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Texas Payday Loan Industry Feeling Pressure from Short-Term Lending Laws
Wednesday, May 6, 2015 6:50 AM

EZCorp Inc., the Austin-based chain of pawn shops and payday lenders that is in the midst of a corporate turnaround, is feeling the pressure from local laws passed in Texas that clamp down on short-term loans, company officials disclosed in a Thursday filing with the U.S. Securities and Exchange Commission.

"The company's U.S. financial services business continues to be pressured by regulatory changes enacted last fiscal year. Financial services revenues were down 10 percent while bad debt expense was flat year-over-year, primarily due to the impact of new ordinance cities in Texas," reads the filing.

EZCorp said it is particularly vulnerable to changes in Texas regulations of the payday lending industry. Roughly 57 percent of its financial services stores are located in Texas, and 37 percent of those are located in Texas cities that have passed laws in recent years that tighten regulations for payday lenders.

Texas Association of Business CEO Bill Hammond has called for Texas lawmakers to stop "overregulating" the payday loan industry.

"Overregulating legal short-term lending in the U.S. has displaced as much as 60 percent of the lending activity from licensed to unlicensed lenders, resulting in a spike in illegal lending," wrote Hammond in a recent opinion column published by the Austin Business Journal.

EZCorp has already significantly drawn down its online payday loan operations in the United States and the United Kingdom after new regulations on that industry were approved.

In the filing, EZCorp said it would delay the full release of its second quarter earnings report, instead releasing selected "preliminary" financial data on its second quarter performance instead.

Company officials said the full results were delayed because the company had found errors in a portion of its still-incomplete Grupo Finmart loan portfolio "that may impact current and historical amounts of loan reserves and interest income."

EZCorp employs about 400 people in the Austin area and more than 7,100 across all its operations. It is one of the largest publicly traded companies in Austin, pulling in $1 billion in revenue in fiscal 2013


Austin Business Journal, 1 May 2015