NEW YORK (AP) -- Shares of DFC Global Corp. tumbled Monday after the payday lender said a "credit crunch" in the U.K. is hurting its business.
DFC forecast fiscal third-quarter results that were well short of Wall Street estimates, and slashed its guidance for the full fiscal year. The Berwyn, Pa., company said changes in industry guidelines and the regulation of payday loans in the U.K. have caused many short-term consumer loans to come due immediately. That has caused an increase in defaults.
DFC Global stock dropped $3.25, or 19.5 percent, to $13.39 in afternoon trading. Shares earlier touched their lowest point since 2010 at $12.95.
DFC Global primarily serves people who don't have bank accounts, or can't get all their needs met by banks, and need access to fast cash. The company said it has tightened its lending criteria to minimize the risk of rising defaults. It said those changes are affecting loan growth in the U.K., where it gets about half of its revenue.
"We expect this will continue for the foreseeable future," Chairman and CEO Jeff Weiss said in a press release.
Earlier this month, the Office of Fair Trading in Britain said it would require leading payday lenders to change their business practices. The agency said it was concerned with "irresponsible lending" and the failure of top lenders to comply with industry standards. It said the companies were not adequately assessing whether prospective customers can afford their loans, were not making sure clients understood how their payments would be collected, and were using aggressive collection practices.
It said the changes had to be made within 12 weeks or the companies could lose their licenses.
For the quarter ended March 31, DFC expects operating income of 20 to 24 cents per share. It is now forecasting adjusted income of $1.70 to $1.80 per share in fiscal 2013, down from $2.35 to $2.45 per share.
Analysts were forecasting net income of 63 cents per share in the third quarter and $2.35 per share for the fiscal year, which ends in June, according to FactSet.