By Becky Yerak
December 30, 2008 isn’t your typical financial-services business.

one, at a time when 140,000 industry jobs have been lost nationally
year to date, the Chicago-based online payday lender is hiring.

another, the headquarters’ vibe conjures up the freewheeling tech-boom
era. Jeans are the norm; one manager even sports a bandanna. The break
room features a foosball table and a Nintendo Wii. And a 28-year-old
University of Illinois computer science graduate runs the place.

has had rocket-like growth, but experts who follow the payday loan
industry expect competition to increase as regulators tighten up on
both traditional brick-and-mortar stores and online operators. Payday
lending involves making short-term loans that help tide consumers over
until their next paycheck.

Texas-based Cash America
International Inc., a pawn-shop chain, bought CashNet in 2006. Founded
in 2004 with stores in Kenosha and Racine, Wis., CashNet quickly
switched exclusively to the Web.

That transition has paid off.
CashNet expects to end 2008 with revenue of more than $200 million, up
from $325,000 in 2004. Next year CashNet plans to boost staffing from
600 in its Loop office and in Lake Bluff to more than 750 in the metro
area. In 2004 it had 23 employees. Cash America paid more than $200
million for CashNet.

"The growth is driven by geographic and
product expansion," said Timothy Ho, a 2002 U of I. grad who was
promoted to CashNet president in October. "We’re launching in two more
countries over the next year," he said.

CashNet’s new products
will include bigger loans and longer terms, said Ho, a Lincolnwood
native who had been senior vice president of strategic development.

Brubaker, executive director of the Illinois Small Loan Association, a
trade group of payday lenders, advises members to consider the Web
because it’s cheaper to run. CashNet isn’t a member.

and Cash America got in ahead of the curve and should be very
successful, but many companies are in the space, and competition should
be fierce," he said.

One reason for online payday loan growth is
that it is more difficult to regulate such companies than
brick-and-mortar stores, said Tom Feltner, policy director for
Woodstock Institute, an economic development non-profit that has
studied the industry.

Last month, for example, Cash America said
it would close a third of its Ohio stores due to tougher state
restrictions. Advance America, another leading payday lender, also said
it might have to trim its Ohio network.

Pennsylvania and
Minnesota are among other states that have tried to regulate Web
activity, and Feltner predicts more crackdowns on online payday lending.

he hasn’t seen evidence of more consumers turning to payday lenders
during the recession, Feltner points out that when the government sent
out stimulus checks this year, Advance America reported lower loan
demand, suggesting that the more cash consumers have on hand, the less
they need payday loans.

The industry has been criticized for
high fees. In Illinois, CashNet’s loan fee is $15.50 per $100 borrowed.
On a 14-day loan, that represents an annual percentage rate of more
than 400 percent.

Proponents say the industry helps consumers
underserved by banks. Ho points out that fees at credit card companies
and banks can be steep. Bounced-check fees, for example, average nearly

In the past three years, 206 complaints were logged against
CashNet at the Better Business Bureau. All but five were resolved or
"administratively closed," meaning the BBB determined CashNet made a
reasonable offer to settle the issue. Even one unresolved complaint
results in an "unsatisfactory" BBB rating.

In September, the
Illinois Department of Financial and Professional Regulation fined
CashNet $30,125 for violations found during a March 2007 exam. The
violations included 59 instances of CashNet either not noting in a
database when a loan was paid in full or when it was originated, and 25
instances of not telling consumers that they had a right to a repayment
plan in a separate signed document. CashNet said it has resolved all
issues cited in the state’s report.

CashNet, which does business
in more than 30 U.S. states and the United Kingdom, points out that it
has served more than a million customers. Ho said more than 90 percent
of users are satisfied.

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