U.S Payday Lender Hits Paydirt in the UK

US Payday lender, Dollar Financial, has found rich pickings in the UK in the past year. The firm, which trades through 250 MoneyShop outlets in the U.K, further expanded its operations here by opening four new stores in the last quarter.

Moneyshop offers cheque chashing, pawnbroking, consumer loans (at 123% APR), payday loans and pre-paid credit cards to people (with minimal inquiries into their ability to repay), and is characterised by brash advertising of people holding wads of cash in their hands, and promises of instant decisions.

The company's latest quarter financial highlights reveal that the UK operation is expanding rapidly:

UK cheque cashing revenue up 20.5% on last year to $10.7 million

Amount of lending on those 123% APR loans up by 22.6% to £50.8 million

Jeff Weiss, Chairman of Dollar Finance, who is reported as earning $1.83 million per year, has been busy in the U.S defending the Payday lending industry from legislation to restrict interest rates. Since a cap on payday lending rates (at 36%) was brought in for U.S military personnel, a number of U.S states have been campaigning for similiar protections for their residents. Only yesterday a new bill was passed in Oregon's House of Representatives that proposes a 36 percent interest rate cap on short-term car title loans and on Internet payday loans that do business in Oregon, would restrict fees charged by check cashers, and create an electronic tracking system for payday loan borrowers to make it difficult for short-term lenders to use a different lending license to circumvent interest rate caps.

Further anti-payday lending laws are in progress in South Carolina where a bill was introduced into the General Assembly this week by Republican Senator Alan Clemmons that would limit the annual interest rate payday loan companies may charge their customers to 36 percent, plus a $5 administrative fee per loan. In Virginia, a compromise bill (with the support of the industry) looks set to be passed that will establish a database to track borrowing activity and limit customers to three outstanding loans at the same time. Repeat borrowers - someone who gets four loans in a row - could qualify for a 60-day repayment plan, at no cost, to escape the cycle of debt.

So all of this begs the question, why aren't UK borrowers being provided with the same levels of protection that U.S borrowers enjoy, even though the company they borrow from and the lending model that it uses in both countries is the same?