Cabela's 2010 Annual Report Download - page 34

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24
The Reform Act will also likely result in increased scrutiny and oversight of consumer financial services
and products, including credit cards, primarily through the establishment of the new independent Bureau within
the Federal Reserve. The Bureau will have broad rulemaking and enforcement authority over providers of credit,
savings, and payment services and products. The Bureau will have rulemaking and interpretive authority under
existing and future consumer financial services laws and supervisory, examination, and enforcement authority over
institutions subject to its jurisdiction. State officials are authorized to enforce consumer protection rules issued by
the Bureau.
Many provisions of the Reform Act require the adoption of rules to implement. In addition, the Reform
Act mandates multiple studies, which could result in additional legislative or regulatory action. The effect of the
Reform Act and its implementing regulations on WFB’s business and operations could be significant. In addition,
we may be required to invest significant management time and resources to address the various provisions of the
Reform Act and the numerous regulations that are required to be issued under it. The Reform Act, any related
legislation, and any implementing regulations could have a material adverse effect on our business, results of
operations, and financial condition.
Changes in interest rates could have a negative impact on our earnings.
In connection with our Financial Services business, we borrow money from institutions and accept funds
by issuing brokered and non-brokered certificates of deposit and secured borrowings, which we then lend to
cardholders. We earn interest on the cardholders’ account balances, and pay interest on the certificates of deposit
and borrowings we use to fund those loans. Changes in these two interest rates affect the value of the assets and
liabilities of our Financial Services business. If the rate of interest we pay on borrowings increases more (or more
rapidly) than the rate of interest we earn on loans, our net interest income, and therefore our earnings, could fall.
Our earnings could also be adversely affected if the rates on our credit card account balances fall more quickly
than those on our borrowings. In addition, at the end of 2010, approximately 34% of our cardholders did not
maintain balances on their credit card accounts. We do not earn any interest from these accounts but do earn other
fees from these accounts such as Visa interchange fees. In the event interest rates rise, the spread between the
interest rate we pay on our borrowings and the fees we earn from these accounts may change and our profitability
may be adversely affected.
Credit card industry litigation and regulation could adversely impact the amount of revenue our
Financial Services business generates from interchange fees.
Our Financial Services business faces possible risk from the outcomes of certain credit card industry
litigation and potential regulation of interchange fees. For example, a number of entities, each purporting to
represent a class of retail merchants, have sued Visa and several member banks, and other credit card associations,
alleging, among other things, that Visa and its member banks have violated United States antitrust laws by
conspiring to fix the level of interchange fees. To date, we have not been named as a defendant in any credit card
industry lawsuits. Moreover, the amount of interchange fees that are charged to merchants could be capped or
limited by credit card industry regulation. If the interchange fees that are charged to merchants are reduced as a
result of the interchange lawsuits or regulation, the financial condition and results of operations of our Financial
Services business may be negatively impacted.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.