Cash America 2013 Annual Report Download - page 139

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
114
Pawn Loans and Pawn Loan Fees and Service Charges Receivable
Pawn loans are short-term loans made on the pledge of tangible personal property. The maximum pawn loan
amount is generally assessed as a percentage of the personal property’s estimated disposition value. The typical loan
term is generally 30 to 90 days and, in many cases, an additional grace period (typically 10 to 60 days) may be
available to the borrower. A pawn loan is considered delinquent if the customer does not repay or, where allowed by
law, renew or extend the loan on or prior to its contractual maturity date plus any applicable grace period. Pawn loan
fees and service charges do not accrue on delinquent pawn loans. When a pawn loan is considered delinquent, any
accrued pawn loan fees and service charges are reversed and no additional pawn loan fees and service charges are
accrued. Pawn loans written during each calendar month are aggregated and tracked for performance. This empirical
data allows the Company to analyze the characteristics of its outstanding pawn loan portfolio and assess the
collectability of the principal balance in addition to pawn loan fees and service charges.
Consumer Loans and Allowance and Liability for Estimated Losses on Consumer Loans
Revenue Recognition
The Company recognizes consumer loan fees based on the loan products it offers. “Consumer loan fees” in the
consolidated statements of income include: interest income, finance charges, fees for services provided through the
CSO programs (“CSO fees”), service charges, draw fees, minimum fees, late fees, nonsufficient funds fees and any
other fees or charges permitted by applicable laws and pursuant to the agreement with the borrower. For short-term
loans that the Company writes, interest and finance charges are recognized on an effective yield basis over the term of
the loan, and fees are recognized when assessed to the customer. For line of credit accounts, interest is recognized
during the period based upon the balance outstanding and the contractual interest rate, and fees are recognized when
assessed to the customer. For installment loans, revenue is recognized on an effective yield basis over the term of the
loan and fees are recognized when assessed to the customer. CSO fees are recognized on an effective yield basis over
the term of the loan. Unpaid and accrued interest and fees are included in “Consumer loans, net” in the consolidated
balance sheets.
Current and Delinquent Consumer Loans
The Company classifies its consumer loans as either current or delinquent. Short-term loans are considered
delinquent when payment of an amount due is not made as of the due date. If a line of credit account or installment
loan customer misses one payment, that payment is considered delinquent. If a line of credit account or installment
loan customer does not make two consecutive payments, the entire account or loan is classified as delinquent. The
Company allows for normal payment processing time before considering a loan delinquent but does not provide for
any additional grace period.
The Company generally does not accrue interest on delinquent consumer loans and does not resume accrual of
interest on a delinquent loan unless it is returned to current status. In addition, delinquent consumer loans generally
may not be renewed, and if, during its attempt to collect on a delinquent consumer loan, the Company allows
additional time for payment through a payment plan or a promise to pay, it is still considered delinquent. All payments
received are first applied against accrued but unpaid interest and fees and then against the principal balance of the loan.
Allowance and Liability for Estimated Losses on Consumer Loans
The Company monitors the performance of its consumer loan portfolio 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. The liability for estimated losses related to
loans guaranteed under the CSO programs is initially recorded at fair value and is included in “Accounts payable and
accrued expenses” in the consolidated balance sheets.