Cash America 2009 Annual Report Download - page 41

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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. In addition, the Company could be subject to changes in regulations
governing its pawn lending business in Mexico as discussed under “Item 1A. Risk Factors—The Company’s
foreign operations are subject to political or regulatory changes or significant changes in the economic
environment and other concerns.”
Cash Advance Regulations
The Company offers cash advance products in most of its U.S. pawn lending locations, in all of its
cash advance storefront 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 storefront 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. Certain states require that the Company be
registered or licensed under state law in order to perform the administrative services that it performs for third-
party 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 uses the Federal Fair Debt Collection Practices Act (“FDCPA”)
as a guide to operating its collection activities and complies with all applicable state collection practices laws.
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.
Short-term consumer loans have come under increased regulatory scrutiny in recent years that has
resulted in increasingly restrictive regulations and legislation that makes offering such loans less profitable or
unattractive to the Company. See “Item 1A. Risk Factors—Risks Related to the Company’s Business and
Industry—Adverse changes in laws or regulations affecting the Company’s short-term consumer loan
services could negatively impact the Company’s operations” for a description of the regulations and
legislation faced by the Company. While the Company, along with other leaders of the cash advance
industry, opposes such overly restrictive regulation and legislation, it is possible that some combination of
federal and state regulation and legislation could be enacted that could restrict or eliminate the availability of
cash advance products in some or all of the states in which the Company offers the cash advance product.