Cash America 2014 Annual Report Download - page 101

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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
86
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 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—Consumer Loans
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, CSO fees, service charges,
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, interest and finance charges are recognized on an
effective yield basis over the term of the loan, and fees (other than CSO 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
(other than CSO fees) are recognized when assessed to the customer. Unpaid and accrued interest and fees are
included in “Consumer loans, net” in the consolidated balance sheets. CSO fees are recognized on an effective yield
basis over the term of the loan.
The Company receives CSO fees for services provided through the CSO programs. Through the Company’s
CSO programs, the Company provides services related to a third-party lender’s consumer loan products in some
markets by acting as a credit services organization or credit access business on behalf of consumers in accordance
with applicable state laws. Services offered under the CSO programs include credit-related services such as
arranging CSO loans with third-party lenders. Under the CSO programs, the Company guarantees consumer loan
payment obligations to the third-party lender in the event that the customer defaults on the loan. CSO loans are not
included in the Company’s financial statements, but the Company has established a liability for the estimated losses
in support of the guarantee on these loans in its 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. Installment loans are considered
delinquent when a customer misses two payments. 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.