8 unchanged sentences
Our business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected by these risks, as well as other risks and uncertainties not currently known to us or that we currently deem immaterial.
−Removed: In that case, the market price of our common stock could decline, and you may lose some or all of your investment.
−Removed: These risks are discussed more fully below and include, but are not limited to:
+Added: The market price of our common stock could decline, and you may lose some or all of your investment.
+Added: 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
−Removed: • Our results of operations and future prospects depend on our ability to retain existing members and attract new members.
• If we do not compete effectively in our target markets, our results of operations could be harmed.
1 unchanged sentence
• Our business may be adversely affected by disruptions in the credit markets and changes to interest rates on our borrowings.
+Added: • We currently rely on Pathward to originate a substantial portion of our loans.
+Added: 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.
+Added: • 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.
2 unchanged sentences
Any material reduction in our interest rate spread could adversely affect our results of operations.
+Added: • 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.
+Added: • 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.
−Removed: • Our results of operations and financial condition have been and may be adversely affected by economic conditions and other factors that we cannot control.
• If we are unable to collect payment 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.
2 unchanged sentences
• The success and growth of our business depends upon our ability to continuously innovate and develop our products and technologies.
+Added: • 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.
2 unchanged sentences
• Our success and future growth depend on our branding and marketing efforts.
−Removed: • We may fail to realize all of the anticipated benefits of the Digit acquisition or those benefits may take longer to realize than expected.
• 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.
2 unchanged sentences
• 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.
−Removed: • We may change our corporate strategies or underwriting and servicing practices, which may adversely affect 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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• The collection, storage, use, disclosure, and other processing of personal information is an area of increasing complexity and scrutiny.
−Removed: • Our business is subject to the regulatory framework applicable to registered investment advisers, including regulation by the Securities and Exchange Commission (the "SEC").
+Added: • Our business has in the past been subject to the regulatory framework applicable to registered investment advisers, including regulation by the Securities and Exchange Commission (the “ SEC ” ).
• Our bank partnership products may lead to regulatory risk and may increase our regulatory burden.
2 unchanged sentences
Business, Financial and Operational Risks
−Removed: Our results of operations and future prospects depend on our ability to retain existing members and attract new members.
−Removed: 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 by using additional products or services we offer, and our ability to attract members in a cost-effective manner.
−Removed: Our member retention rates may decline or fluctuate due to various factors, including pricing changes (including as a result of rising interest rates), our expansion into new products and markets or changes to 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.
−Removed: 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.
−Removed: 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.
−Removed: As of September 30, 2023 and 2022, members with repeat loans comprised 82% and 76%, respectively, of our Owned Principal Balance at End of Period.
−Removed: If our repeat loan rates decline, we may not realize consistent or improved operating results from our existing member base.
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.
−Removed: Our current and potential future competition primarily includes other consumer finance companies, credit card issuers, financial technology companies, technology platforms, neobanks, challenger banks, and financial institutions, as well as payday lenders and pawn shops.
+Added: Our current and potential future competition primarily includes other consumer finance companies, credit card issuers, 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 or are competitive with ours, particularly companies who may provide lending, money management and other services though a platform similar to our platform.
Many of our current or potential competitors have significantly more financial, technical, marketing, access to low-cost capital, 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.
−Removed: 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.
+Added: As such, many of our competitors can leverage their size, robust networks, financial wherewithal, brand awareness, pricing power and
+Added: 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.
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If such measures do not achieve our cost reduction targets, we may engage in further cost-saving measures in the future.
−Removed: Further, we may experience unintended consequences and costs that may be disruptive to our business, such as the loss of institutional knowledge and expertise, attrition beyond our intended workforce reduction, and a reduction in morale among our remaining employees.
+Added: Further, we may experience unintended consequences and costs due to these efforts that may be disruptive to our business, such as the loss of institutional knowledge and expertise, loss of continuity, failure to accurately assess market opportunities and the technology required to address such opportunities, potential adverse effects on our internal control environment and inability to preserve adequate internal controls relating to our general and administrative functions, attrition beyond our intended workforce reduction, loss of key employees, and a reduction in morale among our remaining employees.
Such actions may adversely affect our ability to retain and recruit skilled and motivated personnel, which may be disruptive to our operations and hinder our ability to achieve our key priorities.
−Removed: If we fail to achieve some or all of the expected benefits of these decisions, our future growth, operating results, and financial condition may be adversely affected.
+Added: Moreover, projections of any cost-saving measures or other benefits associated with such measures are based on current business operations and market dynamics, and could be materially impacted by various factors, including significant economic, competitive and other uncertainties.
+Added: 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.
In addition, 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 experienced rapid growth in our business and operations in the recent past, many economic and other factors outside of our control, including general economic and market conditions, pandemics, consumer and commercial credit availability, inflation, interest rate, 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.
−Removed: 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, a trend that we expect to continue as our business continues to grow, and we may not be able to increase our revenue sufficiently to offset such higher expenses.
+Added: 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, a trend that we expect to continue as our business continues to evolve, 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 on our ability to increase the origination volume of our products and services, attract new members and retain existing members, build our brand, achieve the anticipated benefits and synergies from the Digit acquisition, expand and manage our remote-first workforce, all while managing our business systems, operations and expenses.
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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.
+Added: We currently rely on Pathward to originate a substantial portion of our loans.
+Added: 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.*
+Added: As of March 31, 2024 , we relied on Pathward, N.A., or 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 4 states in the United States.
+Added: In the three months ended March 31, 2024 and 2023, Pathward originated approximately 71% and 15% of aggregate personal loan originations, respectively.
+Added: We expect the percentage of aggregate personal loans originated by Pathward to continue to increase in 2024.
+Added: Pathward retains a proportion of the loans they originate on their own balance sheet, and sells the remainder of the loans to us, which we in turn sell to institutional investors, sell to our warehouse trust special purpose entities, or retain on our balance sheet.
+Added: Our Pathward program agreement has an initial term of five years, which is scheduled to expire in calendar year 2025 and will automatically renew for an additional two years following
+Added: the initial five-year term, unless either party provides notice of its intent to not renew.
+Added: In addition, even during the term of our arrangement and for specified circumstances, Pathward could reduce the volume of loans that it chooses to originate and/or retain on its balance sheet.
+Added: 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.
+Added: If our bank partnership arrangement with Pathward were to be suspended or limited, or if Pathward ceased their operations or otherwise terminated their relationship with us, our business, financial condition and results of operations would be adversely affected.
+Added: If we need to enter into alternative arrangements with a different bank to replace our existing arrangement, we may not be able to negotiate a comparable alternative arrangement in a timely manner or at all.
+Added: 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.
+Added: 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 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.”
+Added: Our results of operations and future prospects depend on our ability to retain existing members and attract new members.
+Added: 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 by using additional products or services we offer, and our ability to attract members in a cost-effective manner.
+Added: Our member retention rates may decline or fluctuate due to various factors, including pricing changes (including as a result of rising interest rates), our expansion into new products and markets or changes to 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.
+Added: 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.
+Added: 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.
+Added: As of March 31, 2024 and 2023, members with repeat loans comprised 83% and 80%, respectively, of our Owned Principal Balance at End of Period.
+Added: 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.
1 unchanged sentence
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.
−Removed: We use estimates, assumptions, and
−Removed: judgments when certain financial assets and liabilities are measured and reported at fair value.
+Added: 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.
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We use estimates and assumptions in determining the fair value of our loans receivable held for investment and asset-backed notes.
−Removed: Our Loans Receivable at Fair Value represented 86% of our total assets and our asset-backed notes represented 74% of our total liabilities as of September 30, 2023.
+Added: Our Loans Receivable at Fair Value represented 87% of our total assets and our asset-backed notes represented 86% of our total liabilities as of March 31, 2024.
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.
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Interest rates have recently risen and may continue to rise, which increases our interest expense and cost of funds and may result in lower operating margins.
−Removed: 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.
−Removed: Market interest rate changes may adversely affect our business forecasts and expectations and are highly sensitive to many macroeconomic factors beyond our control, such as 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.
−Removed: Factors outside our control, including interest rate changes and widening credit spreads, may 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.
+Added: 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.
+Added: 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 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.
+Added: 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, rising 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.
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We do not currently hedge our interest rate exposure associated with our debt financing or fair market valuation of our loans.
−Removed: Our risk management efforts may not be effective, which may expose us to market risks that harm our results of operations.
−Removed: We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, monitor and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk and liquidity risk, as well as operational risks.
−Removed: 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.
−Removed: As our loan mix changes and as our product offerings evolve, our risk management strategies may not always adapt to such changes.
−Removed: Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment.
−Removed: 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.
−Removed: 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.
−Removed: If our risk management efforts are ineffective, we could suffer losses that could harm our business, financial condition, and results of operations.
−Removed: We rely extensively on models in managing many aspects of our business.
−Removed: If our models contain errors or are otherwise ineffective, our business could be adversely affected.
−Removed: 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.
−Removed: 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.
−Removed: These models are built using forms of A.I., such as machine learning.
−Removed: 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
−Removed: process described herein fails, we may experience higher than forecasted loan losses.
−Removed: Also, if we are unable to access certain third-party data used in our credit risk models, or access to such data is limited, our ability to accurately evaluate potential members may be compromised and our ability to continue to improve our A.I.
−Removed: models may be adversely affected.
−Removed: 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.
−Removed: In addition, this information may not always be complete, up-to-date or properly evaluated.
−Removed: As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures or available information indicate.
−Removed: 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).
−Removed: We rely on our credit risk models and other models to develop and manage new products and services, including our digital banking platform, with which we have limited development or operating experience, as well as new geographies.
−Removed: 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 and interest rate environment, and human behavior, and they often involve complex interactions between a number of dependent and independent variables and factors.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We may also be subject to liability to those investors if we misrepresented the characteristics of the loans sold because of those errors.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Additionally, the use of A.I.
−Removed: is relatively new and the regulatory framework is evolving and remains uncertain.
−Removed: Any negative regulatory or public scrutiny based upon this could adversely affect our business and reputation.
−Removed: Our results of operations and financial condition have been and may be adversely affected by economic conditions and other factors that we cannot control.*
+Added: 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.
3 unchanged sentences
general economic conditions or outlook, unemployment levels, housing markets, immigration patterns and policies, energy costs, inflation, government shutdowns, delays in tax refunds, financial distress caused by recent or potential bank failures and the associated bank crisis, volatility or disruption in the capital markets, and changes in interest rates, as well as events such as natural disasters, acts of war, terrorism, pandemics or adverse health developments, social unrest, and catastrophes.
−Removed: The United States 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.
−Removed: From March 2022 through September 2023, the Federal Reserve raised the target range for the federal funds rate on 11 separate occasions and signaled that it anticipates additional increases in the target range will be appropriate to lower inflation.
+Added: 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.
+Added: From March 2022 through December 2023, the Federal Reserve raised the target range for the federal funds rate on 11 separate occasions.
Increased interest rates have had, and may continue to have, an adverse impact on the spending levels of consumers and their ability and willingness to borrow money.
2 unchanged sentences
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.
−Removed: As our business grows and we increase our product and service offerings, we intend to continue to expend significant funds, and we may not be able to generate sufficient revenue to offset our higher operating expenses.
−Removed: We recorded a net loss of $77.7 million for the year ended December 31, 2022, primarily due to the goodwill impairment, increased operating expenses, increased interest expense and a net decrease in fair value.
+Added: We recorded a net loss of $180.0 million for the year ended December 31, 2023, primarily due to a net decrease in fair value and increased cost of debt and we recorded a net loss of $77.7 million for the year ended December 31, 2022, primarily due to the goodwill impairment, increased operating expenses, increased interest expense and a net decrease in fair value.
Our business was adversely impacted by the COVID-19 pandemic and we recorded a net loss of $45.1 million for the year ended December 31, 2020.
17 unchanged sentences
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.
+Added: Our risk management efforts may not be effective, which may expose us to market risks that harm our results of operations.
+Added: We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, monitor and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk and liquidity risk, as well as operational risks.
+Added: 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.
+Added: As our loan mix changes and as our product offerings evolve, our risk management strategies may not always adapt to such changes.
+Added: Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment.
+Added: 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.
+Added: 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.
+Added: If our risk management efforts are ineffective, we could suffer losses that could harm our business, financial condition, and results of operations.
+Added: We may change our corporate strategies or underwriting and servicing practices, which may adversely affect our business.
+Added: 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.
+Added: 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.
+Added: We may also decide to modify our strategy with respect to whole loan sales, including increasing or decreasing the number of loans sold.
+Added: 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.
+Added: 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.
+Added: We rely extensively on models in managing many aspects of our business.
+Added: If our models contain errors or are otherwise ineffective, our business could be adversely affected.
+Added: 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.
+Added: 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.
+Added: These models are built using forms of A.I., such as machine learning;
+Added: however, the credit models do not use generative A.I., and once approved and implemented, remain static.
+Added: 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.
+Added: 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.
+Added: models may be adversely affected.
+Added: 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.
+Added: In addition, this information may not always be complete, up-to-date or properly evaluated.
+Added: As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures or available information indicate.
+Added: 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).
+Added: We rely on our credit risk models and other models to develop and manage our products and services.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: We may also be subject to liability to those investors if we misrepresented the characteristics of the loans sold because of those errors.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: Additionally, the use of A.I.
+Added: is relatively new and the regulatory framework is evolving and remains uncertain.
+Added: Any negative regulatory or public scrutiny based upon this could adversely affect our business and reputation.
If we are unable to collect payment 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.
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If our contact center operations become constrained for any reason, the effectiveness of our collection activities may be reduced.
−Removed: In 2021, we had previously voluntarily implemented certain provisions of the call limitations set forth in Regulation F, the CFPB’s Debt Collection Rule that took effect at that time, which is not applicable to creditors such as us who are collecting their own debts.
−Removed: If we did not correctly estimate the impact of a reduced calling strategy, the effectiveness of our efforts to collect on defaulted loans may be impacted.
−Removed: In February 2023, we revised our calling practices to comply with Regulation F, only where applicable under state law.
−Removed: Additionally, in August 2020, we changed our small claims filing practices, including dismissing all pending small claims court filings and suspending all new legal collection actions.
−Removed: We temporarily suspended our legal collections process.
−Removed: This process was revised and relaunched in 2023.
If we are unable to employ alternative means of engaging severely delinquent members and collecting on defaulted loans, the effectiveness of our efforts to collect on defaulted loans may be impacted.
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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.
−Removed: Given the unprecedented nature of the COVID-19 pandemic and its impact on the economy, the amount of subjective assessment and judgment applied to develop our forecasts has increased materially, since no directly corresponding historical data set exists.
+Added: For example, given the unprecedented nature of the COVID-19 pandemic and its impact on the economy, the amount of subjective assessment and judgment applied to develop our forecasts has increased materially, since no directly corresponding historical data set exists.
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.
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• the timing and success of new products and origination channels;
−Removed: • the amount and timing of operating expenses and capital expenditures, including those related to member acquisition, development of new products and services, and maintenance and expansion of our business, operations and infrastructure;
+Added: • 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;
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We are, and intend in the future to continue, developing our financial products and services.
−Removed: We intend to continue investing significant resources in developing new tools, features, services, products and other offerings.
+Added: We intend to continue investing 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.
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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.
−Removed: If we are not able to effectively implement technology-driven products and services as quickly as our competitors or be successful in marketing these products and services to our members and strategic partners, demand for our products and services may decrease.
−Removed: In addition, the borrower profile of members using our products and services may not be as attractive as existing members with credit products, which may lead to higher levels of delinquencies or defaults than we have historically experienced.
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.
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For example, on August 8, 2023, we announced the sunsetting of our checking account product and on November 6, 2023, we announced we are reviewing strategic options for our credit card portfolio, as well as sunsetting our partnership with Sezzle and discontinuing 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.
−Removed: Failure to achieve the anticipated benefits could adversely affect our results of operations.
+Added: Failure to achieve the anticipated benefits from the discontinuation of these products could adversely affect our results of operations.
The success and growth of our business depends upon our ability to continuously innovate and develop our products and technologies.
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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.
−Removed: We may not be 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.
+Added: We may not be 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.
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and machine learning technologies is evolving and remains uncertain.
−Removed: It is possible 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.
+Added: In October 2023, the Biden Administration issued an Executive Order, directing federal agencies to take actions to align to key policy goals in connection with the use of A.I.
+Added: 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 industry standards.
If we are unable to do so in a timely or cost-effective manner, our business could be harmed.
+Added: Stockholder activism could disrupt our business, cause us to incur significant expenses, hinder execution of our business strategy, and impact our stock price.
+Added: 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 and divert management’s and our Board’s attention and resources away from our business.
+Added: 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.
+Added: 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.
+Added: 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.
−Removed: Negative publicity about our industry or our company, including the terms of the consumer loans, effectiveness of the proprietary credit risk model, 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
−Removed: brands and business model or lead to changes in our business practices.
+Added: 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 and have previously, and in the future, may respond to inquiries by modifying our business practices or policies to better align with our mission.
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Competition for highly skilled personnel, particularly engineering and data analytics personnel, is extremely intense across the country and is likely to continue to increase, as more companies are offering remote or hybrid working arrangements.
−Removed: We have experienced and expect to continue to face difficulty identifying and hiring qualified personnel in many areas, especially as we pursue our growth strategy.
+Added: 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.
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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.
−Removed: In February 2023, May 2023, and November 2023, we announced an approximately 10%, 19%, and 18% reduction in our corporate workforce, respectively.
−Removed: These reductions could negatively impact employee morale and make it more difficult to attract, retain and hire new talent.
+Added: Further, the reductions in force that were announced in February, May, and November of 2023 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.
−Removed: In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to
−Removed: recruit them.
−Removed: If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our
−Removed: services and our ability to serve our members could be adversely affected.
+Added: In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them.
+Added: 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.
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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.
−Removed: In the future, we intend to continue to dedicate significant resources to our marketing efforts, particularly as we develop our brand.
−Removed: 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, including by using additional products or services we offer.
−Removed: If we are unable to recover our marketing costs through increases in the size, value or overall number of credit products we originate, or other product selection and utilization, it could have a material adverse effect on our business, financial condition, results of operations, and prospects.
−Removed: We may fail to realize all of the anticipated benefits of the Digit acquisition or those benefits may take longer to realize than expected.*
−Removed: We believe that there are significant benefits and synergies that may be realized through combining the platform, product and service offerings of Oportun and Digit.
−Removed: As we continue to integrate the businesses and seek to realize anticipated benefits and synergies, we continue to devote significant attention and resources to successfully align our business practices and operations, which may disrupt our business.
−Removed: The full benefits of the acquisition, including anticipated growth opportunities, may not be realized as expected or may not be achieved within the anticipated time frame, or at all.
−Removed: Failure to achieve the anticipated benefits of the acquisition could adversely affect our results of operations or cash flows, cause dilution to our earnings per share, decrease or delay any accretive effect of the acquisition and negatively impact the price of our common stock.
+Added: 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.
+Added: 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 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.
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We have previously acquired, and in the future, may acquire, complementary assets or businesses.
+Added: For example, in December 2021 we acquired Digit, and as we seek to realize synergies, we may devote significant attention and resources to successfully align our business practices and operations, which may disrupt our business.
+Added: 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:
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Fraudulent activity could negatively impact our business, brand and reputation and require us to continue to take steps to reduce fraud risk.
−Removed: 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, 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.
+Added: 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.
+Added: 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.
+Added: 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.
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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.
+Added: These mobile technologies may be more susceptible to the fraudulent activities of organized criminal, 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.
−Removed: 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
−Removed: 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.
+Added: 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.
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We have been and continue to be the subject of actual or attempted unauthorized access, mishandling or misuse of information, computer viruses or malware, and cyber-attacks that could obtain 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 other infiltration, exfiltration or other similar events.
−Removed: The automated nature of our business may make us attractive targets for hacking and potentially vulnerable to computer malware, physical or electronic break-ins and similar disruptions.
+Added: The automated nature of our business may make us an attractive target for hacking and potentially vulnerable to computer malware, physical or electronic break-ins and similar disruptions.
Further, our adoption of remote working arrangements for our corporate and many of our contact center employees may result in increased consumer or employee privacy, IT security, and fraud concerns arising from the increased electronic transfer and other online activity.
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technologies into our platform in the future.
−Removed: Our use of A.I.
technologies may create additional cybersecurity risks or increase cybersecurity risks, including risks of security breaches and incidents.
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Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, contractors, third-party vendors, business partners, or by malicious third parties.
−Removed: Any failure or perceived failure by us, or the third parties with whom we do business, to comply with our privacy, confidentiality, or data security-related legal or other obligations to third parties, or any security breaches impacting us, our third-party providers or partners, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others.
−Removed: In addition, a data security 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.
+Added: 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, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others.
+Added: 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.
−Removed: We incur significant costs to detect and prevent security breaches and other security-related incidents, and we expect our costs will increase as we work to continuously improve our systems and processes to prevent future breaches and incidents.
+Added: 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.
+Added: 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;
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We retain physical records in various storage locations outside of our retail locations.
−Removed: 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.
+Added: 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.
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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, physical or electronic break-ins, technical errors, insider threats, power outages or other events.
−Removed: 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 banking services to our members.
+Added: 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.
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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.
−Removed: 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.
+Added: A failure to maintain
+Added: 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.
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Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any of our losses.
−Removed: We may change our corporate strategies or underwriting and servicing practices, which may adversely affect our business.
−Removed: As our business grows and evolves, we have, and may in the future, change certain aspects of our corporate strategies or any of our underwriting guidelines without notice to our stockholders.
−Removed: 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.
−Removed: We may also decide to modify our strategy with respect to whole loan sales, including increasing or decreasing the number of loans sold.
−Removed: 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.
−Removed: 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 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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The geographic concentration of our loan originations may expose us to an increased risk of loss due to risks associated with certain regions.
−Removed: Certain regions of the United States 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.
+Added: Certain regions of the U.S.
+Added: 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 pandemics in specific geographic regions may result in higher rates of delinquency and loss in those areas.
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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.
−Removed: As of September 30, 2023, 46.5%, 25.7%, 8.4%, 5.1% and 3.4% of our Owned Principal Balance at End of Period related to members from California, Texas, Florida, Illinois and New Jersey, respectively.
+Added: As of March 31, 2024, 45.5%, 26.4%, 8.9%, 5.2% and 3.5% 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.
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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.
−Removed: If we are unable to access certain third-party data used in our credit risk models, or our access to such data is limited, 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.
+Added: 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.
+Added: In addition, this information may not always be complete, up-to-date or properly evaluated.
+Added: 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.
+Added: 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.
+Added: Further, regulators may require banks and other lenders to not report certain negative performance data, such as medical debt, to the credit bureaus.
+Added: 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.
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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.
−Removed: As we continue to grow, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to maintain these valuable aspects of our corporate culture and our long-term mission.
+Added: As we continue to evolve our business, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, 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 on workforce morale and productivity.
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Our international operations and offshore service providers involve inherent risks which could result in harm to our business.
−Removed: As of September 30, 2023, we had 1,483 employees in Mexico, including employees related to our two contact centers.
+Added: As of March 31, 2024, we had 1,490 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.
−Removed: We have also engaged outsourcing partners in the United States that provide offshore member-facing contact center activities in Colombia and the Philippines, and may in the future include additional locations in other countries.
−Removed: In addition, our technology development center in India is staffed through outsourcing partners and our own employees.
−Removed: We have engaged vendors that utilize employees or contractors based outside of the United States.
−Removed: As of September 30, 2023, our outsourcing partners have provided us, on an exclusive basis, 177 full-time equivalents in Colombia, Philippines, and India to support contact center and technical delivery work.
+Added: We have also engaged outsourcing partners in the U.S.
+Added: that provide offshore member-facing contact center activities in Colombia and the Philippines, and may in the future include additional locations in other countries.
+Added: In addition, we have a technology development center in India, where we had 121 employees as of March 31, 2024.
+Added: We have engaged vendors that utilize employees or contractors based outside of the U.S.
+Added: As of March 31, 2024, our outsourcing partners have provided us, on an exclusive basis, the equivalent of 71 full-time equivalents in Colombia and Philippines to support contact center work.
These international activities are subject to inherent risks that are beyond our control, including:
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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.
−Removed: 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.
−Removed: Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
+Added: Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial
+Added: statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business.
+Added: 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.
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In addition, a large number of members make payments and apply for loans at our retail locations.
−Removed: 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
−Removed: 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.
+Added: 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.
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Any of our primary locations may be vulnerable to the adverse effects of climate change.
−Removed: For example, our Bay Area headquarters have 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.
+Added: 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.
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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.
+Added: Unfavorable outcomes in legal proceedings may harm our business and results of operations.
+Added: 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.
+Added: 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.
+Added: 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, such as the COVID-19 pandemic, may adversely impact our business and results of operations.
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Worker shortages, supply chain issues, inflationary pressures, vaccine and testing requirements, the emergence of new health epidemics or outbreaks and new variants of COVID-19, 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 and new variants of COVID-19 have occurred in the past and may occur in the future.
−Removed: In 2020 through 2022, we offered payment relief options to members impacted by COVID-19, including hardship programs, reduced payment plans, late fee waivers and other borrower accommodations.
−Removed: In the future, we may offer additional payment relief options and may cease offering some options after the end of the federal state of emergency on May 11, 2023.
We are unable to predict the future path or impact of any global or regional health epidemics, other outbreaks, or resurgences of COVID-19, including existing or future variants.
An extended period of disruption as a result of a health epidemic or pandemic, including COVID-19, may negatively impact us, as well as our members, vendors, and partners.
−Removed: Unfavorable outcomes in legal proceedings may harm our business and results of operations.
−Removed: 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.
−Removed: 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.
−Removed: 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.
Funding and Liquidity Risks
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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.
−Removed: For more information on covenants, requirements and events, see Note 8, Borrowings of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.
+Added: For more information on covenants, requirements and events, see Note 8, B o rrowings of 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.
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We also contribute a portion of the pool of loans in consideration for the equity interests in the SPE.
−Removed: 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.
+Added: Subject to certain
+Added: 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.
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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.
−Removed: The gain on sale generated by any of our structured or whole loan sales and servicing fees earned on sold loans represents a significant source of our earnings.
+Added: 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.
−Removed: In March 2022, we participated in a securitization through which we issued amortizing asset-backed notes secured by a pool of its unsecured and secured personal installment loans and may do additional structured loan sales in the future.
−Removed: 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.
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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were each swept into receivership and on May 1, 2023, First Republic Bank was taken into receivership.
−Removed: While we did not maintain deposits at Silicon Valley Bank, Signature Bank, Silvergate Capital Corp.
+Added: 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.
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Our proprietary technology, including our credit risk models and A.I.
−Removed: algorithms, may infringe upon claims of third-party intellectual property, and we may face intellectual property challenges from such other parties.
+Added: 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.
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In the ordinary course of business, we have been named as a defendant in various legal actions, including class actions and other litigation.
−Removed: Generally, this litigation arises from claims of violation of do-not-call, credit reporting, collection, and bankruptcy laws.
+Added: Generally, this litigation arises from the claims of violation of do-not-call, credit reporting, collection, and bankruptcy laws.
The complexity of the laws related to secured personal loans regarding vehicle titling, lien placement and repossession may enhance the risk of consumer litigation.
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Regulatory bodies may enact new laws or promulgate new regulations or view matters or interpret laws and regulations differently than they have in the past, or commence investigations or inquiries into our business practices.
−Removed: For example, in April 2022, the CFPB announced that it intends to examine nonbank 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 nonbank lenders.
+Added: For example, in April 2022, the CFPB announced that it intends to examine nonbank financial companies that pose risks to consumers, and in November 2022, the Treasury Department issued a report encouraging
+Added: the CFPB to increase its supervisory activity with respect to larger nonbank lenders.
If the CFPB decides to subject us to its supervisory process, it could significantly increase the level of regulatory scrutiny of our business practices.
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If finalized, each of these registries has the potential to increase the operational costs and regulatory scrutiny of our business practices.
−Removed: In addition, the Biden Administration recently announced a government-wide effort to eliminate “junk fees” which could subject our business practices to even further scrutiny.
−Removed: The CFPB’s action on junk fees initially focused on fees associated with deposit products, such as “surprise” overdraft fees and not-sufficient-funds fees, but has since expanded, and what constitutes a “junk fee” remains unclear and both the CFPB and Federal Trade Commission have taken steps to increase scrutiny of fees.
+Added: In addition, the Biden Administration previously announced a government-wide effort to eliminate “junk fees” which could subject our business practices to even further scrutiny.
+Added: The CFPB’s action on junk fees initially focused on fees associated with deposit products, such as “surprise” overdraft fees and not-sufficient-funds fees, but has since expanded.
+Added: Furthermore, what constitutes a “junk fee” remains unclear and both the CFPB and Federal Trade Commission have taken steps to increase scrutiny of fees.
The CFPB has called out other fees, such as pay-to-pay fees charged by debt collectors, and is actively soliciting consumer input on fee practices associated with other consumer financial products or services, signaling that the “junk fee” initiative is likely to continue to broaden in scope.
−Removed: In February 2023, the CFPB published a proposed rule, which is currently subject to public comment, amending Regulation Z to mandate significant decreases to credit card late fees and eliminate annual inflation adjustments for late fee safe harbor amounts.
+Added: On March 5, 2023, the CFPB published a final rule amending Regulation Z to reduce credit card late fees significantly and eliminate annual inflation adjustments for late fee safe harbor amounts, with an effective date of May 14, 2024.
+Added: The rule is currently the subject of litigation in the Fifth Circuit District Court in Texas with plaintiffs challenging the validity of the rule and seeking temporary relief pending that challenge.
+Added: If the final rule becomes effective, it could have operational and financial impacts on our credit card business.
In October 2023, the CFPB issued a pre-rule proposal to modify the Fair Credit Reporting Act and Regulation V, which would have broad implications across all participants in the credit reporting ecosystem.
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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.
−Removed: The current regulatory environment, increased regulatory compliance efforts, and enhanced regulatory enforcement have resulted insignificant operational and compliance costs and may prevent us from providing certain products and services.
+Added: The current 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.
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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.
−Removed: In recent publications, the CFPB has indicated that the agency is significantly increasing its oversight and scrutiny over consumer finance and on April 25, 2022, the CFPB announced that it was invoking a previously unused legal provision to examine nonbank financial companies that it believes pose risk to consumers.
+Added: In recent publications, the CFPB has
+Added: indicated that the agency is significantly increasing its oversight and scrutiny over consumer finance and on April 25, 2022, the CFPB announced that it was invoking a previously unused legal provision to examine nonbank financial companies that it believes pose risk to consumers.
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, may conduct on-site examinations of our business on a periodic basis.
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For example, in March 2022, it requested public input on fees for financial products and has indicated that it plans to ramp up enforcement actions against lenders that illegally charge credit card late-payment fees and may rewrite its rules that set thresholds for such fees.
−Removed: Further, in February 2023, the CFPB proposed a rule that would amend regulations to limit credit card late-payment fees to $8 or 25% of the minimum payment due, whichever is greater.
+Added: Further, in February 2024, the CFPB published a final rule that amends regulations to limit credit card late-payment fees to $8 or 25% of the minimum payment due, whichever is greater.
Digit received a CID from the CFPB in June 2020.
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The current presidential administration has appointed and is expected to continue to appoint consumer-oriented regulators at federal agencies such as the CFPB, FTC, OCC and FDIC, and the government’s focus on enforcement of federal consumer protection laws is expected to increase.
−Removed: It is possible that these regulators could promulgate rulemakings and bring enforcement actions that materially impact our business and the business of our lending partners.
+Added: It is possible that these 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).
−Removed: New laws and regulations concerning the processing of personal information continue to be vigorously debated and enacted at all levels
−Removed: of government across the United States and around the globe while existing laws, such as the Gramm-Leach-Bliley Act, are being amended or reinterpreted to account for the rapidly evolving data economy.
+Added: 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, are being amended or reinterpreted to account for the rapidly evolving data economy.
The California Consumer Privacy Act (the “ CCPA ” ), including the California Privacy Rights Act of 2020 amendments imposes significant requirements on businesses processing consumer personal information – principally around enabling and honoring consumer choices related to such processing.
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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 things like accountability and oversight, performing risk assessments, encryption, and enabling multi-factor authentication to protect all forms of customer information.
−Removed: This patchwork of legislation and regulation may give rise to conflicts or differing views of personal privacy rights and of privacy and security obligations to which companies such as Oportun must adhere.
−Removed: The rapidly evolving privacy and data protection regulatory environment, along with increased scrutiny from consumers and their advocates and increased complexity in Oportun’s organizational structure, demands careful attention to our own processing of personal information and processing by third parties acting on our behalf.
−Removed: 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 through our subsidiary Digit.
−Removed: Our failure, or a failure by third parties with whom we do business, to comply with applicable privacy laws or regulations and contractual obligations required by our business partners, 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.
+Added: Further, in October 2023, the CFPB announced a Section 1033 Proposed 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.
+Added: The rule is not yet finalized or effective.
+Added: federal government also is contemplating federal privacy legislation.
+Added: This patchwork of 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 companies such as Oportun must adhere.
+Added: 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 Oportun’s organizational structure, demands careful attention to our own processing of personal information and processing by third parties acting on our behalf.
+Added: 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.
+Added: 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.
−Removed: Our business is subject to the regulatory framework applicable to registered investment advisers, including regulation by the SEC.
−Removed: We offer investment management services through Digit Advisors, LLC which provides automated investment advice regarding the selection of a portfolio of exchange traded funds through our mobile application.
−Removed: Digit Advisors is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and is subject to regulation by the SEC.
−Removed: Investment advisers are subject to the anti-fraud provisions of the Advisers Act and to fiduciary duties derived from these provisions, which apply to our relationships with our members who are advisory clients, as well as the funds we manage.
−Removed: These provisions and duties impose restrictions and obligations on us with respect to our dealings with our members, including for example restrictions on transactions with our affiliates.
−Removed: Our investment adviser has in the past and will in the future be subject to periodic SEC examinations.
−Removed: Our investment adviser is also subject to other requirements under the Advisers Act and related regulations primarily intended to benefit advisory clients.
+Added: Our business has in the past been subject to the regulatory framework applicable to registered investment advisers, including regulation by the SEC.*
+Added: On March 29, 2024, we withdrew our registration as an investment adviser.
+Added: Prior to the withdrawal, we were registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
+Added: We previously offered investment management services through Digit Advisors, LLC which provided automated investment advice regarding the selection of a portfolio of exchange traded funds through our mobile application.
+Added: Investment advisers are subject to the anti-fraud provisions of the Advisers Act and to fiduciary duties derived from these provisions.
+Added: These provisions and duties imposed restrictions and obligations on us with respect to our dealings with our members, including for example restrictions on transactions with our affiliates.
+Added: Our investment adviser has in the past been subject to SEC examinations.
+Added: Our investment adviser was also subject to other requirements under the Advisers Act and related regulations primarily intended to benefit advisory clients.
These additional requirements relate to matters including maintaining effective and comprehensive compliance programs, record-keeping and reporting and disclosure requirements.
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Our bank partnership products may lead to regulatory risk and may increase our regulatory burden.
−Removed: We provide our credit card products through a bank partnership program with WebBank and we have bank partnership programs with Pathward, N.A., to offer unsecured installment loans and provide deposit accounts, debit card services and other transaction services to our members.
+Added: We provide our credit card products through a bank partnership program with WebBank and we have bank partnership programs with Pathward, N.A., to offer unsecured personal loans, secured personal loans, and provide deposit accounts, debit card services 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.
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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.
−Removed: Regulation by federal and state regulators may also subject us to increased compliance, legal
−Removed: 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.
+Added: 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.
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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.
−Removed: 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.
+Added: 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
+Added: 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.
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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.
−Removed: We have authorized 9,919,428 shares for issuance under our 2019 Equity Incentive Plan, 1,926,598 shares for issuance under our 2019 Employee Stock Purchase Plan, and 508,851 shares for issuance under our Amended and Restated 2021 Inducement Equity Incentive Plan, each subject to adjustment in certain events.
+Added: We have authorized a total of 13,471,733 shares for issuance under our 2019 Equity Incentive Plan with 10,313,782 shares, net of vested and exercised shares, remaining available for issuance, 2,271,288 shares for issuance under our 2019 Employee Stock Purchase Plan, and 1,105,000 shares authorized for issuance under our Amended and Restated 2021 Inducement Equity Incentive Plan with 928,867 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 the Amended Credit Agreement would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
−Removed: As of September 30, 2023, the Warrants to purchase 4,193,453 shares of our Common Stock issued in connection with the Amended Credit Agreement were outstanding and exercisable.
+Added: As of March 31, 2024 , the Warrants to purchase 4,193,453 shares of our Common Stock issued in connection with the Amended Credit Agreement were outstanding and exercisable.
The exercise price of these Warrants is $0.01 per share.
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• actual or anticipated fluctuations in our results of operations;
−Removed: • actual or perceived data security breaches or incidents impacting us or our third-party service providers;
+Added: • actual or perceived security breaches or incidents impacting us or our third-party service providers;
• changes in prevailing interest rates;
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and international tax laws could increase our liability and adversely affect our after-tax profitability.
−Removed: For example, the United States recently enacted the Inflation Reduction Act, which implemented, among others, a 15% alternative minimum tax on adjusted financial statement income for certain large companies and a 1% excise tax on certain stock buybacks.
+Added: For example, the United States recently enacted the Inflation Reduction Act of 2022, which implemented, among other changes, a 15% alternative minimum tax on adjusted financial statement income for certain large companies and a 1% excise tax on certain stock buybacks.
In addition, many countries and the Organisation for Economic Co-operation and Development have reached an agreement to implement a 15% global minimum tax.
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This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing of these items.
−Removed: The differences in treatment may result in payment of additional taxes, interest or penalties that could have an adverse effect on our financial condition and results of operations.
+Added: 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.
+Added: Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
+Added: As of December 31, 2023, the Company had federal net operating loss carryforwards of $189.1 million, of which $17.7 million expires beginning in 2033 and $171.4 million carries forward indefinitely.
+Added: Additionally, the Company had state net operating loss carryforwards of $199.0 million which are set to begin expiring in 2030.
+Added: As of December 31, 2023, the Company had federal and California research and development tax credit carryforwards of $15.3 million and $9.9 million, respectively.
+Added: The federal research and development tax credit expires beginning in 2041, and the California research and development tax credits are not subject to expiration.
+Added: 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.
+Added: 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 carryovers and other pre-change tax attributes, such as research and development credits, to offset its post-change income or taxes may be limited.
+Added: We may experience ownership changes in the future as a result of shifts in our stock ownership.
+Added: As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S.
+Added: 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.
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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.
−Removed: 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.
+Added: This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our
+Added: 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.
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.
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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.
−Removed: Our key metrics are calculated using internal company data, including Members and Products, and have not been validated by an independent third-party.
+Added: 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.
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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.
−Removed: Furthermore, Section 22 of the Securities Act of 1933, as amended (“Securities Act”), creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
+Added: 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.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.