Cash America 2009 Annual Report Download - page 39

11
Regulation
The Company’s operations are subject to extensive regulation, supervision and licensing under
various federal, state and local statutes, ordinances and regulations. (For a geographic breakdown of
operating locations, see “Item 2. Properties.”)
Recent Regulatory Developments.
Legislation permitting short-term unsecured cash advances, or payday lending, in Arizona is
scheduled to expire on July 1, 2010. While there is currently a bill that has been proposed in the Arizona
legislature that would extend this law, the legislature may not renew the legislation or could modify it in a
manner that would affect the Company’s short-term unsecured cash advance operations in that State. The
Company currently offers short-term unsecured cash advances over the internet and through its storefront
lending locations in Arizona.
The State of Washington recently passed legislation that became effective on January 1, 2010 that
sets a maximum loan amount for short-term unsecured cash advance loans that may be loaned to an individual
by all lenders in that state. The Company is still evaluating the effects of such legislation and expects that it
will reduce the volume of short-term unsecured cash advance loans in the State of Washington.
On July 26, 2008, the Pennsylvania Department of Banking issued a notice announcing a “change in
policy,” effective February 1, 2009. The notice concluded that out-of-state lenders such as the Company were
lending “in” Pennsylvania. Accordingly, the notice purported to subject such lenders to the licensing
requirements of the Pennsylvania Consumer Discount Company Act (the “CDCA”), which sets the maximum
permissible interest at a level well below the interest rate the Company charges on its internet cash advance
loans. On January 8, 2009, the Company brought suit against the Pennsylvania Department of Banking in the
Pennsylvania Commonwealth Court, arguing that the notice was invalid because it was adopted in violation of
applicable procedural requirements and because it conflicted with the plain language of the CDCA. As a part
of these proceedings, the Pennsylvania Department of Banking filed a counterclaim against the Company
seeking a declaratory judgment that the Company’s internet lending activities to Pennsylvania consumers is
not authorized by Pennsylvania law, however, the Pennsylvania Department of Banking represented that it
had “no intent to pursue a retroactive financial remedy” against the Company or any similarly situated lender
for loans made prior to the date of the ultimate decision in this case. On July 10, 2009, the Commonwealth
Court issued its decision in favor of the Pennsylvania Department of Banking, and in response thereto, the
Company filed an appeal of this decision and ceased originating new loans in Pennsylvania until a final
decision on this appeal has been rendered. If this decision is not overturned, the Company anticipates a
permanent discontinuation of its internet cash advance product in that state.
In May 2009, Minnesota adopted changes to its law governing short-term cash advances. The
changes to the law cover the Company’s internet cash advance product offered in Minnesota and became
effective on August 1, 2009. The revised law has caused a material reduction in the economics of the
Company’s internet offering in Minnesota, and, in anticipation of this change, the Company decreased the
number of cash advance loans extended to customers in Minnesota in the last half of 2008 and in 2009. The
Company has continued offering internet cash advances to qualified customers in that state and management
will be closely monitoring the economic viability of continuing to offer internet cash advances in Minnesota.
In June 2008, the Governor of Ohio signed into law legislation that capped the annual percentage rate,
as defined in the statute, for certain cash advance loans offered to consumers in that state at 28%, which
effectively eliminated the profitability of the existing short-term unsecured cash advance product in Ohio.
When this new law became effective in the fourth quarter of 2008, the Company's internet business and its
Ohio storefronts, including the remaining Ohio Cashland locations, began offering customers short-term
unsecured cash advance loans under the Ohio Second Mortgage Loan statute (“OMLA”), an alternate,