Short-term cash lender sets up shop in Toronto TheStar

Rentcash opens its 200th store

Borrowers pay 59% plus fees


TONY WONG
BUSINESS REPORTER

To celebrate the 200th store opening of his money lending franchise, Gordon Reykdal opened some champagne.

Two hundred bottles to be exact. The CEO of Edmonton-based Rentcash Inc. hosted a conference call with his franchises across Canada on Monday so managers could simultaneously uncork the bubbly marking the opening of their newest store on Toronto's Yonge St., its first in the GTA.

"It wasn't the really good stuff," said Reykdal a little apologetically yesterday. "I think we're going to have to wait for our 300th store opening to get out the good bottles."

He may not have to wait too long. Rentcash has been on a tear to chase market leader Money Mart, a subsidiary of Dollar Financial Group of Berwyn, Pa., which has more than 1,200 locations.

With growth pegged at several locations a week, Rentcash is the second largest lender, and the largest Canadian-based brand.

The four-year-old company hopes to add significantly to its expansion in Ontario, and its Yonge St. store is the beachhead for a larger offensive. The company has most of its stores in western Canada and wants a piece of the competitive Toronto market.

"We've certainly been busy," said Reykdal. And profitable for investors.

Since the company went public three years ago, the stock has shot from $1.10 to yesterday's close of $13.50.

Investors are enamoured by the fact that with an average loan of just under $300, Rentcash charges an average interest of 59 per cent annually, which works out to about $4 for every 10 days. However, the company also charges a 20 per cent brokerage fee on top of the interest charge.

In that case, a $300 loan could end up costing the customer $364 at the end of the 10-day period.

Section 347 of the Criminal Code prohibits lenders from charging more than 60 per cent per annum.

A study by Ernst & Young for the industry released last October said the broker model "may have been adopted mainly to minimize the risk of the operator being charged for violating the 60 per cent limit on interest under the Criminal Code of Canada."

Reykdal said the company adopted the broker model to "minimize risk," not to get around Criminal Code provisions.

"In this way we're not responsible for bad debt, and we don't have to put up the capital," said Reykdal.

Rentcash Inc. operates under two store banners. The Cash store facilitates cash advances, and Insta-rent rents furniture, appliances and electronic goods through outlets within the Brick Warehouse and United Furniture Warehouse chains.

Reykdal is acutely aware of the negative public image his industry has acquired from consumers and groups, but he argues he provides a necessary service.

Vancouver community organization ACORN (Association of Community Organizations for Reform Now) recently released a report slamming the industry for preying on the most vulnerable.

"I certainly think we provide a service that has been neglected by other institutions," said Reykdal.

He also points to a "cooling off" period adopted by most payday type companies, which allows the client to return within 24 hours to cancel the loan without any penalty.