Short term loan company Money3 is said to be looking at issuing debt securities in order to plug the funding gap left by the withdrawal of Westpac as its primary lender. Readers will recall that Westpac made a corporate decision to cease funding ‘pay day’ lenders such as cash Converters and Money3 and while the bank has not said as much, it is believed to be the result of the increased reputational risk such lending might generate. Westpac is the last major bank to cease funding such providers.
Pay day lenders often charge very high interest rates, sometimes to vulnerable people. In June 2015 Cash Converters reached an in-principle agreement to pay $23m to settle a class action with 37,000 customers who claimed they were charged excessive interest rates on short-term loans.
Money lenders are having to secure lines of credit beyond banks and it is believed that Money3 has secured a $30m corporate bond facility that will allow it to raise funds and grow its business with certainty. It is also believed to be reducing its reliance on the more controversial pay day loans and increasing its lending focus onto other parts of its business such as auto loans.
In September 2013 Cash Converters raised around $60m for 5 years at a rate of 7.95% through FIIG Securities. This was around Swap + 400bps at the time.