CompuCredit Corp., an Atlanta financial services company, will close four collection call centers by March 31. An estimated 740 employees - mostly collectors - will lose their jobs as a result.
Company spokesperson Tom Donahue said the call centers will be shut down because there is not enough work. The centers are in Salt Lake City, Wilkesboro, N.C., Duluth, Ga. and Sandy Springs, Ga.
More than 230 cuts will be in the Wilkesboro office and another 162 in the firm's Salt Lake City office. CompuCredit's call centers in Las Vegas, Lake Mary, Fla. and St. Cloud, Minn. will remain open.
CompuCredit's main business is marketing credit cards and car loans to subprime consumers, those who cannot receive financing through traditional lenders.
According to Collections & Credit Risk, the company in December 2008 reached a $116 million settlement with the Federal Deposit Insurance Corp. and the Federal Trade Commission after being accused of deceptive marketing practices. Under the deal, CompuCredit agreed to credit certain customer accounts that had been opened between 2001 and 2005. The company also agreed to pay a $2.4 million penalty to the U.S. Treasury.
Two months ago, CompuCredit said it is considering a spinoff of its payday lending businesses, according to American Banker, a Collections & Credit Risk sister publication. The company offers in nine states loans of less than $500 (it calls them "microloans"), for terms of 30 days or less.
CompuCredit said these businesses would be spun off into a new, publicly traded company. In a securities filing for the spinoff, the unit, Purpose Financial Holdings Inc., noted that payday lenders "have come under significantly heightened scrutiny from federal and state regulators, as well as community activists. As a result … many banks and potential investors have decided not to do business with companies that own [such] businesses, even where the business opportunity does not involve microloans."
Sameer Gokhale, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., wrote in a research note that, "Separating the payday lending businesses would be a prudent decision."
The proposed transaction would separate the companies by distributing Purpose stock to CompuCredit shareholders. The plan, first disclosed last month, still needs approval from CompuCredit's board.