CashNetUSA.com isn't your typical financial-services business.
For one, at a time when 140,000 industry jobs have been lost nationally year to date, the Chicago-based online payday lender is hiring.
For another, the headquarters' vibe conjures up the freewheeling tech-boom era. Jeans are the norm; one manager even sports a bandanna. The break room features a foosball table and a Nintendo Wii. And a 28-year-old University of Illinois computer science graduate runs the place.
CashNet has had rocket-like growth, but experts who follow the payday loan industry expect competition to increase as regulators tighten up on both traditional brick-and-mortar stores and online operators. Payday lending involves making short-term loans that help tide consumers over until their next paycheck.
Texas-based Cash America International Inc., a pawn-shop chain, bought CashNet in 2006. Founded in 2004 with stores in Kenosha and Racine, Wis., CashNet quickly switched exclusively to the Web.
That transition has paid off. CashNet expects to end 2008 with revenue of more than $200 million, up from $325,000 in 2004. Next year CashNet plans to boost staffing from 600 in its Loop office and in Lake Bluff to more than 750 in the metro area. In 2004 it had 23 employees. Cash America paid more than $200 million for CashNet.
"The growth is driven by geographic and product expansion," said Timothy Ho, a 2002 U of I. grad who was promoted to CashNet president in October. "We're launching in two more countries over the next year," he said.
CashNet's new products will include bigger loans and longer terms, said Ho, a Lincolnwood native who had been senior vice president of strategic development.
Steve Brubaker, executive director of the Illinois Small Loan Association, a trade group of payday lenders, advises members to consider the Web because it's cheaper to run. CashNet isn't a member.
"CashNet and Cash America got in ahead of the curve and should be very successful, but many companies are in the space, and competition should be fierce," he said.
One reason for online payday loan growth is that it is more difficult to regulate such companies than brick-and-mortar stores, said Tom Feltner, policy director for Woodstock Institute, an economic development non-profit that has studied the industry.
Last month, for example, Cash America said it would close a third of its Ohio stores due to tougher state restrictions. Advance America, another leading payday lender, also said it might have to trim its Ohio network.
Pennsylvania and Minnesota are among other states that have tried to regulate Web activity, and Feltner predicts more crackdowns on online payday lending.
Though he hasn't seen evidence of more consumers turning to payday lenders during the recession, Feltner points out that when the government sent out stimulus checks this year, Advance America reported lower loan demand, suggesting that the more cash consumers have on hand, the less they need payday loans.
The industry has been criticized for high fees. In Illinois, CashNet's loan fee is $15.50 per $100 borrowed. On a 14-day loan, that represents an annual percentage rate of more than 400 percent.
Proponents say the industry helps consumers underserved by banks. Ho points out that fees at credit card companies and banks can be steep. Bounced-check fees, for example, average nearly $30.
In the past three years, 206 complaints were logged against CashNet at the Better Business Bureau. All but five were resolved or "administratively closed," meaning the BBB determined CashNet made a reasonable offer to settle the issue. Even one unresolved complaint results in an "unsatisfactory" BBB rating.
In September, the Illinois Department of Financial and Professional Regulation fined CashNet $30,125 for violations found during a March 2007 exam. The violations included 59 instances of CashNet either not noting in a database when a loan was paid in full or when it was originated, and 25 instances of not telling consumers that they had a right to a repayment plan in a separate signed document. CashNet said it has resolved all issues cited in the state's report.
CashNet, which does business in more than 30 U.S. states and the United Kingdom, points out that it has served more than a million customers. Ho said more than 90 percent of users are satisfied.
Payday lenders find fertile place on Web
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