Finance company collapses tipped

The 94-page analysis of the sector by independent broking firm McDouall Stuart says one or more failures are to be expected, as the mushrooming sector adjusts to new economic conditions.

"A growing market has seen the formation of countless finance companies. Many are small, over-geared or over-exposed to a sector and a tightening market may see one or more collapse."

The finance company sector is about to come under increased scrutiny by regulators, with the Securities Commission launching a review of disclosure.

McDouall Stuart claims some finance companies pose a significant risk to investors, a risk for which they are being "woefully compensated."

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