Harley Davidson 2012 Annual Report Download - page 16

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The Company’s motorcycle products use internal combustion engines. These motorcycle products are subject to
statutory and regulatory requirements governing emissions and noise, including standards imposed by the EPA, state
regulatory agencies, such as California Air Resources Board, and regulatory agencies in certain foreign countries
where the Company’s motorcycle products are sold. The Company is also subject to statutory and regulatory
requirements governing emissions and noise in the conduct of the Company’s manufacturing operations. Any
significant change to the regulatory requirements governing emissions and noise may substantially increase the cost of
manufacturing the Company’s products. If the Company fails to meet existing or new requirements, then the Company
may be unable to sell certain products or may be subject to fines or penalties. Further, in response to concerns about
global climate changes, the Company may face greater regulatory or customer pressure to develop products that
generate less emissions. This may require the Company to spend additional funds on research, product development,
and implementation costs and subject the Company to the risk that the Company’s competitors may respond to these
pressures in a manner that gives them a competitive advantage.
The Company’s financial services operations are governed by various foreign, federal and state laws that more
specifically affect general financial and lending institutions. The financial services operations originate the majority of
its consumer loans through its subsidiary, Eaglemark Savings Bank, a Nevada state thrift chartered as an industrial
loan company. Congress has previously considered and may in the future impose additional regulation and supervision
over the financial services industry.
Depending on the provisions of the applicable laws and regulations, the interpretation of laws and regulations and the
specific facts and circumstances involved, violations of or non-compliance with these laws may limit the ability of
HDFS to collect all or part of the principal or interest on applicable loans, may entitle the borrower to rescind the loan
or obtain a refund of amounts previously paid, could subject HDFS to payment of damages or penalties and
administrative sanctions, including "cease and desist" orders, and could limit the number of loans eligible for HDFS
securitizations programs. Such regulatory requirements and associated supervision could limit the discretion of HDFS
in operating its business. Noncompliance with applicable statutes or regulations could result in the suspension or
revocation of any charter, license or registration at issue, as well as the imposition of civil fines, criminal penalties and
administrative sanctions. The Company cannot assure that the applicable laws or regulations will not be amended or
construed differently, that new laws and regulations will not be adopted or that interest rates charged by HDFS will not
rise to maximum levels permitted by law, the effect of any of which could be to adversely affect the business of HDFS
or its results of operations.
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed into law. The Dodd-Frank Act
is a sweeping piece of legislation, and the financial services industry is still assessing the impacts. Congress detailed
some significant changes, but the Dodd-Frank Act leaves many details to be determined by regulation and further
study. The full impact will not be fully known for months or even years, as regulations that are intended to implement
the Dodd-Frank Act are adopted by the appropriate agencies, and the text of the Dodd-Frank Act is analyzed by
impacted stakeholders and possibly the courts. The Dodd-Frank Act also created the Bureau of Consumer Financial
Protection (“CFPB”), housed in the Federal Reserve. The CFPB has been granted significant enforcement and rule-
making authority in the area of consumer financial products and services. The direction that the CFPB will take, the
regulations it will adopt, and its interpretation of existing laws and regulations are all elements that are not yet known.
Compliance with the law may be costly and could affect operating results as the implementation of new forms,
processes, procedures and controls and infrastructure may be required to comply with the regulations. Compliance
may create operational constraints and place limits on pricing. Failure to comply with these regulations, changes in
these or other regulations, or the imposition of additional regulations, could affect HDFS’ earnings, limit its access to
capital, limit the number of loans eligible for HDFS securitization programs and have a material adverse effect on
HDFS’ business and results of operations.
In addition, the Company is also subject to policies and actions of the New York Stock Exchange (“NYSE”). Many
major competitors of the Company are not subject to the requirements of the SEC or the NYSE rules. As a result, the
Company may be required to disclose certain information that may put the Company at a competitive disadvantage to
its principal competitors.
• A cybersecurity breach involving digital consumer or employee personal data may adversely affect the
Company’s reputation, revenue and earnings. The Company and certain of its third-party vendors receive and store
digital personal information in connection with its human resources operations, financial services operations, the
Harley Owners Group and other aspects of its business. Any system failure, accident or security breach could result in
disruptions to the Company's operations. To the extent that any disruptions or security breach results in a loss or
damage to the Company's data, or in inappropriate disclosure of confidential information, it could cause significant