DBRS Morningstar Finalizes Provisional Ratings on Oportun Issuance Trust 2021-C

DBRS, Inc. (DBRS Morningstar ) finalized its provisional ratings on the following notes (the Notes) issued by Oportun Issuance Trust 2021-C (Oportun 2021-C or the Issuer):

-- $377,033,000 Class A Notes at AA (low) (sf)
-- $59,233,000 Class B Notes at A (low) (sf)
-- $48,734,000 Class C Notes at BBB (low) (sf)
-- $15,000,000 Class D Notes at BB (high) (sf)

The 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, published on September 8, 2021. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020. The baseline macroeconomic scenarios reflect the view that, although COVID-19 remains a risk to the outlook, uncertainty around the macroeconomic effects of the pandemic has gradually receded. Current median forecasts considered in the baseline macroeconomic scenarios incorporate some risks associated with further outbreaks, but remain fairly positive on recovery prospects given expectations of continued fiscal and monetary policy support. The policy response to COVID-19 may nonetheless bring other risks to the forefront in coming months and years.
-- DBRS Morningstar's projected losses include the assessment of the impact of the coronavirus. The DBRS Morningstar cumulative net loss assumption is 10.28% based on the worst-case loss pool constructed, giving consideration to the concentration limits present in the structure.
-- DBRS Morningstar incorporated a hardship deferment stress into its analysis as a result of an increase in utilization related to the impact of the coronavirus pandemic on borrowers. DBRS Morningstar stressed hardship deferments to test liquidity risk early in the life of the transaction’s cash flows.

(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.

(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 2021-C 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.
-- Oportun and PF Servicing believe that their practices have been in full compliance with CFPB guidance and that they have followed all published authority with respect to their practices, and Oportun continues to cooperate with the CFPB with respect to this matter. At this time, the Seller is unable to predict the outcome of this CFPB investigation, including whether the investigation will result in any action or proceeding or in any changes to the Seller’s or the Servicer’s practices.

(8) The legal structure and legal opinions that 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 (October 20, 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/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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