Navigating Uncertainty: Credit Unions on Alert Amid Open Lending Corporation’s Class Action Battles

Credit Union Executives on Alert: Open Lending Corporation Faces Multiple Class Action Lawsuits

In a significant development for financial institutions working with lending technology providers, Open Lending Corporation (NASDAQ: LPRO) now faces multiple class action lawsuits alleging securities fraud. The litigation comes at a critical moment as the company grapples with substantial financial challenges and leadership changes.

Pomerantz LLP announced on May 18, 2025, that it has filed a class action lawsuit against Open Lending, joining several other law firms representing investors who purchased the company’s securities between February 24, 2022, and March 31, 2025. The lawsuit alleges that Open Lending, which provides lending enablement and risk analytics solutions to credit unions and other financial institutions, engaged in securities fraud and other unlawful business practices.

According to a complaint filed by Robbins Geller Rudman & Dowd LLP, Open Lending and certain executives allegedly “misrepresented the capabilities of Open Lending’s risk-based pricing model,” “issued materially misleading statements regarding Open Lending’s profit share revenue,” and “failed to disclose Open Lending’s 2021 and 2022 vintage loans had become worth significantly less than their corresponding outstanding loan balances.”

Timeline of Events Leading to Legal Action

The troubles for Open Lending became public on March 17, 2025, when the company announced it would be unable to file its 2024 Annual Report on time. The company stated it “require[d] additional time to finalize its accounting and review processes specifically related to its profit share revenue and related contract assets.” Following this announcement, Open Lending’s stock price fell $0.82 per share (19.03%) over two trading sessions, closing at $3.49 per share on March 18, 2025.

The situation deteriorated further on March 31, 2025, when Open Lending released its fourth quarter and full year 2024 financial results, revealing a quarterly revenue of negative $56.9 million. This shocking figure was largely attributed to “a $81.3 million reduction in estimated profit share revenues related to business in historic vintages” primarily due to “heightened delinquencies and corresponding defaults associated with loans originated in 2021 through 2024.”

Simultaneously, the company announced a major leadership shakeup with the appointment of a new Chief Executive Officer and Chief Operating Officer, both replacing Charles D. Jehl, who had been serving in three executive roles simultaneously as CEO, COO, and Chief Financial Officer. This news triggered another steep decline in Open Lending’s stock price, which fell $1.59 per share (57.61%), closing at just $1.17 per share on April 1, 2025.

Multiple Law Firms Pursuing Legal Action

The legal challenges facing Open Lending are mounting as several prominent law firms have filed class action lawsuits on behalf of investors:

Robbins Geller Rudman & Dowd LLP filed a case captioned Bradley v. Open Lending Corporation, No. 25-cv-00650, in the Western District of Texas. The firm emphasizes that investors who suffered substantial losses have until June 30, 2025, to seek appointment as lead plaintiff in the lawsuit.

Similarly, Glancy Prongay & Murray LLP has filed a securities fraud lawsuit in the same court, also captioned Bradley v. Open Lending Corporation, et al., Case No. 1:25-cv-00650. The firm notified investors they have 60 days from their notice date to move the Court to serve as lead plaintiff.

The Schall Law Firm, a national shareholder rights litigation firm, has also reminded investors of the class action lawsuit, encouraging those who purchased securities during the Class Period to contact the firm before the June 30, 2025 deadline.

Implications for Credit Unions

This legal battle has significant implications for credit unions that utilize Open Lending’s services. The company’s core business involves providing lending enablement and risk analytics solutions to credit unions, regional banks, finance companies, and captive finance companies of automakers.

Credit union executives should carefully evaluate their relationship with Open Lending and assess potential exposure, particularly if their institutions have relied on Open Lending’s risk-based pricing models for loan decisions. The allegations that the company misrepresented the capabilities of these models could raise concerns about the quality of loans originated using Open Lending’s technology.

Furthermore, the reported “heightened delinquencies and corresponding defaults associated with loans originated in 2021 through 2024” may signal broader issues with loan performance that could affect credit unions’ loan portfolios and financial health.

Risk Management Considerations

Credit union executives should consider implementing the following risk management strategies in response to the Open Lending situation:

1. Conduct a comprehensive review of all loans originated through Open Lending’s platform, particularly those from the 2021-2024 vintage years mentioned in the lawsuits.

2. Evaluate the performance metrics of these loans against internal benchmarks and industry standards to identify any concerning patterns or discrepancies.

3. Assess the potential financial impact of increased delinquencies and defaults in this loan segment on the credit union’s overall financial health.

4. Review contractual agreements with Open Lending to understand liability provisions and potential recourse options.

5. Consider contingency plans for risk assessment and loan origination processes if Open Lending’s services are disrupted or terminated.

Looking Ahead

As the legal proceedings unfold, credit union executives should stay informed about developments in these cases and potential settlements or judgments. The June 30, 2025 deadline for investors to join the class action as lead plaintiffs marks an important milestone in the legal timeline.

Credit unions should also monitor Open Lending’s financial stability and operational continuity given the significant leadership changes and financial challenges revealed in recent months. The appointment of new leadership may signal a strategic shift or restructuring at the company that could affect its service offerings and partnerships with financial institutions.

For credit union executives, this situation underscores the importance of thorough due diligence when selecting technology partners for critical lending functions and implementing robust oversight mechanisms to monitor the performance of third-party service providers in the lending process.