Consumer Finance Industry Profile

About 7,000 companies in the US engage primarily in making personal and payday loans to consumers, with combined annual revenue of about $180 billion. Large financing companies include AmeriCredit, Ally Financial, Ford Motor Credit, and the retail finance division of GE Capital. Companies that offer cash advances, payday loans, and other unsecured loans include Dollar Financial and Ace Cash Express. Certain segments of the industry, such as unsecured cash loans, are highly fragmented, while others, like credit card lending, have become concentrated in a few large lenders.

Pawn shops, which also make loans to consumers, are covered in the Used Merchandise Stores profile.

COMPETITIVE LANDSCAPE

Demand is driven by consumer income and demographics. The profitability of individual companies depends on the correct assessment of repayment likelihood and effective collections activities. Large companies have an advantage in the ability to manage large portfolios of mortgage, auto, and credit card loans through sophisticated computer risk modeling. Small companies can compete effectively in the cash lending or sales finance segments, where a local or neighborhood presence is highly effective. The industry is capital-intensive; annual revenue per worker is about $550,000.

The federal financial reform law passed in 2010 could create a tougher business environment for consumer finance firms. New measures in the law include restricting credit cards companies from imposing interest rate hikes and fees, limiting payday loans, and discouraging auto title loans. The law also creates ...