Cash America 2014 Annual Report Download - page 39

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Consumer loans have come under increased regulatory scrutiny that has resulted in increasingly restrictive
regulations and legislation and may in the future result in additional regulations and legislation that makes
offering such loans in certain states where the Company operates less profitable or unattractive to the Company.
In recent years, consumer loans, which are also commonly referred to as “payday loans” and includes
certain of the Company’s consumer loan products and comprised 8.9% of the Company’s total revenue as of
December 31, 2014, have come under increased regulatory scrutiny that has resulted in increasingly restrictive
regulations and legislation that makes offering such loans in certain states where the Company operates less
profitable or unattractive to the Company. For example, during 2013, the Company closed 36 retail services
locations in Texas in connection with the Texas Consumer Loan Store Closures, mainly as a result of restrictive city
ordinances that have been passed since 2011 that had the effect of reducing the profitability and the volume of short-
term consumer loans. The Company closely monitors proposed legislation being discussed in the states where it
offers consumer loans and is currently monitoring proposed legislation in Texas, Missouri and Tennessee.
Additional legislative or regulatory initiatives that are similar to or broader those that have already been adopted
could be enacted that could severely restrict, prohibit or eliminate the Company’s ability to offer its consumer loan
product. Any of these or other legislative or regulatory actions that affect the Company’s consumer loan business at
the national, state and local level could, if enacted or interpreted differently, could have a Material Adverse Effect.
See “The adoption of new laws or regulations or adverse changes in, or the interpretation or enforcement of,
existing laws or regulations affecting the Companyʼs products and services could have a Material Adverse Effect”
for additional information regarding potential rules or regulations that could affect the Company’s consumer loan
business.
Judicial decisions, CFPB rule-making or amendments to the Federal Arbitration Act could render the arbitration
agreements the Company uses illegal or unenforceable.
The Company includes arbitration provisions in its consumer loan agreements. These provisions are
designed to allow the Company to resolve any customer disputes through individual arbitration rather than in court
and explicitly provide that all arbitrations will be conducted on an individual and not on a class basis. Thus, the
Company’s arbitration agreements, if enforced, have the effect of shielding the Company from class action liability.
The Company’s arbitration agreements do not generally have any impact on regulatory enforcement proceedings.
The Company takes the position that the arbitration provisions in its consumer loan agreements, including class
action waivers, are valid and enforceable; however, the enforceability of arbitration provisions is often challenged in
court. If those challenges are successful, the Company’s arbitration and class action waiver provisions could be
unenforceable, which could subject the Company to additional litigation, including additional class action litigation.
In addition, the U.S. Congress has considered legislation that would generally limit or prohibit mandatory
arbitration agreements in consumer contracts and has enacted legislation with such a prohibition with respect to
certain mortgage loan agreements and also certain consumer loan agreements to members of the military on active
duty and their dependents. Further, the Dodd-Frank Act directs the CFPB to study consumer arbitration and report
to the U.S. Congress, and it authorizes the CFPB to adopt rules limiting or prohibiting consumer arbitration,
consistent with the results of its study. In 2013, the CFPB released a preliminary report on consumer arbitration
provisions and indicated further study was in process. The results of the CFPB’s further study on arbitration were
released in a report to Congress in March 2015. The report, which the CFPB states is an empirical study and not an
evaluative study, sets forth the CFPB’s factual findings from its comprehensive empirical review of the facts
surrounding the resolution of consumer disputes - both in arbitration and in the courts. Any rule adopted by the
CFPB would apply to arbitration agreements entered into more than six months after the final rule becomes
effective (and not to prior arbitration agreements). Any judicial decisions, legislation or other rules or regulations
that impair the Company’s ability to enter into and enforce consumer arbitration agreements and class action
waivers could significantly increase the Company’s exposure to class action litigation as well as litigation in
plaintiff-friendly jurisdictions, which would be costly and could have a Material Adverse Effect.