Advance America, Cash Advance Centers is one of the largest payday advance firms in the US. Active in nearly 30 states, it operates more than 2,100 locations under the Advance America brand and more than 400 more under the National Cash Advance, Check Advance, First American Cash Advance, First American Cash Loans, Purpose Financial, and Purpose Money banners; California, Florida, and Texas are its largest markets. At its branches or online, customers provide proof of identification, source of income, bank account, and references, and Advance America loans them from $50 to $1,000 (plus fees and interest) to cover unexpected expenses. Grupo Elektra acquired Advance America in 2012 for some $780 million.
The deal is the first major investment in the US financial services market by Mexico-based Grupo Elektra. The specialty retailer, which also offers banking services, credit, and other financial products to underserved customers, is aggressively expanding its financial arm.
In an industry criticized for preying upon the vulnerable, using strong-arm collection tactics, and slamming borrowers with outrageous rates, Advance America charges origination fees that typically range from $15 to $30, levies finance charges of up to 22% of the loan amount (far less than peers that sometimes charge upwards of 300%), and uses a soft collections touch. Its customers are primarily middle-income working individuals whose average age is around 42 and whose median household income is more than $54,000. A nearly a majority of them are homeowners and more than 90% have a high school degree.
As states tighten the regulations governing payday lenders, Advance America has expanded its product offerings to include fee-based consumer credit consulting, money orders, pre-paid Visa debit cards, Moneygram money transfers, and bill payment services, in addition to installment loans, second mortgages, and gold-buying services in selected markets.
Regulatory restrictions have also had a hand in the company closing or consolidating some 300 US locations since 2009. Since then, Advance America has exited or retrenched in markets such as Arizona, Colorado, Montana, New Hampshire, North Dakota, Virginia, and Washington as laws governing cash advances in those states change. The company closed its foreign offices in Canada and the UK in 2011 and 2012 due to continued losses and related operating costs.
While Advance America expects to continue to close or consolidate branches as situations warrant, it continues to open new locations and is focusing on making its existing locations more profitable. In 2011 the company acquired some 300 retail consumer finance locations in nine states from CompuCredit(now Atlanticus Holdings) for more than $46 million.
Advance America's strategy of cutting costs while pursuing growth seems to be paying off, as an uptick in same-store sales, plus additional revenue from new or acquired locations, contributed to a nearly 5% increase in revenues (from some $600 million to almost $626 million) and a nearly 90% spike in its bottom line ($35.8 million to $67.6 million) for 2011. – less