Payday lenders are now offering an array of new financing products that are sending their stocks soaring.
While the new financing products being offered have the same super-high interest as payday loans, they aren’t subjected to the same regulations due to their length, size or structure.
“We made a big effort over the last five years to diversify our business,” said Enova Chief Executive Officer David Fisher. He added that the diversification was done, in part, to spread out regulatory exposure.
Payday lenders have faced harsh criticism in recent years from consumer advocates. The Consumer Financial Protection Bureau (CFPB) had also been going after the industry under former head Richard Cordray.
“Any lender who had the resources at that point in time said, ‘Gosh, if they’re going to kill my product — and they’re making it very clear that they’re trying to — I’m going to diversify,”’ Jefferies analyst John Hecht said.
From 2012 to 2016, revenue from payday lending generated from $9.2 billion to $6 billion, according to data from the Center for Financial Services Innovation. Short-term installment lending revenue jumped from $4.3 billion to $6.5 billion.
But now Enova and Curo both report that a vast majority of their revenue comes from these new financial products instead of payday loans. Currently, Enova mostly offers installment loans and lines of credit, while Curo also offers installment loans, and participates in gold-buying, check-cashing and money-transferring. Last year, Curo went public on the stock market with a valuation of $620 million.
As for its payday loans, Enova saw revenue from those types of short-term single-payment loans drop to 22 percent from the firm’s 99 percent in 2008. Curo, which introduced installment loans 10 years ago, now gets only 28 percent of its revenue from single-pay loans (most from outside the U.S.).