MoneyGram 2010 Annual Report Download - page 18

Table of Contents
Larger agents and billers in our Global Funds Transfer segment are increasingly demanding financial concessions and more information
technology customization. The development, equipment and capital necessary to meet these demands could require substantial
expenditures and there can be no assurance that we will have the available capital after paying dividends to the Investors and servicing
our debt, or that we will be allowed to make such expenditures under the terms of our debt agreements. If we are unable to meet these
demands, we could lose customers and our business, financial condition and results of operations would be adversely affected.
A substantial portion of our transaction volume is generated by a limited number of key agents. During 2010 and 2009, our 10 largest
agents accounted for 51 percent and 48 percent, respectively, of our total company fee and investment revenue and 55 percent and
53 percent, respectively, of the fee and investment revenue of our Global Funds Transfer segment. In 2010 and 2009, our largest agent,
Walmart, accounted for 30 percent and 29 percent, respectively, of our total company fee and investment revenue and 33 percent and
32 percent, respectively, of the fee and investment revenue of our Global Funds Transfer segment. The term of our agreement with
Walmart runs through January 2013. If any of our key agents do not renew their contracts with us, or if such agents reduce the number of
their locations, or cease doing business, we might not be able to replace the volume of business conducted through these agents, and our
business, financial condition and results of operations would be adversely affected.
Litigation or investigations involving MoneyGram or our agents, which could result in material settlements, fines or penalties, may
adversely affect our business, financial condition and results of operations.
We have been, and in the future may be, subject to allegations and complaints that individuals or entities have used our money transfer
services for fraud-induced money transfers which may result in fines, settlements and litigation expenses. We also are the subject from
time to time of litigation related to our business. The outcome of such allegations, complaints, claims and litigation cannot always be
predicted, although we vigorously defend against them.
Regulatory and judicial proceedings and potential adverse developments in connection with ongoing litigation may adversely affect our
business, financial condition and results of operations. There may also be adverse publicity associated with lawsuits and investigations
that could decrease agent and customer acceptance of our services. Additionally, our business has been in the past, and may be in the
future, the subject of class action lawsuits, regulatory actions and investigations and other general litigation. The outcome of class action
lawsuits, regulatory actions and investigations is difficult to assess or quantify. Plaintiffs or regulatory agencies in these lawsuits, actions
or investigations may seek recovery of very large or indeterminate amounts, and the magnitude of these actions may remain unknown for
substantial periods of time. The cost to defend or settle future lawsuits or investigations may be significant.
We have been served with subpoenas to produce documents and testify before the Grand Jury in the Middle District of Pennsylvania with
regard to our U.S. and Canadian agents, as well as certain transactions involving such agents, fraud complaint data, and our consumer
anti-fraud program. In addition, we have received civil investigative demands from a working group of nine state attorney generals who
have initiated an investigation into whether the Company has taken adequate steps to prevent consumer fraud. The Company continues to
cooperate fully with these investigations, but is unable to predict the outcome or the possible loss, or range of loss, if any, associated with
the resolution of these matters.
We face credit risks from our retail agents and official check financial institution customers.
The vast majority of our Global Funds Transfer segment is conducted through independent agents that provide our products and services
to consumers at their business locations. Our agents receive the proceeds from the sale of our payment instruments and money transfers
and we must then collect these funds from the agents. If an agent becomes insolvent, files for bankruptcy, commits fraud or otherwise
fails to remit money order or money transfer proceeds to us, we must nonetheless pay the money order or complete the money transfer on
behalf of the consumer. Moreover, we have made, and may make in the future, secured or unsecured loans to retail agents under limited
circumstances or allow agents to retain our funds for a period of time before remitting them to us. As of December 31, 2010, we had
credit exposure to our agents of approximately $594.0 million in the aggregate spread across over 15,000 agents, of which three owed us
in excess of $15.0 million.
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