World Acceptance : Shares of World Acceptance drop after federal investigation
03/19/2014 | 01:27pm US/Eastern
Subprime lender World Acceptance Corp. received a Civil Investigative Demand from the U.S. Consumer Financial Protection Bureau concerning possible violations of security laws, according to the Form 8-K the company filed with the U.S. Securities and Exchange Commission.
World Acceptance stock dropped 19% from opening to closing on Thursday but rose 3.6% Friday. The company's stock trades under the Nasdaq ticker symbol WRLD. Shares were trading at $75.78 per share Tuesday morning; that's $3.31, or 4.2%, below the previous close. According to the company, the investigative demand states that the "purpose of this investigation is to determine whether finance companies or other unnamed persons have been or are engaging in unlawful acts or practices in connection with the marketing, offering or extension of credit" in violation of the Consumer Financial Protection Act, the Truth in Lending Act or any other Federal consumer financial law. "The CID contains broad requests for production of documents, answers to interrogatories and written reports related to loans made by the company and numerous other aspects of the company's business," according to World Acceptance's filing. "The company has evaluated the CID and is in the process of providing information requested to the CFPB. The company believes that its marketing and lending practices are lawful."
The investigative demand will also "determine whether Bureau action to obtain legal or equitable relief would be in the public interest," according to the World Acceptance filing.
Pennsylvania-based Law Offices of Howard G. Smith announced Thursday it is conducting an investigation on behalf of World Acceptance shareholders. The investigation will look into securities acquired between Feb. 8, 2013 and March 12, 2014, according to the law firm's website.
Representatives from neither World Acceptance nor from the Law Offices of Howard G. Smith returned multiple telephone messages requesting comment.
"The Law Offices of Howard G. Smith believes that the company and certain of its executives violated federal law," the firm stated in the case summary.
"More specifically, the Law Offices of Howard G. Smith believes that the company misled investors to believe that it was conducting a legitimate business when, in fact, it was violating most every predatory lending practice known to man, including making loans to people who were already in default of previous loans, charging usurious interest rates and physically showing up at borrowers' homes and workplaces to intimidate them into paying. Moreover, the company sells a myriad of useless and valueless insurance products," according to the firm.
Stock has dropped a total of 22.5% in the last five days.
The company's board of directors approved a $50 million common stock repurchase plan in early February, which was in addition to a similar $25 million repurchase plan announced in November. Combining the two repurchase authorizations, World Acceptance has approximately $57.3 million — including pending repurchase orders subject to settlement — in aggregate remaining repurchase capacity.
World Acceptance Corp. is a consumer finance business operating in the U.S. and Mexico. The Greenville-based company offers short-term and medium-term loans, related credit insurance, and ancillary products and services.
Located near Philadelphia, the Law Offices of Howard G. Smith represents clients in federal and state courts for cases concerning securities fraud, takeover, derivative and Employee Retirement Income Security Act litigation brought against public companies, their officers, directors and advisors.
The U.S. Consumer Financial Protection Bureau is a federal entity created to protect consumers by carrying out federal consumer financial laws. The bureau was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
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