Dollar Financial not to close Ohio shops

[cashlenders]

BANGALORE (Reuters) - U.S. payday lender Dollar Financial Corp said it does not plan to close shops in Ohio, where recent legislation significantly capped interest on such loans, and was planning to expand in Europe.
"All our stores in Ohio are multiline...meaning payday lending is just one of a set of eight or nine products," Chief Executive Jeff Weiss said in an interview with Reuters.


The company's Ohio stores will remain profitable even if they do not offer any payday loan product, he said.


Last week, Ohio passed a bill effectively capping the interest rate on payday loans at 28 percent.


Such loans, which tide over borrowers for short periods, carry effective annual interest rates that can top 300 percent.


Following the legislation, at least two payday lenders, Cash America International Inc and Advance America Cash Advance Centers Inc , said they would close their lending operations in the state.


John Rowan, an analyst at Sidoti & Co, said Dollar Financial doesn't need to close its shops in Ohio as the company is better diversified than others.
Dollar Financial provides check cashing, short-term consumer loans, Western Union money orders and money transfers as well as other conveniences such as utility bill payments, currency exchange and tax preparation.

CEO Weiss said, "In the U.S., there is always a difficult regulatory and legislative environment, not only for payday lending, but for all lending products."
The company is focusing on states such as Florida and California, where already existing tight norms mitigate further regulatory risk.
Florida has a lower interest cap on payday loans than most other states, while in California, the maximum amount that can be lent is among the lowest.


BENEATH THE RADAR


CEO Weiss said the nine-month-old credit crisis had not substantially hurt the lender.


"Our customers are beneath the (mortgage crisis) radar, they are not homeowners," he said.


"A payday loan is not going to save your house."


Dollar Financial mainly caters to U.S. customers in the income bracket of $20,000 to $45,000 per year who must be employed to be eligible for payday loans.


"Our customers have to work; if they get fired from their $18 an hour job, they get a job for $12 an hour. They don't go on Monster.com and search for the perfect opportunity," Weiss said.

An average payday loan is under $500 and mainly for a two-week duration.
EYEING EUROPE


There is either a payday lender, a check-cashing store or a pawn shop making loans for every 8,000 adults in the United States, Weiss said.
Canada has one store for every 30,000 adults, while Britain has one for every 60,000.


"So Canada is very under-stored, UK dramatically under-stored and in Ireland, there is just our store."


"We are looking hard at other parts of Europe, particularly Benelux and eastern Europe."


Analyst Rowan said this was a good move as there was less regulatory risk in those areas.


Pawn shop chains First Cash Financial Services Inc and Cash America, which have entered Mexico, seem to be doing well and Dollar Financial is looking at that market, Weiss said.

Dollar Financial, which buys 25 to 100 shops a year, added 29 in the quarter ended March 31.


"We have always been an acquisition-oriented company. We clearly will continue to do that in all the countries we operate," Weiss said.
Jefferies & Co analyst Richard Shane said he did not see any huge
advantage in making further acquisitions in the United States as the market for payday lending is fairly saturated.


Both Shane and Sidoti's Rowan rate Dollar Financial stock "buy."


The company's stock, which lost 36 percent in the last six months, fell to a year low at $18.10 Tuesday.


Analyst Shane said the stock has traded in sympathy with its peers although Dollar Financial was less affected by regulatory changes than its competitors.