Deals: Cash Converters' US Deal Falls Apart

Under the terms of the deal, announced last March, the two companies had planned to enter a "strategic alliance" under which EZCORP would increase its stake in Cash Converters to 53%, from the current 33% and form two joint ventures to roll out the companies' business model in new markets around the world.

But EZCORP terminated the deal because of concerns that proposed changes to the National Consumer Credit Protection Act could have a "material impact on Cash Converters' consumer loan business in Australia".

"Accordingly, the proposed Scheme pursuant to which EZCORP would make an offer to shareholders to acquire further shares in Cash Converters, and the associated proposal for the parties to enter into certain Joint Ventures, have been cancelled," Cash Converters said in the statement.

"EZCORP has taken this decision in light of the announcement by the Australian Federal Government on 24th August, 2011 that it intends to amend the National Consumer Credit Protection Act and seek to introduce strict caps on fees and charges for micro-lenders.

  "Although the amendments have not yet been passed, as currently proposed those limitations could have a material impact on Cash Converters' consumer loan business in Australia.

"Accordingly, EZCORP is not willing to proceed with the transaction.''

The changes referred to were contained in amendments introduced into Federal Parliament to allow account switching between banks, as well as changes to the Consumer Credit Protection Act on: "Unjust transactions and unconscionable interest and other charges." Providers will be required in the contract document to provide "information that expressly advises the debtor of the provisions of this Code that relate to review of:  (a)  unjust transactions; and  (b)  unconscionable interest and other charges; and the debtor's rights under those provisions."

Sounds innocuous, but as Cash Converters provides cash loans for up to six weeks and personal loans for up to three months, costs would have risen with the documentation, although you'd be entitled to think why there would be any worry in providing that information.

The online application contains no details on interest rates charged and penalties and other fees.