Cash America 2012 Annual Report Download - page 34

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quarter holiday seasons. Gross proceeds from merchandise disposition activities contributed approximately 39.1% of the
Company’s total revenue in 2012, 43.5% in 2011 and 44.0% in 2010.
The Company offers customers a 30-day satisfaction guarantee, whereby the customer can return merchandise
and receive a full refund, a replacement item of comparable value or store credit. The Company provides an allowance
for returns and valuation based on management’s evaluation of the characteristics of the merchandise. Customers may
purchase merchandise on a layaway plan under which the customer agrees to pay the purchase price for the item plus a
layaway fee, makes an initial cash deposit representing a small portion of the disposition price and pays the balance in
regularly scheduled, non-interest bearing payments. The Company segregates the layaway item and holds it until the
customer has paid the full disposition price. If the customer fails to make a required payment, the item is returned to
merchandise held for disposition. The layaway fee is recognized as revenue, and any amounts previously paid toward
the item are returned to the customer as store credit.
Consumer Loan Activities
In addition to pawn loans, the Company’s retail services segment also offers consumer loans in many of its retail
services locations in the United States, including short-term loans, unsecured installment loans and secured auto equity
loans. The Company’s e-commerce segment offers consumer loans over the Internet. The Company began offering
short-term loans over the Internet in the United States under the name “CashNetUSA” when that company was acquired
in 2006. Since then, the Company expanded its online product offerings into the United Kingdom, Australia and Canada.
The Company’s e-commerce segment began offering longer-term unsecured installment loans over the internet to
customers in the United States and United Kingdom in 2008 and 2010, respectively, and a secured auto equity product in
the United States in 2012. The Company also began offering line of credit products over the internet in the United States
in 2010. Additionally, the Company began offering a line of credit product in Mexico, which is similar to the MLOC
product for which the Company previously provided services, in 2012.
The Company also provided MLOC services in the United States from 2008 through 2010, whereby advances
were processed on behalf of, and participation interests in MLOC receivables were purchased from, a third-party lender.
The Company’s MLOC services generated earnings through loan processing services as well as from fees generated
from the participation interests it acquired in MLOC advances made to the third-party lender's customers. The Company
stopped providing MLOC services on behalf of the third-party lender in October 2010 when the third-party lender
discontinued offering MLOC advances.
Consumer loans offered by the Company are unsecured loans, with the exception of auto equity loans, which are
secured by the customer’s vehicle. Consumer loan fees include revenue from the loan portfolio owned by the Company
and fees paid to the Company for arranging, guaranteeing and processing loans from independent third-party lenders for
customers through the CSO programs. Due to the credit risk and high transaction costs of serving the Company’s
customer segment, the fees the Company charges are generally considered to be higher than the fees charged to
customers with top-tier credit histories by commercial banks and similar lenders who are typically unwilling to make
unsecured loans to alternative credit customers. Consumer loan fees earned by the Company contributed approximately
43.4% of the Company’s total revenue in 2012, 37.8% in 2011 and 36.7% in 2010.
The Company offers short-term loans in the United States, the United Kingdom, Australia and Canada. Short-
term loans generally have a loan term of seven to 45 days and are usually payable on the customer’s next payday, unless
the loan is renewed or extended in accordance with applicable laws. The fees the Company charges on short-term loans
in the United States vary by jurisdiction but typically range between $10 to $25 per $100 borrowed, and the fees the
Company charges on short-term loans in the foreign markets in which the Company operates also vary but typically
range between 20 and 29.50 per 100 borrowed in their respective currencies.
The Company offers line of credit accounts in several U.S. states, which allow customers to draw on the line of
credit in increments of their choosing, up to their credit limit. Customers may pay off their account balance in full at any