Cash America 2015 Annual Report Download - page 22

limitations on these types of loans, such as requiring additional underwriting requirements, requiring cooling-off
periods between payday loans, limitations on loan amounts and terms and limitations to prevent the sustained use of
certain loans, among other things. The CFPB has also indicated that the rules that are proposed may also place
restrictions on collection practices with respect to these types of loans. All of the Company’s consumer loan
products and certain pawn loans offered by the Company that are collateralized by a customer’s vehicle or the title
thereto could be affected by such rules if they are applicable to the types of loans that the CFPB has indicated when
they are adopted. If the CFPB adopts any such rules or regulations, it could reduce revenue from these products or
make the continuance of these products impractical or unprofitable. The Company does not currently know the
nature and extent of the rules the CFPB will adopt, but those rules could be proposed during 2016 and, if adopted,
would likely become effective in 2017.
The Company closely monitors proposed legislation being discussed in the states where it offers its
products and services. Legislative or regulatory actions that affect the products or services offered by the Company
at the national, state and local level could have a Material Adverse Effect.
Decreased demand for the Company’s products and specialty financial services, due to sustained changes in the
economy or for other reasons, and the Company’s failure to adapt to such decrease could result in a loss of
revenue and could have a Material Adverse Effect.
The demand for a particular product or service may decrease due to a variety of factors, such as regulatory
restrictions that reduce customer access to particular products, the availability of competing or alternative products,
changes in macro-economic conditions or changes in customers’ financial conditions. Should the Company fail to
adapt to a significant change in its customers’ demand for, or access to, its products, the Company’s revenue could
decrease significantly. Even if the Company makes adaptations or introduces new products to fulfill customer
demand, customers may resist or may reject products whose adaptations make them less attractive or less available.
In any event, the effect of any product change on the results of the Company’s business may not be fully
ascertainable until the change has been in effect for some time. In particular, the Company has changed, and will
continue to change, some of the consumer loan operations of the Company and the products it offers. In addition, a
sustained deterioration in the economy could also decrease demand for pre-owned merchandise such as the
merchandise sold in the Company’s pawnshops and cause deterioration in the performance of the Company’s pawn
loan or consumer loan portfolios. While the credit risk for much of the Company’s pawn lending is mitigated by the
collateralized nature of pawn lending, a sustained deterioration in the economy could reduce the demand for and
resale value of pre-owned merchandise and reduce the amount that the Company could effectively lend on an item
of collateral. Such reductions could adversely affect pawn loan balances, pawn loan redemption rates, inventory
balances, inventory mixes and gross profit margins. An economic slowdown could also result in a decreased number
of consumer loans being made to customers due to higher unemployment or an increase in loan defaults in the
Company’s consumer loan products. A sustained strengthening in the economy could also reduce demand for the
Company’s pawn and consumer loans. As the Company’s customer base has more available disposable income, the
demand for pawn loans and consumer loans could decrease. For example, gas prices have recently significantly
decreased, and the Company believes that such decreases cause its customers to have more available disposable
income. A sustained decrease in gas prices could result in a sustained decrease in demand for the Company’s pawn
and consumer loans. Any of these events could result in a loss of revenue and could have a Material Adverse Effect.
A significant portion of the Company’s pawn loans are secured by gold collateral, and a significant and
sustained decline in gold prices could result in decreases in the value of collateral securing outstanding pawn
loans, in the balance of pawn loans secured by gold jewelry, in inventory valuations, and in commercial
merchandise sales.
A significant portion, or 63.3% as of December 31, 2015, of the Company’s pawn loans are secured by
jewelry, a majority of which is gold jewelry, and the Company also sells forfeited gold jewelry through either retail
or commercial sales. The Company’s pawn service charges, sales proceeds and ability to dispose of jewelry
inventory through retail or commercial sales at an acceptable margin depend on the value of gold. In recent years,
there has been an increased volatility in the price of gold, and gold prices have declined meaningfully since 2012.
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