Sam Budiselik, CEO, Cash Converters
Alternative consumer credit provider Cash Converters International says its loan volumes gained momentum in the September quarter, but warns that reforms being advanced by the Albanese Government will make payday loans up to 70 per cent more expensive to borrowers.
In an address to shareholders following the company’s virtual annual meeting on Tuesday, chief executive Sam Budiselik said unaudited first quarter revenue rose by 24.5 per cent to A$69 million compared to the corresponding three months to the end of September in 2021.
“The strength of this first quarter continues to demonstrate the momentum of our diversified business model, with elevated demand for credit continuing across our customer segment,” he said.
“Lending momentum continued with all loan books growing on a comparative basis, as combined lending volumes lifted to $73.2 million for the quarter.”
Cash Converters is growing its medium amount credit business faster than other lending segments, with loan volumes in the product category expanding almost 50 per cent to $77 million in the September quarter.
Activity was also strong in the small amounts business, climbing 23 per cent to $72.5 million.
Budiselik said the store-based pawnbroking division, which has been hard-hit by the global pandemic, returned to profit in the September quarter.
The pawnbroking loan book grew by 14 per cent to $15.2 million over the three months.
Despite the upbeat start to the year, Budiselik said he was concerned that the cost of accessing small amount credit contracts would rise significantly for consumers if the federal government’s financial services reform bill was passed.
The government wants to cap small amount lending to no more than 10 per cent of a borrower’s income and prohibit payday lenders from making unsolicited offers.
“This loan product is often confused with unregulated credit products, such as Buy Now Pay Later (BNPL) and almost always portrayed as something that it isn’t,” Budiselik said.
“Unlike BNPL, Small Amount Credit Contracts are highly regulated, borrowing costs are capped, consumer protections are in place and importantly, this is a product that helps many thousands of Australians meet life’s unexpected events in a safe, responsible and transparent manner.
“A proposal introduced by the Government to restrict employed borrowers from accessing credit, with the introduction of an arbitrary earnings cap, we believe will make small loans between 50 per cent to 70 per cent more expensive for borrowers.
“Importantly however, this move will further restrict access to credit for a segment of the economy that is already excluded from the mainstream financial system.”
Financial services minister Stephen Jones believes the proposed restrictions on payday lenders are necessary to prevent predatory lending practices in the industry.
"It's about ensuring that, where small amount credit is offered, often referred to as payday lending, it's done in a safe environment, and vulnerable consumers aren't exploited,” he told the ABC earlier this month.
"This is long-overdue reform.”
Budiselik also forecast that the reforms would trigger a wave of consolidation in the sector as small lenders struggled to remain competitive under tighter regulation.
“We believe these changes will likely result in significant industry consolidation leaving many of the smaller lenders, without the scale and technological capability of Cash Converters, unable to meet the new obligations being considered,” he said.
“Sadly, it is the voice of the customer that has been lost in this debate, with over 20,000 Cash Converters customers alone having already signed a petition opposing these changes and we continue to encourage the Government to consult withthose most impacted by this proposal.”