Cash America 2008 Annual Report Download - page 35

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background check in connection with any disposition of handguns. In addition, the Company must comply
with the regulations of the U.S. Department of Justice–Bureau of Alcohol, Tobacco and Firearms that
require each pawnshop dealing in guns to maintain a permanent written record of all receipts and
dispositions of firearms.
Mexico law provides for administrative regulation of pawnshops such as the Prenda Fácil shops,
which are organized as Multiple Purpose Financial Entities (Sociedades Financieras de Objeto Múltiple or
“SOFOMS”). SOFOMS are subject to regulation by the National Commission for the Protection and
Defense of Financial Services Users (“CONDUSEF”). CONDUSEF regulates the form of pawn loan
contracts, consumer disclosures and certain operating procedures of SOFOMS with such regulations
pertaining primarily to adequate disclosure of the terms of borrowing. Neither CONDUSEF nor the federal
statute imposes interest rate caps on pawn loans. The pawn industry is subject to various regulations in the
areas of tax compliance, customs, consumer protection and employment matters, among others, by various
federal, state and local governmental agencies. Additionally, certain states have pawn statutes that require
pawnshops to be licensed and regulate certain aspects of a pawn operation such as rate, pawn tickets and
other terms of the pawn transaction. Generally, federal regulations are intended to control over the state
statutes with respect to the pawn operations of SOFOMS.
Cash Advance Regulations
The Company offers cash advance products in most of its U.S. pawnshops, in all of its cash advance
locations and over the internet. Each state in which the Company originates cash advance products,
including cash advances made online, has specific laws dealing with the conduct of this business. The same
regulations generally apply to cash advances made both in physical lending locations and online. These
laws and regulations typically restrict the amount of finance and service charges that may be assessed and
limit the customer’s ability to renew or extend these cash advances. In many instances, the regulations also
limit the aggregate amount that a provider may advance (and, in some cases, the number of cash advances
the provider may make) to any one customer at one time. Cash advance lenders typically must be licensed
by the state licensing authority in order to offer the cash advance product in that state. Some states require
cash advance lenders to report their customers’ cash advance activities to a state-wide database, and such
lenders are generally restricted from making cash advance loans to customers who may have a certain
amount of cash advances outstanding with other lenders. Failure to observe a state’s legal requirements for
cash advance lending could result, among other things, in a loss of cash advance licenses in that state, the
imposition of fines or customer refunds, and other civil and/or criminal penalties. The Company must also
comply with the various disclosure requirements under the Federal Truth in Lending Act (and Federal
Reserve Regulation Z under that Act) in connection with disclosing the interest, fees, total payments and
annual percentage rate related to each cash advance transaction. The cash advance business is also subject
to various laws, rules and guidelines relating to the procedures and disclosures needed for debiting a
debtor’s checking account for amounts due via an ACH transaction. Additionally the Company must
comply with the Federal Fair Debt Collection Practices Act and similar state collection practices laws with
respect to its collection activities related to cash advances. Furthermore, with respect to online cash
advances, the Company is subject to various state and federal e-signature rules mandating that certain
disclosures be made and certain steps be followed in order to obtain and authenticate e-signatures.
Additional federal regulations governing cash advance businesses are described in “Other Regulations
Affecting Lending Operations” below.
As of December 31, 2008, the Company made available cash advance products offered by third-
party lenders in 249 of its 734 locations. Certain states require that the Company be registered or licensed
under state law in order to perform the administrative services that it performs for the third-party lenders.
The Company began offering the CSO program in Texas, Michigan and Florida in July 2005. The
Company discontinued the CSO program in Michigan in February 2007 and in Florida in July 2008, and has
since offered only cash advances underwritten by the Company to customers in those states. In January of
2008, the Company began offering a CSO program in the state of Maryland through its online platform.