Cash America 2015 Annual Report Download - page 90

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Consumer Loans and Allowance and Liability for Estimated Losses on Consumer Loans
Revenue Recognition—Consumer Loans
Revenue from consumer loan fees includes interest income, finance charges, fees for services provided
through the CSO programs (“CSO fees”), service charges, minimum fees, late fees, nonsufficient funds fees and any
other fees or charges permitted by applicable laws and pursuant to the agreement with the borrower and the type of
loan. For short-term loans, interest, finance charges and origination fees are recognized on an effective yield basis
over the term of the loan. Other fees, such as late fees and nonsufficient funds fees, are recognized when assessed to
the customer. For installment loans, revenue is recognized on an effective yield basis over the term of the loan, and
other fees, such as late fees and nonsufficient funds fees, are recognized when assessed to the customer. CSO fees
for short-term loans and installment loans are recognized ratably over the term of the loan. Unpaid and accrued
interest and fees are included in “Consumer loans, net” in the consolidated balance sheets.
Through the Company’s CSO programs, the Company provides services and receives fees related to a third-
party lender’s consumer loan products by acting as a credit services organization or credit access business on behalf
of consumers in accordance with applicable state laws. Services offered under the CSO programs include credit-
related services such as arranging loans with third-party lenders (“CSO loans”). In addition, the Company
guarantees consumer loan payment obligations to the third-party lender in the event that the customer defaults on
the loan. CSO loans are not included in the Company’s consolidated financial statements, but the Company has
established a liability for the estimated losses in support of the guarantee on these loans in its consolidated balance
sheets. In the event that the customer defaults on a CSO loan, the Company purchases the specific loan, and the
outstanding loan balance and related allowance for estimated losses is then included in “Consumer loans, net” in the
Company’s consolidated financial statements.
Current and Delinquent Consumer Loans
The Company classifies its consumer loans as either current or delinquent. Short-term loans are considered
delinquent when payment of an amount due is not made as of the due date. Installment loans are considered
delinquent when a customer misses two payments. The Company allows for normal payment processing time before
considering a loan delinquent but does not provide for any additional grace period.
The Company generally does not accrue interest on delinquent consumer loans. In addition, delinquent
consumer loans generally may not be renewed, and if, during its attempt to collect on a delinquent consumer loan,
the Company allows additional time for payment through a payment plan or a promise to pay, it is still considered
delinquent. Generally, all payments received are first applied against accrued but unpaid interest and fees and then
against the principal balance of the loan.
Allowance and Liability for Estimated Losses on Consumer Loans
The Company monitors the performance of its consumer loan portfolio and maintains either an allowance or
liability for estimated losses on consumer loans (including earned fees and interest) at a level estimated to be
adequate to absorb credit losses inherent in the portfolio. The allowance for estimated losses on the consumer loans
owned by the Company reduces the outstanding loan balance in the consolidated balance sheets. The liability for
estimated losses related to loans guaranteed under the Company’s CSO programs is included in “Accounts payable
and accrued expenses” in the consolidated balance sheets. Increases or decreases in the allowance and the liability
for estimated losses are increased by charge-offs and decreased by recoveries, and the net change is recorded as
“Consumer loan loss provision” in the consolidated statements of income.
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
86