Cash America 2013 Annual Report Download - page 68

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On December 3, 2012, the Ohio Ninth District Court of Appeals affirmed the Municipal Court’s ruling in a 2-1
decision. Although this court decision is only legally binding in the Ninth District of Ohio, which includes four counties
in northern Ohio where Cashland operates seven stores and where the Company has modified its short-term loan product
in response to this decision, other Ohio courts may consider this decision.
The Supreme Court of Ohio heard the Company’s appeal of the Ninth District Court’s decision in December
2013, and a decision is expected during the first half of 2014. If the Ninth District Court’s decision is upheld by the Ohio
Supreme Court on appeal, the Company’s Ohio operations may be adversely affected. The Company relies on the
OMLA to make short-term loans in its retail services locations in Ohio, and if the Company is unable to continue
making short-term loans under this law, it will alter its short-term loan product in Ohio. In addition, following the ruling
by the Ninth District Court, four lawsuits were filed against the Company by customers in Ohio, three of which are
purported class action complaints, alleging that the Company improperly made loans under the OMLA, and the
Company may in the future receive other claims. Each of these four lawsuits has been stayed pending the outcome of the
Supreme Court of Ohio’s decision. The Company is currently unable to estimate a range of reasonably possible losses in
connection with these lawsuits, as defined by ASC 450-20-20, Contingencies—Loss Contingencies—Glossary, for these
litigation matters. The Company believes that the Plaintiffs’ claims in these suits are without merit and will vigorously
defend these lawsuits.
The Company is also a defendant in certain routine litigation matters encountered in the ordinary course of its
business. Certain of these matters are covered to an extent by insurance. In the opinion of management, the resolution of
these matters is not expected to have a material adverse effect on the Company’s financial position, results of operations
or liquidity.
Consumer Financial Protection Bureau
On November 20, 2013, the Company consented to the issuance of a Consent Order by the Consumer Financial
Protection Bureau (the “CFPB”) pursuant to which it 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 $5.0 million,
which is non-deductible for tax purposes. The Company also agreed to set aside $8.0 million of cash 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
voluntary program that was announced in December 2012 to fully reimburse approximately 14,000 Ohio customers for
all funds collected, plus interest accrued from the date collected, in connection with legal collections proceedings
initiated by the Company in Ohio from January 1, 2008 through December 4, 2012 (the “Ohio Reimbursement
Program”). The decision to make voluntary reimbursements in connection with the Ohio Reimbursement Program was
made by the Company in 2012 because the Company determined that a small number of employees did not prepare
certain court documents in many of its Ohio legal collections proceedings in accordance with court rules. As of
December 31, 2013, the Company had refunded approximately $6.4 million in connection with this program.
The Consent Order relates to issues self-disclosed to the CFPB during its 2012 examination of the Company,
including the improper preparation of certain court documents in connection with collections lawsuits initiated by the
Company in Ohio, which were previously disclosed by the Company and for which the Company implemented the Ohio
Reimbursement Program; the making of a limited number of loans to consumers who may have been members of the
military at the time of the loan at rates in excess of the military annual percentage rate permitted by the federal Military
Lending Act due in part to system errors, and for which the Company has made refunds of approximately $33,500; and
for certain failures to timely provide and preserve records and information in connection with the CFPB’s examination
of the Company. 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. For further discussion of the CFPB see
“Item 1A. Risk Factors—Risks Related to the Company’s Business and Industry—The Consumer Financial Protection
Bureau could have a significant impact on the Company’s U.S. consumer loan business.”