Are payday loan companies sin stocks?
They don’t fall into the relatively well-defined category of sin stocks.
But then again, neither did crime sin stocks and that didn’t stop me from lumping those into the sin stocks category.
So let’s look at short term lending market:
Sin stocks are highly regulated industries in which the product or service has some kind of social stigma attached to it. Alcohol, tobacco, gambling… yep, they fit the bill and are commonly considered sin stocks. Social stigma varies, of course, but we can see why they are called sin (or vice) stocks. There’s also a habitual element in a lot of sin stocks, too.
So what about payday loan companies or short term loan companies?
They’re highly regulated. There’s a social stigma attached to them. And there’s kind of a habitual element as well.
And usury is a sin, too, right?
And there’s a social stigma attributed not only to borrowing from these lenders but also to promoting and investing in them, right?
If that’s the case then payday lending companies should be sin stocks. So I’m creating a new category in my big list of sin stocks: Financial sin stocks.
So, who are the culprits?
Well, I’m still doing research on the industry but my initial research suggests the following companies:
Advance America Cash Advance (Mexico: MM AACA is owned by Mexican company Grupo Elektra)
Cash America International (NYSE: CSH)
Encore Capital Group (NASDAQ: ECPG)
EZ Corp (NASDAQ: EZPW)
First Cash Financial Services (NASDAQ: FCFS)
World Acceptance Corp (NASDAQ: WRLD)
… There will be others, too. And these are just the ones in America.
Stay tuned for more about this.