EZPW Inc. and Sleazy Capitalism

by Dual Income No Kids on August 30, 2006 · 0 comments

This post is about EZCORP Inc. I first heard about this gem from its listing in the IBD 100. The Investors Business Daily is a great paper, but not all of its picks are ethically acceptable. Case in point: EZCORP Inc.

Since I’m continually searching for ways to make a buck, I was checking over EZCORP’s 8-k SEC filing last night. The company has been exceptionally profitable, so I was initially attracted to it. But I was horrified to discover that a great deal of their revenue stems from secured lending at 240% a year. They additionally offer “credit counseling”, which charges 20% in return for securing new credit for borrowers.

Now, many companies have ethical issues. For example, I invest in Exxon Mobil (XOM), which has been the subject of controversy for its environmental policies. However, Exxon does provide a valuable public service (e.g. by allowing America to drive).

EZCORP, on the other hand, has both ethical and sleaze issues. Its ethically questionable to charge high rates of interest, but sometimes it can be justified. However, it is sleazy to charge 240%. What makes this worse is that most customers of pawn shops are minorities and uneducated. Charging 240% is simply gouging minorities for the sake of profit. Outfits like this are part of the root causes of social inequality and represent capitalism at its worst.

My investing dollars will go elsewhere. I urge you to make the same decision.

Best,

James

UPDATE: I posted this at the EZCORP yahoo board, board members seemed largely to disagree with what I had to say. Click HERE for the controversy.

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