EZCORP Inc. is a financial service company that is located in Austin. Recently, the company made waves by closing the doors on 28 of its storefront lending locations in San Antonio. Currently, this company only has pawn shops open in the area. This all comes on the trail of the company facing heavy regulatory scrutiny. The only hope for recovery may be the company offering alternative financial services outside of the United States; just down south a bit in Mexico.
Stuart Grimshaw, the CEO of EXCORP Inc. recently released the end of the year statement for the company, and commented on the situation at hand, saying, “We intend to open new stores as well as pursue acquisitions in our Mexican pawn business, but will adjust growth from time-to-time to conform to near-term market conditions.”
Individual pawn loans in the United States are for an average of about $120, and can help lenders to earn nearly 25 percent interest each and every month. By way of comparison, pawn loans in Mexico are for about 1,000 pesos on average ($66) and can earn lenders about 21 percent interest on a monthly basis. In both countries, the loan periods we for close to 30 days.
The typical payday loan in Mexico is for 23,000 pesos ($1,500) and can fetch yearly fees that are close to 75 percent. The typical payday loan in Mexico lasted about 30 months back in 2015, according to information that EZCORP released in its United States Securities and Exchange Filing. The pawn shop industry in Mexico is very similar to the market in the United States. With the price of gold recently going down, their other merchandise tends to become more popular.
In a statement published to the public recently Grimshaw said, “Given that we have a bias towards general merchandise, we believe this structural shift will be beneficial to the business. In fiscal 2016, our key focus will remain on execution of our three-year strategy to position us for future growth and profitability.”
It has been a most unpredictable year for the company. They acquired 12 Texas pawn shops that are branded as Cash Pawn back in February of 2015. That purchase brought the total number of pawn shops that they owned in Texas to 212 out of 755 total. By September, however, the total number dropped to only 522 across the entire country. Back in July, the company made an announcement that they would shut all of the doors to their financial service operation locations in the United States by the end of the calendar year. These locations included auto title lending, installment loans and payday loans. There are currently over 50 payday lending locations that are owned and operated by EZCORP in Mexico. All said, there are 285 stores, with the rest being pawn shops.
In December of 2015, EZCORP reached a settlement with the Consumer Financial Protection Bureau for $10.5 million. As part of the agreement, the company did not have to admit or deny fault in an official consent order. The company is expected to pay another $2 million to the CFPB by the end of the first quarter of 2016; that’s when the case officially gets closed.
Payday lenders and other alternative financial service providers look to be facing a tumultuous 2016. With the CFPB and other government regulators looking to drive alternative lenders out of business at a breakneck pace, the owners of lending locations can expect to see a lot of changes, and some of these lenders will probably have to close doors of their locations, just like EZCORP had to do.