DBRS Morningstar Finalizes Provisional Ratings on Oportun Issuance Trust 2022-A

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following notes (the Notes) issued by Oportun Issuance Trust 2022-A (Oportun 2022-A or the Issuer):

-- $289,514,000 Class A Notes at AA (low) (sf)
-- $53,197,000 Class B Notes at A (low) (sf)
-- $46,035,000 Class C Notes at BBB (low) (sf)
-- $11,254,000 Class D Notes at BB (high) (sf)

The rating 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 - March 2022 Update, published on March 24, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020. Despite several new or increasing risks including Russian invasion of Ukraine, rising inflation and new COVID-19 variants, the overall outlook for growth and employment in the United States remains relatively positive.
-- DBRS Morningstar's projected losses do not include any additional assessment of the impact of the coronavirus. The DBRS Morningstar cumulative net loss assumption is 11.47% based on the worst-case loss pool constructed, giving consideration to the concentration limits present in the structure.
-- Concentrations limits have changed since the DBRS Morningstar rated Oportun 2021-C transaction (2021-C) which has had an adverse effect on the net loss rate for this transaction. As a general observation, performance in new loans is worse than performance in renewed loans. There was a material increase in the concentrations for the Maximum Receivables of New Customers to 45% from 35% as seen in 2021-C, therefore the loss rate for the deal is 11.47% versus 10.28% for 2021-C.

(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 experience, underwriting, and origination capabilities of MetaBank, N.A.
-- Loans originated by MetaBank in Colorado, Connecticut, Georgia (unless the original loan amount was greater than $3,000), Iowa, Maine, New York, Vermont, West Virginia or the District of Columbia, will not be eligible for inclusion in the trust without the required state licenses and satisfaction of Rating Agency Condition.

(6) 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-A 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.

(7) 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. Further, 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.
-- Oportun and PF Servicing believe its and Digit’s business practices have been in full compliance with CFPB guidance and that they have followed all published authority with respect to their practices, and the Seller continues to cooperate with the CFPB with respect to this matter. At this time, the Seller is unable to predict the outcome of the CFPB investigations, including whether the investigations will result in any actions or proceedings or in any changes to the Seller’s or the Servicer’s practices.

(8) The legal structure and legal opinions 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.”

ESG CONSIDERATIONS
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/373262.

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 9, 2021), 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 [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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