Cash America 2011 Annual Report Download - page 130

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
99
5. Consumer Loans, Credit Quality Information and Allowances and Liabilities for Estimated Losses on
Consumer Loans
Each consumer loan provides customers with cash, typically in exchange for a fee and an agreement to repay
the amount advanced. These transactions result in a receivable or a loan, owed to the Company or a third-party lender.
The Company’s consumer loan portfolio includes: short-term loans, which include single payment loans (that are
commonly referred to as payday loans) and line of credit products; longer-term multi-payment installment loans; and
credit services and participation interests in receivables acquired from a third-party lender through the MLOC channel
and generate revenue for the Company. Consumer loan fee revenue generated from the Company’s consumer loans,
CSO programs and related activities for the years ended December 31, 2011 and 2010 was as follows (dollars in
thousands):
 Year Ended December 31,
 2011 2010 2009
 
 Interest and fees on short-term loans $ 541,471 $ 451,232 $ 354,851
Interest and fees on installment loans 57,175 12,077 4,414
Interest and fees on MLOC(a) - 27,643 12,591
 Total consumer loan revenue $ 598,646 $ 490,952 $ 371,856
(a)a
a
The Company stopped providing MLOC services on behalf of a third-party lender in October 2010 when the lender discontinued
offering MLOC advances.
The Company monitors the performance of its portfolio of consumer loans and maintains either an allowance
or liability for estimated losses on consumer loans (including fees and interest) at a level estimated to be adequate to
absorb credit losses inherent in the portfolio. The allowance for losses on the Company’s owned consumer loans
reduces the outstanding loan balance in the consolidated balance sheets. In addition, the Company maintains a liability
for estimated losses related to loans guaranteed under CSO programs. The liability for estimated losses related to
guaranteed loans, which approximates the fair value of the liability, is included in “Accounts payable and accrued
expenses” on the consolidated balance sheets.
In determining the allowance or liability for estimated losses on consumer loans, the Company applies a
documented systematic methodology. Outstanding loans are divided into discrete groups of short-term loans,
installment loans and MLOC receivables and are analyzed as performing or nonperforming. Short-term consumer
loans and MLOC receivables are considered nonperforming as of the payment due date when payment of an amount
due has not been made as of that date (after allowing for normal payment processing time). An installment loan is
considered nonperforming if the customer does not make two consecutive payments.
Where permitted by law, a customer may choose to renew a performing short-term consumer loan before it is
considered nonperforming by agreeing to pay the current finance charge for the right to make payment of the
outstanding principal balance at a later date plus an additional finance charge. If a performing loan is renewed, the
renewal is considered a new loan. In some instances in the United Kingdom, customers agree to repay a new short-
term loan in two payments (which the Company also considers short-term loans), and in these cases the Company
considers the obligation to make the first payment as a new single-payment loan and the obligation to make the second
payment as a renewal of that loan because the customer pays a finance charge when each payment is made, similar to a
renewed loan. If a performing loan is renewed but the customer fails to pay that loan's current finance charge as of its
due date (after allowing for normal payment processing time), the loan that was renewed is reclassified as
nonperforming to the extent of that loan's unpaid finance charge.
The Company does not provide for any grace period when determining the performance status of a consumer
loan (other than allowing for normal payment processing time). Nonperforming loans may not be renewed, and if