Payday Lenders: The industry, leaders, owners, and regulation

Payday Lenders: The industry, leaders, owners, and regulation
Lothringer
Who are the Payday Lenders?
Thoughts of the neighborhood payday lender might conjure up images of small‐scale,
independently owned facilities operating out of a low‐rent strip mall where the signs
advertising FAST CASH look hand‐made. Don’t be fooled. This is a lucrative industry dominated
by large publicly traded companies including Cash America International, Inc. with a net income
(NI) of more than $79 million and Advance America, Cash Advance Centers, Inc. with a net
income of approximately $54 million. Other leading industry participants include World
Acceptance Corporation (NI ≈ $53 million), EZCORP, Inc. (NI ≈ $52 million), First Cash Financial
Services, Inc. (NI ≈ $35 million), and QC Holdings, Inc. (NI ≈ $14 million).
Who are the Executive Leaders?
Similar to other large corporate entities, the leadership of these organizations is educated and
credentialed. Many have vast experience in public accounting and investment banking and
hold advanced degrees from prestigious institutions such as Yale. Payday lender board
members have served as executives and on boards of other well‐known corporations including
RadioShack, Toys “R” Us, and Ryan’s Family Steak House as well as non‐profit boards such as
the YMCA. Further, many have significant ties to the health care industry with organizations
such as GE Healthcare and UnitedHealth Group. Their leadership experience also includes roles
in government and politics, where they possess years of experience in organizations such as the
Federal Deposit Insurance Corporation (FDIC). Examples of high‐level governmental leadership
roles include William M. Webster (Founder, Director, and Chairman of the Board at Advance
America Cash Advance Centers, Inc.) who served as Assistant to the President and Chief of Staff
to the U.S. Department of Education during the Clinton administration
Who are the Institutional Investors?
The size and ownership of the industry is both startling and unsettling for many. This billion
dollar business counts as its major investors Barclays Global Investors UK Holdings Ltd. who has
approximately $177 million invested in securities associated with payday loan organizations and
The Vanguard Group, Inc. with roughly $115 million of similar industry assets. Other large
institutional holders include Thomas W. Smith with over $79 million invested in the industry.
Smith is the senior partner of Prescott Investors and serves as chairman of the board of the
National Center for Policy Analysis (NCPA) a nonprofit organization whose stated goal is to
develop and promote private alternatives to government regulation and control, solving
problems by relying on the strength of the competitive, entrepreneurial private sector. Banking
organizations, also large institutional owners of payday lenders, include Bank of New York
Mellon Corporation with approximately $25 million invested in payday lending interests, JP
Morgan Chase & Company holding about $21 million in such investments, and Bank of America
Corporation with roughly $2 million in similar assets. Finally, and perhaps most troubling, are
public funds invested in the industry such as CALPERS (California‐Public Employees Retirement
System) that holds slightly more than a quarter of a million dollars in public employee
retirement resources in the form of payday lender investments.
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