Cash Converters sinks as deal scrapped

Perth company Cash Converters International has suffered a sharp fall in its share price after a deal with its major shareholder was scrapped because of the impact of new consumer credit laws.

The deal with EZCORP, which owns 33 per cent of Cash Converters, involved the US company lifting its shareholding to 53 per cent, and the joint roll-out of new consumer finance products globally under the Cash Converters brand.

Cash Converters said today that EZCORP has terminated the deal because of the recent federal government decision to introduce strict caps on the fees and charges levied by ‘micro’ or ‘pay day’ lenders.

Cash Converters acknowledged that the new rules, due to take effect from 1 July 2012 at the earliest, would have a material effect on its consumer lending business.

Its share price plunged today to 47 cents, from a previous close of 66.5 cents.

Cash Converters said its Australian store network may focus on other products and services that “may provide an alternative solution” for its customers.

The company said it will also consider directing additional resources into the UK, where it has 200 stores and no cap on its fees and charges.