DBRS Morningstar Assigns Provisional Ratings to Oportun Issuance Trust 2022-3

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following notes (the Notes) to be issued by Oportun Issuance Trust 2022-3 (Oportun 2022-3 or the Issuer):

-- $194,674,000 Class A Notes at AA (low) (sf)
-- $44,209,000 Class B Notes at A (low) (sf)
-- $30,248,000 Class C Notes at BBB (low) (sf)
-- $30,869,000 Class D Notes at BB (sf)

The provisional ratings on the Notes are based on DBRS Morningstar’s review of the following considerations:

(1) The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios For Rated Sovereigns: September 2022 Update, published on September 19, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.
-- The DBRS Morningstar cumulative net loss (CNL) base case loss assumption for the 2022-3 transaction is 11.23%.
-- The increase in CNL from the 2022-2 transaction is attributed to observed credit deterioration and recent loss performance in the Oportun New Loan products. New Loans represent 22.68% of the Statistical Calculation Date outstanding balance.

(2) The transaction’s form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization, subordination, amounts held in the Reserve Account, and excess spread. Credit enhancement levels are sufficient to support DBRS Morningstar’s stressed assumptions under various stress scenarios.

(3) The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and principal by the legal final payment date.

(4) Oportun's capabilities with regard to originations, underwriting, and servicing.

(5) The ability of Systems & Services Technologies, Inc. (SST) to perform duties as a Back-Up Servicer. SST, as Back-Up Servicer, is required to take over as successor servicer of the collateral in the Oportun 2022-3 transaction within 15 calendar days of notice of a servicing termination event. SST and Oportun have developed a detailed servicing transition plan to facilitate an orderly transfer of servicing.

(6) On March 3, 2021, Oportun received a Civil Investigative Demand (CID) from the Consumer Financial Protection Bureau (CFPB). The stated purpose of the CID is to determine whether small-dollar lenders or associated persons, in connection with lending and debt-collection practices, have not been in compliance with certain federal consumer protection laws over which the CFPB has jurisdiction. Oportun has received subsequent information requests to the initial CID focused on Oportun’s legal collection practices from 2019 to 2021 and hardship treatments offered during the COVID-19 pandemic.

(7) On September 15, 2022, Oportun received a Notice and Opportunity to Respond and Advise (NORA) letter from the staff of the CFPB in connection with the Oportun CID, stating that it is considering whether to recommend that the CFPB take legal action against Oportun based on alleged violations focused on the failure to timely dismiss certain lawsuits and the hardship treatments offered during the COVID-19 pandemic, including credit reporting related thereto. On October 14, 2022, Oportun provided the CFPB with its written response to the NORA letter disputing the allegations. In connection with the Oportun CID, Oportun is cooperating fully with the CFPB with respect to this matter. While Oportun believes that its business practices have been in full compliance with applicable laws, because the CFPB has broad authority to determine what it views as potentially unfair, deceptive or abusive acts or practices at this time, Oportun is unable to predict the ultimate outcome of this pending CFPB matter.

(8) Digit received a CID from the CFPB in June 2020. The CID was disclosed and discussed during the acquisition process. The stated purpose of this 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 Seller believes that Digit’s business practices were 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 connection with such consent order, Digit agreed to implement a redress and compliance plan to pay at least $68,145 in consumer redress to consumers who may have been harmed and paid a $2.7 million civil penalty to the CFPB.

(9) The legal structure and expected legal opinions that will address the true sale of the unsecured consumer loans, the nonconsolidation of the trust, and that the trust has a valid perfected security interest in the assets and consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/ Social/ Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Notes:
All figures are in U.S dollars unless otherwise noted.

The principal methodology is Rating U.S. Structured Finance Transactions (April 4, 2022) and Rating U.S. Credit Card Asset-Backed Securities (August 8, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.