Monday, Advance America, Cash Advance Centers Inc. (AEA), said that it has settled a class action lawsuit in Georgia, thereby finally resolving all claims against the company in connection with originating, marketing, or servicing any loan in that state. Also, following the lawsuit the company said that it has planned to close 24 centers it operated in the state of New Hampshire.
If approved, the settlement would require Advance America to make a minimum payment of approximately $2 million from which a settlement pool will be established to pay claims; and attorney fees and other costs related to the litigation and settlement administration will be paid.
The company said that it has reserved approximately $2 million for the legal settlement, which will result in a charge against earnings in the fourth quarter of 2008.
Additionally, Advance America revealed today plans to close 24 centers it operated in the state of New Hampshire. The decision to close the centers comes after approval of legislation that went into effect on January 1, 2009 that effectively prohibits the offering of the cash advance product in that state, and follows the company's previously announced decision to discontinue offering its line of credit product in New Hampshire as a result of an agreement with the state's Bank Commissioner.
For the twelve months ended December 31, 2008, total revenues and gross profit generated from the company's operations in New Hampshire, were approximately $8.1 million and $3.4 million, respectively. The company estimates the costs associated with closure of operations in New Hampshire to total approximately $1.2 million, of which $0.7 million would be recognized during the fourth quarter of 2008.
AEA ended Monday's regular trading at $1.27, down 5.22% or $0.07, on a volume of 198,516 shares on the New York Stock Exchange.
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