Cash America 2012 Annual Report Download - page 52

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uncertainties that are beyond the Company’s control, such as violence, social unrest, enforcement of property rights and
public safety and security, which could restrict or eliminate the Company’s ability to operate some or all of its locations
in Mexico or significantly reduce customer traffic or demand.
In addition, the Company offers consumer loans, either directly or through an independent third-party lender,
over the Internet to customers in Australia, Canada and the United Kingdom. The United Kingdom and Australia have
recently exhibited an increasing interest in considering legislation that could regulate or restrict the consumer loan
products the Company offers.
In Australia the Company acts as a finance broker, offering the lending products of unaffiliated third-party
lenders, which is similar to the Company’s credit services organization (“CSO”) programs in the United States. In
Australia, the Company follows the responsible lending guidelines under the National Consumer Credit Protection Act
(2010) (the “NCCPA”), which has been recently amended. Part of the amendment will become effective on March 1,
2013, and the remainder will become effective on July 1, 2013. The amendment includes limitations on permissible fees
charged on certain consumer loans, including consumer loans arranged by the Company. The Company is still assessing
the impact of this amendment on the product offered in Australia, but the Company expects that the product will be
modified as a result of this amendment, which could make the product less profitable or could eliminate the Company’s
ability to offer lending products in Australia. The Company may even need to exit Australia if the product cannot be
modified in a way that retains their profitability in that country.
In the United Kingdom, the Company must follow the Irresponsible Lending Guidance of the Office of Fair
Trading (the “OFT”) and the Consumer Credit Act of 1974 that was amended by the Consumer Credit Act of 2006
(collectively, the “CCA”), among other risks and regulations. In December 2012, the U.K. Parliament passed the
Financial Services Act of 2012 (the "Act"), certain provisions of which take effect on April 1, 2013 and April 1, 2014.
The Act makes changes to the CCA and the Financial Services and Markets Act of 2000 (the “FSMA”) and gives the
OFT the power to suspend consumer credit licenses with immediate effect or from a date specified. The Act also creates
the Financial Conduct Authority (the “FCA”), which will take over responsibility for regulating consumer credit from
the OFT in April 2014. The FCA may regulate consumer credit pursuant to the guidance of the FSMA, which includes
prescriptive regulations that currently govern the secured credit market and could possibly call for the repeal of the CCA
or for enabling legislation in the United Kingdom. Prescriptive regulations, as contrasted with principles-based
regulations that currently regulate the lending process in the United Kingdom, define what a lender may and may not do
with a specific product, similar to U.S. law. However, the U.K. coalition government has reserved the option to retain
the principles-based CCA provisions should it conclude that a regulatory model for unsecured consumer credit under the
FSMA and FCA cannot be delivered in an effective regulatory manner. During the period of transition of regulatory
responsibility over consumer credit from the OFT to the FCA, the OFT will continue to fully and rigorously regulate
consumer credit, including the short-term loan market. If prescriptive regulations are adopted, the Company’s
compliance costs will be significantly increased. Any of these changes could have a material adverse effect on the
Company’s business, prospects, results of operations and financial conditions and could impair its ability to continue
current operations in the United Kingdom.
In addition, in October 2011, the OFT issued debt collection guidance that was revised in November 2012. This
debt collection guidance allows consumer lenders such as the Company to debit a customer’s account, which includes
debits to both bank accounts and debit cards, in a “reasonable and non-excessive manner.” The Company has not
experienced a material adverse impact on its business as a result of this guidance. The OFT may, in the future, issue
additional guidance that could require further adjustments to the Company’s collections processes and could result in
lower collections on loans made by the Company and a decrease in the number of customers that it is able to approve.
In February 2012, the OFT also announced that it had launched a review of the payday lending sector in the
United Kingdom to assess the sector's compliance with the CCA, the OFT's Irresponsible Lending Guidelines and other
relevant guidance and legal obligations. The OFT has announced that these inspections could be used to assess a
licensee's fitness to hold a consumer credit license and could result in formal enforcement action where appropriate. The