Cash America 2008 Annual Report Download - page 105

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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to be acquired by the Company as a result of its guaranty obligations. The estimated amounts of losses on
portfolios owned by the third-party lenders are included in “Accounts payable and accrued expenses” in the
consolidated balance sheets.
In connection with the Company’s card services business, the Company provides marketing and
loan processing services for a third-party bank issued line of credit made available by the bank on certain
stored-value debit cards the bank issues (“Processing Program”). The Company also acquires a
participation interest in the receivables generated by the bank in connection with the Processing Program.
The Company classifies revenue from its participation interest in the receivables generated by the third-
party lending bank, as well as marketing, processing and other miscellaneous fee income generated from its
card services business as cash advance fees.
Losses on cash advances in which the Company has a participation interest that prove uncollectible
are the responsibility of the Company. Since the Company may not be successful in the collection of these
accounts, the Company’s cash advance loss provision includes amounts estimated to be adequate to absorb
credit losses from these cash advances.
During the second quarter, the Company announced the potential closure of up to 139 cash advance
locations in Ohio due to legislation adopted by the Ohio legislature in May 2008 that made changes to the
statutes governing the Ohio cash advance product. In June 2008, the Governor of Ohio signed the new
legislation into law. This new law capped the annual percentage rate, as defined in the statute (“APR”), on
payday loans in Ohio at 28%, which significantly reduced the revenue and profitability of that product in
Ohio, effectively eliminating the Company’s ability to offer that particular product in Ohio. Upon the new
law becoming effective in the fourth quarter of 2008, the Company's online business and its Ohio
storefronts, including the remaining Ohio Cashland locations, began offering customers short-term
unsecured loans governed by the Ohio Second Mortgage Loan statute, and most of the remaining Ohio
Cashland locations also began offering gold buying services. Also, in the fourth quarter of 2008, 24 of
Cashland’s Ohio locations were combined or closed.
The Company discontinued offering single payment third-party bank-originated cash advances to its
Texas, Florida and North Carolina customers in January 2006, discontinued offering single and multi-
payment third-party bank-originated cash advances to its Georgia customers in April 2006, and discontinued
offering multi-payment third-party bank-originated cash advances to its California customers in July 2006.
Cash advances outstanding at December 31, 2008 and 2007, were as follows (in thousands):
December 31,
2008 2007
Funded by the Company:
Active cash advances and fees receivable .................................................... $ 69,443 $ 76,620
Cash advances and fees in collection ................................................................... 21,147 24,099
Total Funded by the Company ................................................................... 90,590 100,719
Purchased by the Company from third-party lenders............................................... 14,755 13,105
Company-owned cash advances and fees receivable, gross ............................ 105,345 113,824
Less: Allowance for losses.................................................................................. 21,495 25,676
Cash advances and fees receivable, net................................................................... $ 83,850 $ 88,148
Changes in the allowance for losses for the Company-owned portfolio and the accrued loss for
third-party lender-owned portfolios for the years ended December 31, 2008, 2007 and 2006 were as follows
(in thousands):