Cash America 2010 Annual Report Download - page 56

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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 online consumer 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 are 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 decision by the
Commonwealth Court. On July 10, 2009, the Commonwealth Court issued a decision in favor of the Pennsylvania
Department of Banking. As a result of the Commonwealth Court’s initial decision, the Company ceased offering
consumer loans in Pennsylvania in July 2009. On July 15, 2009, the Company filed an appeal of this decision with the
Pennsylvania Supreme Court, and on October 19, 2010, the Pennsylvania Supreme Court upheld the Commonwealth
Court’s decision in favor of the Pennsylvania Department of Banking.
On March 5, 2009, Peter Alfeche filed a purported class action lawsuit in the United States District Court for
the Eastern District of Pennsylvania against Cash America International, Inc., Cash America Net of Nevada, LLC
(“CashNet Nevada”), Cash America Net of Pennsylvania, LLC and Cash America of PA, LLC, d/b/a
CashNetUSA.com (collectively, “CashNetUSA”). The lawsuit alleges, among other things, that CashNetUSA’s online
consumer loan activities in Pennsylvania were illegal and not in accordance with the Pennsylvania Loan Interest
Protection Law or the licensing requirements of the CDCA. The lawsuit also seeks declaratory judgment that several
of CashNetUSA’s contractual provisions, including choice of law and arbitration provisions, are not authorized by
Pennsylvania law. The complaint seeks unspecified compensatory damages, attorney’s fees and the trebling of any
compensatory damages. CashNetUSA filed a motion to enforce the arbitration provision located in the agreements
governing the lending activities, and the Court has not yet ruled on this motion. The Alfeche litigation is still at an
early stage, and neither the likelihood of an unfavorable outcome nor the ultimate liability, if any, with respect to this
litigation can be determined at this time. CashNetUSA believes that the Plaintiffs’ claims in this suit are without merit
and will vigorously defend this lawsuit.
On April 21, 2009, Yulon Clerk filed a purported class action lawsuit in the Court of Common Pleas of
Philadelphia County, Pennsylvania, against CashNet Nevada and several other unrelated third-party lenders. The
lawsuit alleges, among other things, that the defendants’ lending activities in Pennsylvania, including CashNet
Nevada’s online consumer loan lending activities in Pennsylvania, were illegal and in violation of various
Pennsylvania laws, including the Loan Interest Protection Law, the CDCA and the Unfair Trade Practices and
Consumer Protection Laws. The complaint seeks payment of potential fines, unspecified damages, attorney’s fees and
the trebling of certain damages. The defendants removed the case to the United States District Court for the Eastern
District of Pennsylvania where the lawsuit now resides. The case was subsequently reassigned to the same judge
presiding in the Alfeche litigation. In August 2009, the Court severed the claims against the other defendants
originally named in the litigation. CashNet Nevada filed a motion with the federal court to enforce the arbitration
provision located in the agreements governing the lending activities, and the Court has not yet ruled on this motion.
The Clerk litigation is still at an early stage, and neither the likelihood of an unfavorable outcome nor the ultimate
liability, if any, with respect to this litigation can be determined at this time. CashNet Nevada believes that the
Plaintiffs’ claims in this suit are without merit and will vigorously defend this lawsuit.
The Company is also a defendant in certain routine litigation matters encountered in the ordinary course of its
business. Certain of these matters are covered to an extent by insurance. In the opinion of management, the resolution
of these matters will not have a material adverse effect on the Company’s financial position, results of operations or
liquidity.