With the housing market, the job market and the economy as a whole rebounding, consumer confidence is higher than it has been in years - and all that confidence is driving an increased demand for personal small loans. Consumers looking to buy new furniture, upgrade home electronics or splurge on a last minute summer getaway have more lending options available to them now than they've had in many years. Among those vying for their cash are payday lenders and cash advance companies like Cash America International, Inc. (NYSE: CSH) and DFC Global Corp. (NASDAQ: DLLR). These businesses are popular with borrowers because they provide easy access to cash, but convenience has its price - usually in the form of triple digit interest rates. Similar to these are tribal lenders - companies such as AmeriLoan, Mobiloans, Western Sky Loans and Splash Cash Advance - that are associated with Native American tribes. They operate much like payday lenders, but their tribal sovereign immunity means that they are often free to operate outside of state and federal restrictions. As a result, tribal loans sometimes carry interest rates 10 times higher than those of their non-tribal rivals.
Borrowers who might ordinarily be typical customers of these lenders do have other options, though. Bringing to market an alternative business model, IEG Holdings Corporation (OTC Pink: IEGH) offers under-served consumers small, unsecured personal loans within the bounds of government regulations regardless of mandate.
IEGH operates throughout the United States as Investment Evolution Corporation and markets itself under the consumer brand Mr. Amazing Loans. The company is distinguished by a philosophy that promotes loyalty and seeks to generate recurring revenue through consumer-friendly business policies. They offer a streamlined application process and long-term payment plan that consists of 3- to 5-year terms broken down into weekly fully amortizing budgeted repayments. Mr. Amazing Loans offers all of their loans with no prepayment penalties, meaning if the customer's financial position changes for the better they are able to repay the outstanding balance early without any additional fees or charges. The company has already found this unique consumer-friendly policy to be a popular feature of their product offering and a strong generator of brand loyalty. Throughout the process, IEGH maintains lending principles that are in line with the FDIC's small-dollar loan guidelines, a key point of differentiation between their program and the riskier policies of payday and tribal lenders.
Paul Mathieson, Founder/CEO and major shareholder of IEG Holdings Corporation, explained that "Mr. Amazing Loans entered the USA market with its policy from day one being to comply with not only all of the required government laws but also within the spirit of what the regulators intended from the laws. The aim of this policy is to enable a win-win scenario between Mr. Amazing Loans and its customers and to ensure the long term sustainability of its successful business model."
Moreover, customers and investors alike value the company's thorough underwriting practices and commitment to establishing credit profiles for its consumers - a policy that enables IEGH to build a quality loan portfolio and IEGH's clients to build stronger credit scores and become savvier borrowers - something not often seen in its competitors.
Perhaps most attractive to investors interested in leveraging today's increased loan activity while seeking an alternative to traditional payday loans may be the fact that IEGH is steadfast about maintaining low operating costs, building effective distribution channels and reaching out to consumers with a well-developed branding and targeted marketing strategy.
Of course, those features would mean little if Mr. Amazing Loans' insistence on integrity put it at a competitive disadvantage. However, the company's loan structure is powerfully competitive, with advances in amounts ranging from $2,000 to $10,000 at rates starting at 19.9% with an average APR of 27.94%, including all fees. While consumers borrow an average of $3,000, the broad borrowing range available to them means that they can affordably cover multiple demands for money from a single source. This is a welcome variation from payday loan providers, who largely issue loans in the $100 to $1,000 range at average APRs of 450% or even higher.
This business model may seem ahead of its time, but there is a good chance that it may become the standard platform for the industry. That's because 17 states plus the District of Columbia have enacted double-digit rate caps on payday loans, typically setting a ceiling of 36%. Even more states are reviewing their legislation regarding these businesses, and the continued focus on payday lending by the Consumer Protection Financial Bureau (CPFB) is expected to bring about more adjustments at both the federal and state level.
IEGH views their policies as the key to longevity in an industry that is repeatedly assailed by regulators, legislators and watchdogs. During a recent U.S. Senate committee, for example, Oregon Senator Ron Wyden called for the CPFB to crack down on consumer exploitation by some in the installment lending industry. Senator Wyden made his point by citing one of America's largest installment lenders, World Finance, a subsidiary of World Acceptance Corporation (NASDAQ: WRLD), for often loading consumer loans with insurance products that can double costs, as well as for encouraging borrowers to use their products like a credit card, which may lead to ballooning extra fees and interest.
IEGH welcomes these reforms and remains resolute in embracing change as an opportunity for growth. The company is actively making efforts to raise its profile in the industry, building awareness that those with credit challenges or specialized borrowing needs do not have to settle for unfavorable loan rates or terms. Importantly, IEGH has also built an infrastructure that is poised to make the most of the growth potential ahead, with a scalable platform that can be deployed across multiple markets as demand grows, enabling them to maximize the prospect of tomorrow's regulatory landscape. The company anticipates that more stringent legislation will ultimately bolster its business through the combined promise of reduced competition, a rehabilitated image of the industry and a strengthening economy. All of which should bode well for the organization and its stakeholders. More information about IEG Holdings and Mr. Amazing Loans is available at http://www.tdmfinancial.com/emailassets/iegh/iegh_landing.php
ABOUT IEG Holdings (IEGH)
IEG Holdings Corporation (OTC Markets: IEGH) provides unsecured consumer loans under the brand name "Mr. Amazing Loans" via its website mramazingloans.com. After lending about $48 million to over 11,500 borrowers in Australia, the company entered into the U.S. market in 2008 with a presence in Nevada, Arizona, Illinois and Florida. The company also launched an online loan origination platform in early 2013, partnering with one of the top lead generators in the United States. The company's loans typically range in value from $2,000 to $10,000 and have a term of three to five years with a 19.9% to 34.45% APR. Funded by a $3 million senior revolving credit facility, the U.S. division has already written more than $291,000 in loans since its launch. Significant additional growth is expected from the online loan origination business, which has the potential to scale much more rapidly and at a higher margin than the brick-and-mortar business. For more information visit investmentevolution.com.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: TDM Financial is a marketing and consulting firm that specializes in creating ongoing communications strategies for public and private companies. For full disclosure please visit: secfilings.com/Disclaimer.aspx