In yesterday's World Acceptance investor call, CEO Sandy McLean made it clear that the company rewards its employees when they get their customers to refinance.
Responding to a question from Philadelphia Financial's Jordan Hymowitz:
Jordan Hymowitz - Philadelphia Financial
Thanks guys. I'm just wondering your employee’s incentive in any way to make a refinance?
Sandy McLean - Chief Executive Officer
One, not -- all employees to a certain extent are incentive for refinancing, because it's very important that we maintain relationships with our customers and so forth. But there is only one employee level anywhere that it has any impact, direct impact from refinancing and that's the CSR who does get some small dollar bonus on a monthly basis for encouraging renewals, because encouraging renewals is a very important part of our business, just like credit cards, people to the pay the minimum. Because we want to maintain balances and we want to maintain relationship with these customers. But no other incentives are geared towards incentive.
So - there it is!
His comment provoked some interest from the other investors on the call. A follow-up asked McLean if there had been a new effort at in-store marketing to increase refinance activities. World has done that and more. Customer receipts now remind them that once they have knocked down 10 percent off of their principal, they can turn around and refi.
Even when a loan repayment schedule is governed by the Rule of 78ths, a customer surpasses 10 percent by the end of the 2nd month.
We can't do it without our generous bank partners
McLean then went on to underscore how important it is that World continue to have access to credit markets. He said that the company faces its highest loan demands toward the end of the calendar year. Their line of credit allows the company to draw down and then pay it back once tax season comes in January.
World negotiated an amendment of its $680 million line of credit back in September 2013. Wells Fargo - the lender that still supplies more capital to this sector than anyone else - backed the company for a cool $200 million. Bank of America stepped in for $150 million and Capital One set aside $75 million. The whole point of that amendment was to facilitate that liquidity. The deal lowered levels of capital requirements imposed by lenders upon World for December.