Cash America 2013 Annual Report Download - page 50

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short-term, small dollar lenders, such as the Company, and ask questions about their business practices, and the
examination procedures include specific modules for examining marketing activities, loan application and origination
activities, payment processing activities and sustained use by consumers, collections, accounts in default, consumer
reporting and third-party relationships, as well as compliance programs. As a result of these examinations of non-bank
providers of consumer credit, the Company could be required to change its practices or procedures, whether as a result
of another party being examined or as a result of an examination of the Company, or could be subject to monetary
penalties, which could adversely affect the Company. On November 20, 2013, the Company consented to the issuance
of a Consent Order by the CFPB pursuant to which the Company agreed, without admitting or denying any of the facts
or conclusions made by the CFPB from its 2012 review of the Company, to pay a civil money penalty of $5 million and
to set aside $8 million for a period of 180 days to fund any further payments to eligible Ohio customers who make valid
claims in connection with the Company’s Ohio voluntary reimbursement program. In addition, as a result of the CFPB’s
review, the Company is in the process of enhancing its compliance management programs and implementing additional
procedures to address the issues identified by the CFPB. The Company is also required to provide periodic reports to the
CFPB. See “Item 1. Business—Recent Developments—Regulatory, Litigation and Other Developments—Consumer
Financial Protection Bureau” and “—Voluntary Reimbursements to Ohio Customers” for additional information
regarding the Ohio voluntary reimbursement program.
In addition to having the authority to obtain monetary penalties for violations of applicable federal consumer
financial laws (including the CFPB’s own rules), the CFPB can require remediation of practices, pursue administrative
proceedings or litigation and obtain cease and desist orders (which can include orders for restitution or rescission of
contracts, as well as other kinds of affirmative relief). Also, where a company has violated Title X of the Dodd-Frank
Act or CFPB regulations implemented under Title X of the Dodd-Frank Act, the Dodd-Frank Act empowers state
attorneys general and state regulators to bring civil actions to remedy violations of state law. If the CFPB or one or more
state attorneys general or state regulators believe that the Company has violated any of the applicable laws or
regulations, they could exercise their enforcement powers in ways that could have a material adverse effect on the
Company’s business, prospects, results of operations, financial condition and cash flows.
On April 24, 2013, the CFPB issued a report entitled “Payday Loans and Deposit Advance Products: A White
Paper of Initial Findings,” indicating that it had “engaged in an in-depth review of short-term small dollar loans,
including payday loans.” The report discusses the initial findings of the CFPB regarding short-term payday loans
provided by non-bank financial institutions at storefront locations and deposit account advances offered by depository
institutions. While the CFPB’s study stated that “these products may work for some consumers for whom an expense
needs to be deferred for a short period of time,” the CFPB also stated that its “findings raised substantial consumer
protection concerns” related to the sustained use of payday loans and deposit account advances. In the report and
subsequent statements, the CFPB reiterated that it has authority to adopt rules identifying acts or practices as unfair,
deceptive or abusive, and hence unlawful, in connection with the offering of consumer financial products and services
and to act to prevent providers from engaging in such acts or practices. The CFPB announced that, based on the potential
consumer harm and the data that it had gathered, further attention was warranted to protect consumers and that it expects
to use its authorities to provide protections to consumers. The report indicated the CFPB plans to analyze the
effectiveness of limitations, such as cooling-off periods between payday loans, “in curbing sustained use and other
harms.” Additionally, the CFPB indicated that the report did not focus on online lending and that the CFPB is analyzing
borrowing activity by consumers using online payday loans. The Company does not currently know the nature and
extent of the rules that the CFPB will adopt, and the CFPB’s 2014 agenda indicates that its target date for proposing
such rules is March 2014, although it could act earlier or later than that date. If the CFPB adopts any rules or regulations
that significantly restrict the conduct of the Company’s consumer loan business, any such rules or regulations could have
a material adverse effect on the Company’s business, prospects, results of operations, financial condition and cash flows
or could make the continuance of all or part of the Company’s U.S. consumer loan business impractical or unprofitable.
Any new rules or regulations adopted by the CFPB could also result in significant compliance costs.
The United Kingdom has recently increased regulation of the consumer loan industry as well as demonstrated an
increasing interest in considering legislation or regulations that could further regulate or restrict the consumer loan
products the Company offers.
In the United Kingdom, the Company must comply with the European Union Consumer Credit Directive, 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 rules and regulations. In