CompuCredit Corp., an Atlanta financial services company, confirmed it will lay off more than 300 collection agents and supervisors in two Atlanta area collection call centers that will be closed by March 31, a spokesperson said late today.
The company cited a decline in the number of credit card accounts the company services. CompuCredit's core business is marketing credit cards and car loans to subprime consumers, those who cannot receive financing through traditional lenders. The company has been hit hard by the collapse of the credit markets, losing $499.9 million in the first nine months of 2009, compared with an $87 million loss for the same period in 2008.
Earlier this week, Collections & Credit Risk reported the company will cut nearly 400 collectors and managers in two call centers in Wilkesboro, N.C. and Salt Lake City. The Atlanta-area call centers to be closed are in Duluth, Ga. and Sandy Springs, Ga. CompuCredit's call centers in Las Vegas, Lake Mary, Fla. and St. Cloud, Minn. will remain open.
In December, CompuCredit announced plans to spin off its payday lending businesses into a new, publicly traded company called Purpose Financial Holdings Inc. CompuCredit currently offers loans of less than $500 (it calls them "microloans"), for terms of 30 days or less. Purpose Financial will operate CompuCredit's chain of 316 retail short-term loan offices in Alabama, Colorado, Kentucky, Mississippi, Ohio, Oklahoma, South Carolina, Tennessee and Wisconsin.
The company 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.