- Aura Financial — a lender that markets itself as a payday loan alternative and caters to lower-income, underbanked borrowers — has closed, founder and former CEO James Gutierrez wrote Monday in a LinkedIn post.
- "When the pandemic first hit, Aura was on the verge of closing new financing on its final march to profitability," Gutierrez wrote. "However, suddenly, all capital dried up as the uncertainty of how our low-income, mostly Latino customer base would recover from a pandemic that disproportionately impacted their jobs, health, and finances intimidated investors."
- Gutierrez stepped down as Aura's CEO last summer to focus on raising money for the company, and since that time, explored a strategic sale and merger opportunities as potential paths forward, he wrote Monday. "Unfortunately, time and circumstances were not on our side," Gutierrez wrote.
Aura's closure leaves one less lending option for low- and moderate-income (LMI) borrowers and adds to a growing list of financial platforms — including digital banks Azlo and Simple — that have shuttered in 2021's opening days.
Aura was a community development financial institution, a designation that has increasingly found the spotlight over the past year as wealthier companies have pledged to support community development financial institutions (CDFIs) as part of a larger strategy to re-balance racial wealth inequality. CDFIs are also among the few lenders eligible to submit Paycheck Protection Program (PPP) applications during the first two days after the lending portal is reopened.
A notice posted on Aura's website indicates another company, Systems & Services Technologies, is servicing outstanding Aura accounts.
Aura marked the second Latino-focused alternative lender Gutierrez founded. He started Progreso Financiero — now known as Oportun — and served as its CEO from 2005 until he left the company in 2012. Oportun went public in 2019 and applied in November for a national banking charter.
Unlike Oportun, which operates its own brick-and-mortar locations, Aura offered installment loans of between $300 and $4,000 through a network of partner retailers such as supermarkets, tax preparation businesses, auto insurance companies and money remittance shops in California, Arizona, Texas and Illinois, according to Bank Innovation. Gutierrez estimated 900 businesses partner with Aura on loans that carry an average interest rate between 33% and 34%, with a maximum of 36% to match the cap in its home state of California.
As the pandemic worsened, Aura reduced minimum payments on some loans to $5 to ensure borrowers wouldn't default. "We're really, really focused on just staying their solution, not becoming their problem," Aura board member Dean Florez told American Banker in August.
In his LinkedIn post, Gutierrez touted some of Aura's successes over its more than eight-year run. It raised more than $100 million in revenue, provided nearly $700 million in loans, and pioneered a method of crowdfunding the majority of that total through micro-securitizations, Gutierrez said. Additionally, 71% of repeat borrowers' credit scores improved after taking out loans through Aura, Gutierrez said.
Gutierrez told Mass News last month he wants to pursue an entirely digital business aimed at underbanked Latinos and other lower-income borrowers.
"I'm thinking about ... trying to create a brand that's a proverbial one-stop-shop for a myriad of financial services, trusted insight, tracking tools, and everything else an individual may need for long-term financial wealth creation and growth," he said. "Insurance would be a big part of it — auto insurance, life insurance. While some other digital banks exist, there really hasn't been a digital bank created for this population."
The split between Gutierrez and his first entrepreneurial venture turned acrimonious: Gutierrez sued Oportun in 2019, accusing the lender and its backers of racial discrimination, verbal abuse and fostering a hostile work environment. Oportun called the discrimination allegations an "absurdity," pointing to Gutierrez's successor as CEO, Raul Vazquez, who is also Latino.
In its own court filing, Oportun asserted Gutierrez was terminated in part for his ineffectiveness as CEO.
"While Mr. Gutierrez, as one of the co-founders, can be credited with having a good idea that led to the founding of Oportun, his shortcomings as CEO eventually became clear to the board," the company said in the filing, according to American Banker. "One of Mr. Gutierrez's primary responsibilities as CEO was to raise equity from external sources at the levels necessary to maintain Oportun's market position and growth projections. Mr. Gutierrez was ultimately unsuccessful in these efforts, thereby focusing Oportun to seek inside financing to continue operations."
Oportun also alleged Gutierrez misappropriated corporate funds in his time at the company and used Oportun employees as personal chauffeurs and to help plan his wedding, American Banker reported.
In Monday's LinkedIn post, Gutierrez vacillated between blaming himself for Aura's closure and assigning that burden to "the disruption, discord and uncertainty stemming from the global COVID-19 pandemic."
"Although I lost our company, I've made peace with letting go," he wrote. "The mission of the company shall continue to surge onwards, and our shared pain for Aura's final chapter will be the source of new visions and directions."