Payday Loans, Advance America Laws & Government Affairs

The payday loan industry, after getting hammered the past few months, is getting more proactive in pursuing their agenda; satisfactory payday loan laws, legislation and regulation.

Advance America (AEA), with nealy 2900 locations in 33 states plus the UK and Canada, hired Tony S. Colletti to serve as a Company director. This is a big deal! Tony Colletti runs Colletti & Assoc. a public relations company out of Chicago; isn’t that ironic! The guy comes from Chicago (Obama land) and has experience and connections throughout the payday loan industry and the regulatory purgatory the payday loan industry is in.

We’re very upbeat about this appointment. Advance America, amongst many others, is a very large and profitable payday loan company whose agenda includes fighting for the rights of consumers to have access to multiple financial products and in defending our industry and all the employees, business operators, commercial property owners that depend on the micro-lending niche.

Our expectation is that Mr Colletti and his peers in the payday loan industry can communicate to legislators that, in general, it isn’t consumers who complain about our products.  When one digs down to the roots of any complaints, it’s the so-called consumer protectionists, who have their own agendas, and competitors such as banks, credit unions, installment lenders and credit card companies.

Mr. Colletti, age 56, is the founder of Colletti & Associates, a public affairs consultant. Mr. Colletti was also formerly an employee of Multistate Associates Incorporated, a state and local government relations services company, which provides government relations and outsourced management services to the Community Financial Services Association of America (“CFSA“), a national trade association for the payday cash advance services industry. Via Multistate, Mr. Colletti served as executive vice president of the CFSA from 2004 through 2007. Prior to this, Mr. Colletti was the General Counsel and Senior Vice President of Check Into Cash, Inc. from 2001 to 2004. Mr. Colletti previously was engaged in the private practice of law.

Advance America is a founding member of the CFSA, a not-for-profit payday loan organization.

Multistate provides management services to CFSA, including the outsourced employment of all CFSA personnel. Multistate also provides government relations and management services to numerous entities not affiliated with the Advance America or the CFSA.

As a member of the CFSA, Advance America supports the CFSA through the payment of membership dues and assessments. Additionally, Advance America supports various legislative and public relations initiatives for the payday cash advance services industry sponsored by the CFSA. On behalf of the CFSA, Multistate has in the past engaged Mr. Colletti as an independent contractor in connection with these activities.

During 2008, the Advance America contributed an $314,500 to the CFSA in regular annual membership dues and assessments. Additionally, Advance America made payments totaling $125,179 to the CFSA or directly to Multistate in 2008 in support of projects for which Mr. Colletti was retained by Multistate as a consultant on behalf of the CFSA. Advance America also provided funds to the CFSA or Multistate in 2008 to support other projects in which Mr. Colletti did not have an interest.

During 2008, Mr. Colletti received a salary of $119,000 and health, dental and other customary benefits as an employee of Multistate. Mr. Colletti received additional payments in 2008 totaling $64,565 from Multistate for his services as an independent consultant on certain projects financially supported by the CFSA and Advance America. Beginning in 2009, Mr. Colletti is engaged by Advance America directly on two separate government relations initiatives for which he will be paid by Advance America monthly consulting fees of $5,000 and $10,000, respectively. The first initiative is for an indeterminant period. The second is expected to terminate at the end of 2009. Mr. Colletti also will be paid by Advance America the standard board fees for its non-employee directors of $70,000 per year plus $1,000 for each meeting of the Board or its committees that he attends.

Regarding Mr. Colletti’s appointment Billy Webster, Advance America’s Chairman, stated: “Tony Colletti is one of the premier government relations experts in the United States. In addition, Tony understands that hardworking families deserve the freedom to chose among their credit options, and that millions of Americans use our products and services to help them overcome unexpected financial difficulties. We are fortunate to have someone with his knowledge of our industry and business experience serving on our board. We will greatly benefit from his expertise.”


Payday Loan Laws – South Carolina Legislation

South Carolina legislators introduced new payday loan legislation that will protect consumers from the so-called “cycle of debt” and allow thousands of payday loan employees and entrepreneurs to remain in business.

The bills sponsors introduced payday loan legislation that permits consumers to take out no more than one payday loan at a time for up to $600 dollars and enroll lenders in a state database before granting loans. Lender fees would be used to set up and operate the database, which would instantly report when loans are made. The database would track consumers and make sure they don’t have more than one loan at a time. Lenders are allowed to charge $15 for every $100 borrowed for the loans that have to be repaid in two weeks. For people that can’t pay loans on time, lenders will be able create payment plans that aren’t allowed under current law.

We applaud the direction the legislators of South Carolina are headed. It protects consumers from the few payday loan operators who abuse them. It allows the payday loan product to exist. And the commercial property owners can continue to lease their locations to payday loan companies in South Carolina.

Consumers by the millions use payday loans in Canada, the U.S.A., Australia, New Zealand, Korea, Barbados, the Bahamas, and the United Kingdom every year. There is no doubt that demand by consumers for the payday  loan product exists. The Legislators and regulators must find a way to meet the needs of consumers and protect them from abuse by the few operators that exist in every industry including banks, credit card companies, loan modification companies, etc.


Payday Loan Industry Convention – Win $50

The payday loan industry announced their next convention will be held in Orlando, Florida.

CFSA – The Community Financial Services Association will hold it’s annual convention March 4-7 at the Omni Orlando resort at Champions Gate, Orlando, Florida.

We have attended past CFSA events and certainly came away better informed and more aware of the many business solutions available to the industry, the regulatory environment, media coverage, and strategies for running our payday loan businesses.

We recommend anyone having an interest in the industry attend. One caveat though! If you’re an Internet guy keep your mouth shut. A couple years back, Jer was called an “Internet bandit” and would certainly be seeing the inside of a prison cell soon. The CFSA guys had no clue! Now the Internet payday loan operators are eating the lunch of the “brick-n-mortar” guys and they want to learn how to embrace the Internet!

Oh, one last thing: The first reader of this Blog to spot Jer at the convention wins $50.00 Just look for the most dashing, slightly older, silver haired, mustachioed, blue-eyed guy in the room!


Pawn Shops and Payday Loans: No Recession Here

In spite of all the doomsayers out there, payday loan companies, pawn shops, and car title loan companies are doing just fine thank you.

Zack’s Investment Research correspondent Tracey Ryniec wrote an interesting analysis of EZPWN recently. Basically she says, “EZCORP, Inc. (EZPW) is riding high as the pawnshop business booms during the economic slowdown. The company recently acquired an additional 67 pawnshops to expand its reach in Florida. EZPW is trading at 10.18x forward earnings.”

As many of our readers know, EZCORP operates payday loan stores and pawnshops in the U.S. and Mexico. EZCORP has  890 locations, including 412 pawnshops, with 371 in the U.S. and 41 in Mexico, and 478 loan stores in the U.S.

Ms. Ryniec goes on to write, 

“Revenue Jumped 23% in Fiscal 2008

On Nov 6, EZCORP announced fourth-quarter and 2008 full-year earnings that met Wall Street estimates. For the fourth quarter, net income rose 44% to $16 million from $11 million in the year ago period.

Revenue grew 19% to $123 million. The pawn operations were the engine of growth in the quarter. It was the 25th consecutive quarter of year-over-year earnings growth.

Fiscal 2008 net income climbed 38% to $52.43 million, or $1.21 per share, from $37.87 million, or 88 cents per share, for the 2007 period. Revenue rose 23% to $457 million.

First-Quarter and Full-Year 2009 Guidance

EZCORP issued first quarter 2009 and full-year earnings forecast of 35 cents and $1.45 per share, respectively. The company is scheduled to report first-quarter earnings on Jan 22.”

She sums up,

“Full-year 2009 estimates, however, have risen 5 cents to $1.50 over the same period, which is higher than the company’s guidance. Analysts expect 2009 year-over-year earnings growth of 25.84%.”

One thing that amazed us was the following:

EZCORP also closed on a $120 million credit facility, consisting of a $40 million term loan and an $80 million revolving line of credit. As of the closing, the company only borrowed $40 million, leaving $80 million of the credit line available for future use.”

No problems with access to capital experienced in this industry!

Read the article in it’s entirety here: Zack’s Investment Research

We HIGHLY recommend you listen to EZCORP’s  conference call scheduled for January 22, 2009. Go here and scroll to the very bottom to get to their link to the investors page where you can sign up free. This is a MUST!


Payday Loans:Fair & Balanced Media Coverage

Wow, what a shocker! The payday loan industry got a little fair coverage by the New Hampshire Sentinel Post regarding the pros and cons of the payday loan product.

Excellent arguments can be made for and against so-called payday lending.

Sometimes you might need $100 or so for two weeks just to get over a rough patch, a miscalculation in the family finances, so to speak. You can hardly go to the bank for that, and anyway banks don’t make two-week loans. And maybe your sister-in-law is tapped out. So you borrow the money from a payday lender. You pick it up on a Monday, and you pay it back a week from Friday, plus a $20 fee. Sure, that interest would add up to 500 percent on an annual basis, but you’re not borrowing the money for a year. And nobody’s going to loan you $100 for two weeks and charge a nickel. There’s no business model in that. So you willingly pay the $20. No harm done.”

They go on to say: “In other words, payday lending performs a service, and it poses a threat. Should it be outlawed? How far should the state government go in protecting people from their own potential folly?

They continue: “Ken Compton is CEO of Advance America, the nation’s biggest payday lender. His company has (or maybe had) stores in 20 New Hampshire communities, including Keene. On January 15, 2008, he made a persuasive case for payday lending, in a column published on this page.

“The measured use of payday advances allows consumers a firm footing to overcome unexpected financial circumstances,” Compton wrote. “Our customers are educated and appreciate why such a product, with a comparatively low one-time fee, makes more sense than accepting the costs and other consequences related to bouncing a check, missing a credit card payment or neglecting an outstanding bill. Payday advances are a valuable tool in our customers’ financial tool belt.”

Finally, The Sentinel Post offers some pretty sound advice: “Actually, Compton’s best option now, if he wants to do business in New Hampshire, is to go back to the Legislature and try to get the interest cap repealed or revised. He has fought the good fight, and lost. In the words of another fellow with some knowledge of personal finance: “You got to know when to hold ’em, know when to fold ’em, know when to walk away and know when to run.”

Read the entire article here:

Do you think this fair and balanced media coverage is a portent of the future? Or is it an anomaly? What do YOU THINK? Leave a comment!