FirstCash Holdings, Inc., along with its wholly owned subsidiaries, operates pawn stores in the U.S. and Latin America.
The company is also a leading provider of technology-driven, retail POS payment solutions focused on serving credit-constrained consumers in the U.S. and Puerto Rico.
The company’s primary line of business is the operation of retail pawn stores, also known as pawnshops. It also operates a retail POS payment solutions business. The company is organized into three reportable se...
FirstCash Holdings, Inc., along with its wholly owned subsidiaries, operates pawn stores in the U.S. and Latin America.
The company is also a leading provider of technology-driven, retail POS payment solutions focused on serving credit-constrained consumers in the U.S. and Puerto Rico.
The company’s primary line of business is the operation of retail pawn stores, also known as pawnshops. It also operates a retail POS payment solutions business. The company is organized into three reportable segments that cover these two lines of business. The U.S. pawn segment consists of pawn operations in 29 U.S. states and the District of Columbia, while the Latin America pawn segment consists of pawn operations in Mexico, Guatemala, El Salvador, and Colombia. The retail POS payment solutions segment consists of the operations of American First Finance, LLC (AFF), which offers products in all 50 states in the U.S. plus the District of Columbia and Puerto Rico.
Pawn stores help customers meet small, short-term cash needs by providing non-recourse pawn loans and buying merchandise directly from customers. Personal property, such as jewelry, electronics, tools, appliances, sporting goods and musical instruments, is pledged and held as collateral for the pawn loans over the typical 30-day term of the loan. Pawn stores also generate retail sales primarily from the merchandise acquired through collateral forfeitures and over-the-counter purchases from customers.
The company’s retail POS payment solutions business line consists solely of the operations of AFF. AFF focuses on LTO products and facilitating other retail financing payment options across a large network of traditional and e-commerce merchant partners. AFF’s retail partners provide consumer goods and services to their customers and use AFF’s LTO and retail finance solutions to facilitate payments on such transactions. As one of the largest omni-channel providers of no credit required payment options, AFF’s technology set provides consumers with seamless leasing and financing experiences in-store, online, in-cart, and on mobile devices.
Pawn Operations
Pawn stores are neighborhood-based retail locations that buy and sell pre-owned consumer products, such as jewelry, electronics, tools, appliances, sporting goods and musical instruments. Pawn stores also provide a quick and convenient source of small, secured consumer loans, also known as pawn loans, to unbanked, under-banked and credit-constrained customers. Pawn loans are safe and affordable non-recourse loans for which the customer has no legal obligation to repay. The company does not engage in post-default collection efforts, does not take legal actions against its customers for defaulted loans, does not ban its customers for nonpayment, nor does it report any negative credit information to credit reporting agencies, but rather relies only on the resale of the pawn collateral for recovery. Pawnshop customers are typically value-conscious consumers and/or borrowers who are not effectively or efficiently served by traditional lenders, such as banks, credit unions, credit card providers or other small loan providers.
The pawn industry in the U.S. is well established, with the highest concentration of pawn stores located in states that have favorable customer demographics, high population growth and maintain regulations most conducive to profitable pawn operations. Generally, these states are located in the Southeast, Midwest, Southwest, and Mountain West regions of the country, which is where the majority of the company’s U.S. stores are located.
A majority of the company’s pawn stores opened in Latin America are larger format, full-service stores similar to the U.S. stores, which buy, sell and lend on a wide array of merchandise.
Services Offered by the company’s Pawn Operations
Pawn Merchandise Sales
The company’s pawn merchandise sales are primarily retail sales to the general public from its pawn store locations. The items sold generally consist of pre-owned consumer products, such as jewelry, electronics, tools, appliances, sporting goods and musical instruments. It also melts certain quantities of scrap jewelry and sells the gold, silver, and diamonds in the commodity markets.
Merchandise inventory is acquired primarily through forfeited pawn loan collateral and, to a lesser extent, through purchases of used goods directly from the general public. The company also acquires limited quantities of new or refurbished merchandise inventories directly from wholesalers and manufacturers. Merchandise acquired by the company through forfeited pawn loan collateral is carried in inventory at the amount of the related pawn loan, exclusive of any accrued service fees, and purchased inventory is carried at cost.
Retail customers can use cash and debit or credit cards for retail purchases or can purchase merchandise on an interest-free layaway plan. Should the customer fail to make a required payment pursuant to a layaway plan, the item is returned to inventory and all or a portion of previous payments are typically forfeited to the company. Deposits and interim payments from customers on layaway sales are recorded as deferred revenue and subsequently recorded as retail merchandise sales revenue when the merchandise is delivered to the customer upon receipt of final payment or when previous payments are forfeited to the company. In addition, the company offers an LTO option at its U.S. pawn stores through AFF.
Retail sales are seasonally highest in the fourth quarter, associated with holiday shopping, and, to a lesser extent, in the first quarter, due to tax refund proceeds received by customers in the U.S.
Pawn Lending
The company’s pawn store locations make pawn loans to customers in order to help them meet instant or short-term cash needs. All pawn loans are collateralized by personal property, such as jewelry, electronics, tools, appliances, sporting goods, musical instruments and other items. The pledged collateral provides the only security to the company for the repayment of the loan. The company does not investigate the creditworthiness of the borrower through third party reporting services, instead relying primarily on the marketability and expected sales value of pledged goods as a basis for the amount loaned. Pawn loans are non-recourse loans, and a customer does not have a legal obligation to repay a pawn loan. There is no collections process, and the decision to not repay the loan will not affect the customer’s credit score with any credit reporting agency and rarely affects the customer’s ability to obtain a subsequent pawn loan from the company.
The company typically experiences seasonal growth in its pawn loan balances in the third and fourth quarters, preceded by lower balances in the first two quarters due to the typical repayment of pawn loans associated with statutory bonuses received by customers in the fourth quarter in Mexico and with tax refund proceeds typically received by customers in the first quarter in the U.S.
Pawn Business Strategy
The company’s business strategy is to continue growing pawn revenues and income by opening new (de novo) retail pawn locations, acquiring existing pawn stores in strategic markets and increasing revenue and operating profits in existing stores.
The key elements of the company’s strategy include opening new stores in under-served markets and neighborhoods; acquisition opportunities that will continue to arise in both the U.S. and Latin America; and enhancing productivity of existing and newly opened stores.
Pawn Store Locations
The company’s typical large format pawn store is a freestanding building or part of a retail shopping center with dedicated available parking. Many of the company’s acquired stores in Latin America tend to be smaller than its U.S. stores, especially those located in dense urban markets that may not have dedicated parking.
The company operates pawn store locations in 29 U.S. states and the District of Columbia, in 32 states in Mexico, in Guatemala, in El Salvador, and in Colombia.
Retail POS Payment Solutions Operations
AFF facilitates customized LTO and retail finance programs to its merchant partners, allowing those merchant partners to complete sales by providing their customers with a retail POS payment solution. Customers can apply for AFF’s products online or through their mobile devices and complete the process electronically or in person at one of AFF’s merchant partner locations. AFF primarily serves customers who are credit-constrained who may not qualify for prime or near prime retail payment options.
Products Offered by AFF
AFF’s merchant partners may provide consumer goods and services to their customers using one of AFF’s retail POS payment products to facilitate payments on such transactions. AFF’s ability to customize the technology and offer a choice between retail POS payment products provides its merchant partners the ability to identify the most effective solution for its business and customers.
The three retail POS payment products offered by AFF:
LTO — LTO transactions involve the purchase by AFF of tangible personal property directly from the merchant partner and a subsequent lease of that merchandise by AFF to the customer through a consumer rental purchase agreement under applicable state laws. Customers can cancel their agreements at any time, without penalty, by returning the merchandise. The terms of the leased merchandise contracts generally provide for weekly, bi-weekly, semi-monthly, or monthly rental periods and give the customers the option to acquire ownership of the merchandise over a fixed term, typically between six and 24 months, if the customer leases the merchandise through that term. AFF offers the LTO retail POS payment product to merchant partners in 45 U.S. states, the District of Columbia and Puerto Rico.
Retail installment sales agreement (RISA) — The RISA transaction involves the purchase of either tangible personal property or services from the merchant partner by the customer. The customer enters into a RISA with the merchant and AFF subsequently purchases the RISA from the merchant partner and services the account through the end of the contractual term. RISA finance receivables typically have a term ranging from six to 24 months, and when utilized for the purchase of tangible personal property, are generally secured by such tangible personal property. AFF facilitates the RISA retail POS payment product with merchant partners in 22 U.S. states.
Bank-originated installment loans — The customer enters into an installment loan directly with a Utah state-chartered non-member bank (the bank), for the purchase of a good or service from the merchant partner. After origination of the loan by the bank, AFF purchases the rights to a portion of the cash flows of the loan from the bank but does not purchase the loan itself. AFF then assumes responsibility for sub-servicing the loan on behalf of the bank for the remaining term of the loan. Bank-originated loans typically have a term ranging from six to 24 months and can be either secured by tangible personal property or unsecured. Approximately 81% of these loans are related to the purchase of property or services while approximately 19% are loans with cash proceeds issued directly to the customer. The bank-originated installment loan retail POS payment product is made available to merchant partners in 34 U.S. states.
Customer Service
Customers have access to AFF’s customer service team and online customer portal to answer questions about their lease, RISA or loan or to provide comments or complaints about merchant partners. For those customers that utilize AFF’s LTO solution and choose not to renew their lease, AFF’s customer service team can also assist with the non-renewal process.
Merchant Relationships
AFF attracts and sources new merchants through various channels, including field sales representatives, national sales, buying groups, AFF’s website and strategic integrations via waterfall lending platforms. To ensure merchant quality, each prospective merchant goes through a vetting and approval process and once approved, they must sign a merchant agreement that identifies the roles and responsibilities of both the merchant and AFF. Merchants also receive appropriate training so they can properly represent AFF’s retail POS payment products to their customers and ensure regulatory compliance.
Approved merchant partners are subject to regular monitoring. AFF’s monitoring procedures are designed to identify merchant partners that do not meet AFF’s merchant standards. Merchant partners are subject to suspension and/or termination if, based upon the results of AFF’s monitoring, they are found to be out of compliance with the merchant agreement, have low lease or loan quality performance, have elevated customer complaint volume or fail to comply with applicable laws.
AFF has approximately 13,600 active retail merchant partner locations and e-commerce platforms offering its leasing and financing products. Those merchant partners offer a wide array of goods and services spanning 26 vertical channels.
A significant portion of AFF’s gross transaction volumes has been concentrated with certain large merchant partners, many of which were also concentrated within the furniture vertical, which has suffered from declining sales, store closures, and bankruptcies over the past few years.
Retail POS Payment Solutions Business Strategy
AFF’s business strategy is to continue building market share through additional expansion of both its brick-and-mortar and online merchant base while increasing customer utilization rates by continuous improvement and enhancement of its omni-channel user experience. With an ongoing focus toward improving application conversion rates for qualified applicants combined with an enhanced risk segmentation of its applications, AFF believes that it has numerous opportunities to gain additional market share and expand its large and fast-growing merchant and customer base to achieve greater levels of revenue and profitability.
Governmental Regulations
The U.S. government and its agencies have significant regulatory authority over the company’s activities, and its business is subject to a variety of federal laws, including but not limited to the following: Federal Trade Commission (FTC) Act and Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act); Electronic Fund Transfer Act (EFTA); MLA; Servicemembers Civil Relief Act (SCRA); Truth in Lending Act (TILA); Anti-Money Laundering and Economic Sanctions; Gramm-Leach-Bliley Act (GLBA); Fair Credit Reporting Act (FCRA); Anti-Corruption; Brady Handgun Violence Prevention Act (Brady Act); and Telephone Consumer Protection Act.
The company’s pawn business in Mexico is regulated by the Procuraduria Federal del Consumidor (PROFECO), Mexico’s primary federal consumer protection agency, which requires the company to annually register its pawn stores, approve pawn contracts and disclose the interest rates and fees charged on pawn transactions.
The company is subject to certain provisions of the USA PATRIOT Act and the Bank Secrecy Act under which it must maintain an anti-money laundering compliance program covering certain of its business activities.
The company is subject to the Fair Credit Reporting Act (FCRA) and its implementing regulation known as Regulation V, which regulate the use of consumer reports and reporting of information to credit reporting agencies.
The company also has implemented an identity theft prevention program to fulfill the requirements of the Red Flags Regulations and Guidelines issued under the Fair and Accurate Credit Transactions Act (FACTA).
The company is subject to the U.S. Foreign Corrupt Practices Act (FCPA) and other similar laws in other jurisdictions, which generally prohibit companies and their agents or intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits.
The company must also comply with various state law provisions and the regulations of the U.S. Department of Justice-Bureau of Alcohol, Tobacco, and Firearms that require each pawn lending location dealing in guns to obtain a Federal Firearm License (FFL) and maintain a permanent record of all receipts and dispositions of firearms.
The company is subject to the Telephone Consumer Protection Act and its implementing regulations (together, the TCPA) and the regulations of the Federal Communications Commission.
History
The company was founded in 1988 as a Texas corporation. It was incorporated in 1988. In 1991, the company was reincorporated as a Delaware corporation. The company was formerly known as First Cash Financial Services, Inc. and changed its name to FirstCash, Inc. in 2016 and then to FirstCash Holdings, Inc. in 2021.
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