Payday lenders are now offering a range of new financing products that are skyrocketing their stocks.
According to Bloomberg, Enova International inc. shares have more than doubled so far this year, while its rival Curo Group Holdings Corp. is up 64%.
Although the new financing products on offer have the same very high interest rate as payday loans, they are not subject to the same regulations due to their duration, size or structure.
“We have made great efforts over the past five years to diversify our business,” said David Fisher, CEO of Enova. He added that the diversification was done, in part, to spread regulatory exposure.
Payday lenders have come under heavy criticism in recent years by consumer advocates. The Consumer Financial Protection Bureau (CFPB) also attacked the industry under the leadership of former chief Richard Cordray.
“Any lender that had the resources at that point said, ‘My God, if they’re going to kill my product – and they’re saying very clearly they’re trying to – I’m going to branch out.’ Jefferies analyst John Hecht.
From 2012 to 2016, payday loan income generated $ 9.2 billion to $ 6 billion, according to data from the Center for Financial Services Innovation. Short-term installment loan income increased from $ 4.3 billion to $ 6.5 billion.
But now both Enova and Curo report that a large majority of their income comes from these new financial products instead of payday loans. Currently, Enova mainly offers installment loans and lines of credit, while Curo also offers installment loans and is involved in buying gold, cashing checks and transferring money. Last year, Curo became public on the stock market with a valuation of $ 620 million.
When it comes to its payday loans, Enova saw the income from these types of one-time loans at 22% compared to 99% in 2008. Curo, which introduced installment loans 10 years ago, now only receives 28% of its income. single payday loans (most from outside the United States).
