 10.1+*^ | 8-K | 001-39050 | 10.1 | 4/17/2026 | ||||||||||||||||||||||
| 10.2+ | 8-K | 001-39050 | 10.2 | 4/17/2026 | ||||||||||||||||||||||
| 10.3+ | 8-K | 001-39050 | 10.3 | 4/17/2026 | ||||||||||||||||||||||
| 10.4+ | 10-Q | 001-39050 | 10.5 | 5/8/2026 | ||||||||||||||||||||||
| 10.5+ | 10-Q | 001-39050 | 10.6 | 5/8/2026 | ||||||||||||||||||||||
| 10.6+ | 8-K | 001-39050 | 10.1 | 6/18/2026 | ||||||||||||||||||||||
| 10.7+^ | 8-K | 001-39050 | 10.2 | 6/18/2026 | ||||||||||||||||||||||
| 10.8 | 8-K | 001-39050 | 10.1 | 6/24/2026 | ||||||||||||||||||||||
| 10.9*^ | x | |||||||||||||||||||||||||
| 31.1 | x | |||||||||||||||||||||||||
31.2 | x | |||||||||||||||||||||||||
| 32.1** | x | |||||||||||||||||||||||||
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T: | |||||||||||||||||||||||||
| (i) Condensed Consolidated Balance Sheets, | ||||||||||||||||||||||||||
| (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, | ||||||||||||||||||||||||||
| (iii) Condensed Consolidated Statements of Changes in Stockholders' Equity, | ||||||||||||||||||||||||||
| (iv) Condensed Consolidated Statements of Cash Flows, and | ||||||||||||||||||||||||||
| (v) Notes to the Condensed Consolidated Financial Statements | ||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File in Inline XBRL format (Included in Exhibit 101). | |||||||||||||||||||||||||
* Certain portions of this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally to the SEC a copy of any omitted schedule or exhibit upon request by the SEC.
+ Management contract or compensatory plan.
^ Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K by means of marking such portions with asterisks because the registrant has determined that the information is not material and would likely cause competitive harm to the registrant if publicly disclosed.
** The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
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Signature
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the date set forth below.
| OPORTUN FINANCIAL CORPORATION | |||||||||||
| (Registrant) | |||||||||||
| Date: | August 5, 2026 | By: | /s/ Joseph Schueller | ||||||||
Joseph Schueller | |||||||||||
| Senior Vice President, Finance – Controller | |||||||||||
(Principal Financial Officer, Principal Accounting Officer and duly authorized signatory of the Registrant) | |||||||||||
73
Exhibit 10.9
Certain information contained in this exhibit, marked by [***], has been excluded from this exhibit because the registrant has determined that it is both not material and is the type that the registrant treats as private or confidential.
Exhibits A-F to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K.
PROGRAM MANAGEMENT AGREEMENT
This PROGRAM MANAGEMENT AGREEMENT (together with all Program Schedules, exhibits, schedules and addenda, including as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”), dated as of June 30, 2026 (the “Effective Date”), is made by and between COLUMN NATIONAL ASSOCIATION, a national banking association (“Bank”), and OPORTUN, INC., a Delaware corporation (“Company”).
RECITALS
WHEREAS, Company facilitates the origination of consumer loans by lenders on a nationwide basis;
WHEREAS, Bank is in the business of providing various banking services, including the maintenance of deposit accounts, card offerings and services, and other financial services and products customarily provided by an insured depository institution (“Services”); and
WHEREAS, the Parties desire to establish one or more programs under which the Parties will cooperate to offer customers various banking services through the Platform, as set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions and mutual covenants and agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Company mutually agree as follows:
Article 1
DEFINITIONS AND RULES OF CONSTRUCTION
DEFINITIONS AND RULES OF CONSTRUCTION
1.1Definitions. Unless otherwise defined, capitalized terms used in the Agreement and in the applicable Program Schedules shall have the meanings ascribed as follows:
“Account” means, as applicable, (i) a deposit account issued to an Accountholder; (ii) a sub-account of any omnibus account established and maintained by Bank and allocated to a specific Accountholder; (iii) a Consumer Credit Product originated by Bank; or (iv) such other accounts issued to Accountholders for the receipt of Services in connection with a Program.
“Account Agreement” means (i) the agreement between Bank and an Accountholder containing the terms and conditions governing the Account, including all disclosures required by Applicable Law and Bank’s privacy notice or (ii) a Loan Agreement.
“Account Application” means an application (including through the use of an electronic, paper, or verbal application) for an Account made by an Applicant through the Platform or other approved channels.
“Accountholder” means (i) a Person to whom Bank issues an Account or that otherwise receives Services in connection with a Program or (ii) a Borrower.
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“Accountholder Data” means all data or information pertaining to Accountholders, including information (i) provided by an Applicant or Accountholder to obtain an Account or Services; (ii) about an Accountholder resulting from any transaction involving a Program, Account or Service; or (iii) otherwise obtained or generated by a Party or their subcontractors in the course of their activities in connection with this Agreement, a Program, or a Service. “Accountholder Data” includes, but is not limited to, “Cardholder Data” as defined under PCI-DSS and nonpublic personal information as defined under the Gramm-Leach-Bliley Act of 1999 and implementing regulations that is subject to protection from publication under Applicable Law; provided Accountholder Data shall not include aggregate data that does not identify any specific Applicant or Accountholder.
“Accountholder File” means the information and documentation collected by and relied on by Company in verifying the identity of an Applicant or Accountholder, and any and all information and documentation collected as part of Company’s customer due diligence and enhanced due diligence processes in accordance with Company’s policies and procedures approved by Bank. The Accountholder File includes, but is not limited to, the information and documentation set forth in Exhibit E of this Agreement.
“ACH” means the Automated Clearinghouse.
“Affiliate” means, with respect to a Party, a Person who directly or indirectly controls, is controlled by or is under common control with the Party. For the purpose of this definition, the term “control” (including with correlative meanings, the terms controlling, controlled by and under common control with) means the power to direct the management or policies of such Person, directly or indirectly, through the ownership of fifty percent (50%) or more of the voting securities of such Person, by contract or otherwise.
“Affiliated Critical Service Provider” has the meaning set forth in Section 3.10.3.
“Anti-Corruption Laws” means all Applicable Law concerning or relating to bribery or corruption.
“Anti-Money Laundering Laws” means all Applicable Law relating to anti-money laundering, and including, the Bank Secrecy Act, 31 U.S.C. § 5311 et seq., and Regulation X promulgated thereunder, the applicable sections of the Patriot Act, and implementing regulations related to Know-Your-Customer and Customer Identification Programs.
“Applicable Law” means all federal, state and local laws, statutes, regulations and orders applicable to a Party or relating to or affecting any aspect of any Program, including the Accounts and the Program promotional and Marketing Materials, all requirements of any Regulatory Authority having jurisdiction over a Party, and Network Rules, as any such laws, statutes, regulations, orders and requirements may be amended and in effect from time to time during the Term.
“Applicant” means a Person who has completed an Account Application.
“BIN” means a bank identification number or similar identifier assigned to Bank by a Network for the purposes of identifying and routing electronic payment transactions.
“Borrower” means, with respect to any Consumer Credit Product, each Person who is a borrower under such Consumer Credit Product, and each other obligor (including any co-signor or guarantor) of the payment obligation for such Consumer Credit Product.
“Brand Guidelines” means Bank’s policies and requirements for Company’s use of Bank’s Marks in connection with a Program, which may be updated from time to time upon written notice to Company.
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“Business Day” means any day, other than (i) a Saturday or Sunday or (ii) a day on which banking institutions in the State of California are authorized or obligated by law or executive order to be closed.
“Change of Control” means a reorganization, merger, consolidation, sale of all or substantially all of the assets of, or other corporate transaction involving, a Party (a “Transaction”), in each case, with respect to which those stockholders of the Party immediately prior to such Transaction do not, immediately after the Transaction, own more than fifty percent (50%) of the combined voting power of the Party or the other corporation resulting from such Transaction.
“Closed-End Consumer Credit Product” means any closed-end consumer credit products that may hereafter be offered under a Program from time to time upon written agreement of the Parties.
“Company Customer Information” means any data or information pertaining to any customer of Company that is provided by Company to Bank as required under a Program.
“[***]” [***].
“Confidential Information” means the terms and conditions of this Agreement and any confidential, proprietary or non-public information related to an Account, of an Accountholder, or of a Party, including a Party’s proprietary marketing plans and objectives, that is furnished to the other Party, either directly or indirectly, in writing, orally or by inspection of intangible objects (including, documents), in connection with this Agreement. Confidential Information includes (i) the Program Policies; (ii) business information (including products and services, employee information, business models, know-how, strategies, designs, reports, data, research, financial information, pricing information, corporate client information, market definitions and information, and business inventions and ideas), and (iii) technical information including software, source code, documentation, algorithms, models, developments, inventions, processes, ideas, designs, drawings, hardware configuration, and technical specifications, including computer terminal specifications and the source code developed from such specifications.
“Consumer Credit Product” means each Closed-End Consumer Credit Product and each Open-End Consumer Credit Product originated by Bank pursuant to a Program.
“Consumer Product” means an Account issued by Bank and other Consumer Credit Product originated by Bank pursuant to a Program.
“Control Person” means, with respect to Company, (i) any officer, director, manager, shareholder or member of Company, (ii) any Person participating in the Control of Company’s business, and (iii) any Person having the power to direct the management or policies of Company.
“Critical Service Provider” means any Service Provider that (i) has access to, stores, transmits, or processes Accountholder Data; (ii) interacts directly with, or has a significant impact on, Applicants and Accountholders in connection with a Program; (iii) involves significant Bank functions or other activities that could cause Bank to face significant risk if such Critical Service Provider fails to meet expectations; (iv) requires significant Bank investment or resources to implement such service or manage the risk, or (v) has otherwise been determined by Bank, in its sole, good faith, and reasonable discretion, to be a Critical Service Provider, provided, however, that Bank may in its sole discretion determine and communicate in writing that a Service Provider that otherwise meets this definition of Critical Service Provider will not be treated as a Critical Service Provider under this Agreement or will not be subject to certain requirements otherwise applicable to a Critical Service Provider under this Agreement.
“FDIC” means the Federal Deposit Insurance Corporation.
3
“Fee Commencement Date” means the earlier of the (x) the date the first loan is originated by Bank under the Program, or (y) July 1, 2026.
“Financial Covenant” means, [***].
“GAAP” means United States generally accepted accounting principles.
“Government List” means (i) the Annex to Presidential Executive Order 13224 (Sept. 23, 2001), (ii) OFAC’s most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including the OFAC website, http://www.treasury.gov/ofac/ downloads/t11sdn.pdf or any successor website or webpage), and (iii) any other list of terrorists, terrorist organizations or narcotics traffickers maintained by a Regulatory Authority that Bank notifies Company in writing is now included in “Government List.”
“Inquiry” means any inquiry, investigation, or proceeding (whether verbal or written, formal or informal) by any state attorney general, Regulatory Authority, governmental figure (including a state or federal legislator), Network, or the Better Business Bureau or similar organization that relates to the Program, other than routine communications. For the avoidance of doubt, routine communications exclude communications that are reasonably expected to adversely affect the Program.
“Insolvent” means, with respect to any specified Person, the failure of such Person to pay debts in the ordinary course of business, the inability of such Person to pay its debts as they come due or the condition whereby the sum of such Person’s debts is greater than the sum of its assets.
“Intellectual Property” means, with respect to the applicable materials, all right, title and interest in all intellectual property rights, including but not limited to, Marks, rights in patents, trade secrets, copyrights, trademarks, trade dress and service marks, and including but not limited to the right to distribute, sell, modify, reproduce, publish, display, perform, prepare derivative works, and all other intellectual property rights relating thereto.
“Interagency Guidance on Third-Party Relationships” means the Interagency Guidance on Third-Party Relationships: Risk Management (88 Fed. Reg 37920, June 6, 2023) jointly issued by The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, or such successor or replacement guidance as may be in effect from Bank’s Regulatory Authorities from time to time.
“Loan” means a consumer loan in connection with Closed-End Consumer Credit Products made by Bank to a Borrower under a Program.
“Loan Advance” means, with respect to any Open-End Consumer Credit Product, an extension of credit made by Bank to a Borrower under a Program pursuant to an Account.
“Loan Agreement” means the agreement between Bank and a Borrower containing the terms and conditions governing the Consumer Credit Product, including all disclosures required by Applicable Law and Bank’s privacy notice.
“Losses” means all claims, actions, liability, losses, judgments, damages, settlements, orders, offsets, fines, penalties and costs and expenses of any nature, including reasonable attorneys’ fees, [***].
“Marketing Materials” means any advertisements, brochures, applications, promotional materials, telemarketing scripts and any other marketing materials or Accountholder-facing communications (whether oral, in print, on the internet, over the phone or in any other medium) relating to a Program, including all marketing and advertising in paper, video, radio, or electronic or other
4
formats, electronic web pages, electronic web links and any other type of promotional materials related to a Program, and any such materials sent to, or the scripts or templates used in connection with oral communications with an Accountholder or potential Applicant.
“Marks” means a Party’s trademarks, trade names, service marks, logos, brands, corporate names, trade dress, domain names, social media usernames, and other source identifiers or indicia of goods or services, whether registered or unregistered, and all registrations and applications for registration of the foregoing, and all issuances, extensions, and renewals of such registrations and applications, and all goodwill associated with any of the foregoing.
“Material Adverse Effect” means, with respect to a Party, an event, change, or occurrence that individually or together with any other event, change, or occurrence, has a material adverse impact on the ability of such Party to perform its obligations under this Agreement or any Program Schedule, including where such inability to perform is caused by the financial position, business, or results of operations of the Company.
“NACHA” means the National Automated Clearinghouse Association.
“Network” means, individually and collectively, NACHA, the payment card networks (Visa, Mastercard, etc.), and any other applicable payments network.
“Network Rules” means the by-laws and operating rules of any Network as in effect on the date hereof and as the Network may amend from time to time, including PCI DSS.
“Open-End Consumer Credit Product” means any open-end consumer credit products that may hereafter be offered under a Program from time to time upon written agreement of the Parties.
“Party” means either Company or Bank, as applicable, and “Parties” means Company and Bank.
“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT ACT) of 2001, as the same may be amended from time to time, and corresponding provisions of future laws.
“PCI DSS” means the Payment Card Industry Data Security Standards promulgated by the Payment Card Industry Security Standards Council.
“Person” means any individual or legal entity, including a corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity or other entity of similar nature.
“Platform” means the computer software, proprietary system information, and related technology and documentation, developed and owned by, or licensed by third parties to, Company relating to its facilitation of deposit or credit products, including the facilitation of the origination of consumer loans by lenders on a nationwide basis, including any mobile application or website operated by Company, and all Intellectual Property rights therein owned by Company or licensed by third parties to Company; provided that the Platform does not include any Intellectual Property rights owned by Bank or licensed by third parties to Bank.
“Privacy Laws” means all federal, state, and local laws and regulations related to privacy, all as they may be amended, supplemented or interpreted in writing from time to time by any applicable Regulatory Authority.
“Processor” means a Critical Service Provider engaged by Company to process transactions and maintain a system of records associated with a Program and Accounts.
5
“Product Documents” means any Account Agreement and Account Application (which may be in the form of digital field indicators), and any other individualized documents provided to Accountholders.
“Product Launch” means the date on which the Parties first make a particular Program available to prospective Applicants, but shall not include any alpha or beta testing of such Program. For the avoidance of doubt, any alpha or beta testing of the Program shall not be considered the “Product Launch.”
“Program” means a program as contemplated by any Program Schedule. The Parties acknowledge that multiple Programs may exist under this Agreement based on meaningful differences, including but not limited to, Bank product terms and functionality, distribution locations, and Accountholder characteristics. All Programs shall be subject to the terms hereof and, prior to Product Launch, the prior written approval of Bank. For the avoidance of doubt, (i) Program does not include any product or service provided by Company or a third party to Persons that are unrelated to a Program or are otherwise not provided by Company or its Affiliates pursuant to this Agreement, and (ii) any credit or other financial service or product originated or issued by Company or its Affiliates or any other third party (except any such product originated, issued, or refinanced by Bank) is not considered part of the Program.
“Program Documents” means this Agreement, all Program Schedules, and all Servicing Agreements and Purchase Agreements.
“Program Guidelines” means the written guidelines for the Bank’s administration of a Program, including but not limited to any risk and compliance program requirements, which have been delivered to Company by Bank and which may be updated from time to time in its sole discretion. Any change or modification to the Program Guidelines that would result in the Bank changing or modifying the Program shall be subject to Section 2.1.3.
“Program Policies” means the policies developed by Company in accordance with Applicable Law and this Agreement and approved in advance by Bank, in its sole discretion, to govern the compliance and operation of each Program as set forth in Exhibit A.
“Purchase Agreement” means any agreement pursuant to which Bank agrees to sell an Account or Receivables to a Purchaser, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Purchaser” means Oportun, Inc., a Delaware corporation, or such other entity as may be disclosed pursuant to the terms of a Program Document.
“Receivable” means, with respect to any Loan Advance, the right to any and all payments from or on behalf of the Borrower in respect of such Loan Advance, including the right to payment of any existing or future interest charges associated with such Loan Advance, and includes all rights of Bank to payment under the Account Agreement with respect to such Loan Advance.
“Regulatory Authority” means any federal, state or local regulatory agency or other governmental agency or authority having jurisdiction over or exercising regulatory oversight with respect to a Party, including, but not limited to, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Consumer Financial Protection Bureau (except that nothing herein shall be deemed to constitute an acknowledgement by Bank that any Regulatory Authority other than the Office of the Comptroller of the Currency has jurisdiction over or exercises regulatory oversight with respect to Bank).
“Reserve Account” has the meaning set forth in Section 10.6.2.
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“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, or His Majesty’s Treasury of the United Kingdom, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the OFAC or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or any EU member state, or His Majesty’s Treasury of the United Kingdom.
“Service Provider” means any vendor, service provider or subcontractor retained, directly or indirectly, by Company that fulfills any or all of Company’s obligations under this Agreement or any Program Schedule. The term “Service Provider” includes a Critical Service Provider.
“Servicer” means Oportun, Inc., a Delaware corporation or such other entity as may be disclosed pursuant to the terms of a Program Document.
“Services” has the meaning set forth in the Preamble.
“Servicing Agreement” means that certain Servicing Agreement, dated as of the date hereof, by and between Bank and Servicer, as the same may be amended, restated, supplemented or otherwise modified from time to time, relating to the servicing of Accounts.
“[***]” [***].
1.2Rules of Interpretation.
1.2.1As used in this Agreement and each Program Schedule and unless otherwise stated, the fact that Bank has provided approval or consent shall not mean or otherwise be construed to mean that: [***].
1.2.2All references to “include,” “includes,” or “including” shall be deemed to be followed by the words “without limitation.”
1.2.3The word “or” means both “and” and “or,” except where the context clearly indicates that the Parties intend “or” to designate alternatives only, including when the word “either” or similar words or phrases are used.
1.2.4The words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole.
1.2.5References to any law or regulation refer to that law or regulation as amended from time to time and include any successor law or regulation.
1.2.6References to another agreement, instrument or other document means such agreement, instrument or other document as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.
1.2.7References to “dollars” or “$” shall be to United States dollars unless otherwise specified herein.
1.2.8Unless otherwise specified, all references to days, months or years shall be deemed to be preceded by the word “calendar.”
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1.2.9All references to “quarter” shall be deemed to mean calendar quarter.
1.2.10Unless otherwise specified, all references to an article, section, subsection, exhibit or schedule shall be deemed to refer to, respectively, an article, section, subsection, exhibit or schedule of or to this Agreement, except that such references in a Program Schedule shall be deemed to refer to, respectively, an article, section, subsection, exhibit or schedule of or to such Program Schedule.
1.2.11Unless the context otherwise clearly indicates, words used in the singular include the plural and words in the plural include the singular.
1.2.12In connection with the computation of any time period, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.”
1.3Parties’ Responsibilities Not Waived. Except as expressly set forth in any written waiver or consent, neither the giving of any consent or approval by a Party to the other Party, nor a Party’s failure to maintain adequate controls or oversight, shall relieve the other Party of any obligation under this Agreement.
1.4Conflict Among Documents. To the extent practicable, this Agreement and all Program Schedules shall be interpreted to give effect to all terms herein and therein, and to avoid any conflict of terms. In the event of a conflict, the terms of the Program Schedule shall prevail over any inconsistent term in this Agreement, solely with respect to the Program that is the subject of such Program Schedule.
Article 2
PROGRAMS AND SERVICES
PROGRAMS AND SERVICES
2.1Establishment of Programs.
2.1.1General. The Parties agree to establish and offer to Persons through the Platform one or more programs under which Bank shall issue Accounts and for which Company shall act as Bank’s service provider and program manager. This Agreement sets forth the understanding between Bank and Company with respect to the Programs and Accounts generated thereunder, and the performance by Bank and Company of various services relating to such Programs and Accounts as the Parties may mutually agree to offer as part of a Program.
2.1.2Program Schedules. Each Program shall be documented by a schedule that will be attached to this Agreement in numbered, sequential order (each, a “Program Schedule”). Pursuant to Section 2.4, Company may request to establish a new Program by submitting a business case to Bank with such information as Bank may require for its approval in its sole discretion. If approved by Bank, in its sole discretion, the Parties shall mutually agree on the terms governing such new Program, including the fees applicable thereto, and attach those terms hereto as a new Program Schedule.
2.1.3Program Modification. Bank may require amendments, modifications or changes to any aspect of a Program, including Company’s Platform, terms of services, or any disclosures related to a Program, [***].
2.2Program Manager. Subject to the terms and conditions of this Agreement, Bank hereby appoints Company as Bank’s exclusive service provider and program manager for the limited purposes of (i) developing and marketing the Programs; (ii) providing Accountholders access to the Accounts through the Platform; and (iii) performing any other services required of Company pursuant to this Agreement. In connection with this appointment, Company acknowledges and agrees that:
8
2.2.1All Accounts and Services offered to Accountholders through the Program(s) are services of Bank and, notwithstanding any other relationship with Company, Accountholders are Bank customers, including for purposes of Applicable Law;
2.2.2Bank has ultimate control and continued oversight over the Programs subject to the terms of this Agreement and any modifications hereunder, including the right to (i) monitor and review Company’s activities in connection with the Programs; (ii) require modifications to Programs; and (iii) determine the terms and conditions of any Account and Product Documents offered to Accountholders or potential Accountholders under a Program;
2.2.3Bank’s Regulatory Authorities have the authority, to the extent provided by Applicable Law, to regulate, examine and take supervisory or enforcement action against Company with respect to its activities as a service provider to Bank;
2.2.4As Bank’s service provider and program manager, Company’s compliance activities in connection with each Program shall ensure the Programs achieve and remain in compliance with Applicable Law, including as applicable to Bank;
2.2.5All Marketing Materials will appropriately identify Bank as the issuer of the Accounts, the originator of any Consumer Credit Products and the provider of Services;
2.2.6Bank shall have no obligation to honor any transaction instruction, entry, file, payment order, or other request from Company or an Accountholder that Bank reasonably believes (i) exceeds the available balance in the relevant Account (as applicable to Open-End Consumer Credit Products); (ii) would violate Applicable Law, applicable Network Rules, the Program Policies, or Bank’s applicable policies and procedures; (iii) may not have been duly authorized or represents a fraudulent transaction; or (iv) may involve funds subject to a hold, dispute, restriction, or legal process; and
2.2.7To the extent there is a dispute between Bank and Company with respect to interpretation of provisions of Applicable Law, such dispute shall be resolved in the manner set forth in Section 13.18.
2.3Product Launch. Prior to each Product Launch, Company shall have: (i) accomplished technical integration with Bank’s systems and/or any other required systems, including pre-implementation validation and testing, (ii) completed all necessary contracts required for Company to perform under this Agreement and the particular Program Schedule, including engaging Critical Service Providers; (iii) obtained Bank’s approval of all Program Policies; and (iv) accomplished any other condition specified by Bank in its sole, good faith, and reasonable discretion, including as may be detailed in any Program or Program Schedule. Bank, in its sole, good faith, and reasonable discretion, shall determine whether the conditions for the Product Launch have been satisfied.
2.4 [***].
2.4.1[***]. [***]
2.4.2[***]. [***]
2.4.3[***]. [***].
Article 3
COMPANY OBLIGATIONS
COMPANY OBLIGATIONS
3.1General. Company shall establish and maintain a risk management program designed to ensure compliance with Applicable Law and any other Bank requirements in the performance of Company’s
9
obligations under this Agreement, including any obligations set forth in a Program Schedule or Program Documents (“Risk Management Program”), which shall be subject to Bank’s review and approval prior to Product Launch. As part of Company’s Risk Management Program, Company shall be responsible for developing, implementing, maintaining, and complying with Program Policies and related procedures in accordance with Applicable Law, this Agreement, and any Program Documents. Prior to making a material change to the Risk Management Program, Company will submit the material change to Bank for review and approval in its sole discretion, which approval shall not be unreasonably withheld, conditioned, or delayed. Company acknowledges that Bank retains the authority, in its sole discretion, to require Company to revise the Program Policies, or, as necessary, implement new policies and procedures. Company shall comply with the Program Policies and Applicable Law with respect to the Programs.
3.2Compliance Management System. In connection with Company’s Risk Management Program, Company shall establish and maintain a compliance management system that is reasonably designed to (i) ensure compliance with all Applicable Law, (ii) ensure compliance with the examination manual of each Regulatory Authority, (iii) be consistent with Bank’s achievement of at least a “satisfactory” rating under the FFIEC consumer compliance rating system, and (iv) meet the Bank’s policies and procedures provided to Company from time to time (the “Compliance Management System” or “CMS”). In connection with the CMS, Company shall:
3.2.1Develop and implement the CMS to provide an internal control process for Company’s business functions and processes, the elements of which shall include (i) an overall policy statement governing the CMS; (ii) specific procedures for approvals of additions or changes to the CMS, including a description of items subject to the CMS, a process for internal review and approval by Company and its legal counsel, and a process for internal review and approval by Bank (and, if applicable, its legal counsel) of material changes to the CMS; (iii) a compliance training program for all relevant officers, directors, employees, and agents that will support the Programs; (iv) appointment of a compliance officer who shall oversee reviews of Company’s compliance with Applicable Law, provided that although the compliance officer remains ultimately responsible for such reviews, the compliance officer may delegate reviews to subject matter experts; and (v) appropriate oversight by Company’s board of directors and senior management.
3.2.2Provide to Bank in writing a report by the compliance officer, or their delegate, of the results of any audits or reviews of any Program conducted by Company, promptly following the completion of any such audit or review, and identify significant issues to be addressed (if any), as well as Company’s resolutions of such issues (if applicable).
3.3AML Obligations. In connection with Company’s Risk Management Program:
3.3.1Company shall comply and, as applicable, cause each of its Affiliates and Critical Service Providers to take action reasonably designed to enable Bank to comply with all applicable Anti-Money Laundering Laws, Anti-Corruption Laws, and Sanctions, and shall implement customer identification, anti-money laundering, transaction screening, incident reporting, and Office of Foreign Assets Control (“OFAC”) programs approved by Bank designed specifically to address the Anti-Money Laundering Laws and Sanctions, and associated risks with the Programs. Without limiting the generality of the foregoing, Company shall develop, administer, and maintain (i) an anti-money laundering (“AML”) program consistent with the requirements of the federal Bank Secrecy Act (“BSA”), and its implementing rules as interpreted and enforced by the Financial Crimes Enforcement Network, as applicable to banking institutions (31 C.F.R. Part 1020); and (ii) procedures for complying with U.S. sanctions laws and other requirements enforced by OFAC (collectively, the “AML Program”). The AML Program must, at a minimum, provide for (i) a designated AML and sanctions compliance officer responsible for managing Company’s compliance with the AML Program; (ii) appropriate and ongoing training for relevant Company personnel; (iii) policies and procedures for (A) verifying the identity of each Applicant and Accountholder at Account opening or Consumer Credit Product origination, as applicable, and on an on-going basis; (B) screening each Applicant and Accountholder at Account opening or Consumer Credit Product origination,
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as applicable, and on an on-going basis against OFAC’s list of Specially-Designated Nationals and Blocked Persons List and any other such list used by OFAC or other Regulatory Authority, notifying Bank of any matches, and cooperating with Bank to take any necessary actions; (C) performing customer due diligence and enhanced due diligence; (D) monitoring and reporting suspicious activity to Bank; (E) annual independent audits of the AML Program with the results thereof provided to Bank; and (F) retaining AML-related records, including all information relied on as part of Company’s customer identification procedures, for at least five (5) years after an Account is closed.
3.3.2[***]
3.3.3Unless a shorter time is otherwise required under this Section 3.3, Company shall provide to Bank electronic copies of any information retained pursuant to this Section 3.3 as requested by Bank, [***] following receipt of the request, or within a shorter period of time if required by a Regulatory Authority or Applicable Law, and cooperate with Bank in responding to any request for information from government or law enforcement entities. Except in the case of Bank’s request for information required by a Regulatory Authority or Applicable Law, Company may request approval from Bank to extend such timeline [***] if Company determines in its reasonable discretion that it requires a longer time frame, which approval Bank shall not unreasonably withhold, condition or delay.
3.3.4Company shall provide notice to Bank, within [***] of receipt, of any written notice of any Anti-Money Laundering Law, Anti-Corruption Law or Sanctions violation or action involving Company or any of its Affiliates.
3.3.5Company shall provide information and documentation responsive to Bank’s requests in accordance with Sections 3.3.2 through 3.3.4 of this Agreement and to Bank’s reasonable satisfaction. [***]. For the avoidance of doubt, where Bank issues a single request under Sections 3.3.2 through 3.3.4 and Company’s response is deficient with respect to multiple items or issues within that request, such failure shall constitute a single occurrence for purposes of this Section 3.3.5.
3.3.6Company’s AML Program shall include policies and procedures requiring an annual independent audit of Company’s AML Program, as set forth in Section 3.3.1, and Company shall conduct such an audit at Company’s sole expense. Company shall provide Bank with the results of its AML audit within five (5) days of Company’s receipt of the audit report. Company shall maintain at all times during the Term a current AML audit, the scope of which shall be consistent with the Bank’s requirements as set forth in this Agreement, and “current” means that such audit was conducted within the [***] period (“Current AML Audit”). If Company has a Current AML Audit as of the Effective Date, Company shall have provided such report to Bank during the due diligence process or within [***] of the Effective Date, at the latest. If Company does not have a Current AML Audit as of the Effective Date, Company’s first annual audit shall be conducted, completed, and provided to Bank within [***] of the Effective Date and, subsequently, every [***] thereafter. If Company’s AML audit produces results that are not satisfactory to Bank, in Bank’s sole discretion, Bank may require additional AML audits in such [***] period at Company’s sole expense. For the avoidance of doubt, Company’s obligations under this Section 3.3.6 shall be considered a material obligation under this Agreement.
3.3.7Company acknowledges that, to the extent any of its Affiliates are involved in a Program, its responsibilities under this Section 3.3 shall also apply to such Affiliates and those Affiliates’ personnel.
3.4UDAP/UDAAP Policies. The Compliance Management System shall include Company’s policies and procedures to prevent engaging in any unfair, deceptive, acts, or abusive acts or practices in connection with a Program (“UDAP/UDAAP Policy”).
3.5Information Security.
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3.5.1The Risk Management Program shall include an information security program that is designed to (i) ensure the security and confidentiality of Accountholder Data held on behalf of Bank; (ii) protect against any anticipated and emergent threats or hazards to security or integrity of such information held on behalf of Bank; (iii) protect against unauthorized access to or use of such information held on behalf of Bank that could result in substantial harm or inconvenience to any Applicant or Accountholder; and (iv) ensure the proper disposal of Applicant or Accountholder information (such program, the “Information Security Program”). The Information Security Program must be designed to comply with the applicable requirements set forth in 12 C.F.R. Part 1016 (Privacy of Consumer Financial Information), and 12 C.F.R. Part 30 (including the Interagency Guidelines Establishing Information Security Standards found at Appendix B to Part 30). Bank has in place and shall maintain throughout the Term of this Agreement an information security program that is designed to (a) ensure the security and confidentiality of Accountholder Data held by Bank; (b) protect against any anticipated and emergent threats or hazards to security or integrity of such information held by Bank; (c) protect against unauthorized access to or use of such information held by Bank that could result in substantial harm or inconvenience to any Applicant or Accountholder; and (d) ensure the proper disposal of Applicant or Accountholder information. Such information security program of Bank must be designed to comply with the applicable requirements set forth in 12 C.F.R. Part 1016 (Privacy of Consumer Financial Information), and 12 C.F.R. Part 30 (including the Interagency Guidelines Establishing Information Security Standards found at Appendix B to Part 30).
3.5.2Prior to the initial Product Launch, Company will establish the Information Security Program so that it addresses Accountholder Data held directly by Company, as well as information held or accessible by its Affiliates and Service Providers, which data shall be accessible to Bank during any transition or wind-down. Bank will work with Company in good faith to determine whether vendors onboarded after initial Product Launch satisfy the requirements of this Section 3.5.2. Further, with certain exceptions as identified in Exhibit B, Company shall ensure that any Critical Service Providers are contractually obligated to maintain security measures and response programs consistent in all material respects with the requirements of this Agreement. Company agrees that it will not make any changes to its Information Security Program which would materially reduce the security of its operations or materially reduce the confidentiality of any databases and information maintained with respect to Bank, Applicants, and Accountholders without the prior written consent of the Bank. Notwithstanding any review or approval by Bank, the Information Security Program and the efficacy thereof is Company’s responsibility and Bank shall have no liability therefor.
3.5.3The Information Security Program shall be reviewed and tested by Company at least annually, at Company’s own expense, in order to demonstrate compliance with all Applicable Law, including documented policies and procedures, an audit and quality assurance program, and independent testing of its Information Security Program, which testing shall include vulnerability scans (or, with the consent of Bank, not to be unreasonably withheld, an independent, internal test by Company). Subject to the terms of the agreement between the Company and such Critical Service Provider, the schedule of such testing, audits, and quality reviews shall be provided to Bank at least annually upon reasonable request by Bank and a summary of the results from each such test, audit, or review shall be promptly provided to Bank in writing in accordance with the schedule or upon the request of Bank. Company shall report to Bank on the remediation or other actions taken in response to the findings of such testing, subject to any confidentiality obligations.
3.5.4Company agrees that, in the event there is a breach of its or of any of its Critical Service Providers’ systems, networks, applications, databases or other property or premises resulting in actual or suspected unauthorized access to or use or disclosure of Accountholder Data or Bank’s Confidential Information (“Company Security Breach”), Company will, [***].
3.5.5Bank agrees that, in the event there is a breach of its, or its subcontractors’, systems, networks, applications, databases or other property or premises resulting in actual or suspected
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unauthorized access to or use or disclosure of Accountholder Data or Company’s Confidential Information (“Bank Security Breach”), Bank will [***].
3.6Disaster Recovery and Business Continuity. The Risk Management Program shall include a disaster recovery and business continuity program and related policies reasonably acceptable to Bank (collectively, the “Business Continuity Plan”) appropriate for the nature and scope of the activities of, and the obligations to be performed by, Company and any Critical Service Provider. Company shall ensure the Business Continuity Plan is designed to permit Company and any Critical Service Provider to promptly resume the performance of its obligations hereunder in the event of a natural disaster, destruction of facilities or operations, utility or communication failures, cyber incidents, system degradations, or similar or unplanned interruption in operations and shall be designed to permit that all Accountholder Data is backed up in a manner sufficient to survive any disaster or business interruption. Company agrees that the Business Continuity Plan shall be at least consistent with industry standards for the banking industry and in compliance with all Applicable Law. The Business Continuity Plan must include, without limitation, reasonable time frames to resume activities and recover data in the event Company’s ability to perform its obligations is impaired, and controls such as those to protect and store programs, back up data, and address cybersecurity issues. At the request of Bank, Company shall provide a current copy of the Business Continuity Plan, as well as operating procedures to be carried out in the event the Business Continuity Plan is implemented. Company shall not amend the Business Continuity Plan in a manner that materially increases the risks of disruptions and delays of its services without the consent of Bank. Reinstating the services contemplated under this Agreement shall receive as high a priority as reinstating the similar services provided to Company’s Affiliates and other customers. Company shall test its Business Continuity Plan at least once annually, at Company’s cost and expense, and shall provide Bank a copy of the report of such test promptly following Bank’s request. In addition, Bank, in its reasonable discretion, may require joint testing of the Business Continuity Plan by Bank and Company, which shall be conducted simultaneously with Company’s annual testing of its Business Continuity Plan, unless an incident triggers a need, in Bank’s reasonable discretion, to engage in joint testing of the Business Continuity Plan more frequently than annually. The Parties agree that Company shall be solely responsible for the costs and expenses of the annual audit and testing of the Business Continuity Plan. In the event of a disaster or any other disruption event that prevents or impairs the Company from performing its obligations under this Agreement, Company will notify Bank and implement its Business Continuity Plan (on the timing set forth in such Business Continuity Plan) to restore and continue to perform its obligations under this Agreement. Upon cessation of the disaster or disruption event, Company will as soon as reasonably practicable, provide Bank with an incident report detailing the reason for the disaster or disruption and all actions taken by Company to resolve the disaster or disruption.
3.7Complaint Management.
3.7.1Complaint Management Program. The Risk Management Program shall include a complaint management program to address and resolve all complaints received by Company regarding any aspect of a Program (“Complaint Management Program”). The Complaint Management Program shall provide for root cause analysis and mitigation steps, and shall require Company to provide monthly complaint reports to Bank. Company shall use commercially reasonable efforts to promptly resolve all complaints. Company shall cooperate in good faith and provide such assistance, at Bank’s request, to permit Bank to promptly resolve or address any investigation, proceeding or complaint not resolved by Company. Company acknowledges and agrees that a violation of the Complaint Management Program will be deemed a breach of this Agreement.
3.7.2Regulatory and Network Inquiries. If either Party receives any Inquiry, such Party shall advise the other Party in writing of the Inquiry within five (5) Business Days of receipt and share relevant portions of any written documentation, or for oral communications, provide a detailed summary in writing, in each case to the extent not specifically prohibited by Applicable Law, a Regulatory Authority, or a Network. Following receipt of such Inquiry, the Parties shall in good faith consult as to the appropriate action to be taken to address such Inquiry. Company shall take all actions within its reasonable control to
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address the Inquiry in the manner and time period reasonably specified by Bank and Bank shall have final approval over the form and content of all responses provided to an Inquiry, provided, however, if the Inquiry is from a Regulatory Authority with authority over Company but not over the Bank, the Parties shall in good faith consult (where permitted) as to the appropriate action to be taken to address such Inquiry, and Company shall have final approval over whatever components of the Inquiry are responsive to Company’s Regulatory Authority.
3.7.3Accountholder Complaints and Resolution. All complaints received by Company from an Accountholder relating to an Account or its use (each, an “Accountholder Complaint”) shall be promptly addressed and resolved by Company in accordance with Applicable Law and Company’s Complaint Management Program. Company shall catalog and maintain copies of all Accountholder Complaints, and responses thereto, for the period required by Applicable Law or such longer period as specified by Bank in a written notice to Company. Company shall analyze, at least monthly, all Accountholder Complaints, including a trend analysis, and report such analysis to Company’s board of directors or a Company committee approved by Bank at the next regularly scheduled meeting of the board or such committee. Additionally, Company shall provide to Bank, by the [***] after the end of each month, a report, in a form and manner reasonably acceptable to Bank (such approval not to be unreasonably withheld, conditioned, or delayed), containing all Accountholder Complaints, for the preceding month along with the disposition of each and other criteria required by the Company’s Complaints Management Program. Bank may, in its sole discretion, reasonably request Company to provide additional details or supporting documentation within Company’s control regarding any and all Accountholder Complaints. Company shall provide such requested details and documentation as promptly as reasonably possible.
3.7.4Legal Actions and Requests. Unless prohibited by Applicable Law, each Party shall promptly notify the other Party of any legal action brought by a third party that may have a material effect on the Program. Unless prohibited by Applicable Law, a Regulatory Authority (or any of its regulations or guidance), or a court order, each Party shall further provide the other Party with prompt notice and copies of all documents, subpoenas, or other legal requests received by the Party that require the assistance of the other Party in order to provide an accurate response, or that would otherwise have a material effect on the Program, whether from a Regulatory Authority, private attorney, court, or otherwise, relating to an Accountholder, an Account, the Program or this Agreement, or pursuant to a civil investigative demand, National Security Letter, or similar process relating to the Program (“Legal Documents”). Each Party shall provide any assistance reasonably requested by the other in order to timely meet the response deadline of any Legal Document, and in no event later than [***] prior to the response deadline of the Legal Document in order for the filing party to timely meet such response deadline. Notwithstanding the foregoing, nothing in this paragraph shall require either Party to act in a way that violates Applicable Law or waives otherwise applicable privilege (such as attorney-client privilege).
3.8Customer Service.
3.8.1Company shall be responsible for (i) establishing and maintaining an internet website and mobile application that performs customer service functions required by Applicable Law and as otherwise mutually agreed by the Parties; (ii) administering and maintaining live agent customer service with availability to be agreed by the Parties; and (iii) providing Accountholders with access to Account information regarding their Accounts as required by Applicable Law. At a minimum, Company shall maintain or cause to be maintained web or app access that shall be available twenty-four (24) hours per day, seven (7) days per week (excluding scheduled downtimes or emergency or unplanned outages) for Accountholders who have a lost or stolen card (if applicable) or who have detected fraud on their Account.
3.8.2Company shall address and resolve all Applicant and Accountholder issues and inquiries related to Programs in accordance with a customer service policy reviewed and approved by Bank and in compliance with Applicable Law (the “Customer Service Policy”). Without limiting the foregoing, the Customer Service Policy must address inquiries related to, as applicable, (i) Account opening and eligibility decisions; (ii) Consumer Credit Product eligibility decisions (iii) error resolution, unauthorized
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transactions, chargebacks, ACH returns, and similar issues; (iv) Account closing or termination; and (v) lost or stolen payment cards, among others. Company shall ensure that all Company employees handling Program-related inquiries are trained in accordance with Company’s established customer service procedures and Applicable Law. Company will provide a commercially reasonable level of training to Company customer service representatives regarding the Programs. Company shall ensure that customer service activities are conducted by trained personnel in accordance with the Customer Service Policy using a standard of care and service levels that are commercially reasonable consistent with industry best practices and in accordance with Applicable Law. Without limiting the generality of the foregoing, Company shall also ensure that customer service representatives and relevant Company staff are knowledgeable regarding substantive terms of the Programs including, without limitation, any fees. Company will additionally make available to Applicants and Accountholders mutually agreed general information and help documentation regarding the Programs. Additional customer service responsibilities may be assigned in a Program Schedule. Company may utilize a Service Provider to provide some or all of the customer service activities described in this Section 3.8.2.
3.8.3As applicable, Company will receive, investigate, process, log, and resolve all disputes, chargebacks, reversals, unauthorized transactions claims, and similar issues from Accountholders on a timely basis and in accordance with Applicable Law and Network Rules. Without limiting the foregoing, Company shall submit its relevant policies and procedures (“Error Resolution Policy”) for Bank’s prior review and approval.
3.9Account Application Process; Account Opening Requirements.
3.9.1Account Application Process. The Parties agree that the sole channel through which Persons may apply for an Account is by completing and submitting an Account Application through the Platform and other approved channels.
3.9.2Account Opening Requirements. As part of each Program Schedule, the Parties shall establish the eligibility criteria for Applicants to be approved for an Account, the form of Account Application to be used for the Program, and the Account Application approval process (the “Account Opening Requirements”). Following a Product Launch, Company shall make available to each Person who desires to open a related Account an Account Application. Bank shall have the right to amend or modify the Account Opening Requirements from time to time in its sole discretion with input from Company (which such input Bank will review and consider in good faith); provided that any such amendments or modifications that would have, or would be reasonably expected to have, a material adverse impact on the Program or Company shall be subject to Section 2.1.3.
3.9.3Denial. As part of each Program Schedule, the Parties shall establish the notice and disclosure requirements and responsibilities that apply in the event an Applicant is denied, including as a result of failing to meet the applicable Account Opening Requirements.
3.10Service Providers and Critical Service Providers.
3.10.1The Risk Management Program shall include policies and procedures for the engagement by Company of any Service Provider to perform marketing, data processing, or other services in connection with a Program (“Vendor Management Program”). The Vendor Management Program shall include policies and procedures for Service Provider due diligence, training, on-boarding, monitoring, risk assessments, compliance with Bank audit rights under this Agreement, and termination. Company may use Service Providers in the performance of its obligations under this Agreement, to the extent permitted by and in accordance with the Vendor Management Program. Company agrees to be fully responsible for the acts and omissions of all of its Service Providers, including, as applicable, their compliance with the applicable terms of this Agreement, applicable Program Schedules, applicable Program Policies, Applicable Law, and applicable Network Rules. Company shall be responsible and liable to Bank for any and all acts or omissions of its Service Providers to the same extent as if such acts
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or omissions were taken or omitted by Company directly; provided, however, that any Service Providers listed on Exhibit F is approved by the Bank to perform marketing, data processing, or other services in connection with a Program and shall not be subject to the requirements of this Section 3.10.1.
3.10.2Company shall provide notice and obtain Bank’s prior written approval (such approval not to be unreasonably withheld, conditioned, or delayed) before engaging any Critical Service Provider for use in a Program. A list of approved Critical Service Providers as of the Effective Date is attached as Exhibit B hereto. In respect of the Critical Services Providers set forth in Exhibit B and any new Critical Service Providers required by Bank, where reasonably required by Bank, Company shall use commercially reasonable efforts to (i) ensure its agreements with Critical Service Providers include Bank as a third-party beneficiary and (ii) provide Bank the right to step in and assume Company’s right to direct the Critical Service Provider and receive the Critical Service Provider’s services at Company’s expense in the event of any occurrence that would permit Bank to terminate this Agreement. Company and Bank shall agree to any revisions required to the Vendor Management Program or existing agreements with Critical Service Providers set forth in Exhibit B.
3.10.3Company may retain a Critical Service Provider that is an Affiliate of Company (“Affiliated Critical Service Provider”) subject to any required diligence by Bank and Bank’s prior written approval. If Company engages or retains an Affiliated Critical Service Provider or outsources any of Company’s obligations hereunder to an Affiliate, Company shall engage such Affiliate or Affiliated Critical Service Provider through an intercompany services agreement that requires such Affiliate to assume responsibility for any of Company’s obligations pursuant to this Agreement or any Program Schedule for which such Affiliate or Affiliated Critical Service Provider is responsible (“Intercompany Agreement”), including but not limited to establishing and maintaining requisite Program Policies and complying with audit requests and reporting. Company shall not, in a manner that adversely affects the Program, amend any Intercompany Agreement between the Affiliate and Company without Bank’s review and written approval. Company shall be responsible for the acts and omissions of any of its Affiliated Critical Service Providers.
3.10.4From time to time, Bank may provide written feedback to Company regarding the quality and performance of any Service Providers utilized by Company in connection with a Program. In the event that a Service Provider fails to comply with Applicable Law and such failure, in Bank’s reasonable discretion, has or will have a material and adverse effect on the Program, Company will promptly take remediation measures to Bank’s reasonable satisfaction, including reducing or replacing the scope of services provided by such Service Provider in connection with the Program as soon as reasonably practicable. If such Service Provider’s noncompliance cannot be cured, or remains uncured for more than [***] or such longer period as may be approved by Bank, Bank may request in writing to Company that Company no longer use such Service Provider for the Program, and in such event, Company, acting in a commercially reasonable manner and using commercially reasonable efforts, shall commence the process to cease utilizing such Service Provider or find a replacement provider and wind down its use of such Service Provider. Any such wind-down shall be executed pursuant to a wind-down plan established by Company and approved by Bank, such approval not to be unreasonably withheld, conditioned or delayed.
3.11Marketing Program.
3.11.1Company’s Risk Management Program shall implement policies and procedures reasonably designed to ensure Marketing Materials comply with Applicable Law and Bank’s marketing guidelines, including prohibitions on unfair, deceptive, and abusive acts and practices (the “Marketing Policy”). Subject to Bank’s approval, Bank and Company shall agree upon the requirements and restrictions governing the use of all Marketing Materials, which shall be incorporated into the Marketing Policy. Company is responsible for ensuring all Marketing Materials and its marketing methods are in compliance with Applicable Law and the Marketing Policy. The Marketing Policy shall require that all Marketing Materials identify Bank as the issuer or originator of Accounts under a Program.
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3.11.2All Marketing Materials are subject to prior written approval by Bank prior to use (such approval not to be unreasonably withheld, conditioned, or delayed); [***]. Where Bank’s approval is not provided, Bank shall provide a reasonable level of detail as to why such approval was withheld to allow Company to make modifications to allow for Bank’s approval. If Bank in its reasonable discretion determines that the content or use of any previously approved Marketing Materials should be modified as Bank shall request to comply with Applicable Law or Network Rules, Company shall promptly make such modifications all in accordance with Section 2.1.3, or discontinue using such Marketing Materials.
3.11.3Unless otherwise agreed in writing by Bank, Company shall be responsible for its own costs and expenses associated with the development of all Marketing Materials, including all costs and expenses associated with modifying or withdrawing Marketing Materials at Bank’s request.
3.11.4As between Company and Bank, Company shall have the exclusive right to market the Programs set forth in any Program Schedule to potential Accountholders. Either Party may also directly or indirectly market or solicit potential Applicants and Accountholders with offerings for other products or services offered by such Party, including without limitation deposit and other loan products that are not part of a Program. All marketing by Company of a Program shall be conducted in accordance with the Program Policies and Applicable Law. Notwithstanding the foregoing, Bank shall not directly or indirectly use Accountholder Data, Company Customer Information, or any data derived therefrom to market, advertise, solicit, or target any product or service offered by Bank or any third party to any Applicant or Accountholder under or in connection with any service outside of the Program, including any program with any other Person. For the avoidance of doubt, nothing herein shall restrict Bank from engaging in general market advertising, promotional activities, or public communications that are not specifically targeted at Applicants or Accountholders in connection with any service outside of the Program, including any program with any other Person.
3.12Tax Statements. Company shall deliver to all Accountholders or other appropriate parties all federal and state income tax forms as required by Applicable Law, including but not limited to any applicable IRS Forms 1099.
3.13Background Checks. Company shall, to the extent permitted by Applicable Law, request or conduct (or cause to be conducted or requested) background, educational, criminal record, employment verification, and/or other checks of any employee, agent, Service Provider or other key Person participating in the performance of marketing, origination assistance, or servicing in connection with this Agreement and the overall Programs, and who has access to Confidential Information, Accountholder Data, and/or information technology systems prior to granting such employee, agent, Service Provider, or other key Person access to such Confidential Information, Accountholder Data, or information technology systems in order to ensure Bank’s compliance with Section 19 of the Federal Deposit Insurance Act as amended by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. § 1829).
3.14Notifications. Company shall, unless expressly prohibited by Applicable Law, promptly notify Bank of the termination, separation, or departure of any key Company personnel who is directly involved in the Program or in Company’s performance of its obligations under this Agreement, if such termination, separation, or departure resulted from Company’s reasonable belief that such person committed an act of fraud, theft, money laundering, or crime of moral turpitude.
3.15Patriot Act. The Parties hereto acknowledge that in order to help the United States government fight the funding of terrorism and money laundering activities, pursuant to federal regulations that became effective on October 1, 2003, Section 326 of the Patriot Act requires all financial institutions to obtain, verify, record, and update information that identifies each person establishing a relationship or opening an account. Company agrees that it will provide Bank such information as it may reasonably request, from time to time, in order for Bank to satisfy the requirements of the Patriot Act, including the name, physical address, tax identification number, and other information that will allow it to identify the individual or entity
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who is establishing the relationship or opening the account and may also ask for formation documents such as articles of incorporation or other identifying documents to be provided.
3.16Company shall take all necessary steps to ensure Bank maintains adequate control of the Program. Neither Bank’s failure to establish and maintain any such controls nor the inadequacy of any Bank’s controls shall relieve Company of (i) its separate and independent obligations to establish and maintain its own such controls or to comply with this Agreement and Applicable Law or (ii) any liability in respect of the Program. Company understands that the Bank’s oversight program is designed in accordance with industry standards and any applicable regulatory guidance including guidance with respect to third-party relationships provided in OCC Bulletin 2023-17, or such successor or replacement guidance as may be in effect from Regulatory Authorities from time to time.
3.17Accounting System. Company shall establish and maintain, at its sole cost and expense, a comprehensive accounting and Account tracking system to accurately and promptly and timely reflect all Account Applications, Accounts, and related information regarding the Programs to satisfy the reasonable information requirements of Bank, Regulatory Authorities, and Bank’s internal and external auditors. Company shall provide, or shall ensure the system to provide, Bank with view access to copies of records and documentation authenticated by Account Applicants and Accountholders, including the information needed to underwrite and approve Account Applications pursuant to the Program Schedule for the related Program; provided, however, Company may limit information regarding the models and attributes used in the risk strategy to the level of generality that Bank determines in its reasonable discretion is required to confirm that such models and attributes adhere to all Program Guidelines and Program Policies. Company further agrees that the information reporting features, integrity, and security of the system shall be designed to operate in compliance with the Information Security Program to the reasonable satisfaction of Bank and its Regulatory Authorities.
Article 4
ACCOUNTHOLDER DATA, COMPANY CUSTOMER INFORMATION, AND OTHER RELATIONSHIPS WITH ACCOUNTHOLDERS
ACCOUNTHOLDER DATA, COMPANY CUSTOMER INFORMATION, AND OTHER RELATIONSHIPS WITH ACCOUNTHOLDERS
4.1Accountholder Data. Except as set forth in Section 4.2, the Program Policies, and Bank’s privacy policy (which Program Policies shall allow Company to use Accountholder Data consistent with Section 4.2) and privacy notice for each Program, Company may receive, use, and share Accountholder Data solely (i) for promotion of the Program; (ii) as otherwise appropriate to carry out its obligations or exercise its rights under this Agreement or any Program Document; and (iii) as necessary to comply with Applicable Law. Company may disclose Accountholder Data to its Critical Service Providers, which may receive, share, use, or disclose Accountholder Data only to the extent required for providing services to Company in connection with a Program. Company will only store Accountholder Data in the United States of America and by Critical Service Providers approved by the Bank, provided that Company or Service Provider employees located in India or Mexico may access certain items of Accountholder Data, but all Accountholder Data shall be stored on U.S. servers. Company shall provide Bank with direct, continuous, real-time and unrestricted view-only access (i.e., without date, time, or other restrictions, other than scheduled or emergency downtime for maintenance or service or updates, provided that Company shall provide notice to Bank of any such downtime) to any Accountholder Data in its possession or control (including any Accountholder Data held by a Service Provider). Company shall submit to Bank for Bank’s prior review and approval Company’s (A) internal policies and procedures for compliance with Privacy Laws and this section (“Privacy Compliance Policy”); and (B) public-facing privacy policy for the Program, which shall clearly and conspicuously describe the purposes for which Company may receive from Bank, use, and disclose Accountholder Data (“Privacy Policy”), which approval shall not be unreasonably withheld, conditioned, or delayed. As set forth in the applicable Purchase Agreement, following the purchase of any Loan by Company pursuant to the Purchase Agreement, Accountholder Data relating to such Loan shall be jointly owned by Bank and Company.
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4.2Company Use of Accountholder Data. Notwithstanding Section 4.1, Bank and Company agree that Bank may share, and Company shall have the right to receive, use, and disclose Accountholder Data for any purpose permitted by Applicable Law, Network Rules, Program Policies, and Company’s Privacy Policy; provided that Company shall (i) where required by Applicable Law, as program manager and on Bank’s behalf, obtain, from each Applicant or Accountholder such Applicant’s or Accountholder’s affirmative consent to Bank’s sharing with Company for this purpose; (ii) submit its Privacy Policy for the Program for Bank’s prior review and approval as to the provisions relevant to the Program, which shall clearly and conspicuously describe the purposes for which Company may use or disclose Accountholder Data; (iii) where required by Applicable Law, clearly and conspicuously disclose such Applicant’s or Accountholder’s right to opt-out of such disclosure and the method for doing so and, to the extent any Applicant or Accountholder exercises such opt-out right, discontinue any further use or disclosure of such Accountholder Data, except as otherwise permitted by Applicable Law and this Agreement; (iv) where required by Applicable Law, implement policies and procedures to capture, track, and maintain records of each Applicant and Accountholder’s consent and provide such records applicable to the Program promptly to Bank upon request; (v) be responsible for all costs and expenses of developing the systems and compliance procedures necessary to implement this section; and (vi) indemnify and hold Bank harmless against any and all third party claims initiated by any Person against Bank, as a result of Company’s activities or omissions in connection with this section. Notwithstanding the foregoing, Company shall not sell Accountholder Data. For the avoidance of doubt, this Section 4.2 shall not prevent Company from directly or indirectly marketing or soliciting Accountholders with offerings for deposit products and other loan products offered by Company; provided that such activities comply with subsections (i) - (vi) of this Section 4.2.
4.3Company Customer Information. Subject to Applicable Law and Bank’s privacy policy for each Program, Bank may receive, use, and share Company Customer Information solely (i) for promotion of the Program; (ii) to carry out its obligations or exercise its rights under this Agreement; and (iii) as necessary to comply with Applicable Law. Company Customer Information shall be considered Company’s Confidential Information, regardless of which Party collects, generates, or maintains such Company Customer Information. For the avoidance of doubt, use of Accountholder Data shall be subject to Section 4.2 and 4.5 as applicable, and not this Section 4.3.
4.4Overlapping Data. The Parties acknowledge and agree that each Party has a separate customer relationship with Accountholders and that any Accountholder information Company obtains through such separate relationship shall be Company Customer Information owned by Company. Nothing contained in this Article 4 shall apply to, limit, or prohibit the use in any manner of, any Company Customer Information owned or held by Company or its Affiliates to the extent such information has been independently obtained by Company in connection with its separate customer relationship with Applicants and Accountholders, even if such information is duplicative of Accountholder Data and in each such case, Company and Bank shall independently own such overlapping Accountholder Data and Company Customer Information.
4.5[***]. [***].
Article 5
INTELLECTUAL PROPERTY
5.1Bank Marks. Bank hereby grants to Company and Affiliated Critical Service Providers during the Term a nonexclusive, royalty-free, non-assignable license in the United States to use Bank’s Marks and as Bank authorizes in connection with the description and promotion of the Program. Bank’s Marks shall
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be used according to the Brand Guidelines shared by Bank and only in the forms and format expressly approved by Bank in writing.
5.2Company Marks. Company hereby grants to Bank during the Term a non-exclusive, royalty-free, non-assignable license in the United States to use Company’s Marks in connection with the description and promotion of the Program and Bank’s services, including by featuring Company’s Marks for promotional purposes on Bank’s website. Any use by Bank of Company’s Marks is subject to Company’s advance approval and Brand Guidelines.
5.3Use of Marks. Except as otherwise permitted by any Program Document, no materials shall be distributed by Company in any format or by any means, whether printed, broadcast, posted online, included in an app or transmitted electronically or by other means, that include Bank’s Marks that refer to a Program without the prior written approval of Bank, which shall not be unreasonably withheld, conditioned, or delayed. It is expressly agreed that neither Party is acquiring any right, title, and interest (other than the foregoing license rights) in the other Party’s Marks which – as between the Parties – shall remain the property of their respective owners. Each Party agrees that it shall not challenge the title or any rights of the other Party in and to its Marks. In no event and under no circumstances shall either Party use the other Party’s Marks in any manner that is derogatory, negative, likely to confuse a third party as to source of goods or services, or otherwise injurious to the other Party, as determined in such Party’s sole discretion, except in connection with any filing, correspondence, or communication with a Regulatory Authority or as otherwise directed by a Regulatory Authority. Each Party, in its role as the licensee of the other Party’s Mark’s, recognizes the value of the goodwill associated with the other Party’s Marks, in its role as licensor, and acknowledges that such licensor Party exclusively owns all right, title and interest in and to the licensor Party’s Marks and all goodwill pertaining thereto. All goodwill resulting from a Party’s use of the other Party’s Marks, as applicable, shall inure to the benefit of, and be owned by, the Party which owns the applicable Marks.
5.4Termination of License. Upon termination of this Agreement for any reason, the license granted in Section 5.1 and 5.2 above shall terminate automatically, except such license will remain in force during any period of post-termination assistance in accordance with this Agreement or any Program Schedule, including the Wind-Down Period.
5.5Intellectual Property. As between the Parties, the Parties agree that each Party is and shall remain the sole and exclusive owner of all right, title and interest in and to all Intellectual Property created or developed by or on behalf of such Party (it being understood for the purposes of this Agreement, Company is not creating any Intellectual Property on behalf of Bank), including its Marks, its websites, promotional materials, proprietary information, and technology, in connection with the Program during the Term of the Agreement. For clarity, the Platform, any derivatives (including feedback from Bank with respect to the Platform), enhancements or modifications to the Platform created by Company in connection with this Agreement and all Intellectual Property therein shall be the sole and exclusive property of the Company. If any term of this Agreement or any provision of any schedule referenced herein or any performance or other action in connection with this Agreement, including any action as a result of Applicable Law, is deemed to alter a Party’s ownership rights or to confer any rights or interest in such Party’s Intellectual Property in or on the other Party, the Party receiving such rights or interest hereby relinquishes and assigns all such rights and interests to the other Party and agrees to execute and deliver all necessary documentation to convey, reconvey or transfer all such rights to the other Party without compensation of any kind immediately upon request. Neither Party will take any actions to dispute the validity of the other Party’s ownership in its Intellectual Property. Neither Party shall, anywhere in the world, use or seek to register in its own name, or that of any third party, any Marks that are the other Party’s Marks, that are colorably or confusingly similar to such other Party’s Marks, or that incorporate the Licensing Party’s Marks or any element colorably or confusingly similar to the Licensing Party’s Marks. Without limitation of the foregoing, except as expressly authorized herein, neither Party will take any action to convey to any third party any interest in the other Party’s Intellectual Property, whether by sublicense, transfer, lien hypothecation or otherwise, nor suffer any lien to be asserted over the other
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Party’s Intellectual Property, and will immediately take all actions and execute all documents at its sole expense, including payment of all sums necessary to a third party, to cause any such liens to be removed. Each Party’s Intellectual Property shall be considered its Confidential Information pursuant to Article 6 below.
5.6Licenses. During the Term and any period of post-termination assistance (and/or transition) and strictly for the purpose of this Agreement, the Parties grant each other a non-exclusive, worldwide, royalty-free, non-transferable license (subject to a right to sublicense to Service Providers) to copy, use, and display Intellectual Property solely in the performance of and strictly in accordance with the requirements and restrictions stated in this Agreement. Any use, adaptation, modification or amendment of Intellectual Property shall be subject to prior written approval by the Party licensing the Intellectual Property in question. Except as expressly stated, nothing in this Agreement shall grant or be deemed to grant to any Party any right, title or interest in Intellectual Property licensed to that Party by the other Party. In using the other Party’s Intellectual Property, each Party shall follow the other Party’s reasonable instructions having regard to the purpose of such use under this Agreement.
Article 6
CONFIDENTIALITY
CONFIDENTIALITY
6.1General. Each Party agrees that Confidential Information of the other Party shall be used by such Party solely in the performance of its obligations and exercise of its rights pursuant to this Agreement, each Program Schedule, and the Program Documents. For purposes of this Article 6, a Party that receives Confidential Information shall be the “Restricted Party,” and the Party that discloses Confidential Information shall be the “Disclosing Party.” A Party’s Confidential Information shall not include information that (i) is generally available to the public through lawful means; (ii) has become publicly known, without fault on the part of the Restricted Party or any of its Representatives, subsequent to the Restricted Party acquiring the information; (iii) was otherwise known by, or available to, the Restricted Party prior to entering into this Agreement and was not otherwise the subject of a nondisclosure agreement prior to such date; (iv) becomes available to the Restricted Party on a non-confidential basis from a Person, other than a Party to this Agreement, who is not known by the Restricted Party after reasonable inquiry to be bound by a confidentiality agreement with the Disclosing Party or otherwise prohibited from transmitting the information to the Restricted Party; or (v) was or hereafter is independently developed by either Party without using, or referencing, Confidential Information of the other Party and without any violation of its obligations under this Agreement or any other nondisclosure agreement between the Parties. Each Party represents and covenants that it will protect the Confidential Information of the other Party in accordance with prudent business practices and will use the same degree of care to protect the other Party’s Confidential Information that it uses to protect its own confidential information of a similar type. Except as expressly provided herein, no right or license whatsoever is granted with respect to the Confidential Information or otherwise.
6.2Exceptions. Except as required by Applicable Law or legal process, neither Party shall disclose Confidential Information of the other Party to third parties without such Party’s prior written consent; provided, however, that the Restricted Party may disclose Confidential Information of the other Party (i) to the Restricted Party’s Affiliates, agents, representatives or subcontractors (collectively, the “Representatives”) for the sole purpose of fulfilling the Restricted Party’s obligations under this Agreement provided such parties are subject to confidentiality obligations at least as restrictive as those provided in this Agreement, and provided further, that, in all events, the Restricted Party shall be responsible for any breach of the confidentiality obligations hereunder by any of its Representatives (other than Company as agent for Bank), (ii) to the Restricted Party’s auditors, accountants and other professional advisors, or to a Regulatory Authority, provided, that, in all events, the Restricted Party shall be responsible for any breach of the confidentiality obligations hereunder by any of its auditors, accountants, or other professional advisors, or (iii) to any other third party as mutually agreed by the Parties, provided, that, in all events, the Restricted Party shall be responsible for any breach of the confidentiality obligations hereunder by such
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third parties of Restricted Party except to the extent such third party directly enters into an agreement with the Disclosing Party related to such disclosure. Each Party may also file this Agreement with the U.S. Securities and Exchange Commission, without the other Party’s prior written consent and may share Confidential Information of the other Party with actual or prospective acquirers, investors or financing parties, including in connection with a transaction involving such Party or any Consumer Credit Products, solely to the extent necessary to facilitate due diligence associated with such transactions, and provided that the recipient of the information shall be subject to confidentiality obligations at least as restrictive as those provided in this Agreement and Applicable Law. Nothing in this Agreement shall prevent Company or its designee from providing an anonymized data tape for informational purposes to a new purchaser or other financing source in connection with a whole loan transfer or financing transaction with respect to Loans originated by Bank.
6.3Return. Upon written request or upon the termination of this Agreement, each Party shall, within thirty (30) days, return to the other Party or destroy all Confidential Information of the other Party in its possession that is in written form, including by way of example, but not limited to, reports, plans and manuals; provided, however, that either Party may maintain in its possession all such Confidential Information of the other Party (i) required to be maintained under Applicable Law relating to the retention of records for the period of time required thereunder or the requirements of a Regulatory Authority or (ii) information relating to the Program stored on back-up servers or systems as a result of Company’s back-up procedures, provided that any retained information shall remain subject to the confidentiality provisions of this Agreement. At the request of the Disclosing Party made at the time of its request for the return or destruction of Confidential Information, the return or destruction of materials in accordance with the foregoing shall be certified to the Disclosing Party in writing by an authorized officer of the Restricted Party.
6.4Notice. In the event that a Restricted Party is requested or required (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information of the Disclosing Party, the Restricted Party will provide the Disclosing Party with prompt notice of such request(s) to the extent permitted by Applicable Law and (i) to the extent practicable and permitted, the Restricted Party agrees to reasonably cooperate with the Disclosing Party to limit such disclosure or seek confidential treatment of such Confidential Information, and (ii) if the Restricted Party or its applicable representative is compelled to disclose all or a portion of the Disclosing Party’s Confidential Information, the Restricted Party or its applicable representative may disclose that Confidential Information that its counsel advises that it is legally compelled to disclose and will exercise such efforts to obtain reasonable assurance that confidential treatment will be accorded to the Confidential Information that is being so disclosed as the Restricted Party would exercise in assuring the confidentiality of any of its own Confidential Information.
Article 7
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
7.1Bank Representations and Warranties. Bank hereby represents and warrants, as of the Effective Date, or covenants, as applicable, to Company that:
7.1.1Bank (i) is a national banking association, duly organized and validly existing and in good standing under the laws of the United States, the deposits of which are insured by the FDIC to the maximum extent allowed by law, (ii) is authorized, registered, and licensed to do business in each state in which the nature of its activities makes such authorization, registration, or licensing necessary or required, and (iii) has the requisite power and authority to execute and deliver, and perform its obligations under this Agreement, including originating Consumer Credit Products in accordance with this Agreement and the Product Documents;
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7.1.2The execution, delivery and performance of this Agreement have been duly authorized, are not in conflict with and do not violate the terms of the certificate of incorporation or bylaws of Bank and will not result in a material breach of or constitute a default under, or require any consent under, any material indenture, loan or agreement to which Bank is a party or by which it is bound and will not violate any outstanding judgment, order, writ, injunction, law, rule or regulation to which it is subject;
7.1.3Bank is in, and will maintain, good standing with the Networks;
7.1.4All approvals, authorizations, consents, and other actions by, notices to and filings with any Person required to be obtained for the execution, delivery, and performance of this Agreement by Bank have been obtained;
7.1.5Bank has full corporate power and authority to execute, deliver and perform all of its obligations under this Agreement;
7.1.6The execution of this Agreement and the completion of all actions required or contemplated to be taken by Bank hereunder are within the ordinary course of Bank’s business and not prohibited by Applicable Law;
7.1.7This Agreement constitutes a legal, valid and binding obligation of Bank, enforceable against Bank in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or other similar laws now or hereafter in effect, including the rights and obligations of receivers and conservators under 12 U.S.C. § 1821 (d) and (e), which may affect the enforcement of creditors’ rights in general, and (ii) general principles of equity (whether considered in a suit at law or in equity);
7.1.8There are no proceedings or investigations pending or, to the knowledge of Bank, threatened against Bank (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by Bank pursuant to this Agreement, (iii) that would have a materially adverse financial effect on Bank or its operations if resolved adversely to it, (iv) seeking any determination or ruling that, in the reasonable judgment of Bank, would materially and adversely affect the performance by Bank of its obligations under this Agreement, or (v) seeking any termination or ruling that would adversely and materially affect the validity or enforceability of the Loans;
7.1.9Bank is not Insolvent and is well-capitalized;
7.1.10The Intellectual Property that Bank licenses to Company, if any, and their use as contemplated by this Agreement, do not violate or infringe upon, or constitute an infringement or misappropriation of, any U.S. patent, copyright or U.S. trademark, service mark, trade name or trade secret of any person or entity, and Bank has the right to grant the licenses set forth in Section 5.1;
7.1.11Bank is in compliance with all Applicable Law applicable to it under this Agreement and any Program Schedule and shall comply with Applicable Law in the performance of its obligations and exercise of its rights under this Agreement and any Program Schedule and with regard to any Program;
7.1.12Bank is located in California and Utah for purposes of 12 U.S.C. § 85, as applicable, and, as of the Effective Date, has authority under such section to charge interest allowed by the laws of California or Utah on a Loan made to a Borrower who resides anywhere in the United States; and
7.1.13None of Bank, any of its Affiliates or any of their respective officers, directors, managers or members is a Person (or to Bank’s knowledge, is owned or controlled by a Person) that (i) is listed on any Government Lists, (ii) has been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC or in any enabling legislation or other Presidential
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Executive Orders in respect thereof, (iii) has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any Patriot Act Offense (as defined below), (iv) is currently under investigation by any Regulatory Authority for alleged felony involving a crime of moral turpitude, or (v) is a Sanctioned Person.
7.2Company Representations and Warranties Company hereby represents and warrants, as of the Effective Date, or covenants, as applicable, to Bank that:
7.2.1Company is a corporation, duly organized, and validly existing in good standing under the laws of the State of Delaware, and has the requisite power and authority to execute and deliver, and perform its obligations under, this Agreement;
7.2.2The execution, delivery and performance of this Agreement have been duly authorized, are not in conflict with and do not violate the terms of the organizational documents of Company and will not result in a material breach of or constitute a default under or require any consent under any material indenture, loan or agreement to which Company is a party or by which it is bound and will not violate any outstanding judgment, order, writ, injunction, law, rule or regulation to which it is subject;
7.2.3Company is authorized, registered, and licensed to do business in each state in which the nature of its activities makes such authorization, registration or licensing necessary or required, except where the failure to be so authorized, registered or licensed would not be reasonably expected to have a Material Adverse Effect on Company;
7.2.4To the extent applicable to the Program, Company is in, and will maintain, good standing with the Networks;
7.2.5All approvals, authorizations, consents, and other actions by, notices to, and filings with any Person required to be obtained for the execution, delivery, and performance of this Agreement by Company, have been obtained;
7.2.6This Agreement constitutes a legal, valid and binding obligation of Company, enforceable against Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect, which may affect the enforcement of creditors’ rights in general, and (ii) general principles of equity (whether considered in a suit at law or in equity);
7.2.7The execution of this Agreement and the completion of all actions required or contemplated to be taken by Company hereunder are within the ordinary course of Company’s business and not prohibited by Applicable Law;
7.2.8There are no proceedings or investigations pending or, to the best knowledge of Company, threatened against Company (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by Company pursuant to this Agreement or (iii) that would have a materially adverse financial effect on Company or its operations if resolved adversely to it;
7.2.9Company is not Insolvent and is not in default under any of its financing agreements in a manner that materially affects Company’s ability to perform under the Program, including the ability to meet purchase obligations under the applicable Purchase Agreement;
7.2.10The execution, delivery, and performance of this Agreement by Company shall comply with Applicable Law;
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7.2.11Neither Company nor any Control Person has been convicted of a crime, or has agreed to or entered into a pretrial diversion or similar program, or is under indictment, in each case in connection with a dishonest act or a breach of trust or money laundering, as set forth in Section 19 of the Federal Deposit Insurance Act, 12 U.S.C. § 1829(a);
7.2.12Company and its Affiliates are in compliance in all material respects with all applicable Anti-Money Laundering Laws and Anti-Corruption Laws. Without limiting the generality of the foregoing, Company has established an AML compliance program that is in compliance, in all material respects, with all applicable Anti-Money Laundering Laws and Anti-Corruption Laws and Bank’s written requirements provided by Bank to Company from time to time;
7.2.13Company and its Affiliates have and shall maintain all necessary licenses, permits, consents, concessions, authorizations of governmental, regulatory or administrative agencies or authorities, whether federal, state or local, required to engage in the activities as contemplated by this Agreement;
7.2.14The Intellectual Property that Company licenses, if any, and their use as contemplated by this Agreement, do not violate or infringe upon, or constitute an infringement or misappropriation of, any U.S. patent, copyright or U.S. trademark, service mark, trade name or trade secret of any person or entity, and Company has the right to grant the license set forth in Section 5.2;
7.2.15Company is in compliance with all Applicable Law applicable to it under this Agreement, any Program Schedule, and any Program Documents and shall comply with Applicable Law in the performance of its obligations and exercise of its rights under this Agreement and any Program Schedule and with regard to any Program;
7.2.16All information maintained by Company for Bank through Company’s Platform or provided by Company to Bank in connection with an Account is true, correct, and consistent with the information obtained or generated by Company;
7.2.17Company is not a “money services business” as such term is defined in 31 C.F.R. § 1010.100(ff);
7.2.18Company is not required to register as an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and is not owned or controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended; and
7.2.19None of Company, any of its Affiliates or any of their respective officers, directors, managers or members is a Person (or to Company’s knowledge, is owned or controlled by a Person) that (i) is listed on any Government Lists, (ii) has been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC or in any enabling legislation or other Presidential Executive Orders in respect thereof, (iii) has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any Patriot Act Offense, (iv) is currently under investigation by any Regulatory Authority for alleged felony involving a crime of moral turpitude, or (v) is a Sanctioned Person. For purposes of this Section 7, the term “Patriot Act Offense” means any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (A) the criminal laws against terrorism; (B) the criminal laws against money laundering, (C) the Bank Secrecy Act, as amended, (D) the Money Laundering Control Act of 1986, as amended, or (E) the Patriot Act. “Patriot Act Offense” also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense.
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7.3Generally. The representations and warranties of Bank and Company contained in this Article 7, except those representations and warranties contained in subsections 7.1.8 and 7.2.8, are made continuously throughout the Term. In the event that any investigation or proceeding of the nature described in subsection 7.1.8 or subsection 7.2.8 is instituted or threatened against a Party, such Party shall promptly notify the other Party of the pending or threatened investigation or proceeding, provided that such disclosure is permitted by Applicable Law or a Regulatory Authority, as applicable.
Article 8
ADDITIONAL COVENANTS
8.1Conduct of Business. Company shall perform all actions necessary to remain duly organized or incorporated, validly existing, and in good standing in its jurisdiction of formation and to maintain all requisite authority to conduct its business in each jurisdiction in which it conducts business.
8.2Preservation of Corporate Existence. Company shall preserve and maintain its corporate existence, rights, franchises, and privileges in the jurisdiction of its formation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges, and qualification has had, or could reasonably be expected to have, a material adverse effect with respect to Company.
8.3Representations. Each Party shall promptly, upon having knowledge thereof, provide the other Party with written notice that any representation or warranty set forth herein or in any Program Document or Program Schedule was incorrect at the time it was given or deemed to have been given, which failure or breach would reasonably be expected to materially and adversely affect such other Party, including reasonable detail of the nature of such facts and circumstances.
8.4Notice of Material Events. Each Party shall, as soon as practicable and permitted, after becoming aware thereof, provide the other Party with written notice of any event or circumstances that, in its reasonable judgment, has had or would reasonably be expected to have a Material Adverse Effect with respect to the Party.
8.5Notice of other Changes. Each Party shall, within thirty (30) days, after becoming aware thereof, provide the other Party with written notice of any material adverse changes in such Party’s financial position, business, or operations related to the Program, provided that neither Party shall be required to provide the other Party with confidential supervisory information.
8.6Financial Covenants. [***].
8.7Accounting Changes. Company shall promptly notify Bank of any material change in Company’s accounting policies that adversely affect a Program.
8.8Software Connection. With respect to Consumer Credit Products, Company shall establish and maintain an application program interface connectivity to Bank’s automated accounting and loan tracking system designed to accurately reflect all Loan Applications, Loans, and related information regarding the Program to satisfy the commercially reasonable information requirements of Bank, Regulatory Authorities, and Bank’s internal and external auditors.
8.9Material Systems Failure. Company shall promptly notify Bank of any material systems failure that would adversely affect a Program and shall advise Bank of the estimated time required to remedy such material systems failure. Until such material systems failure is remedied, Company shall (i) furnish to Bank such periodic status reports and other information relating to such material systems failure as Bank may reasonably request and (ii) promptly notify Bank if it believes that such material systems failure cannot be remedied by the estimated date, which notice shall include a description of the circumstances
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which gave rise to such delay, and the actions proposed to be taken in response thereto. Company shall promptly notify Bank when such a material systems failure has been remedied.
Article 9
AUDIT AND REPORTING REQUIREMENTS
AUDIT AND REPORTING REQUIREMENTS
9.1Bank Audit. During the Term and any Wind-Down Period, Bank shall have the rights to audit and inspect (directly or through third parties) Company’s books, records, operations, premises, and physical assets to confirm Company’s compliance with Applicable Law, Network Rules, this Agreement, the Program Policies and any Program Schedule, and any other contractual obligations of Company to Bank. Bank shall make commercially reasonable efforts to (i) avoid undue disruption of Company’s business operations; (ii) perform any onsite audit activities during normal business hours; and (iii) provide at least thirty (30) days’ advance written notice of an audit, except in exigent circumstances where such prior notice cannot be provided. [***]. Additional audits in the same year shall be at Bank’s expense unless the audit identifies, or was required as a result of, noncompliance by Company with Applicable Law, Network Rules, Program Policies, or this Agreement, including a Program Schedule, in which case Bank’s reasonable, documented third-party (i) legal expenses; and (ii) expenses in conducting such audit and any additional audits, as necessary to resolve the noncompliance, shall be at Company’s expense. Bank will use commercially reasonable efforts to minimize the costs of any audit.
9.2Bank Regulatory Audit. Company acknowledges that (i) Bank is subject to examination and audit by Regulatory Authorities; and (ii) that Regulatory Authorities may also examine and audit Company, as Bank’s service provider and program manager, or require Bank to perform such audit. Company further acknowledges that its performance is subject to examination by Bank Regulatory Authorities, including access to all Program-related work papers, drafts, and other materials or locations in which Company performs any obligations under this Agreement. During the Term and for a period of [***] following the termination or expiration of this Agreement and any Wind-Down Period, Company agrees to cooperate fully with respect to all such audits at no additional cost to Bank, but subject to the cap set forth in Section 9.1. The timing, scope, and manner of such audits shall be as requested by the applicable Regulatory Authority and, Company agrees to provide Bank or the applicable Regulatory Authority with reasonable access to and assistance with any information, materials, personnel, systems, or locations required by Bank or the Regulatory Authority to confirm Company’s compliance with Applicable Law, this Agreement, the Program Policies and any Program Schedule. Company further agrees to notify Bank as soon as practicable of any formal request by any Bank Regulatory Authority to examine Company’s records pertaining to Bank or its customers where permitted by Applicable Law. Any audit of Company required by a Regulatory Authority shall be at Company’s expense.
9.3Audit Findings. If Company is determined to be noncompliant with Applicable Law, Network Rules, this Agreement, the Program Policies or any Program Schedule as a result of any audit, Company shall (i) take action to remedy the non-compliance within a commercially reasonable period of time, provided that Bank may agree to extend this period in its sole reasonable discretion and Company shall provide Bank with evidence of the steps taken to rectify the audit finding; and (ii) conduct any additional audits as may be requested by Bank at Company’s sole expense.
9.4Information Security Audits.
9.4.1At least once annually, Company shall cooperate with and bear the reasonable expenses of a SOC 2 Type 2 audit, which shall include review of the Information Security Program, and shall be conducted by a third-party audit firm that is selected by Company, subject to Bank’s approval, which approval shall not be unreasonably withheld, conditioned, or delayed. The scope of each audit shall be consistent with industry standards and Bank shall receive all final reports from the audit firm and, at Bank’s written request, shall be included in meetings or correspondence related to the audit that directly relate to Bank. Notwithstanding the foregoing, Bank may, in its sole discretion, accept in lieu of such third
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party annual audit the report of an information technology audit conducted by Company. In all circumstances, Company shall promptly provide management’s response to any errors or deficiencies identified in any such report or audit, and take action to correct any material errors or deficiencies identified in any such report or audit and shall develop, with the approval of Bank, a schedule for the correction of such errors and deficiencies.
9.4.2Company shall engage a third party to conduct penetration testing and vulnerability scans, the frequency and scope of which will be mutually agreed to by the Parties, and Company shall promptly provide a high-level summary of the results of such testing to Bank. Company shall report to Bank on the remediation or other actions taken in response to the findings of such testing. To the extent permitted by the agreement(s) between Company and any Critical Service Provider, Company shall require each of its Critical Service Provider to provide, on an annual basis, evidence reasonably satisfactory to Bank that it has sufficient information security protections. Following Bank’s request and subject to any confidentiality restrictions in Company’s agreements with its Critical Service Providers, Company shall provide Bank with a copy of any security documentation provided by such Critical Service Provider. Notwithstanding the foregoing, if, after using reasonable efforts to obtain the foregoing evidence and documentation from such Critical Service Providers, Company cannot obtain such evidence or documentation, Company may (i) provide a summary of any such security documentation (redacted, where necessary) that may materially impact operations specific to the Program or (ii) request a waiver from this requirement from Bank and Bank may, in its discretion, grant such waiver (not to be unreasonably withheld, conditioned, or delayed).
9.5Reporting.
9.5.1Periodic Reports. Company shall provide to Bank on [***] (i) standard reporting identified in the Program Guidelines provided by Bank; and (ii) responses to surveys or questionnaires reasonably provided by Bank concerning Company’s policies, procedures, and controls to ensure that Company is maintaining compliance with its obligations pursuant to this Agreement. To the extent Company relies on a Critical Service Provider (including a Processor) for any information reasonably required by Bank under this provision, Company shall facilitate such reporting that is reasonably available to Company. Additionally, Company shall (A) if Company uses any models as part of a Program including but not limited to any credit model, assist Bank in its model validation process and provide necessary documentation and information to ensure general understanding of the modeling approach, assumptions, input data, and model performance to meet the requirement of model governance framework at a summary-level (it being understood that Company may withhold specific modeling information including any information that Company considers to be proprietary information) and (B) subject to the following sentence, participate in third party management monitoring calls as may be required by Bank to meet its third-party oversight requirements, comply with Applicable Law, or comply with the requirements of a Regulatory Authority. Bank shall not be entitled to copy or retain any source code, algorithms, or other proprietary methodologies underlying such credit models. Any model validation or audit required by Bank shall be first conducted by Company’s internal model validation team and Company shall provide Bank with a summary or a report of the same with any source code, algorithms, or other proprietary methodologies underlying such credit models redacted, it being understood that Company shall use reasonable efforts to provide Bank with such model validation information as is reasonably necessary to address any legal or regulatory concerns of Bank. Following such model validation or audit, to the extent that Bank reasonably determines that an independent third-party audit is necessary to comply with Bank’s obligations under Applicable Law, Company shall cooperate with a third-party auditor selected by Bank and approved by Company (which approval Company shall not unreasonably withhold, condition, or delay), provided that such third-party audit shall not entitle Bank to separately receive, copy, or retain any source code, algorithms, or other proprietary methodologies underlying such credit models, and Company may redact any related report accordingly. The Parties shall agree on a case-by-case basis to the time frame within which Company must provide the information required by Bank, except where Bank must request the information on behalf of or instruction from any Bank Regulatory Authority, in which case the term set by such Regulatory Authority must be complied with. Company will ensure that all information
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provided to Bank (directly or indirectly) is correct, and all records reported are complete and accurate. Company agrees to comply with the requirements of this section at Company’s expense. For the avoidance of doubt, as between the Parties, Company is and shall remain the sole and exclusive owner of all right, title, and interest in and to its credit models (including all Intellectual Property therein), and nothing in this Agreement or any Program Document shall be deemed to transfer, assign, or otherwise convey any ownership interest in Company’s credit models to Bank.
9.5.2Financial Statements. Company shall provide to Bank (i) an audited annual financial statement, which shall, at a minimum, include a balance sheet and related statements of income and cash flow, audited by an independent accounting firm within [***] following the end of Company’s fiscal year, and such financial statements shall be accompanied by an opinion of such independent accounting firm that the consolidated financial statements present fairly, in all material respects, the financial position of Company and the results of its operations in accordance with accounting principles generally accepted in the United States and (ii) an unaudited quarterly financial statement, including a balance sheet and related statements of income, cash flow, and forecast complied by Company, within [***] after the end of each quarter, certified by the chief executive officer, chief financial officer, treasurer or controller of Company as fairly presenting the financial position, results of operations of Company and as having been prepared in accordance with GAAP, subject only to normal year-end audit adjustments, and including financial statements both for that quarter and year-to-date. Company may satisfy the obligations contained in this Section 9.5.2 through any publicly available annual or quarterly financial statements that have been filed with a Company Regulatory Authority.
9.5.3Information Requested by Bank. Company shall provide to Bank any other data submissions and reports as may be reasonably required by Bank, or as agreed to between the Parties, to maintain effective enterprise risk management, internal controls, and compliance management systems and to monitor Company and its Service Providers for compliance with this Agreement, any Program Schedule, Program Documents, Program Policies, and Applicable Law in order to facilitate Bank’s compliance with Applicable Law.
9.6Document Retention. Company shall maintain and retain on behalf of Bank all original Applications and copies of all notices and other documents relating to rejected Applications for the period required by Applicable Law, [***]. Company shall further maintain originals or copies, as applicable, of all the Product Documents, Marketing Materials, and any other documents provided to or received from Accountholders and/or Applicants for a period [***].
9.7Notification to Bank. Company agrees that should an audit, investigation or review of Company or its Service Providers reveal material noncompliance with this Agreement, a Program Schedule, Program Policies, and/or Applicable Law, Company shall notify Bank as soon as reasonably possible but, in any case, [***] of its actual knowledge of the noncompliance. In addition to the indemnification provided for in Section 12.2.1, Company agrees to take all necessary steps reasonably requested in writing by Bank or required by Bank’s Regulatory Authorities to remediate and conform in all material respects Company’s or Company’s Service Providers’ actions with this Agreement, the applicable Program Schedule, Program Documents, Program Policies, and/or Applicable Law, including reporting any potential restitution to any affected Borrowers that is reasonably acceptable to the Bank. Company further agrees to establish appropriate mitigation steps to Bank’s reasonable satisfaction designed to prevent the reoccurrence of any such noncompliance.
9.8Consumer Credit Products. With respect to Consumer Credit Products, and without limiting the foregoing, Company shall provide such supplemental information that is reasonably available to Company without undue effort or expense as Bank may reasonably request regarding the performance of Consumer Credit Products originated through the Program using measures such as production volumes and trends, approval rates, decline rates, losses, delinquencies, collections, prepayments, Consumer Credit Products in bankruptcy, identification of Consumer Credit Products that have been granted modified terms together with, to the extent applicable, a description of the modifications, late payments,
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non-sufficient funds fees, returns, and reversal fees, any other events factoring into the repayment history of a Consumer Credit Products, and any other measure that Company internally tracks (all of which shall be deemed Company’s Confidential Information). Company shall provide such information within a timeframe reasonably acceptable to Bank, in a commercially reasonable manner, and in a form sufficient to permit Bank to conduct a meaningful analysis for risk or compliance purposes, including compliance and credit quality, including by individual third parties, loan type, origination period or vintage, and credit grade or score bands.
Article 10
FEES AND EXPENSES
FEES AND EXPENSES
10.1General.
10.1.1Fees and pricing for each Program shall be set forth in each Program Schedule. Company shall bear all expenses in the marketing, opening, management, and servicing of Programs and Accounts, including the costs associated with all funds transfers executed in connection with a Program, and, to the extent Bank incurs any of the foregoing, Company shall promptly reimburse Bank for its reasonable, out-of-pocket external cost and expenses that are directly attributable to the Program. [***]. Subject to any applicable Program Schedule, Company shall be responsible for (i) any BIN sponsorship fees, other Network or Processor fees incurred in registering Company with any Network (if applicable), and any other Network fees incurred in connection with the operation of a Program; (ii) all actual, out-of-pocket costs of obtaining credit reports, delivering adverse action notices and other regulatory disclosures, preparing other Program materials, and administering any rewards programs; (iii) any actual, out-of-pocket fees for Company’s own use of Bank’s services, including ACH, wire, and account fees; (iv) Bank’s actual legal costs associated with the Program, including but not limited to review of new Programs or Program features, legal review of Marketing Materials, changes to Account Opening Requirements or Account Agreements, [***], and resolution of Company compliance issues, [***] (v) Bank’s variable compliance costs and expenses; (vi) reasonable legal fees associated with Bank entering into another agreement at Company’s request with Company or a third party with respect to the Program, including third party sale agreements, agency agreements and any agreements with, or in connection with, the credit bureaus, [***], (vii) modifications to this Agreement, any Program Schedule, or any other Program Documents requested by Company or otherwise required by Bank for compliance purposes, [***]; (viii) Company submitting a change management request; (ix) actual, out-of-pocket fees for any Uniform Commercial Code filings relating to any Consumer Credit Product; and (x) reasonable legal fees associated with transactions to which Bank is not otherwise a party but in which Bank’s participation is requested by Company based on Bank’s role in a Program. [***]. Without limiting the generality of the foregoing, Company is responsible for the costs associated with all funds transfers executed in connection with a Program.
10.2Operating Account. Company shall, during the Term and any Wind-Down Period, maintain an operating account (“Operating Account”) at Bank. The Operating Account will be used to accumulate Program revenues owed to Company and to fund amounts owed to Bank. The Operating Account shall be governed by the terms and conditions of Bank’s standard commercial deposit account and treasury management agreements, as applicable.
10.3Taxes. Each Party shall be responsible for payment of any federal, state or local taxes or assessments associated with the performance of its obligations under this Agreement and for compliance with all filing, registration, and other requirements with regard thereto. Company acknowledges and agrees that all excise, sales, use, transfer, documentary, stamp tax, intangible or similar taxes that are payable, that relate to, or arise as a result of any Loans, including Consumer Products, contemplated by this Agreement, including without limitation Florida’s documentary stamp tax set forth in Section 201.08 of the Florida Statutes (“Taxes”) and any recording or filing fees relating to the Taxes, shall be timely paid by Company. In the event that Bank pays the Taxes described in the immediately preceding sentence,
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including any penalties or interest imposed thereon, then Company shall promptly reimburse Bank for its payment of such amounts.
10.4Payments. Notwithstanding anything to the contrary contained herein, neither Party shall be excused from making any payment required of it under this Agreement as a result of a breach or alleged breach by the other Party of any of its obligations under this Agreement or any other agreement; provided, that the making of any payment hereunder shall not constitute a waiver by the Party making the payment of any rights it may have under this Agreement, any Program Schedule, or Applicable Law.
10.5Invoices. Bank shall provide Company a periodic, reasonably itemized invoice for amounts due pursuant to this Article or the corresponding provisions of any Program Schedule for the preceding month, including any usage-based fees. Company shall pay any such undisputed invoice within thirty (30) days of receipt of such invoice. Company may raise a good faith dispute on the amounts in an invoice by providing written notice to Bank together with a reasonably detailed description of the reason for dispute. If Company fails to provide notice of a dispute within sixty (60) days of the date of the applicable invoice, Company shall be deemed to have waived its dispute rights. Payment shall be due thirty (30) days after the date of an invoice and Bank shall debit the Operating Account for the undisputed amount of the invoice. In the event there are insufficient funds in the Operating Account to make payment on an invoice when due, Company shall make an immediate payment to Bank.
10.6Reserve Accounts.
10.6.1Program Reserve Accounts. In connection with a Program, Company must establish one or more reserve accounts as and to the extent set forth in the applicable Purchase Agreement to secure Company’s obligations under this Agreement and any Program. Company agrees to fund such reserve account in such minimum amounts as may be set forth in an applicable Purchase Agreement. In the event of wind-down under Section 11.4, Bank will not be obligated to return the remaining balance in the reserve account to Company until the conclusion of the Wind-Down Period or until all outstanding obligations are satisfied, whichever occurs later.
10.6.2Required Minimum Balance. As and to the extent set forth in the applicable Program Schedule, Bank shall establish and Company shall fund and maintain at all times a noninterest-bearing deposit account at Bank in the Company’s name to hold funds to cover Losses and any other unpaid obligations of Company to Bank, which shall be controlled by Bank and held on behalf of Company (the “Reserve Account”). Company shall ensure the Reserve Account is funded at all times with a minimum balance [***]. For the avoidance of doubt, Bank may not change the calculation of the Required Minimum Balance (except as set forth in Section 10.6.4) unless mutually agreed to by the Parties. Company shall fund the Reserve Account prior to the provision of any Services to Borrowers or marketing the Consumer Loan Program to any Person and shall maintain the Required Minimum Balance in the Reserve Account for a minimum of [***] days following the termination of this Schedule and any Wind-Down Period. In the event a Reserve Account falls below the Required Minimum Balance, Bank shall notify Company and Company shall deposit sufficient funds within [***]. The Bank retains the right to withhold the Reserve Account balance in the event obligations are outstanding at the end of the Wind-Down Period. For the avoidance of doubt, the existence of the Reserve Account shall not limit any liability for any Losses, liabilities, costs or other expenses that Company is responsible for under the terms of any Program Documents or any Schedule. Company grants to Bank a security interest in the Reserve Account to secure the full and faithful performance of Company’s payment and other obligations under any Program Documents, including this Agreement.
10.6.3Bank’s Right to Withdraw from Reserve Account. Without limiting any other rights or remedies of Bank under any Program Documents, the applicable Program Schedule or as may be available at law or equity, Bank shall have the right to withdraw funds from the Reserve Account to [***]. Prior to any of Bank’s withdrawal of funds in connection with this Section, Bank shall provide written notice to Company at least [***] Days prior to such withdrawal. Thereafter if not paid directly by Company
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and such amounts are withdrawn by Bank, then Company will deposit into the Reserve Account an amount sufficient to cause the balance to be not less than the Required Minimum Balance within [***] after receipt of such notice. Repeated failures by the Company to maintain the Required Minimum Balance may result in modifications to the minimum reserve levels in accordance with Section 10.6.4.
10.6.4Modifications. Bank reserves the right to increase or decrease the Required Minimum Balance as set forth in Exhibit D at any time or to otherwise modify the method through which it is calculated in each case (other than in respect of a decrease) in the event of the occurrence of a Material Adverse Effect on the Company, provided that any such change resulting in an increase to the calculation of the Required Minimum Balance is subject to advance written notice and shall only occur in the event that (i) a Regulatory Authority finds that the Required Minimum Balance is not sufficient to cover the risks collateralized by the Reserve Account or (ii) Company causes repeated breaches of Program Documents. Any increase shall be commensurate with the risk relating to the occurrence giving rise to the increase in the Required Minimum Balance. Following receipt of such notice, Company shall have [***] to increase the Required Minimum Balance to the amount provided in the notice, and this amount shall then become the Required Minimum Balance.
10.6.5Company’s Right to Withdraw from Reserve Account. Company acknowledges and agrees it shall not, and shall have no rights to, withdraw funds from the Reserve Account unless and solely to the extent such withdrawal shall not cause the balance in the Reserve Account to fall below the Required Minimum Balance.
10.7Losses. Except to the extent that any Losses arise from (a) gross negligence or willful misconduct on the part of Bank or Bank or Bank employee fraud or (b) Company’s compliance with Bank-mandated actions that are a violation of Applicable Law, [***].
10.8Right of Setoff. Bank may, in its sole discretion, set-off, combine, consolidate or otherwise appropriate and apply [***].
Article 11
TERM AND TERMINATION
TERM AND TERMINATION
11.1Term.
11.1.1Agreement Term. Unless terminated earlier in accordance with this Article 11, this Agreement shall have an initial term beginning on the Effective Date and ending on the final day of the calendar month that is the fourth (4th) anniversary of the Effective Date (the “Initial Term”) and shall renew automatically for successive terms of one (1) year each (each a “Renewal Term,” and, collectively, the Initial Term and Renewal Term(s), together with any Wind-Down Period, shall be referred to as the “Term”), unless either Party provides written notice of non-renewal to the other Party at least one hundred and eighty (180) days prior to the end of the Initial Term or any Renewal Term or this Agreement is earlier terminated in accordance with the provisions hereof.
11.1.2Program Schedule Term. Each Program Schedule shall have a term expiring at the end of the Term, unless otherwise specified in such Program Schedule.
11.2Termination.
11.2.1Program Schedule Termination. Either Party shall have the right to terminate this Agreement upon the expiration or earlier termination of all Program Schedules; provided, that the provisions that are specifically noted to survive any expiration or termination in this Agreement or any Program Schedule shall survive such expiration or termination.
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11.2.2Bank Termination Rights. Bank shall have the right to terminate this Agreement:
11.2.2.1upon thirty (30) days’ notice to Company, if Bank determines in its reasonable discretion (i) that in good faith (a) its continued performance under this Agreement or any Program Schedule would be in violation of Applicable Law, including but not limited to, as a result of a change in Applicable Law, any judicial decision of a court having jurisdiction over Bank, or any interpretation of a Regulatory Authority with jurisdiction over Bank, or (b) its continued performance under this Agreement or any Program Schedule would materially and adversely affect the safety and soundness of Bank; and (ii) that such material violation cannot be cured through timely modification of a Program, as provided herein (it being understood that modifying the underlying action or omission or aspect of the Program such that it would not cause a violation on a go-forward basis shall be deemed to cure the violation, except in the case of repeated violations); provided that Bank shall retain all suspension rights under Section 11.2.5 (as applicable) during the thirty (30) day notice period;
11.2.2.2immediately upon written notice to Company, if there is a Material Adverse Effect with respect to Company that, if capable of cure, remains uncured more than thirty (30) Business Days after written notice thereof from Bank;
11.2.2.3immediately upon written notice to Company, if Company breaches its obligations to fund any Reserve Account and does not fund the Reserve Account up to the Required Minimum Balance as set forth in Section 10.6.2; or
11.2.2.4immediately upon written notice to Company, if there is a Change of Control at Company that has not otherwise been approved in writing by Bank (such approval not to be unreasonably withheld, conditioned, or delayed).
11.2.3Mutual Termination Rights. Either Party shall have the right to terminate this Agreement immediately upon written notice to the other Party in any of the following circumstances:
11.2.3.1the Party’s continued participation in the Program has been prohibited by order or injunction of any court or any requirement of Regulatory Authority;
11.2.3.2any representation or warranty made by the other Party in this Agreement or any Program Schedule is or becomes incorrect in any material respect and is not corrected within thirty (30) Business Days after written notice thereof has been given to such other Party;
11.2.3.3the other Party defaults in the performance of any material obligation or undertaking under this Agreement or any Program Schedule, and such default continues for thirty (30) Business Days after written notice thereof has been given to such other Party;
11.2.3.4the other Party has a receiver or conservator appointed for it, commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, conservator, custodian or other similar official of it or any substantial part of its property, or consents to any such relief or to the appointment of a trustee, receiver, liquidator, conservator, custodian or other similar official or to any involuntary case or other similar proceeding commenced against it, or makes a general assignment for the benefit of creditors, or fails generally to pay its debts as they become due, or takes any corporate action to authorize any of the foregoing;
11.2.3.5an involuntary case or other proceeding, whether pursuant to banking regulations or otherwise, is commenced against the other Party seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency, receivership, conservatorship or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator,
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conservator, custodian or other similar official of it or any substantial part of its property and such action or proceeding remains undismissed sixty (60) days after its filing; or an order for relief is entered against the other Party under the federal bankruptcy laws as now or hereafter in effect; or
11.2.3.6by providing the other Party with written notice at least one hundred and eighty (180) days prior to the end of the Initial Term or any Renewal Term, as the case may be.
11.2.4Company Termination Rights. Company shall have the right to terminate this Agreement immediately upon written notice to Bank:
11.2.4.1if Bank can no longer support the Program in all material respects or perform its obligations under the Program or originate or issue the products contemplated under any Program Schedule;
11.2.4.2if Bank limits the Program (including the volume of any transactions) in connection with an activity, event, or circumstance unrelated to Company’s (i) breach of this Agreement (ii) violation of Applicable Law; or (iii) action causing a material risk of Losses, reputational risk, or adverse effects on the safety and soundness of Bank;
11.2.4.3[***].
11.2.4.4[***].
11.2.5Suspension. In addition to any other rights or remedies available to Bank under this Agreement or by law, following the provision of written notice to Company, Bank shall have the right to suspend performance of its obligations under this Agreement during the period commencing with the occurrence [***]. Bank shall only exercise its suspension rights under this section if the circumstances giving rise to Bank’s suspension rights cannot be alleviated by the good faith consultation between Company and Bank within a reasonable time after written notice from Bank to Company, and shall work with Company in good faith to lift the suspension.
11.2.6Effect of Termination.
11.2.6.1The termination or expiration of this Agreement either in part or in whole shall not discharge any Party from any obligation incurred prior to such termination.
11.2.6.2To the extent this Agreement, or a Program Schedule, is terminated or expires, the Parties shall cooperate to transition or wind down the Program, as set forth in Section 11.4. Company shall (i) purchase any Consumer Credit Products or Receivables owned by Bank as of the termination date in accordance with the applicable Purchase Agreement (other than Retained Loans); and (ii) Bank may, but will no longer be obligated to, originate any Consumer Credit Products or Receivables (except in respect of any applications for Credit Products received prior to the effective date of termination), unless a Party terminates pursuant to Section 11.2.3.6.
11.3[***]. [***].
11.4Post-Termination Assistance and Wind-Down.
11.4.1So long as it is not prohibited by Applicable Law, in the event of the termination or expiration of this Agreement or a Program Schedule, the Parties agree to cooperate in good faith to transition or wind-down any affected Program(s) in accordance with Applicable Law in a commercially reasonable way within 180 days from the date of termination or expiration (the “Wind-Down Period”). Each Party acknowledges that the goals of any transition or wind-down of any Program are to benefit the Accountholders by minimizing any possible burdens or confusion and to protect and enhance the names
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and reputations of the Parties. During the Wind-Down Period, Company shall not accept any Account Applications, onboard Accountholders, or open any new Accounts on Bank’s behalf. Except as otherwise provided in this section, each Party shall remain in compliance with all provisions of the Agreement and any Program Schedule, including the maintenance of the appropriate balances in the Operating Account and any Reserve Account and the timely payment of all other amounts under the Agreement and any Program Schedule. In the event (i) Company fails to provide effective notice of its intent to transition a Program pursuant to Section 11.4.2 below; or (ii) a transition is otherwise not permitted, the Parties shall work in good faith to wind down the Program and terminate all Accounts in accordance with their terms and in compliance with Applicable Law. The Bank shall retain the right to shorten the Wind-Down Period if required by a Regulatory Authority.
11.4.2Transition. If this Agreement or any Program Schedule terminates or expires, Company may elect at its sole cost and expense to transition the affected Program to a qualified successor financial institution (“Successor Bank”); provided that, notwithstanding anything herein to the contrary, Bank shall be under no obligation to transition any Program if (i) Bank has terminated this Agreement or any Program Schedule for material non-payment and the same is not cured; (ii) to the extent transitioning the Program would result in Bank’s noncompliance with Applicable Law or the supervisory guidance of a Regulatory Authority; or (iii) the assignment or other documentation used to effectuate the transition does not provide that Bank will be fully indemnified and released with respect to any and all liabilities associated with the transition, it being understood that either Company or Successor Bank may satisfy such indemnification requirement. In the event Company is eligible to transition the Program (a “Transition Event”), Company must give written notice of its decision to exercise this option within sixty (60) days of the notice giving rise to termination of this Agreement or any Program Schedule and, within thirty (30) days of such notice, must provide a detailed, written transition plan, including Company’s proposed timeline for transition, transition procedures, planned Successor Bank, the proposed assignment or other documentation and any other information reasonably requested by Bank (a “Transition Plan”). The Transition Plan must ensure the transition is accomplished prior to the end of the Wind-Down Period.
11.4.3Bank and Company shall meet promptly and use best efforts to finalize a mutually agreed Transition Plan. Unless otherwise contemplated by the Transition Plan, Bank and Company shall continue to be bound by and comply with the terms of this Agreement and any Program Schedule and to perform all of their obligations hereunder until such time as all obligations have been satisfied and resolved to Bank’s satisfaction. If Company is unable or unwilling to continue meeting its obligations under this Agreement, or if the Parties have not agreed on a final Transition Plan within thirty (30) days of the Bank’s receipt of notice of transition to a Successor Bank, the Parties agree to wind down the Program. During any such wind down, Bank will continue to provide all of the services necessary to maintain the Program(s), or any part or portion thereof.
11.4.4Except as required by Applicable Law, in no event will either Party make any public statement or customer communication regarding the wind-down of this Agreement, or any Program without the express prior written approval of the other, which shall not be unreasonably withheld, conditioned, or delayed. Notwithstanding the foregoing, Bank and Company may communicate the termination or expiration of this Agreement with any third party with which it has contracted to provide services for the affected Program(s) and in the case of a Transition Event, Company may communicate the termination or expiration of this Agreement to any third party with which it desires to negotiate to take over as Successor Bank.
11.4.5Upon notice of termination of this Agreement, the Parties shall mutually agree in good faith upon the allocation of expenses and costs associated with a wind-down of any Program or transition to a Successor Bank of any Program; provided, however, that Company shall be responsible for all reasonable and documented third party expenses and costs associated with such wind-down or transition where this Agreement is terminated for cause by Bank. If, after good faith discussions, the Parties are unable to agree on the allocation of expenses and costs within twenty (20) days of notice of termination, then Company shall be responsible for all reasonable and documented third party expenses and costs
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associated with such wind-down or transition. Notwithstanding anything to the contrary in this Section 11.4.5, in no event shall Company be responsible for any expenses, costs, fees, charges, or other amounts payable or reimbursable under this Section 11.4.5 that exceed the rates customarily charged by Bank in connection with the wind-down or transition of programs. Failure by Company to pay for post-termination assistance in accordance with these terms shall constitute grounds for Bank to cease providing the post-termination assistance. In addition, Company shall reimburse Bank for all reasonable and documented third-party expenses incurred by Bank in connection with the transfer of any Program to a Successor Bank, including any third-party costs associated with preparing or negotiating any documentation with Company and Successor Bank. Each Party shall pay its own internal costs and expenses incurred in connection with any wind-down of this Agreement or Transition Event.
Article 12
LIMITATION OF LIABILITY; DISCLAIMER OF WARRANTIES AND INDEMNIFICATION
LIMITATION OF LIABILITY; DISCLAIMER OF WARRANTIES AND INDEMNIFICATION
12.1Limitation of Liability. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, CONSEQUENTIAL, OR EXEMPLARY DAMAGES OR LOST PROFITS (EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY PROGRAM SCHEDULE. THE FOREGOING LIMITATION SHALL NOT, HOWEVER, APPLY TO ANY CLAIM ARISING FROM ANY INTENTIONAL OR WILLFUL BREACH OF THIS AGREEMENT, BREACH OF THE CONFIDENTIALITY OBLIGATIONS IN ARTICLE 6, INDEMNIFICATION OBLIGATIONS TO THE EXTENT OF AMOUNTS PAYABLE TO A THIRD PARTY, OR A SECURITY BREACH. Notwithstanding anything to the contrary contained in this Agreement, Bank’s total liability for any and all damages shall not exceed [***].
12.2Indemnification.
12.2.1Company Obligations. Except to the extent of any Losses [***], Company shall be liable to and shall indemnify, defend, and hold harmless Bank and its respective directors, officers, employees, agents and Affiliates and permitted assigns from and against any and all Losses arising out of [***].
12.2.2Bank Obligations. Except to the extent of any Losses [***], Bank shall be liable to and shall indemnify, defend, and hold harmless Company and its respective directors, officers, employees, agents and Affiliates, and permitted assigns from and against any and all Losses arising out of [***].
12.2.3Notice of Claims. To the extent permitted by Applicable Law, the Party seeking indemnification (the “Indemnified Party”) hereunder shall promptly notify the indemnifying party (the “Indemnifying Party”), but, in the case of lawsuit, in no event later than the time necessary to enable the Indemnifying Party to file a timely answer to the complaint, in writing, of any notice of the assertion by any third party of any claim or of the commencement by any third party of any legal or regulatory proceeding, arbitration or action, or if the Indemnified Party determines the existence of any such claim or the commencement by any third party of any such legal or regulatory proceeding, arbitration or action, whether or not the same shall have been asserted or initiated, in any case with respect to which the Indemnifying Party is or may be obligated to provide indemnification (an “Indemnifiable Claim”), specifying in reasonable detail the nature of the claim and, if known, the amount or an estimate of the amount of the Losses; provided, that failure to promptly give such notice shall only limit the liability of the Indemnifying Party to the extent of the actual prejudice, if any, suffered by the Indemnifying Party as a result of such failure. The Indemnified Party shall provide to the Indemnifying Party as promptly as practicable thereafter information and documentation reasonably requested by the Indemnifying Party to defend against the Indemnifiable Claim.
12.2.4Defense and Counsel. Subject to the terms hereof, the Indemnifying Party shall have the right to assume the defense of any suit, claim, action or proceeding. The Indemnifying Party shall
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have [***] after receipt of any notification of an Indemnifiable Claim (a “Claim Notice”) to notify each relevant Indemnified Party in writing of the Indemnifying Party’s election to assume the defense of the Indemnifiable Claim and, through counsel of the Indemnifying Party’s own choosing, and at its own expense, to commence the settlement or defense thereof, and each such Indemnified Party shall cooperate with the Indemnifying Party in connection therewith if such cooperation is so requested and the request is reasonable; provided, that the Indemnifying Party shall hold each Indemnified Party harmless from its reasonable out-of-pocket expenses, including reasonable attorneys’ fees, incurred in connection with the Indemnified Parties’ cooperation; provided, further, that if the Indemnifiable Claim relates to a matter before a Regulatory Authority, each Indemnified Party may elect, upon written notice to the Indemnifying Party, to assume the defense of the Indemnifiable Claim at the cost of and with the cooperation of the Indemnifying Party. If the Indemnifying Party assumes responsibility for the settlement or defense of any such claim, (i) the Indemnifying Party shall permit each relevant Indemnified Party to participate at such Indemnified Party’s expense (for which no claim of Losses shall be made) in such settlement or defense through counsel chosen by such Indemnified Party; provided, that, in the event that both the Indemnifying Party and an Indemnified Party are defendants in the proceeding, and such Indemnified Party has reasonably determined and notified the Indemnifying Party that representation of both parties by the same counsel would be inappropriate due to the actual or potential differing interests between them, then the reasonable fees and expenses of one such counsel for all Indemnified Parties in the aggregate shall be borne by the Indemnifying Party; and (ii) the Indemnifying Party shall not settle any Indemnifiable Claim without each relevant Indemnified Party’s consent (such consent not to be unreasonably withheld, conditioned, or delayed), except that the Indemnifying Party may settle any Indemnifiable Claim upon notice to each such Indemnified Party if the settlement involves only the payment of money damages (which such money damages are paid by the Indemnifying Party) and no admission of liability by any Person and no injunctive relief, and the settlement is subject to a confidentiality provision prohibiting disclosure of the terms of the settlement.
12.2.5Settlement of Claims. If the Indemnifying Party does not notify each relevant Indemnified Party in writing within [***] after receipt of the Claim Notice that it elects to undertake the defense of the Indemnifiable Claim described therein, or if the Indemnifying Party fails to contest any such Indemnifiable Claim, or if an Indemnified Party elects to control the defense of an Indemnifiable Claim before a Regulatory Authority as permitted by Section 12.2.4 above, then, in each case, the Indemnified Party shall have the right, upon reasonable written notice to the Indemnifying Party, to contest, settle (subject to the Indemnifying Party’s approval and such approval shall not be unreasonably withheld, conditioned, or delayed) or compromise (subject to the Indemnifying Party’s approval and such approval shall not be unreasonably withheld, conditioned, or delayed) the Indemnifiable Claim in the exercise of its reasonable discretion; provided that the Indemnified Party shall notify the Indemnifying Party in writing prior thereto of any compromise or settlement of any such Indemnifiable Claim and shall consider in good faith and discuss with the Indemnifying Party any objection to the settlement the Indemnifying Party may express and provided further that the foregoing shall not limit or modify the Indemnifying Party’s approval rights to any settlement or compromise as set forth in this Section 12.2.5. No action taken by any Indemnified Party pursuant to this Section 12.2.5 shall deprive such Indemnified Party of its rights to indemnification pursuant to this Article 12.
12.2.6Indemnification Payments. Amounts owing under Section 12.2 shall be paid promptly upon written demand for indemnification containing in reasonable detail the facts giving rise to such Losses, except where a Party notifies the other Party within thirty (30) days of receipt of such demand that it disputes its obligation to indemnify, or the Losses being claimed, and the Parties are not otherwise able to reach agreement.
Article 13
MISCELLANEOUS
MISCELLANEOUS
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13.1Relationship of Parties. Except as otherwise provided herein, Bank and Company agree that they are in the position of independent contractors in performing their responsibilities pursuant to this Agreement. This Agreement is not intended to create, nor does it create, and it shall not be construed to create, a relationship of partner or joint venturer or any association for profit between and among Bank and Company.
13.2Governing Law. This Agreement shall be governed by federal law, as well as the internal laws, and not by the laws regarding conflicts of laws, of the State of California. Each Party hereby submits to the jurisdiction of the federal and state courts sitting in San Francisco, California for the resolution of any and all claims arising out of or related to this Agreement, and waives any objection to venue with respect to actions brought in such courts.
13.3Severability. Any provision of this Agreement that is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining portions hereof in such jurisdiction, which such remaining portions shall remain in full force and effect, or rendering such provision or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction. In addition, if the operation of a Program or the compliance by a Party with its obligations set forth herein causes or results in a violation of an Applicable Law, the Parties agree to negotiate in good faith to modify the impacted Program or this Agreement as necessary in order to permit the Parties to continue the impacted Program in full compliance with Applicable Law.
13.4Assignment. This Agreement and the rights and obligations hereunder it shall be binding upon and inure solely to the benefit of the Parties and their respective successors and permitted assigns. Neither Party shall be entitled to assign or transfer any interest under this Agreement without the prior written consent of the other Party, provided that following advance notice to Company, Bank may assign or transfer any interest to its Affiliates as part of an internal restructuring at any time without the consent of Company, so long as such assignee remains a federally-chartered bank with the ability to meet the obligations of Bank under the Program. No assignment under this section shall relieve a Party of its obligations under this Agreement.
13.5Third-Party Beneficiaries. Nothing contained herein shall be construed as creating a third-party beneficiary relationship between either Party and any other Person.
13.6Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed received (a) on the day delivered, if delivered by hand; (b) on the day transmitted, if transmitted by facsimile or e-mail with receipt confirmed; (c) three (3) Business Days after the date of mailing to the other Party, if mailed first-class mail postage prepaid; or (d) when delivered in person, if mailed by express or overnight mail delivered by a nationally recognized courier (delivery charged prepaid), in each case at the applicable address that follows (or such other address as either Party shall specify in a notice to the other):
To Bank: Column National Association
Attention: Legal
[***]
Email: [***]
To Company: Oportun, Inc.
Attention: Chief Legal Officer
Attention: Chief Legal Officer
1825 South Grant Street, Suite 850
38
San Mateo, CA 94402
Email: [***]
Email: [***]
13.7Amendment and Waiver. This Agreement may not be amended orally, but only by a written instrument signed by all Parties. The delay or failure of a Party to require the performance of any term of this Agreement or the waiver by a Party of any default under this Agreement shall not prevent a subsequent enforcement of such term and shall not be deemed a waiver of any subsequent breach. All waivers must be in writing and signed by the Party against whom the waiver is to be enforced.
13.8Entire Agreement. This Agreement, together with the Program Documents and the exhibits hereto and any exhibits thereto, constitute the entire agreement between the Parties with respect to the subject matter hereof and supersede any prior or contemporaneous negotiations or oral or written agreements with regard to the same subject matter.
13.9Further Assurances. From time to time, and subject to the terms of this Agreement, each Party will execute and deliver to the other such additional documents and will provide such additional information as the other Party may reasonably require to carry out the terms of this Agreement.
13.10Referrals. Neither Party has agreed to pay any fee or commission to any agent, broker, finder or other person for or on account of such person’s services rendered in connection with this Agreement that would give rise to any valid claim against the other Party for any commission, finder’s fee or like payment.
13.11Counterparts. This Agreement may be executed and delivered by the Parties in any number of counterparts, and by different parties on separate counterparts, each of which counterpart shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. The Parties agree that this Agreement and signature pages may be transmitted between them by electronic mail, that PDF signatures may constitute original signatures, and that a PDF signature page containing the signature (PDF or original) is binding upon the Parties.
13.12Interpretation. The Parties acknowledge that each Party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments hereto, and the same shall be construed neither for nor against either Party but shall be given a reasonable interpretation.
13.13Force Majeure. If any Party is unable to carry out the whole or any part of its obligations under this Agreement by reason of a Force Majeure Event, then the performance of the obligations under this Agreement of such Party as they are affected by such cause shall be excused during the continuance of the inability so caused, except that should such inability not be remedied within thirty (30) days after the date of such cause, the Party not so affected may at any time after the expiration of such thirty (30) days period, during the continuance of such inability, terminate this Agreement on giving written notice to the other Party and without further liability, payment of a termination fee or other penalty. To the extent that the Party not affected by a Force Majeure Event is unable to carry out the whole or any part of its obligations under this Agreement because a prerequisite obligation of the Party so affected has not been performed, the Party not affected by a Force Majeure Event also is excused from such performance during such period. A “Force Majeure Event” as used in this Agreement shall mean an unanticipated event that is not reasonably within the control of the affected Party or its subcontractors (including, but not limited to, acts of God, acts of governmental authorities, strikes, war, riot and any other causes of such nature), and which by exercise of reasonable due diligence, such affected Party or its subcontractors could not reasonably have been expected to avoid, overcome or obtain, or cause to be obtained, a commercially reasonable substitute therefor. No Party shall be relieved of its obligations hereunder if its failure of performance is due to removable or remediable causes which such Party fails to remove or remedy using commercially reasonable efforts within a reasonable time period. Either Party rendered
39
unable to fulfill any of its obligations under this Agreement by reason of a Force Majeure Event shall give prompt notice of such fact to the other Party, followed by written confirmation of notice, and shall exercise due diligence to remove such inability with all reasonable dispatch.
13.14Insurance. Company agrees to maintain adequate insurance coverage on the terms and conditions specified in Exhibit C at all times during the Term and to notify Bank promptly of any cancellation or lapse of any such insurance coverage. Insurance policies required to be maintained hereunder shall be procured from reputable insurance companies. Company shall provide evidence of its insurance coverages in the form of certificates of insurance promptly following the Effective Date and promptly following any reasonable request from Bank.
13.15Headings. Captions and headings in this Agreement are for convenience only and are not to be deemed part of this Agreement.
13.16Publicity. Neither Bank nor Company shall make, or cause to be made, any press release or public announcement in respect of the Program or this Agreement or the transactions contemplated hereby, or otherwise communicate with any news media regarding the Program or this Agreement, without the prior consent of the other Party (such consent not to be unreasonably withheld, conditioned, or delayed). The Parties agree to cooperate to publicize a press release announcing the Program in a form and manner reasonably acceptable to both Parties. Bank and Company agree that nothing in this Section 13.16 limits or restricts any legal or regulatory disclosure obligations of Bank or Company.
13.17Manner of Payments. Unless the manner of payment is expressly provided herein, all payments under this Agreement shall be made by ACH transfer, wire, or other payment methods agreed by the Parties to the bank accounts designated by the respective Parties. Notwithstanding anything to the contrary contained herein, neither Party shall fail to make any payment required of it under this Agreement as a result of a breach or alleged breach by the other Party of any of its obligations under this Agreement or any other agreement, provided that the making payment hereunder shall not constitute a waiver by the Party making the payment of any rights it may have under this Agreement or by law.
13.18Disputes.
13.18.1In the event of any dispute, controversy or claim arising out of or relating to this Agreement or the construction, interpretation, performance, breach, termination, enforceability or validity thereof (hereinafter, a “Dispute”), the Party raising such Dispute shall notify the other promptly and no later than sixty (60) days from the date of its discovery of the Dispute, provided that any disputes related to Losses are subject to Section 13.18.2. The Parties shall cooperate and attempt in good faith to resolve any Dispute promptly by negotiating between persons who have authority to settle the Dispute and who are at a higher level of management than the relationship managers with direct responsibility for administration and performance of the provisions or obligations of this Agreement that are the subject of the Dispute. If such persons are unable to resolve the Dispute within fifteen (15) days, then the Parties can seek remedies from a court of competent jurisdiction subject to Section 13.2. Notwithstanding the foregoing, this Section 13.18 shall not limit a Party’s right to obtain any provisional remedy, including, without limitation, specific performance or injunctive relief from any court of competent jurisdiction (subject to Section 13.2), as may be necessary, in the sole discretion of the aggrieved Party, to protect its rights under this Agreement or to institute formal proceedings prior to the expiration of the time periods set forth in this Section 13.18 to preserve a superior position with respect to other creditors.
13.18.2[***].
13.19Survival. The terms of Articles 4, 6, 12, and 13 and Sections 5.5, 9.2 (to the extent set forth therein), 9.6 (to the extent set forth therein), 10.4, 10.5, 10.6 (to the extent set forth therein), 10.7, 11.2.6, 11.3, and 11.4, and any terms that are applicable to or necessary to interpret the foregoing, shall survive termination or expiration of this Agreement.
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[Signature Pages Follow]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized officers as of the date first written above.
COLUMN NATIONAL ASSOCIATION
By: __/s/ William Hockey
Name: William Hockey
Title: CEO
Name: William Hockey
Title: CEO
OPORTUN, INC.
By: /s/ Gaurav Rana
Name: Gaurav Rana
Title: SVP & General Manager, Lending
Name: Gaurav Rana
Title: SVP & General Manager, Lending
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Exhibit A
Program Policies
42
Exhibit B
Company’s Critical Service Providers
43
Exhibit C
Insurance Requirements
44
Exhibit D
Reserve Account Required Minimum Balance
45
Exhibit E
Accountholder File Minimum Requirements
46
Exhibit F
Approved Service Providers
47
Exhibit 31.1
CERTIFICATIONS
I, Douglas Bland, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Oportun Financial Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 5, 2026
| /s/ Douglas Bland | |||||
Douglas Bland Chief Executive Officer and Director (Principal Executive Officer) | |||||
Exhibit 31.2
CERTIFICATIONS
I, Joseph Schueller, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Oportun Financial Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 5, 2026
| /s/ Joseph Schueller | |||||
Joseph Schueller SVP, Finance - Controller (Principal Financial Officer and Principal Accounting Officer) | |||||
Exhibit 32.1
CERTIFICATIONS
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Douglas Bland, Chief Executive Officer of Oportun Financial Corporation (the “Company”), and Joseph Schueller, Principal Financial Officer, Principal Accounting Officer and SVP, Finance - Controller of the Company, each hereby certifies that, to the best of his knowledge:
1.The Company’s Quarterly Report on Form 10-Q for the fiscal period ended June 30, 2026, to which this Certification is attached as Exhibit 32.1 (the “Quarterly Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
2.The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: August 5, 2026
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 5th day of August 2026.
| /s/ Douglas Bland | /s/ Joseph Schueller | |||||||
Douglas Bland Chief Executive Officer and Director (Principal Executive Officer) | Joseph Schueller SVP, Finance - Controller (Principal Financial Officer and Principal Accounting Officer) | |||||||
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Oportun Financial Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.