Cash America 2014 Annual Report Download - page 36

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the Company’s consumer loan products. A sustained strengthening in the economy could also reduce demand for
the Company’s pawn and consumer loans. As the Company’s customer base has more available disposable income,
the demand for pawn loans and consumer loans could decrease. For example, gas prices have recently significantly
decreased, and the Company believes that such decreases cause its customers to have more available disposable
income. A sustained decrease in gas prices could result in a sustained decrease in demand for the Company’s pawn
and consumer loans. Any of these events could result in a loss of revenue and could have a Material Adverse Effect.
A significant portion of the Company’s pawn loans are secured by gold collateral, and a significant and
sustained decline in gold prices could result in decreases in the value of collateral securing outstanding pawn
loans, in the balance of pawn loans secured by gold jewelry, in inventory valuations, and in commercial
merchandise sales.
A significant portion, or 62.9% as of December 31, 2014, of the Company’s pawn loans are secured by gold
jewelry, and the Company also sells forfeited gold jewelry through either retail or commercial sales. The
Company’s pawn service charges, sales proceeds and ability to dispose of jewelry inventory through retail or
commercial sales at an acceptable margin depend on the value of gold. In recent years, there has been an increased
volatility in the price of gold, and gold prices have declined meaningfully since 2012. This decrease significantly
reduced the proceeds and gross profit from the disposition of gold through commercial sales, and, as a result, during
2013 and 2014, the Company shifted its strategy to place a greater emphasis on retail disposition of merchandise
and now relies less on the disposition of commercial merchandise due to the prevailing lower market price for gold.
An additional significant and sustained decline in gold prices could result in decreases in the value of collateral
securing outstanding pawn loans, in the balance of pawn loans secured by gold jewelry, in inventory valuations, and
in commercial merchandise sales and could have a Material Adverse Effect.
Negative public perception of the Company’s business and its business practices could cause demand for the
Company’s products to significantly decrease.
In recent years, consumer advocacy groups and some media reports have advocated governmental action to
prohibit or place severe restrictions on consumer loans. The fees and/or interest charged by the Company for
consumer loans and others in the industry attract media publicity about the industry and can be perceived as
controversial because the focus is typically on the Annual Percentage Rate charged to a consumer for these types of
loans, which is compared unfavorably to the interest typically charged by banks to consumers with top-tier credit
histories. If the negative characterization of the types of loans that the Company offers becomes increasingly
accepted by consumers, demand for any or all of the Company’s loan products could significantly decrease, which
could have a Material Adverse Effect. Additionally, if the negative characterization of these types of loans is
accepted by legislators and regulators, even if such negative perceptions are inaccurate, attributable to conduct by
third parties not affiliated with the Company (such as other industry members), or attributable to matters not specific
to the industry, the Company could become subject to more restrictive laws and regulations applicable to the
consumer loan products offered by the Company that could impair the Company’s ability to offer consumer loans.
In addition, the Company’s ability to attract and retain customers is highly dependent upon the external
perceptions of its business, including its level of service, trustworthiness, business practices, financial condition and
other subjective qualities. Negative perceptions or publicity regarding these or other similar matters-even if related
to seemingly isolated incidents or to practices not specific to pawn loans or consumer loans, such as debt collection-
could erode trust and confidence and damage the Company’s reputation among existing and potential customers,
which could make it difficult for the Company to attract new customers and retain existing customers and could
significantly decrease the demand for the Company’s product, any of which could have a Material Adverse Effect.