Consumer Finance

About 5,000 companies in the US engage primarily in making personal and payday loans to consumers, with combined annual revenue of about $40 billion, although industry size is uncertain. Large financing companies include AmeriCredit, GMAC, and GE Consumer Finance. 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 profile for Used Merchandise Stores.

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 $430,000.

PRODUCTS, OPERATIONS & TECHNOLOGY

Consumer finance companies offer the same kinds of loans to consumers that banks and credit unions do, but operate in the "subprime" portion of the market. Subprime borrowers may have a history of delinquent loan payments or no credit history, and often have low income and a higher debt-to-income ...