Cash America 2009 Annual Report Download - page 32

4
Cash Advance Segment
Cash Advance Activities. The Company offers cash advance products through its cash advance
storefront locations, through its internet channel and through many of its pawn lending locations. The
Company also purchases a participation interest in a third-party bank’s line of credit cash advances through its
card services business. In addition, the Company arranges for customers to obtain cash advances from
independent third-party lenders through the CSO program (as described below) in other locations. The
Company’s short-term cash advance products are generally offered as single payment cash advance loans.
These loans generally have a loan term of seven to 45 days and are generally payable on the customer’s next
payday. The Company also offers an internet longer-term installment loan product that typically has an
average term of four months.
The Company began offering cash advances over the internet in the United States under the name
“CashNetUSA” when it acquired CashNetUSA in 2006. (See “Item 8. Financial Statements and
Supplementary Data—Note 3” for further discussion related to the CashNetUSA acquisition.) The Company
further expanded its internet business internationally when it began offering its short-term cash advance
product online to customers in the United Kingdom in 2007 and Canada in 2009 under the names
“QuickQuid” and “DollarsDirect,” respectively. In addition, in 2009 the Company also began offering short-
term cash advances online through an independent third-party lender in Australia under the name
“DollarsDirect.”
Cash advances provide customers with cash in exchange for a promissory note or other repayment
agreement supported, in most cases, by that customer’s personal check or authorization to debit the
customer’s account via an Automated Clearing House (“ACH”) transaction for the amount due. The
customer may repay the cash advance in cash or by allowing the check to be presented for collection by
manual deposit or an electronic debit ACH for the amount due. Collection activities are an important aspect
of the cash advance product offering due to the high incidence of unpaid balances beyond stated terms. The
Company operates centralized collection centers to coordinate a consistent approach to customer service and
collections.
Although cash advance transactions may take the form of loans or deferred check deposit
transactions, this report refers to cash advances originated both by the Company and by third-party lenders
under the CSO program and the Processing Program (as described below) as “cash advances” for
convenience. Cash advance fees earned by the Company contributed approximately 33.2% of the Company’s
total revenue in 2009, 35.4% in 2008 and 38.2% in 2007. The Company generally experiences seasonal
growth in cash advance fees during the second, third and fourth quarters of each year due to loan balance
growth that typically occurs after the heavy repayment period of cash advance loans with tax refund proceeds
received by customers in the first quarter each year.
Customers generally use cash advances to satisfy short term needs for cash. In certain circumstances,
the customer may elect an extended repayment program which provides for a schedule of periodic payments
which typically range from 28 days to 180 days (subject to state guidelines) with no additional fees or charges
on the loan amount. In addition, unpaid past due cash advance balances do not accrue additional fees or
charges like a traditional bank loan, but may be assessed a limited number of fees for insufficient funds. Both
of these customer benefits, which effectively extend the term of the credit granted to the customer, will
materially reduce the Company’s yield on these loans.
The Company provides a cash advance product in some markets by acting as a credit services
organization on behalf of consumers in accordance with applicable state laws (the “CSO program”). Under
the CSO program, the Company provides consumers with certain credit services, such as arranging loans with
independent third-party lenders, assisting in the preparation of loan applications and loan documents and
accepting loan payments. The Company also guarantees the customer’s payment obligations in the event of