Major Overland Park payday lending company QC Holdings about to come off public exchange, stocks take a nosedive

QC Holdings’ presence in Overland Park is one reason why Kansas City is often seen as a geographic nerve center for the world of payday lending.

QC Holdings runs nearly 400 retail payday, title and installment loan shops around the country. But as regulators take a closer look at the practices employed by payday lenders, and as lawsuits against those companies loom, the short-term, high-interest lending business gets tougher.

Stock prices for QC Holdings took a beating on Monday, days after the company announced it will stop trading on Nasdaq on February 11. Stocks will move to Pink Sheets, an over-the-counter exchange with far less stringent reporting requirements than companies listed on Nasdaq or the New York Stock Exchange. 

The company cited a history of low trading volume and the costs associated with listing on a major exchange (regulatory compliance, accounting and legal fees) as reasons for getting off Nasdaq.

Share prices for QC Holdings opened at $1.12 a share on Monday and quickly dropped as low as 54 cents — more than half their value. At the time of this writing, shares traded for 62 cents with an hour left in trading. QC Holdings shares traded as high as $4.89 a share on April 29, 2011, a time when the recession started fading but economic pressures on households had not.

It’s been largely downhill for QC stock prices since then. Signs of stress have been apparent for the company.

The company posted a $1.39 million net loss for the nine-month period ending on September 30, compared to a $3.87 million net income for the same period in 2014.

The company has particular sensitivity to laws that limit the interest rates that it can charge on loans. Payday loan companies will charge higher interest rates to adjust for the risk it takes by extending credit to low-income consumers. The industry is often accused of charging predatory interest rates.

In the company’s last annual report, it described closing its locations in Montana and Oregon after legislatures in each state passed laws that “precluded payday lending on profitable terms.”

What do profitable terms look like? Apparently, 36 percent is not enough. QC Holdings’ 2014 annual report described how federal legislation that caps interest rates on short-term loans to military members at 36 percent “effectively bans payday lending to members of the military or their families.”

Also troublesome to payday lenders was the formation of the Consumer Financial Protection Bureau, an Easter egg of the 2010 Dodd-Frank Act. The CFPB has rulemaking authority over, among other financial companies, payday lenders. The CFPB is expected to release new rules governing payday lenders that restrict how much consumers can borrow and on what terms, as well as require that payday lenders assist consumer in repaying their debts.