CompuCredit Corp. said it is considering a spinoff of its payday lending businesses.
The Atlanta company, whose main business is marketing credit cards to subprime consumers, also offers in nine states loans of less than $500 (it calls them "microloans"), for terms of 30 days or less. CompuCredit said last week that these businesses would be spun off into a new, publicly traded company called Purpose Financial Holdings Inc.
The plan "may partly have been due to the negative perception of the business and difficulties in arranging partnerships and financing," Sameer Gokhale, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., wrote in a research note Friday. "Separating the payday lending businesses would be a prudent decision."
The businesses have 316 retail locations in Alabama, Colorado, Kentucky, Mississippi, Ohio, Oklahoma, South Carolina, Tennessee and Wisconsin. They also sell loans through the Internet in this country and in the United Kingdom. The businesses lost $13 million in the first nine months of the year, compared with a profit of $6 million a year earlier.
The spinoff requires approval from CompuCredit's board. David Hanna, its chairman and chief executive, said in a press release that the move would leave the two companies with "a sharper focus on their core businesses."