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News Breaks | | | | September 18, 2012 | | 10:04 EDT |  | DLLR, CSH | Payday lenders sink after analyst warns on potential U.K. rules
Shares of payday lenders DFC Corp. (DLLR) and Cash America (CSH) are sliding after Jefferies research analyst Daniel Furtado downgraded the stocks to Hold from Buy. Furtado believes that the companies, which both have operations in the U.K., could be hurt by potential new regulations there. Specifically, after speaking with numerous inside sources, the analyst warns that Britain's financial regulator could put new restrictions on the collection activities of payday lenders next month. Such restrictions would limit the number of times a lender can access funds from delinquent borrowers' accounts, Furtado explained. Currently there's no limit on the number of times that lenders can take money from delinquent borrowers' accounts, explained the analyst, adding that the pending change in the regulations wasn't priced into the stocks before the market opened today. Such restrictions would likely cause loan losses absorbed by DFC and Cash America to increase, said Furtado, who has a $19 target an DFC and a $40 target on Cash America. In early trading, DFC sank $1.07, or 5.53%, to $18.29, while Cash America lost 77c, or 1.91%, to $39.52. | |
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