Cash America 2015 Annual Report Download - page 27

result in a decrease in the number of loans that the Company writes, resulting in lower levels of revenue and
earnings. The Company may not be able to compete successfully against any or all of its current or future
competitors. As a result, the Company could lose market share and its revenue could decline, thereby affecting the
Company’s ability to generate sufficient cash flow to service its indebtedness and fund the Company’s operations.
Any such changes in the Company’s competition could have a Material Adverse Effect.
Consumer loans are under increased regulatory scrutiny that has resulted in increasingly restrictive regulations
and legislation and may in the future result in additional regulations and legislation that makes offering such
loans in certain states where the Company operates less profitable or unattractive to the Company.
In recent years, consumer loans, which are also commonly referred to as “payday loans” and includes
certain of the Company’s consumer loan products, have been under increased regulatory scrutiny that has resulted in
increasingly restrictive regulations and legislation that makes offering such loans in certain states where the
Company operates less profitable or unattractive to the Company. For example, during 2013, the Company closed
36 retail services locations in Texas that offered consumer loans as their primary source of revenue, mainly as a
result of restrictive city ordinances that had been passed since 2011 that had the effect of reducing the profitability
and the volume of short-term consumer loans. In addition, partially as a result of the increased regulation on
consumer loans, the Company has recently de-emphasized its consumer lending business, such that consumer loans
onlycomprised8%oftheCompany’stotalrevenuefortheyearendedDecember31,2015.The Company closely
monitors proposed legislation being discussed in the states where it offers consumer loans, and additional legislative
or regulatory initiatives that are similar to or broader than those that have already been adopted could be enacted
that could severely restrict, prohibit or eliminate the Company’s ability to offer its consumer loan product. Any of
these or other legislative or regulatory actions that affect the Company’s consumer loan business at the national,
state and local level could, if enacted or interpreted differently, could have a Material Adverse Effect on the
Company’s consumer lending business. See “The adoption of new laws or regulations or adverse changes in, or the
interpretation or enforcement of, existing laws or regulations affecting the Company’s products and services could
have a Material Adverse Effect” for additional information regarding potential rules or regulations that could affect
the Company’s consumer loan business.
Judicial decisions, CFPB rule-making or amendments to the Federal Arbitration Act could render the arbitration
agreements the Company uses illegal or unenforceable.
The Company includes arbitration provisions in its consumer loan agreements. These provisions are
designed to allow the Company to resolve any customer disputes through individual arbitration rather than in court
and explicitly provide that all arbitrations will be conducted on an individual and not on a class basis. Thus, the
Company’s arbitration agreements, if enforced, have the effect of shielding the Company from class action liability.
The Company’s arbitration agreements do not generally have any impact on regulatory enforcement proceedings.
The Company takes the position that the arbitration provisions in its consumer loan agreements, including class
action waivers, are valid and enforceable; however, the enforceability of arbitration provisions is often challenged in
court. If those challenges are successful, the Company’s arbitration and class action waiver provisions could be
unenforceable, which could subject the Company to additional litigation, including additional class action litigation.
In addition, the U.S. Congress has considered legislation that would generally limit or prohibit mandatory
arbitration agreements in consumer contracts and has enacted legislation with such a prohibition with respect to
certain mortgage loan agreements and also certain consumer loan agreements to members of the military on active
duty and their dependents. Further, the Dodd-Frank Act directs the CFPB to study consumer arbitration and report
to the U.S. Congress, and it authorizes the CFPB to adopt rules limiting or prohibiting consumer arbitration,
consistent with the results of its study. In 2013, the CFPB released a preliminary report on consumer arbitration
provisions and indicated further study was in process. The results of the CFPB’s further study on arbitration were
releasedinareporttoCongressinMarch2015.The report, which the CFPB states is an empirical study and not an
evaluative study, sets forth the CFPB’s factual findings from its comprehensive empirical review of the facts
surrounding the resolution of consumer disputes - both in arbitration and in the courts. In October 2015, the CFPB
announced that it is considering proposing rules that would directly affect arbitration clauses that include class
actionwaivers.Although this announcement is only the first step in the rulemaking process, the CFPB proposal, as
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