Customers taking less than maximum pawn advance at Cash America: Cash America told investors that there is a new phenomenon taking place out in its pawn shops. More and more often, customers are turning down a
portion of the advance they are being offered on a pawn transaction. For example, if the shop bids $100 for a lawn mower, often times the customer is telling them that they only want fifty dollars. A person does that when they intend to keep their collateral.
I hear more from our store managers than I've ever heard about, when we talk about loan balances and some of the challenges that they have, how customers are not taking the full collateral value of the merchandise. So obviously, when someone comes in and we've got the update loan amount. Say $150 on a piece of jewelry, they'll -- in many instances, they won't take it. They're going to take something less than that. And we obviously let them know that their collateral can cover more than that, than the amount that they ask for, in the extent that they are going to come for it, but I'm hearing that more and more that it's all the customer really wants, they're being cautious about how much their borrowing against our collateral.
The good news, at least from a customer perspective, is that they are pulling that off. Redemption rates are now much higher, according to Cash America CEO Daniel Feehand, than they have been in the past. But more broadly, it reflects something significant about the pullback in the desire among low-income consumers to take on debt.
Separately, Cash America acknowledged that the CFPB is about to issue an enforcement action against the company.
Wells Fargo Makes Another Loan to Dollar Financial: Dollar Financial reported that Wells Fargo - the leading financier to high-cost consumer credit - has made a new arrangement to advance a $150 million line of credit to Dollar. The debt costs 400 basis points plus LIBOR. This means that Dollar is essentially borrowing at five percent interest. In Missouri, a Dollar Financial subsidiary offers short-term loans at an interest rate of 443.2 percent.
Bancorp sees prepaid spending increasing rapidly: Gross Dollar Volume in spend for the quarter was $7.2 billion which represented a year-over-year increase of 23 percent.