UK payday loan lenders are really taking it in the shorts! Loan defaults are going through the roof as a result of new legislation in the U.K. DFC Global (DLLR) issued a press release announcing “consolidated adjusted EBITDA for the fiscal 2013 third quarter is expected to be in the range of $52 to $54 million.”
WOW! A paltry $52M for 3 months. The PR continues:
“In particular, as the various industry lenders transition to the new loan rollover limitations stipulated in the lending guidelines agreed upon by both our trade association and the regulators, many of the outstanding short-term consumer loans have now become immediately due. We believe this transition is causing a temporary ‘credit crunch’ for consumers in the United Kingdom, many of which currently have multiple short-term loans outstanding. Consequently, we have already begun to experience increasing loan defaults across our U.K. business. In response to these developments, we have tightened our underwriting criteria during the fiscal third quarter to minimize the impact of the anticipated rising loan defaults. It is difficult to ascertain how long this regulatory transition period will last, but our current conservative underwriting posture had a significant effect on our store-based and internet loan growth in the United Kingdom during the fiscal third quarter ended March 31, 2013, and we expect this will
continue for the foreseeable future. While we are naturally disappointed…”
Read the entire DFC Global Press Release.