Even in the midst of a bear market, shares in payday loan companies rose today. The rise followed the stocks getting an upgrade from a Sterne Agee analyst.
Obama may change payday loan policies by imposing a 36 percent interest rate cap
The industry has been buzzing about whether President-elect Barack Obama will impose a national interest rate cap on payday loan companies. Right now the news is that Obama has plans to place a 36 percent cap on interest rates on payday loans. He also has plans to require companies to provide simplified information on fees, payments and penalties.
Following a trend
In New Hampshire, the interest rate cap has already been put in place. Payday loan companies are not allowed to charge more than 36 percent interest in New Hampshire.
Many politicians have called the interest rates that payday lenders charge outlandish. Some lenders charge an underlying annual interest rate of up to 400 percent. Payday loan companies maintain that in order for them to turn a decent profit and finance their own businesses these rates are necessary. They also argue that capping the interest rate at 36 percent effectively causes the profit on some transactions to be reduced to mere pennies.
Back to the stock market
The market analyst, Henry Coffey Jr., said he decided to upgrade the payday loan companies’ stocks because their prices dropped. He changed his ranking from “Neutral” to “Buy” after the price of the stock fell far enough to be attractive to buyers, he said.
Coffey estimates EZCorp will earn $1.45 per share in 2009. He said he, himself, would buy stock in EZCorp and Cash America International at its current levels.
No quiet on the payday loan front
Four payday loan companies showed increases in the price of shares today, with differences between two cents and $1.87.
Other states, including Virginia and Ohio, have seen the issue of interest rates on payday loans show up in their courtrooms. In Canada, the Manitoba Court of Appeals struck down the interest rate limits last week.
On the money
Obama seems to have plenty of plans up his sleeve regarding the nation’s finances. Bush today complied with Obama’s request to ask Congress for access to the remaining bailout money, $350 billion. This means one of Obama’s initial acts when he get gets into the White House will be to decide who that bailout money goes to.
He has also said that he will impose strict regulations that require the use of the money to be tracked. He is also working on an $800 billion stimulus package.
Wild rumors
Besides the likely credible news saying Obama will seek to cap interest rates, there are a few doozies out there that don’t sound quite right. For instance, one common rumor that I have heard is that Obama will try to make getting a payday loan illegal all together.
This, of course, doesn’t make much sense to me. Why would Obama bother even talking about regulating the payday loan industry if he had plans to get rid of it? But it is likely that we will see some changes in industry policy and legislation regarding interest rates on payday loans in the near future.
Just like Obama to try and control a business owner from making any money. I own a title pawn Company and I do it the right way. I give back sales proceeds from car sales. I had a client that I reduced their rate to 1.99% after I had received my full principal balance back. I do not charge ridiculous rates, and I treat people fair. My company already does all the right things, and this wonderful messiah thinks he can come in and put me out of business. That is all this country needs right now, me and my employees out of jobs, and living of the government.
I guess Obama will lend the high risk individuals money when they need it. I help people with horrendous credit ratings, and treat them better than someone with grade A credit is treated in a bank. Let’s not forget that banks no longer even lend money to ANYONE. With everything else going on in the world, he is worried about me feeding my kids but yet he harms the American people with his ridiculous money wasting projects and proposals but that is alright. I guess as long as his family is taken care of, well that is all that matters.
Why would Obama want to regulate several growing industries (payday, title loan, pawn shop loan, rent to own, finance companies out of business, especially in the current economic climate? The changes he proposes will do just that- and help no one. People like these loans, and they have few other options- the industry is growing and employing a lot of people!!
Trying to regulate payday loans should honestly be the last thing from anyone’s minds right now. We have bigger problems going on then trying to put a cap or banning payday loans.
It’s a wait and see situation, investors in this business sector wait with baited breath.
Obama has enough on his plate at this time, and he shoulden’t worry about payday loans. Leave then as is for now.