We Are The World
Sep 05, 2019 11:21PM
By David Dykes
Shares of Greenville-based World Acceptance Corp., one of the nation’s largest small-loan consumer finance firms, plunged in March 2014. The reason: the company had disclosed in a regulatory filing the Consumer Financial Protection Bureau requested information about its marketing and lending practices. Company officials denied wrongdoing, but braced for the worst, including possible fines, penalties or sanctions.
Fast forward five years.
Founded in 1962, World Acceptance Corp. was cleared without any enforcement action by regulators, and since then, its stock has rebounded and the company’s chief executive is leading an effort to accelerate growth, rebrand the company’s image and hunt for potential acquisitions.
In addition, the company is moving its corporate headquarters from Frederick Street off South Pleasantburg Drive in Greenville to the Poinsett Plaza office tower downtown. As of June 30, World Acceptance Corp. operates 1,218 branches in 16 states, with almost all offices under the primary trade name World Finance.
“This is a good place to be right now,” Chad Prashad, who has been World’s president and CEO since June 2018, says of the company. Dating back to June 2014 at World, Prashad had been senior vice president and chief strategy and analytics officer and vice president of analytics. Previously, he was senior director of strategy development and director of legal strategy for Greenville-based Resurgent Capital Services, a consumer debt managing and servicing company.
The company offers short-term small installment loans, medium-term larger installment loans and related credit insurance products to those who have limited access to other sources of consumer credit. It also offers tax-return preparation services.
The company’s personal installment loans generally range between $300 and $8,000, with the average being $1,300 to $1,500, Prashad says. The lowest interest rate on an installment loan is about 17 to 18 percent and rates average about 50 percent, he says.
World abides by each state’s laws and regulations, and its loan activity is audited by each state’s officials, the company says. Customers can earn a lower interest rate with a consistent payment history.
The small-loan consumer finance industry is a highly fragmented segment of consumer lending, with companies generally making loans to individuals of less than $2,000 with maturities less than 18 months.
As a result of their higher credit standards and specific collateral requirements, commercial banks, savings and loans, and other consumer finance businesses typically charge lower interest rates and fees and experience lower delinquency and charge-off rates.
Against that backdrop, World conducted more than 1,500 interviews with its employees, and more than 1,000 interviews with potential, current and former customers to focus on “who we really are” and rediscover the company’s core values, Prashad says.
The results showed customers felt World empathized with their financial situations, especially since customers have limited credit options in most cases, the CEO says.
“A lot of companies go through rebranding to portray this image of who they want to become,” Prashad says. “For us, we want to portray the image of who we already are. That’s really the difference here.”
One of World’s core objectives is helping customers establish or improve their credit scores and better their financial futures.
Instead of a short, three- to five-minute application and approval process, World works with an applicant for 45 minutes or longer to review his or her finances and establish a household budget.
In its last fiscal year, World had 92,000 new customers who opened loan accounts but had no credit score. Prashad says company figures for that year show 110,000 customers improved their credit scores from below 550, or deep subprime, and 115,000 improved from subprime, or below 620, by working with World.
In its fiscal 2020 first quarter ending June 30, World reported gross loans outstanding in the U.S. increased to 15.1 percent to $1.22 billion from a year earlier. Meanwhile, net income increased to $8.6 million, or 97 cents per diluted share, from a $21.5 million loss, or $2.32 per diluted share, a year earlier. Net charge-offs increased $6.8 million. Earnings per share for the quarter benefited from World’s share repurchase program.
Prashad and Johnny Calmes, World’s chief financial and strategy officer, told analysts in a conference call in July that $4.1 million of the $6.8 million charge-off increase was due to an increase in average loans outstanding. The mix of less-than-one-year tenured customers, considered the riskiest, rose from 17.5 percent to 25 percent of World’s portfolio.
In fiscal 2020, the company plans to open or acquire approximately 50 new branches by increasing the number in existing markets or beginning operations in new states where World believes demographic profiles and state regulations are attractive.
“We want to help customers get back to the good in their life,” Prashad says of World. “Everyone has struggles financially every now and then. When customers come to us for help, we can choose to be kind in how we work with them. For us, customers are more than a number.”