Cash America 2014 Annual Report Download - page 129

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
114
Litigation
2013 Litigation Settlement
On August 6, 2004, James E. Strong filed a purported class action lawsuit in the State Court of Cobb
County, Georgia against Georgia Cash America, Inc., Cash America International, Inc. (referred to together with
Georgia Cash America, Inc., as Cash America), Daniel R. Feehan (the Company’s chief executive officer), and
several unnamed officers, directors, owners and “stakeholders” of Cash America. In August 2006, James H. Greene
and Mennie Johnson were permitted to join the lawsuit as named plaintiffs, and in June 2009, the court agreed to the
removal of James E. Strong as a named plaintiff. The lawsuit alleged many different causes of action, among the
most significant of which is that Cash America made illegal short-term loans in Georgia in violation of Georgia’s
usury law, the Georgia Industrial Loan Act and Georgia’s Racketeer Influenced and Corrupt Organizations Act. First
National Bank of Brookings, South Dakota and Community State Bank of Milbank, South Dakota for some time
made loans to Georgia residents through Cash America’s Georgia operating locations. The complaint in this lawsuit
claims that Cash America was the true lender with respect to the loans made to Georgia borrowers and that First
National Bank of Brookings, South Dakota and Community State Bank of Milbank, South Dakota’s involvement in
the process is “a mere subterfuge.” Based on this claim, the suit alleged that Cash America was the “de facto” lender
and was illegally operating in Georgia. The complaint sought unspecified compensatory damages, attorney’s fees,
punitive damages and the trebling of any compensatory damages. In November 2009 the case was certified as a
class action lawsuit.
This case was scheduled to go to trial in November 2013, but on October 9, 2013, the parties agreed to a
settlement that was approved by the trial court on January 16, 2014. In accordance with ASC 450, the Company
recognized a liability in 2013 in the amount of $18.0 million. The liability was recorded in “Accounts payable and
accrued liabilities” in the consolidated balance sheets and “Operations and administration expense” in the
consolidated statements of income for the year ended December 31, 2013. In February 2014, the amount to be paid
in connection with the settlement was substantially finalized, and the amount was not materially different than the
liability accrued by the Company at December 31, 2013. The final payments in connection with the settlement were
paid during the first six months of 2014. The Company denies all of the material allegations of the lawsuit and
denies any and all liability or wrongdoing in connection with the conduct described in the lawsuit, but the Company
agreed to the settlement to eliminate the uncertainty, distraction, burden and expense of further litigation.
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 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 ($2.5 million was allocated to each of the
Company’s retail services and e-commerce segments that existed at the time), referred to as the Regulatory Penalty,
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 any remaining eligible Ohio customers in connection with the Ohio
Reimbursement Program.
The $8.0 million of cash set aside was classified as restricted cash on the Company’s consolidated balance
sheets beginning in November 2013. In June 2014, following the expiration of the 180-day extended claims period,
the Company released $7.9 million of restricted cash. As of December 31, 2014, the remaining balance in restricted
cash was approximately $60 thousand, reflecting the amount of refunds that were still outstanding as of that date.