This excerpt taken from the DLLR 8-K filed Aug 25, 2005.
Update on the Consumer Lending Transition Plan
As was previously announced on June 16, 2005, Dollar has implemented a plan to transition the majority of its U.S. consumer lending business to the company funded loan model, which was precipitated by the recent FDIC guidance limiting short term consumer lending (or payday loans) by its member banks to 90 days within a twelve month period.
Commenting on the transition, Don Gayhardt, the Companys President, stated, While we are still in the early stages of the transition, our domestic consumer lending results are substantially in line with our expectations. Additionally, we are pleased to report that the Companys agent bank, First Bank of Delaware, recently received approval from the FDIC to offer a new installment loan product. This new loan product will have a longer loan term of 4 months and will allow us to offer customers a loan amount ranging from $300 to $1,500. We expect this product will help us to drive additional revenue growth and are very excited to begin offering it to our customers in California in the next 30 to 45 days. Following the introduction in California, we will proceed with a roll-out of this product into our other markets.
In total, only 21 of the Companys 347 domestic financial services store locations (4 stores in Texas and 17 stores in Pennsylvania) are located in states where the Company does not have the option of offering company funded loans. In these locations, loans to customers fall under the 90 day payday loan limitation per the bank agent model.
As of June 30, 2005, the Company had completed the transition of 241 stores in the following states to the company funded loan model: Arizona; California; Hawaii; New Mexico; Nevada; Utah; and Washington, as well as Washington D.C.. Since June 30, 2005, Dollar has transitioned all stores in the remaining states where enabling legislation exists, with the exception of Ohio. The Company is currently awaiting license approval from the state of Ohio to offer payday loans under state law. Until this license is approved, the Company will continue to offer bank funded loans in the 22 Ohio locations under the 90 day loan limitation. Approval of the license request from the state authorities in Ohio is expected soon.
As a result of this transition, as of June 30, 2005, the total bank funded U.S. loan portfolio decreased by $3.2 million, while company funded loans receivable increased by $1.2 million resulting in a net portfolio decline of $2.0 million or 10.7%. The majority of the decrease in the loan portfolio was related to the 141 stores in California, where the loan portfolio decreased by $1.7 million. This was anticipated, as the maximum loan amount in California was reduced to $255 under state law from the previous $1,000 loan limitation under the bank agency model. Upon the completion of the transition, it is expected that the company funded loan portfolio will increase by a total of $8.0 to $9.0 million by the end of September.
As was previously discussed in the Companys June 16, 2005 press release, the changes to the domestic consumer lending business necessitated by the new FDIC guidelines are expected to cause a decline in domestic store revenue of $8.0 to $12.0 million in fiscal 2006. These revenue estimates do not include any offsetting revenue from the new First Bank of Delaware installment loan product. Furthermore, there is no impact from the FDIC guidelines on the revenues of the international business.
There is an investors conference call scheduled for Tuesday, August 23, 2005 at 5:00 p.m. ET to discuss the Companys results for the fiscal fourth quarter, fiscal year ended June 30, 2005, and the Companys future prospects. Investors can participate in the conference by dialing 888-896-0863 (U.S. and Canada) or 973-935-8507 (International); use the confirmation code Dollar. Hosting the call will be Jeff Weiss, Chairman and CEO, Don Gayhardt, President, and Randy Underwood, Executive Vice President and CFO. For your convenience, the conference call can be replayed in its entirety beginning at 7:00 p.m. Eastern Time on August 23, 2005 through August 30, 2005. If you wish to listen to the replay of this conference call, please dial 973-341-3080 and enter passcode 6373338.
The conference call will also be broadcast live through a link on the Investor Relations page on the Dollar Financial web site at http://www.dfg.com. Please go to the Web site at least 15 minutes prior to the call to register, download and install any necessary audio software.