Cash America 2010 Annual Report Download - page 41

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Pawnshop Regulations
The Company’s pawn lending locations are regulated by the states and municipalities in which they are
located, and generally must be licensed by the state. The statutes and regulations applicable to pawn lending locations
vary from state to state and in each municipality. In general, these statutes and regulations establish licensing
requirements for pawnbrokers and pawn lending locations and regulate various aspects of the pawn loan, such as the
service charges and interest rates that a pawn lending location may charge, the maximum amount of a pawn loan, the
minimum and/or maximum term of a pawn loan, the content and format of the pawn ticket, and the length of time after
a loan default that a pawn lending location must hold a pawned item before disposing of it. Failure to observe a state’s
legal requirements for pawnbroking could result in, among other things, a loss of pawn licenses in that state, the
imposition of fines or refunds, and other civil and/or criminal penalties. Additional federal regulations governing pawn
operations are described in “Other Regulations Affecting Lending Operations” below.
Many of the Company’s pawn lending locations are also subject to municipal ordinances that may require, for
example, local licenses or permits and specified recordkeeping procedures, among other things. Most of the
Company’s pawn lending locations voluntarily, or pursuant to applicable laws, work with local law enforcement
agencies and other pawn lenders to determine conflicting claims of rightful ownership. Goods held to secure pawn
loans or goods purchased that are determined to belong to an owner other than the borrower or seller are subject to
recovery by the rightful owner. The Company historically has not experienced a material number of claims of this
nature, and the claims experienced have not had a material adverse effect on the Company’s results of operations.
Each pawn lending location that handles firearms must comply with the Brady Handgun Violence Prevention
Act (the “Brady Act”). The Brady Act requires that federally licensed firearms dealers conduct a 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 pawn lending location dealing in
guns to maintain a permanent written record of all receipts and dispositions of firearms.
During 2010, the Prenda Fácil storefront locations were 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. Effective January 1, 2011, the Prenda Fácil storefront locations are
no longer organized as SOFOMS, and those locations are now regulated by a federal consumer protection agency,
Procuraduría Federal del Consumidor (“PROFECO”). PROFECO regulates the form and terms of pawn loan contracts
and many operating standards and procedures for pawnshops, including retail operations. Neither PROFECO nor the
federal statute imposes interest rate caps on pawn loans. The pawn industry in Mexico is also 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.
Consumer Loan Regulations
The Company offers consumer loan products in most of its U.S. pawn lending locations, in all of its consumer
loan storefront locations and over the internet. Each state in which the Company originates consumer loan products,
including consumer loans made online, has specific laws dealing with the conduct of this business. The same
regulations generally apply to consumer loans 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 consumer loans. In many instances, the regulations also limit the aggregate amount
that a provider may advance (and, in some cases, the number of consumer loans the provider may make) to any one
customer at one time. Consumer loan lenders typically must be licensed by the state licensing authority in order to
offer the consumer loan product in that state. Some states require consumer loan lenders to report their customers’
consumer loan activities to a state-wide database, and such lenders are generally restricted from making consumer