ALJDEC decisions subject to certification as final

21A-011-FIN · Department of Insurance and Financial Institutions - Financial · 2021-04-30

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of Consumer Lender License(s) of:

AURA FINANCIAL LLC

(License No. 0936448)

Respondent.

No. 21A-011-FIN

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 14, 2021 at 9:00 AM.

APPEARANCES: Assistant Attorney General James Rolstead, Esq. appeared on behalf of the Arizona Department of Insurance and Financial Institutions (“Department”) with Deian Ousounov, Regulatory Legal Affairs Officer, as a witness. No appearance(s) by or on behalf of Aura Financial LLC (“Respondent”) Lynette Evans and Susan Hack observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

_____________________________________________________________________

Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Order to the Director of the Department.

FINDINGS OF FACT

Background and Procedure

The Department was created and enabled by the State of Arizona to administer enumerated State laws by protecting the public interest through licensure and regulation of the consumer lender profession.

Respondent is domiciled in Delaware. On January 09, 2017, the Department issued License No. 0936448 to Respondent for consumer lending. On June 30, 2021, Respondent’s license is scheduled to expire. Respondent also holds the following twenty-seven (27) branch office consumer lending licenses:

Phoenix, AZ Branch License No. CL-BR-0122107.

Phoenix, AZ Branch License No. CL-BR-0122108.

Glendale, AZ Branch License No. CL-BR-0122109.

Mesa, AZ Branch License No. CL-BR-0122110.

Phoenix, AZ Branch License No. CL-BR-0122111.

Glendale, AZ Branch License No. CL-BR-0122112.

El Mirage, AZ Branch License No. CL-BR-0122113.

Phoenix, AZ Branch License No. CL-BR-0122114.

Mesa, AZ Branch License No. CL-BR-0122115.

Mesa, AZ Branch License No. CL-BR-0122116.

Tempe, AZ Branch License No. CL-BR-0122117.

Phoenix, AZ Branch License No. CL-BR-0122119.

Phoenix, AZ Branch License No. CL-BR-0122123.

Phoenix, AZ Branch License No. CL-BR-0122124.

Phoenix, AZ Branch License No. CL-BR-0122125.

Phoenix, AZ Branch License No. CL-BR-0122126.

Mesa, AZ Branch License No. CL-BR-0122127

Chandler, AZ Branch License No. CL-BR-0122128

Glendale, AZ Branch License No. CL-BR-0122129.

Phoenix, AZ Branch License No. CL-BR-0122130.

Phoenix, AZ Branch License No. CL-BR-0122131.

Phoenix, AZ Branch License No. CL-BR-0122132.

Phoenix, AZ Branch License No. CL-BR-0122135.

Chandler, AZ Branch License No. CL-BR-0122309.

Phoenix, AZ Branch License No. CL-BR-0122310.

Phoenix, AZ Branch License No. CL-BR-0122312.

Phoenix, AZ Branch License No. CL-BR-0122329.

These branch office consumer lender licenses are scheduled to expire on June 30, 221.

Respondent also holds the following twelve (12) expired branch office consumer lending licenses:

Mesa, AZ Branch License No. CL-BR-0123339.

Phoenix, AZ Branch License No. CL-BR-0123438.

Phoenix, AZ Branch License No. CL-BR-0123442.

Tucson, AZ Branch License No. CL-BR-0122120.

Phoenix, AZ Branch License No. CL-BR-0122133.

Phoenix, AZ Branch License No. CL-BR-0123338.

Glendale, AZ Branch License No. CL-BR-0123340.

Phoenix, AZ Branch License No. CL-BR-0123439.

Phoenix, AZ Branch License No. CL-BR-0123440.

Phoenix, AZ Branch License No. CL-BR-0123441.

Mesa, AZ Branch License No. CL-BR-0123443.

Mesa, AZ Branch License No. CL-BR-0123444.

On January 05, 2021, Respondent notified the Department that “Aura Financial LLC (“Aura”), Consumer Lender License Number CL0936448, will cease lending operations on January 6, 2021. Aura is no longer originating new loans and has ceased accepting loan applications and disbursements. The servicing of Aura’s existing loan portfolio will continue through the arrangement made with a successor servicer. The appointed successor will continue to process future collections.”

On January 09, 2021, the Department obtained a portion of Respondent’s Chapter 7 bankruptcy filings from the United States Bankruptcy Court for the District of Delaware. Respondent failed to provide notice of its bankruptcy filing, or provide copies of any documents related to its bankruptcy petition, to the Department.

On January 22, the Department asked Respondent to provide the following information on or before January 29, 2021: its plans for transferring its loan portfolio, its consumer notification plan for the transfer of its loans to a successor servicer, and its wind-down operations plan. Respondent did not comply with the Department’s request.

On February 03, 3031, the Department issued an Order Summarily Suspending Consumer Lender License and Notification of Rights (“Order“) to Respondent pursuant to Ariz. Rev. Stat. § 41-1092.11(B). Copies of the Order were sent via certified mail to Respondent’s address of record, and to Respondent’s statutory agent’s address on record with the Arizona Corporate Commission. No response was received by or on behalf of Respondent.

On February 03, 2021, the Department received a Notice from the Clerk of the Court of the United States Bankruptcy Court, District of Delaware for Case No. 21-100016-BLS, regarding the possibility of Respondent’s assets being available for distribution as dividends to creditors.

On February 16, 2021, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on April 14, 2021. Per the Notice of Hearing issued on February 26, 2021, the issue to be determined is whether the Department has cause to revoke Respondent’s consumer lender license based on the foregoing alleged conduct.

Hearing Evidence

The Department called Deian Ousounov as a witness and submitted Exhibits 1-7. The Notice of Hearing was also admitted as its own exhibit. The substantive evidence of record is as follows:

A Consumer Lender is defined as a person or entity that advertises to make or procure, solicits, or holds themselves out as willing to loan members of the public $10,000.00 or less, subject to a finance charge. Consumer Lenders must be licensed by the Department. Subsequent licenses issued to a licensee are branch office licenses that are held under the originally issued primary license.

Respondent’s January 05, 2021, operational notification to the Department was deficient because it was missing critical information, such as their successor’s contact information and who the debt holder will be, the date(s) of assignments and transfers of existing loans from Respondent to the successor, Respondent’s total loan portfolio, and whether Respondent provided notice to its closure and successor information to its consumers.

Neither Respondent nor Respondent’s statutory agent responded to any of the Department’s correspondence, which they both unquestionably received.

In closing, the Department argued that because Respondent was still a licensee that it was still subject to the regulation of the Department, and conversely, because Respondent was still licensed the Department was still obligated to ensure that the public was protected from Respondent’s conduct. The Department opined that because Respondent failed to provide the Department with the information it requested, or respond to any of its correspondence; the Order in particular, that Respondent had acquiesced to the suspension and revocation of its license.

CONCLUSIONS OF LAW

The Director of the Department is vested with the authority to regulate entities engaged in business as consumer lenders and has the duty to enforce statutes and rules relating to consumer lending. The matter was properly brought before OAH pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq.

The Notice of Hearing the Department mailed to Respondent’s address of record is sufficient, and Respondent is deemed to have received notice of the hearing in this matter. Because the Department mailed all correspondence to Respondent in the same manner and failed to receive any mail returned as undeliverable, Respondent is deemed to have received all correspondence regarding this matter from the Department as well.

The Department bears the burden of proof to establish that cause to sanction Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

Ariz. Rev. Stat. § 6-605(A)(6) provides, in pertinent part, that the Director may suspend or revoke a license if the licensee has either knowingly or without the exercise of due care to prevent a violation, violated any provision of this title or any rule or order adopted or made pursuant to this title.

Ariz. Admin Code R20-4-106 provides that a consumer lender licensee shall immediately deliver written notice to the Department if it files a voluntary bankruptcy petitioner, and must provide copies of the (1) petitioner for relief; (2) schedule of assets and liabilities; (3) statement of financial affairs; (4) list of creditors, and (5) plan of reorganization.

Here, the material facts are not in dispute.

The credible evidence of record reflects that Respondent failed to provide the Department with notice of its bankruptcy petition, failed to provide copies of documents requested by the Department, and generally failed to respond to the Department’s correspondence after January 05, 2021.

Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to comply with the Department’s requests or correspond in a timely manner. This is an affirmative defense that Respondent bears the burden to establish. Because Respondent failed to appear and provide testimony, this burden has not been sustained. Respondent’s absence is a factor in aggravation. The record reflects that Respondent had no affirmative defense(s) for its in/action.

Because the Department established by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 6-605(A)(6) and Ariz. Admin Code R20-4-106, the Department has also established that grounds exist for discipline to be taken against Respondent’s consumer lender license, up to and including revocation.

RECOMMENDED ORDER

Based on the aforementioned Findings of Fact and Conclusions of Law,

IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Respondent Aura Financial LLC, License No. 0936448 et al., be revoked.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Final Order will be 40 days from the date of that certification.

Done this day, April 30, 2021.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Evan Daniels, Director

Arizona Department of Insurance and Financial Institutions