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What changed in CREDIT ACCEPTANCE CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CREDIT ACCEPTANCE CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+249 added−240 removedSource: 10-K (2024-02-12) vs 10-K (2023-02-10)

Top changes in CREDIT ACCEPTANCE CORP's 2023 10-K

249 paragraphs added · 240 removed · 192 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

48 edited+3 added−19 removed78 unchanged
Biggest changeIn addition, we compete by offering a profitable and efficient method for Dealers to finance consumers who would be more difficult or less profitable to finance through other methods. 9 Customer and Geographic Concentrations The following tables provide information regarding the five states that were responsible for the largest dollar volume of Consumer Loan assignments and the related number of active Dealers during 2022, 2021, and 2020: For the Year Ended December 31, 2022 (Dollars in millions) Consumer Loan Assignments Active Dealers (2) Dollar Volume (1) % of Total Number % of Total Michigan $ 353.0 9.7 % 731 6.1 % New York 229.8 6.3 % 687 5.8 % Ohio 205.7 5.7 % 832 7.0 % Texas 205.5 5.7 % 903 7.6 % New Jersey 204.0 5.6 % 300 2.5 % All other states 2,427.3 67.0 % 8,448 71.0 % Total $ 3,625.3 100.0 % 11,901 100.0 % For the Year Ended December 31, 2021 (Dollars in millions) Consumer Loan Assignments Active Dealers (2) Dollar Volume (1) % of Total Number % of Total Michigan $ 343.4 10.8 % 747 6.5 % New York 218.9 6.9 % 709 6.2 % Ohio 181.5 5.7 % 764 6.7 % Texas 170.2 5.4 % 810 7.1 % Tennessee 162.9 5.1 % 458 4.0 % All other states 2,090.9 66.1 % 7,922 69.5 % Total $ 3,167.8 100.0 % 11,410 100.0 % For the Year Ended December 31, 2020 (Dollars in millions) Consumer Loan Assignments Active Dealers (2) Dollar Volume (1) % of Total Number % of Total Michigan $ 325.2 8.9 % 775 6.1 % Ohio 236.7 6.5 % 853 6.7 % New York 234.2 6.4 % 765 6.0 % Texas 215.9 5.9 % 927 7.3 % Tennessee 179.8 4.9 % 490 3.9 % All other states 2,449.4 67.4 % 8,880 70.0 % Total $ 3,641.2 100.0 % 12,690 100.0 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
Biggest changeIn addition, we compete by offering a profitable and efficient method for Dealers to finance consumers who would be more difficult or less profitable to finance through other methods. 9 Customer and Geographic Concentrations The following tables provide information regarding the five states that were responsible for the largest dollar volume of Consumer Loan assignments and the related number of active Dealers during 2023, 2022, and 2021: For the Year Ended December 31, 2023 (Dollars in millions) Consumer Loan Assignments Active Dealers (2) Dollar Volume (1) % of Total Number % of Total Michigan $ 326.3 7.9 % 833 5.9 % Texas 272.5 6.6 % 1,170 8.3 % Ohio 245.2 5.9 % 986 7.0 % New Jersey 238.2 5.7 % 357 2.5 % Tennessee 216.0 5.2 % 569 4.0 % All other states 2,849.6 68.7 % 10,259 72.3 % Total $ 4,147.8 100.0 % 14,174 100.0 % For the Year Ended December 31, 2022 (Dollars in millions) Consumer Loan Assignments Active Dealers (2) Dollar Volume (1) % of Total Number % of Total Michigan $ 353.0 9.7 % 731 6.1 % New York 229.8 6.3 % 687 5.8 % Ohio 205.7 5.7 % 832 7.0 % Texas 205.5 5.7 % 903 7.6 % New Jersey 204.0 5.6 % 300 2.5 % All other states 2,427.3 67.0 % 8,448 71.0 % Total $ 3,625.3 100.0 % 11,901 100.0 % For the Year Ended December 31, 2021 (Dollars in millions) Consumer Loan Assignments Active Dealers (2) Dollar Volume (1) % of Total Number % of Total Michigan $ 343.4 10.8 % 747 6.5 % New York 218.9 6.9 % 709 6.2 % Ohio 181.5 5.7 % 764 6.7 % Texas 170.2 5.4 % 810 7.1 % Tennessee 162.9 5.1 % 458 4.0 % All other states 2,090.9 66.1 % 7,922 69.5 % Total $ 3,167.8 100.0 % 11,410 100.0 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
For information regarding our one reportable segment and related entity-wide disclosures, see Note 15 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference. 3 Principal Business We offer our Dealers financing programs that enable them to sell vehicles to consumers, regardless of their credit history.
For information regarding our one reportable segment and related entity-wide disclosures, see Note 15 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference. 3 Principal Business We offer Dealers financing programs that enable them to sell vehicles to consumers, regardless of their credit history.
A Consumer Loan is originated by the Dealer when a consumer enters into a contract with a Dealer that sets forth the terms of the agreement between the consumer and the Dealer for the payment of the purchase price of the vehicle.
A Consumer Loan is originated by the Dealer when a consumer enters into a contract with the Dealer that sets forth the terms of the agreement between the consumer and the Dealer for the payment of the purchase price of the vehicle.
The amount of funding is determined using a formula which considers a number of factors including the timing and amount of cash flows expected on the related Consumer Loan and our target profitability at the time a Consumer Loan is submitted to us for assignment.
The amount of funding is determined using a formula which considers a number of factors, including the timing and amount of cash flows expected on the related Consumer Loan and our target profitability at the time the Consumer Loan is submitted to us for assignment.
Through our Dealer Service Center, we perform all significant functions relating to the processing of the Consumer Loan applications and bear certain costs of Consumer Loan assignment, including the cost of assessing the adequacy of Consumer Loan documentation, compliance with our underwriting guidelines, and the cost of verifying employment, residence, and other information provided by the Dealer.
Through our Dealer Service Center, we perform all significant functions relating to the processing of the Consumer Loan applications and bear certain costs of Consumer Loan assignment, including the cost of assessing the adequacy of Consumer Loan documentation, the cost of compliance with our underwriting guidelines, and the cost of verifying employment, residence, and other information provided by the Dealer.
We audit Consumer Loan files for compliance with our underwriting guidelines on a daily basis in order to assess whether our Dealers are operating in accordance with the terms and conditions of our Dealer servicing agreement.
We audit Consumer Loan files for compliance with our underwriting guidelines on a daily basis in order to assess whether Dealers are operating in accordance with the terms and conditions of the Dealer servicing agreement.
We market the vehicle service contracts directly to our Dealers. Our agreement with one of our TPPs allows us to receive profit sharing payments depending on the performance of the vehicle service contracts.
We market the vehicle service contracts directly to Dealers. Our agreement with one of our TPPs allows us to receive profit sharing payments depending on the performance of the vehicle service contracts.
VSC Re Company (“VSC Re”), our wholly owned subsidiary, is engaged in the business of reinsuring coverage under vehicle service contracts sold to consumers by Dealers on vehicles financed by us. VSC Re currently reinsures vehicle service contracts that are offered through one of our TPPs.
Our wholly owned subsidiary VSC Re Company (“VSC Re”) is engaged in the business of reinsuring coverage under vehicle service contracts sold to consumers by Dealers on vehicles financed by us. VSC Re currently reinsures vehicle service contracts that are offered through one of our TPPs.
Proposals to change the laws and regulations governing the operations and taxation of financial institutions and financial services providers are frequently made in the U.S. Congress, in the state legislatures, and by various regulatory agencies.
Proposals to change the laws and regulations governing the operations and taxation of financial institutions and financial services providers are frequently made in the U.S. Congress, in state legislatures, and by various regulatory agencies.
Department of Justice pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 directing us to produce certain information relating to subprime automotive finance and related securitization activities. In addition, governmental regulations that would deplete the supply of used vehicles, such as environmental protection regulations governing emissions or fuel consumption, could have a material adverse effect on us.
Department of Justice pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 directing us to produce certain information relating to subprime automotive finance and related securitization activities. 12 In addition, governmental regulations that would deplete the supply of used vehicles, such as environmental protection regulations governing emissions or fuel consumption, could have a material adverse effect on us.
Our Company’s culture attracts talented people and enables them to perform to their potential. We have been honored to receive many workplace awards in recent years. 14 Available Information Our internet address is creditacceptance.com .
Our Company’s culture attracts talented people and enables them to perform to their potential. We have been honored to receive many workplace awards in recent years. Available Information Our internet address is creditacceptance.com .
Such changes in laws and regulations may change our operating environment in substantial and unpredictable ways and may have a material adverse effect on our business. We are subject to supervision by the Bureau of Consumer Financial Protection (the “Bureau”). The Bureau has rulemaking and enforcement authority over certain non-depository institutions, including us.
Such changes in laws and regulations, or the interpretation of such laws and regulations, may change our operating environment in substantial and unpredictable ways and may have a material adverse effect on our business. We are subject to supervision by the Consumer Financial Protection Bureau (the “Bureau”). The Bureau has rulemaking and enforcement authority over certain non-depository institutions, including us.
The following table sets forth the percent relationship to total revenue of each of these sources: For the Years Ended December 31, Percent of Total Revenue 2022 2021 2020 Finance charges 92.0 % 93.9 % 93.6 % Premiums earned 3.4 % 3.2 % 3.4 % Other income 4.6 % 2.9 % 3.0 % Total revenue 100.0 % 100.0 % 100.0 % 5 Operations Sales and Marketing .
The following table sets forth the percent relationship to total revenue of each of these sources: For the Years Ended December 31, Percent of Total Revenue 2023 2022 2021 Finance charges 92.3 % 92.0 % 93.9 % Premiums earned 4.2 % 3.4 % 3.2 % Other income 3.5 % 4.6 % 2.9 % Total revenue 100.0 % 100.0 % 100.0 % 5 Operations Sales and Marketing .
Collectors service Consumer Loans through our servicing platform, which consists of the following two systems: • The collection system, which assigns Consumer Loans to collectors through a predictive dialer and records all collection activity, including: • details of past phone conversations with the consumer; • collection letters sent; • promises to pay; • broken promises; • repossession orders; and • collection attorney activity. • The servicing system, which maintains a record of all transactions relating to Consumer Loan assignments and is a primary source of data utilized to: • determine the outstanding balance of the Consumer Loans; • forecast future collections; • analyze the profitability of our program; and • evaluate our proprietary credit scoring system. 8 Ancillary Products We provide Dealers the ability to offer vehicle service contracts to consumers through our relationships with Third Party Providers (“TPPs”).
Representatives service Consumer Loans through our servicing platform, which consists of the following two systems: • The collection system, which assigns Consumer Loans to representatives through a predictive dialer and records all collection activity, including: • details of past phone conversations with the consumer; • collection letters sent; • promises to pay; • broken promises; • payment history; • repossession orders; and • collection attorney activity. • The servicing system, which maintains a record of all transactions relating to Consumer Loan assignments and is a primary source of data utilized to: • determine the outstanding balance of the Consumer Loans; • forecast future collections; • analyze the profitability of our program; and • evaluate our proprietary credit scoring system. 8 Ancillary Products We provide Dealers the ability to offer vehicle service contracts to consumers through our relationships with Third-Party Providers (“TPPs”).
Revenue Sources Credit Acceptance derives its revenues from the following principal sources: • finance charges, which are comprised of: (1) interest income earned on Loans; (2) administrative fees earned from ancillary products; (3) program fees charged to Dealers under the Portfolio Program; (4) Consumer Loan assignment fees charged to Dealers; and (5) direct origination costs incurred on Dealer Loans; • premiums earned on the reinsurance of vehicle service contracts; and • other income, which primarily consists of ancillary product profit sharing, remarketing fees, Dealer enrollment fees, Dealer support products and services, and interest.
Revenue Sources Credit Acceptance derives its revenues from the following principal sources: • finance charges, which are comprised of: (1) interest income earned on Loans; (2) administrative fees earned from ancillary products; (3) program fees charged to Dealers under the Portfolio Program; (4) Consumer Loan assignment fees charged to Dealers; and (5) direct origination costs incurred on Dealer Loans; • premiums earned on the reinsurance of vehicle service contracts; and • other income, which primarily consists of ancillary product profit sharing, remarketing fees, and interest.
Dealers are assigned a Dealer rating based upon the performance of their Consumer Loans in both the Portfolio and Purchase Programs as well as other criteria. The Dealer rating is one of the factors used to determine the amount paid to Dealers as an advance or to acquire a Purchased Loan.
Dealers are assigned a Dealer rating based upon the performance of their Consumer Loans in both the Portfolio Program and Purchase Program as well as other criteria. The Dealer rating is one of the factors used to determine the amount paid to Dealers as an advance or to acquire a Purchased Loan.
No single Dealer’s Loans receivable balance accounted for more than 10% of total Loans receivable balance as of December 31, 2022 or 2021. 10 Seasonality Our business is seasonal with peak Consumer Loan assignments and collections occurring during the first quarter of the year.
No single Dealer’s Loans receivable balance accounted for more than 10% of total Loans receivable balance as of December 31, 2023 or 2022. 10 Seasonality Our business is seasonal with peak Consumer Loan assignments and collections occurring during the first quarter of the year.
In the event of a termination of the Dealer servicing agreement by us, we may continue to service Consumer Loans assigned by Dealers accepted prior to termination in the normal course of business without charging a termination fee. Consumer Loan Assignment. Once a Dealer has enrolled in our programs, the Dealer may begin assigning Consumer Loans to us.
In the event of a termination of the Dealer servicing agreement by us, we may continue to service Consumer Loans assigned by the Dealer to us prior to termination in the normal course of business without charging a termination fee. Consumer Loan Assignment. Once a Dealer has enrolled in our programs, the Dealer may begin assigning Consumer Loans to us.
The vast majority of the Consumer Loans assigned to us are made to consumers with impaired or limited credit histories.
The majority of the Consumer Loans assigned to us are made to consumers with impaired or limited credit histories.
We refer to automobile dealers who participate in our programs and who share our commitment to changing consumers’ lives as “Dealers”. Upon enrollment in our financing programs, the Dealer enters into a Dealer servicing agreement with us that defines the legal relationship between Credit Acceptance and the Dealer.
We refer to automobile dealers who participate in our programs and who share our commitment to changing consumers’ lives as “Dealers.” Upon enrollment in our financing programs, the Dealer enters into a Dealer servicing agreement with us that defines the legal relationship between Credit Acceptance and the Dealer.
Our target market is approximately 60,000 i ndependent and franchised automobile dealers in the United States. We have market area managers located throughout the United States that market our programs to prospective Dealers, enroll new Dealers, and support active Dealers.
Our target market is approximately 60,000 independent and franchised automobile dealers in the United States. We have market area managers located throughout the United States that market our programs to prospective Dealers, enroll new Dealers, and support active Dealers.
We provide each Dealer under the Portfolio Program with a monthly statement summarizing all activity that occurred on their Consumer Loan assignments. Servicing. Our largest group of collectors services Consumer Loans that are in the early stages of delinquency.
We provide each Dealer under the Portfolio Program with a monthly statement summarizing all activity that occurred on its Consumer Loan assignments. Servicing. Our largest group of representatives services Consumer Loans that are in the early stages of delinquency.
As noted above, on January 4, 2023, the Bureau and the Office of the New York State Attorney General jointly filed a complaint in the United States District Court for the Southern District of New York alleging that the Company engaged in deceptive practices, fraud, illegality, and securities fraud in violation of New York Executive Law § 63(12) and New York General Business Law §§ 349 and 352, and that the Company engaged in deceptive and abusive acts and provided substantial assistance to a covered person or service provider in violation of the CFPA, 12 U.S.C. § 5531 and 12 U.S.C. § 5536(a)(1)(B).
See the description below of the lawsuit commenced by the Bureau on January 4, 2023. • On January 4, 2023, the Office of the New York State Attorney General and the Bureau jointly filed a complaint in the United States District Court for the Southern District of New York alleging that the Company engaged in deceptive practices, fraud, illegality, and securities fraud in violation of New York Executive Law § 63(12) and New York General Business Law §§ 349 and 352, and that the Company engaged in deceptive and abusive acts and provided substantial assistance to a covered person or service provider in violation of the CFPA, 12 U.S.C. § 5531 and 12 U.S.C. § 5536(a)(1)(B).
The vast majority of our team members work remotely from locations within the United States, with nearly half of our team members located outside of Michigan. Our Company is highly diverse, as more than half of our team members are women, and more than half belong to a minority ethnicity.
The vast majority of our team members w ork remotely from locations within the United States, with approximately half of our team members located outside of Michigan. Our Company is highly diverse, as more than half of our team members are women, and more than half belong to a minority ethnicity.
On December 6, 2021, we received a Notice and Opportunity to Respond and Advise (“NORA”) letter from the Staff of the Office of Enforcement (“Staff”) of the Bureau, stating that the Staff was considering whether to recommend that the Bureau take legal action against the Company for alleged violations of the CFPA in connection with the Company’s consumer loan origination practices.
On December 6, 2021, we received a Notice and Opportunity to Respond and Advise letter from the Staff of the Office of Enforcement (“Staff”) of the Bureau, stating that the Staff was considering whether to recommend that the Bureau take legal action against the Company for alleged violations of the Consumer Financial Protection Act of 2010 (the “CFPA”) in connection with the Company’s consumer loan origination practices.
At this point, the Consumer Loan is serviced by either: (1) our internal collection team, in the event the consumer is willing to make payments on the full or partial deficiency balance; or (2) where permitted by law, our external collection team, if it is believed that legal action is required to reduce the deficiency balance owing on the Consumer Loan.
At this point, the Consumer Loan is serviced by either: (1) our internal collection team, in the event the consumer is willing to make payments on the full or partial deficiency balance; or (2) where permitted by law, our external collection team, if it is believed that legal action will be successful in reducing or eliminating the deficiency balance owing on the Consumer Loan.
The volume of new or modified laws and regulations has increased in recent years. From time to time, legislation and regulations are enacted which increase the cost of doing business, limit or expand permissible activities, or affect the competitive balance among financial services providers.
The volume of new or modified laws and regulations, and new interpretations of existing laws and regulations, has increased in recent years. From time to time, enactment and interpretations of legislation and regulations increase the cost of doing business, limit or expand permissible activities, or affect the competitive balance among financial services providers.
The number of Dealer enrollments and active Dealers for each of the last three years are presented in the table below: For the Years Ended December 31, Dealer Enrollments Active Dealers (1) 2020 3,413 12,690 2021 2,804 11,410 2022 3,627 11,901 (1) Active Dealers are Dealers who have received funding for at least one Loan during the period.
The number of Dealer enrollments and active Dealers for each of the last three years are presented in the table below: For the Years Ended December 31, Dealer Enrollments Active Dealers (1) 2021 2,804 11,410 2022 3,627 11,901 2023 5,605 14,174 (1) Active Dealers are Dealers who have received funding for at least one Loan during the period.
Our external collection team generally assigns Consumer Loans to third party collection attorneys who work on a contingency fee basis.
Our external collection team may assign Consumer Loans to third-party collection attorneys who work on a contingency fee basis.
Under the Purchase Program, we buy the Consumer Loans from the Dealers (referred to as a “Purchased Loan”) and keep all amounts collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as “Loans”.
Under the Purchase Program, we buy the Consumer Loans from the Dealers (referred to as a “Purchased Loan”) and keep all amounts collected from the consumer.
Also on August 11, 2020, we received from the Attorney General of the State of New Jersey a subpoena that is essentially identical to the August 11, 2020 Maryland subpoena, both as to substance and as to the jurisdictions identified. • On December 9, 2014, we received a civil investigative subpoena from the U.S.
Also on August 11, 2020, we received from the Attorney General of the State of New Jersey a subpoena that is essentially identical to the August 11, 2020 Maryland subpoena, both as to substance and as to the jurisdictions identified.
The Company intends to vigorously defend itself in this matter. • On March 18, 2016, we received a subpoena from the Attorney General of the State of Maryland, relating to the Company’s repossession and sale policies and procedures in the state of Maryland.
Community Financial Services Association of America Ltd ., No. 22-448. The Company intends to vigorously defend itself in this matter. • On March 18, 2016, we received a subpoena from the Attorney General of the State of Maryland, relating to the Company’s repossession and sale policies and procedures in the state of Maryland.
We require repayment of the related advance or purchase payment and, if requested more than 90 days after assignment, payment of a fee; and • all Consumer Loans assigned under the Portfolio Program may be reassigned through termination of the Dealer servicing agreement, as described under “Dealer Servicing Agreement,” above. 7 Our business model allows us to share the risk and reward of collecting on the Consumer Loans with the Dealers, more so with the Portfolio Program than the Purchase Program.
Consumer Loans that have been assigned to us can be reassigned back to the Dealer at the Dealer’s discretion as follows: • an individual Consumer Loan may be reassigned within 180 days of assignment, in which case we require repayment of the related advance or purchase payment and, if requested more than 90 days after assignment, payment of a fee; and • all Consumer Loans assigned under the Portfolio Program may be reassigned through termination of the Dealer servicing agreement, as described under “Dealer Servicing Agreement,” above. 7 Our business model allows us to share the risk and reward of collecting on the Consumer Loans with the Dealers, more so with the Portfolio Program than the Purchase Program.
When a Consumer Loan is approved for repossession, we continue to service the Consumer Loan while it is being assigned to a third party repossession contractor, who works on a contingency fee basis.
The decision to repossess a vehicle is based on policy-based criteria. When a Consumer Loan is approved for repossession, we continue to service the Consumer Loan while it is being assigned to a third-party repossession service provider, who works on a contingency fee basis.
Once a vehicle has been repossessed, the consumer can negotiate to redeem the vehicle, whereupon the vehicle is returned to the consumer in exchange for paying off the Consumer Loan balance; or, where appropriate or if required by law, the vehicle is returned to the consumer and the Consumer Loan is reinstated in exchange for a payment that reduces or eliminates the past due balance.
Once a vehicle has been repossessed, the consumer can redeem the vehicle, whereupon the vehicle is returned to the consumer in exchange for paying off the Consumer Loan balance; or, where appropriate or if required by law, the vehicle is returned to the consumer and the consumer is permitted to continue with the Consumer Loan in exchange for a payment or series of payments which eliminates the past due balance.
If this process is unsuccessful, the vehicle is sold at a wholesale automobile auction. Prior to sale, the vehicle is typically inspected by a representative at the auction who provides repair and reconditioning recommendations. Alternatively, our remarketing representatives may inspect the vehicle directly.
If the consumer elects not to regain possession of the vehicle after repossession, the vehicle is sold at a wholesale automobile auction. Prior to sale, the vehicle is typically inspected by a representative at the auction who provides repair and reconditioning recommendations. Alternatively, our remarketing representatives may inspect the vehicle directly.
The following table shows the percentage of Consumer Loans assigned to us under each of the programs for each of the last three years: Unit Volume Dollar Volume (1) For the Years Ended December 31, Portfolio Program Purchase Program Portfolio Program Purchase Program 2020 64.1 % 35.9 % 60.6 % 39.4 % 2021 67.9 % 32.1 % 65.0 % 35.0 % 2022 73.5 % 26.5 % 69.8 % 30.2 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
Dealer Loans and Purchased Loans are collectively referred to as “Loans.” The following table shows the percentage of Consumer Loans assigned to us under each of the programs for each of the last three years: Unit Volume Dollar Volume (1) For the Years Ended December 31, Portfolio Program Purchase Program Portfolio Program Purchase Program 2021 67.9 % 32.1 % 65.0 % 35.0 % 2022 73.5 % 26.5 % 69.8 % 30.2 % 2023 74.0 % 26.0 % 70.7 % 29.3 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
The table below presents team members by operating function: Number of Team Members As of December 31, Operating Function 2022 2021 2020 Originations 505 500 527 Servicing 913 895 867 Support 828 678 639 Total 2,246 2,073 2,033 As of December 31, 2022, we had 2,246 fu ll- and part-time team members.
The table below presents team members by operating function: Number of Team Members As of December 31, Operating Function 2023 2022 2021 Originations 533 505 500 Servicing 851 913 895 Support 848 828 678 Total 2,232 2,246 2,073 As of December 31, 2023, we had 2,232 full- and part-time team members.
The majority of these team members are responsible for collection activities on delinquent Consumer Loans. Support . The support function includes team members that are responsible for engineering, corporate legal and compliance, human resources, finance, analytics, and marketing and product management.
Support . The support function includes team members that are responsible for engineering, corporate legal and compliance, human resources, finance, analytics, and marketing and product management.
The following table shows the percentage of Consumer Loans assigned to us with either FICO ® scores below 650 or no FICO ® scores: For the Years Ended December 31, Consumer Loan Assignment Volume 2022 2021 2020 Percentage of total unit volume with either FICO ® scores below 650 or no FICO ® scores 84.8 % 91.0 % 94.9 % In 2020, we began piloting an option that expanded our financing programs to consumers with higher credit ratings.
The following table shows the percentage of Consumer Loans assigned to us with either FICO ® scores below 650 or no FICO ® scores: For the Years Ended December 31, Consumer Loan Assignment Volume 2023 2022 2021 Percentage of total unit volume with either FICO ® scores below 650 or no FICO ® scores 80.9 % 84.8 % 91.0 % In recent years, we have expanded our financing programs to consumers with higher credit ratings, which has contributed to the reduction in the percentage of total unit volume with either FICO ® scores below 650 or no FICO ® scores over the three year period presented above.
The originations function includes team members that are responsible for marketing our programs to prospective Dealers, enrolling new Dealers, and supporting active Dealers. Originations also includes team members responsible for processing new Consumer Loan assignments. Servicing . The servicing function includes team members that are responsible for servicing the Consumer Loans.
The originations function includes team members that are responsible for enrolling new Dealers and supporting active Dealers. Originations also includes team members responsible for processing new Consumer Loan assignments. Servicing . The servicing function includes team members that are responsible for servicing the Consumer Loans. The majority of these team members are responsible for collection activities on delinquent Consumer Loans.
On August 23, 2022, we received a letter from the Consumer Frauds and Protection Bureau of the Office of the New York State Attorney General stating that the Office of the New York State Attorney General intended to commence litigation against the Company asserting violations of New York Executive Law § 63(12) and New York General Business Law §§ 349 and 352 et seq. and applicable federal laws, including but not limited to claims that the Company engaged in unfair and deceptive trade practices in auto lending, debt collection, and asset-backed securitizations in the State of New York in violation of the Dodd-Frank Act, New York Executive Law § 63(12), the New York Martin Act and New York General Business Law § 349, and seeking to obtain injunctive relief, restitution, civil penalties, damages, disgorgement, reformation, rescission, costs, and such other relief as the court may deem just and proper.
On November 19, 2020 and August 23, 2022, we received letters from the Office of the New York State Attorney General indicating that it may commence litigation against the Company asserting violations of New York Executive Law § 63(12) and New York General Business Law §§ 349 and 352 et seq. and applicable federal laws, including but not limited to claims that the Company engaged in unfair and deceptive trade practices in auto lending, debt collection, and asset-backed securitizations in the State of New York in violation of the Dodd-Frank Act, New York Executive Law § 63(12), the New York Martin Act, and New York General Business Law § 349.
We place great importance on listening to our team members, as we believe that “ the people doing the work know the most about it. ” We encourage participation in periodic anonymous surveys to gain honest feedback about our workplace from our team members, and we use this feedback to generate ideas for improvement.
We have a Diversity and Inclusion Committee, chaired by a senior manager, tasked with generating concrete actions that we can take together to help our communities heal and make our culture and our Company stronger. 13 We place great importance on listening to our team members, as we believe that “ the people doing the work know the most about it. ” We encourage participation in periodic anonymous surveys to gain honest feedback about our workplace from our team members, and we use this feedback to generate ideas for improvement.
The Company intends to vigorously defend itself in this matter. 12 • On April 22, 2019, we received a civil investigative demand from the Bureau seeking, among other things, certain information relating to the Company’s origination and collection of Consumer Loans, TPPs, and credit reporting.
See the description below of the lawsuit commenced by the Office of the New York State Attorney General on January 4, 2023. • On April 22, 2019, we received a civil investigative demand from the Bureau seeking, among other things, certain information relating to the Company’s origination and collection of Consumer Loans, TPPs, and credit reporting.
Failure of our Dealers to comply with these statutes and regulations could result in consumers having rights of rescission and other remedies that could have a material adverse effect on us. 13 The sale of vehicle service contracts and GAP by Dealers in connection with Consumer Loans assigned to us from Dealers is also subject to state laws and regulations.
Dealers must also comply with credit and trade practice statutes and regulations. Failure of Dealers to comply with these statutes and regulations could result in consumers having rights of rescission and other remedies that could have a material adverse effect on us.
On February 24 and April 30, 2021, we received additional subpoenas from the Office of the New York State Attorney General seeking information relating to its investigation.
After May 7, 2019 through April 30, 2021, we received additional subpoenas from the Office of the New York State Attorney General relating to the Company’s origination, collection, and securitization practices.
We utilize text messaging and email as additional means to contact the consumer. Our collectors work with consumers to attempt to reach a solution that will help them avoid becoming further past due and get them current where possible. The decision to repossess a vehicle is based on policy-based criteria.
Our representatives work with consumers to attempt to develop a solution that will help them avoid becoming further past due and get them current where possible. We utilize a variety of methods to attempt to contact the consumer or to remind them of upcoming scheduled payments, including phone calls, email, text messaging, mail, and mobile notifications.
The complaint seeks injunctive relief, an accounting of all consumers for whom the Company provided financing, restitution, damages, disgorgement, civil penalties, and payment of costs.
The complaint seeks injunctive relief, an accounting of all consumers for whom the Company provided financing, restitution, damages, disgorgement, civil penalties, and payment of costs. On March 14, 2023, the Company filed a motion to dismiss the complaint. On August 7, 2023, the court stayed the action pending the U.S. Supreme Court’s decision in Consumer Financial Protection Bureau v.
Removed
In the fourth quarter of 2021, we made this option available to all Dealers. A portion of the reduction in the percentage of total unit volume with FICO ® scores below 650 or no FICO ® scores relates to Consumer Loans assigned under this option.
Added
After April 22, 2019 through March 7, 2022, we received additional subpoenas from the Bureau.
Removed
Consumer Loans that have been assigned to us can be reassigned back to the Dealer, at the Dealer’s discretion, as follows: • an individual Consumer Loan may be reassigned within 180 days of assignment.
Added
The Company has been informed that the State of Kansas, the State of Texas, and the State of Iowa have withdrawn from the multistate investigation. • On December 9, 2014, we received a civil investigative subpoena from the U.S.
Removed
Collection efforts typically consist of placing a call to the consumer within one day of the missed payment due date, although efforts may begin later for some segments of accounts. Consumer Loans are segmented into dialing pools by various phone contact profiles in an effort to efficiently contact the consumer.
Added
The sale of vehicle service contracts and GAP by Dealers in connection with Consumer Loans assigned to us from Dealers is also subject to state laws and regulations.
Removed
On July 30, 2020, we received two additional subpoenas from the Office of the New York State Attorney General, both from the Consumer Frauds and Protection Bureau and the Investor Protection Bureau, relating to the Company’s origination and collection policies and procedures in the state of New York and its securitizations.
Removed
On August 28, 2020, we were informed that one of the two additional subpoenas was being withdrawn. On November 16, 2020, we received an additional subpoena for documents from the Office of the New York State Attorney General.
Removed
On November 19, 2020, the Company received a letter from the Office of the New York State Attorney General stating that the New York State Attorney General was considering bringing claims against the Company under the Dodd-Frank Act, New York Executive Law § 63(12), the New York Martin Act and New York General Business Law § 349 in connection with the Company’s origination and securitization practices.
Removed
On December 9, 2020, we responded to the New York State Attorney General’s letter disputing the assertions contained therein. On December 21, 2020, we received two additional subpoenas from the Office of the New York State Attorney General, one relating to data and the other seeking testimony.
Removed
On January 4, 2023, the Office of the New York State Attorney General and the Bureau jointly filed a complaint in the United States District Court for the Southern District of New York alleging that the Company engaged in deceptive practices, fraud, illegality, and securities fraud in violation of New York Executive Law § 63(12) and New York General Business Law §§ 349 and 352, and that the Company engaged in deceptive and abusive acts and provided substantial assistance to a covered person or service provider in violation of the Consumer Financial Protection Act of 2010 (the “CFPA”), 12 U.S.C. § 5531 and 12 U.S.C. § 5536(a)(1)(B).
Removed
On May 7, 2020, we received another civil investigative demand from the Bureau seeking additional information relating to its investigation. The Company raised various objections to the May 7, 2020 civil investigative demand, and on May 26, 2020, we were notified that it was withdrawn.
Removed
On June 1, 2020, we received another civil investigative demand that was similar to the May 7, 2020 demand, and which raised many of the same objections. We formally petitioned the Bureau to modify the June 1, 2020 civil investigative demand.
Removed
On September 3, 2020, the Director of the Bureau denied our petition to modify the June 1, 2020 civil investigative demand. On December 23, 2020, we received a civil investigative demand for investigational hearings in connection with the Bureau’s investigation.
Removed
The Company objected to certain portions of the civil investigative demands for hearings and, on January 19, 2021, the Bureau notified the Company that it had withdrawn such portions from the December 23, 2020 civil investigative demands.
Removed
On March 11, 2021, we received another civil investigative demand from the Bureau seeking additional information relating to its investigation and an investigational hearing. On June 3, 2021, we received another civil investigative demand from the Bureau seeking additional information relating to its investigation.
Removed
The NORA letter stated that the Bureau may allege that the Company (i) committed abusive and unfair acts or practices in violation of 12 U.S.C. § 5531(c) and (d) and 12 U.S.C. § 5536(a)(1)(B) and (ii) substantially assisted the deceptive acts of others in violation of 12 U.S.C. § 5536 (a)(3).
Removed
The NORA letter also stated that, in connection with any action, the Bureau may seek all remedies available under the CFPA, including civil money penalties, consumer redress, and injunctive relief. On January 18, 2022, the Company responded to the NORA letter disputing that it had committed any violations.
Removed
On March 7, 2022, we received another civil investigative demand from the Bureau seeking additional information relating to its investigation.
Removed
The complaint seeks injunctive relief, an accounting of all consumers for whom the Company provided financing, restitution, damages, disgorgement, civil penalties, and payment of costs.
Removed
Our Dealers must also comply with credit and trade practice statutes and regulations.
Removed
We have a Diversity and Inclusion Committee, chaired by a senior manager, tasked with generating concrete actions that we can take together to help our communities heal and make our culture and our Company stronger.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

54 edited+12 added−16 removed68 unchanged
Biggest changeAny continuing default would permit the creditors to accelerate the related debt, which could also result in the acceleration of other debt containing a cross acceleration or cross default provision. In addition, an event of default under our revolving credit facility would permit the lenders thereunder to terminate all commitments to extend further credit under our revolving credit facility.
Biggest changeA breach of any of the covenants in our debt instruments would result in an event of default thereunder if not promptly cured or waived. Any continuing default would permit the creditors to accelerate the related debt, which could also result in the acceleration of other debt containing a cross acceleration or cross default provision.
Our ability to attract consumers through our Dealers is highly dependent upon external perceptions of our level of service, trustworthiness, business practices, and financial condition. Negative publicity regarding these matters could damage our reputation among existing and potential consumers and Dealers, which could make it difficult for us to attract new consumers and Dealers and maintain existing Dealers.
Our ability to attract consumers through Dealers is highly dependent upon external perceptions of our level of service, trustworthiness, business practices, and financial condition. Negative publicity regarding these matters could damage our reputation among existing and potential consumers and Dealers, which could make it difficult for us to attract new consumers and Dealers and maintain existing Dealers.
ITEM 1A. RISK FACTORS Industry, Operational and Macroeconomic Risks Our inability to accurately forecast and estimate the amount and timing of future collections could have a material adverse effect on results of operations. The vast majority of the Consumer Loans assigned to us are made to individuals with impaired or limited credit histories.
ITEM 1A. RISK FACTORS Industry, Operational, and Macroeconomic Risks Our inability to accurately forecast and estimate the amount and timing of future collections could have a material adverse effect on results of operations. The majority of the Consumer Loans assigned to us are made to individuals with impaired or limited credit histories.
Natural disasters, climate change, military conflicts such as the war in Ukraine, acts of war, terrorist attacks, and the escalation of military activity in response to terrorist attacks or otherwise may have negative and significant effects, such as imposition of increased security measures, changes in applicable laws, economic and financial market disruptions, loss of lives, damage to infrastructure, and job losses.
Natural disasters, climate change, military conflicts, acts of war, terrorist attacks, and the escalation of military activity in response to terrorist attacks or otherwise may have negative and significant effects, such as imposition of increased security measures, changes in applicable laws, economic and financial market disruptions, loss of lives, damage to infrastructure, and job losses.
Failure to maintain those ratings could, among other things, adversely limit our access to the capital markets and affect the cost and other terms upon which we are able to obtain financing. We may incur substantially more debt and other liabilities. This could exacerbate further the risks associated with our current debt levels.
Failure to maintain those ratings could, among other things, adversely limit our access to the capital markets and affect the cost and other terms upon which we are able to obtain financing. 19 We may incur substantially more debt and other liabilities. This could exacerbate further the risks associated with our current debt levels.
As the assignee of Consumer Loans originated by Dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against Dealers. We may also have disputes and litigation with Dealers. The claims may allege, among other theories of liability, that we breached our Dealer servicing agreement.
As the assignee of Consumer Loans originated by Dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against Dealers. We may also have disputes and litigation with Dealers. The claims may allege, among other theories of liability, that we breached the Dealer servicing agreement.
There can be no assurance that we will be able to retain our existing senior management or attract additional qualified team members. Our reputation is a key asset to our business, and our business may be affected by how we are perceived in the marketplace. Our reputation is a key asset to our business.
There can be no assurance that we will be able to retain our existing senior management or attract additional qualified team members. 15 Our reputation is a key asset to our business, and our business may be affected by how we are perceived in the marketplace. Our reputation is a key asset to our business.
Changes to conditions in these states could lead to an increase in Dealer attrition or a reduction in demand for our service that could materially adversely affect our financial position, liquidity, and results of operations. 16 Reliance on our outsourced business functions could adversely affect our business.
Changes to conditions in these states could lead to an increase in Dealer attrition or a reduction in demand for our service that could materially adversely affect our financial position, liquidity, and results of operations. Reliance on our outsourced business functions could adversely affect our business.
We continue to forecast the expected collection rate of each Consumer Loan subsequent to assignment. These forecasts also serve as a critical assumption in our accounting for recognizing finance charge income and determining our allowance for credit losses.
We continue to forecast the expected collection rate for each Consumer Loan subsequent to assignment. These forecasts also serve as a critical assumption in our accounting for recognizing finance charge income and determining our allowance for credit losses.
We cannot guarantee that the revolving secured line of credit or the Warehouse facilities will continue to be available beyond their current maturity dates, on acceptable terms, or at all, or that we will be able to obtain additional financing on acceptable terms or at all.
We cannot guarantee that the revolving secured line of credit facility or the Warehouse facilities will continue to be available beyond their current maturity dates, on acceptable terms, or at all, or that we will be able to obtain additional financing on acceptable terms or at all.
In addition, the violation of any financial covenant under our revolving secured line of credit facility is an event of default or termination event under certain of the Term ABS facilities and our Warehouse facilities.
In addition, the violation of any financial covenant under our revolving secured line of credit facility is an event of default or termination event under certain of our Term ABS financings and our Warehouse facilities.
In the event our creditors accelerate the repayment of our debt, there can be no assurance that we would have sufficient assets to repay that debt, and our financial condition, liquidity, and results of operations would suffer. A violation of the terms of our Term ABS facilities or Warehouse facilities could have a material adverse impact on our operations.
In the event our creditors accelerate the repayment of our debt, there can be no assurance that we would have sufficient assets to repay that debt, and our financial condition, liquidity, and results of operations would suffer. 18 A violation of the terms of our Term ABS financings or Warehouse facilities could have a material adverse impact on our operations.
The regulations to which we are or may become subject could result in a material adverse effect on our business. Reference should be made to Item 1. Business “Regulation” for a discussion of regulatory risk factors. 23
The regulations to which we are or may become subject could result in a material adverse effect on our business. Reference should be made to Item 1. Business “Regulation” for a discussion of regulatory risk factors. 22
We are dependent on our senior management and the loss of any of these individuals or an inability to hire additional team members could adversely affect our ability to operate profitably. Our senior management average 15 years of experience with us. Our success is dependent upon the management and the leadership skills of this team.
We are dependent on our senior management and the loss of any of these individuals or an inability to hire additional team members could adversely affect our ability to operate profitably. Our senior management average over 14 years of experience with us. Our success is dependent upon the management and the leadership skills of this team.
Additionally, inflation, higher gasoline prices, increased focus on climate-related initiatives and regulation, declining stock market values, unstable real estate values, resets of adjustable rate mortgages to higher interest rates, increasing unemployment levels, general availability of consumer credit, or other factors that impact consumer confidence or disposable income could increase loss frequency and decrease consumer demand for automobiles as well as weaken collateral values of automobiles.
Additionally, inflation, higher gasoline prices, the deferral or resumption of student loan payments, increased focus on climate-related initiatives and regulation, declining stock market values, unstable real estate values, resets of adjustable rate mortgages to higher interest rates, increasing unemployment levels, general availability of consumer credit, or other factors that impact consumer confidence or disposable income could increase loss frequency and decrease consumer demand for automobiles as well as weaken collateral values of automobiles.
In addition, our competitors or other third parties may allege that our systems, processes, or technologies infringe their intellectual property rights. Our ability to integrate computer and telecommunications technologies into our business is essential to our success. Computer and telecommunications technologies are evolving rapidly and are characterized by short product life cycles.
In addition, our competitors or other third parties may allege that our proprietary systems, processes, or technologies infringe their intellectual property rights. Our ability to integrate computer and telecommunications technologies into our business is essential to our success. Computer and telecommunications technologies are evolving rapidly and, as a result, may be characterized by short product life cycles.
We currently utilize the following primary forms of debt financing: (1) a revolving secured line of credit; (2) revolving secured warehouse (“Warehouse”) facilities; (3) asset-backed secured financings (“Term ABS”); and (4) senior notes.
We currently utilize the following primary forms of debt financing: (1) a revolving secured line of credit facility; (2) revolving secured warehouse (“Warehouse”) facilities; (3) asset-backed secured financings (“Term ABS financings”); and (4) senior notes.
Our systems are dependent upon computer and telecommunications equipment, software systems, and internet access. The temporary or permanent loss of any components of these systems through hardware failures, software errors, operating malfunctions, the vulnerability of the internet, or otherwise could interrupt our business operations and harm our business.
Our systems, and those of our third-party service providers, are dependent upon computer and telecommunications equipment, software systems, and internet access. The temporary or permanent loss of any components of these systems through hardware failures, software errors, operating malfunctions, the vulnerability of the internet, or otherwise could interrupt our business operations and harm our business.
Changes in the laws or regulations affecting the availability, allocation, and/or cost of H-1B visas, eligibility for the H-1B visa category, or otherwise affecting the admission or retention of skilled foreign nationals by U.S. employers, or any increase in demand for H-1B visas relative to the limited supply of those visas, may adversely affect our ability to hire or retain foreign engineering personnel and may, as a result, increase our operating costs and impair our business operations.
Changes in the laws or regulations affecting the availability, allocation, and/or cost of H-1B visas, eligibility for the H-1B visa category, or otherwise affecting the admission or retention of skilled foreign nationals by U.S. employers, or any increase in demand for H-1B visas relative to the limited supply of those visas, may adversely affect our ability to hire or retain foreign engineering personnel and may, as a result, increase our operating costs and impair our business operations. 16 We may be unable to execute our business strategy due to current economic conditions.
During the year ended December 31, 2022, our five largest states (measured by advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program) contained 29.0% of our Dealers.
During the year ended December 31, 2023, our five largest states (measured by advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program) contained 27.7% of Dealers.
Because our business is focused on consumers who do not qualify for conventional automobile financing, the actual rates of delinquencies, defaults, repossessions, and losses on our Consumer Loans could be higher than those experienced in the general automobile finance industry, and could be more dramatically affected by a general economic downturn. 17 We rely on Dealers to originate Consumer Loans for assignment under our programs.
Because our business is focused on consumers who do not qualify for conventional automobile financing, the actual rates of delinquencies, defaults, repossessions, and losses on our Consumer Loans could be higher than those experienced in the general automobile finance industry, and could be more dramatically affected by a general economic downturn.
Financial market disruptions, as occurred during the early stages of the COVID-19 outbreak, that occur as a result of contagious-disease outbreaks or other public health emergencies could reduce our ability to access capital or our consumers’ ability to repay past or future Consumer Loans and could negatively affect our liquidity and results of operations.
Financial market disruptions that occur as a result of contagious-disease outbreaks or other public health emergencies could reduce our ability to access capital or our consumers’ ability to repay past or future Consumer Loans and could negatively affect our liquidity and results of operations.
Neary beneficially owned 11.4% of our common stock (representing, collectively, beneficial ownership of 46.8% of our common stock, after taking into account those shares reported as beneficially owned by more than one of these shareholders).
Neary beneficially owned 9.2% of our common stock (representing, collectively, beneficial ownership of 45.2% of our common stock, after taking into account those shares reported as beneficially owned by more than one of these shareholders).
The secure processing, maintenance, and transmission of this information is critical to our operations and business strategy. 22 If third parties or our team members are able to breach our network security, the network security of a third party that we share information with, or otherwise misappropriate our consumers’ and team members’ personal information, or if we give third parties or our team members improper access to our consumers’ and team members’ personal information, we could be subject to liability.
If third parties or our team members are able to breach our network security, the network security of a third party that we share information with, or otherwise misappropriate our consumers’ and team members’ personal information, or if we give third parties or our team members improper access to our consumers’ and team members’ personal information, we could be subject to liability.
We may not be successful in anticipating, managing, or adopting technological changes on a timely basis. While we believe that our existing information systems are sufficient to meet our current demands and continued expansion, our future growth may require additional investment in these systems. We cannot assure that adequate capital resources will be available to us at the appropriate time.
We may not be successful in anticipating, managing, or adopting technological changes on a timely basis. While we believe that our existing information systems are sufficient to meet our current demands and continued expansion, our future growth may require additional investment in these systems.
Under our Term ABS facilities and our Warehouse facilities, (1) we have various obligations and covenants as servicer and custodian of the Consumer Loans contributed thereto and in our individual capacity and (2) the special purpose subsidiaries to which we contribute Consumer Loans have various obligations and covenants.
Under our Term ABS financings and our Warehouse facilities, (1) we have various obligations and covenants as seller, servicer, and custodian of the Loans conveyed thereunder and in our individual capacity and (2) the special purpose subsidiaries to which we convey Loans have various obligations and covenants.
Decreased consumer demand for automobiles could negatively impact demand for our financing programs as well as weaken collateral values of automobiles, which could materially adversely affect our financial position, liquidity, and results of operations.
Decreased consumer demand for automobiles could negatively impact demand for our financing programs as well as weaken collateral values of automobiles, which could materially adversely affect our financial position, liquidity, and results of operations. Reliance on third parties to administer our ancillary product offerings could adversely affect our business and financial results.
Their interests may conflict with the interests of our other security holders. The beneficial ownership reported by Mr. Apple and Mr. Neary includes, in each case, beneficial ownership in their capacity as trustees of shares held in a trust established by our late founder, Donald Foss, for the benefit of members of Mr.
Their interests may conflict with the interests of our other security holders. 17 The beneficial ownership reported by Mr. Apple and Mr. Neary includes, in each case, beneficial ownership in their capacity as trustees of shares held in a marital trust established by our late founder, Donald Foss, and representing 9.2% of our common stock as of December 31, 2023.
This liability could include identity theft or other similar fraud-related claims. This liability could also include claims for other misuses or losses of personal information, including for unauthorized marketing purposes. Other liabilities could include claims alleging misrepresentation of our privacy and data security practices.
This liability could include identity theft or other similar fraud-related claims. This liability could also include claims for other misuses or losses of personal information, including for unauthorized marketing purposes.
Reliance on third parties to administer our ancillary product offerings could adversely affect our business and financial results. We have relationships with TPPs to administer vehicle service contracts and GAP underwritten by third party insurers and financed by us. We depend on these TPPs to evaluate and pay claims in an accurate and timely manner.
We have relationships with TPPs to administer vehicle service contracts and GAP underwritten by third-party insurers and financed by us. We depend on these TPPs to evaluate and pay claims in an accurate and timely manner.
Adverse changes in economic conditions, the automobile or finance industries, or the non-prime consumer market could adversely affect our financial position, liquidity, and results of operations, the ability of key vendors that we depend on to supply us with services, and our ability to enter into future financing transactions.
Additionally, if we are unsuccessful in maintaining and expanding our relationships with Dealers, we may be unable to accept Consumer Loans in the volume and on the terms that we anticipate. 14 Adverse changes in economic conditions, the automobile or finance industries, or the non-prime consumer market could adversely affect our financial position, liquidity, and results of operations, the ability of key vendors that we depend on to supply us with services, and our ability to enter into future financing transactions.
In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and personally identifiable information of our consumers and team members, on our computer networks.
In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and personally identifiable information of our consumers and team members, on our computer networks. The secure processing, maintenance, and transmission of this information is critical to our operations and business strategy.
It is possible as well that changes in climate and related environmental risks, perceptions of them, and governmental responses to them may occur more rapidly than our ability to adapt without disrupting our business which could have a material adverse effect on our financial position and results of operations. 18 A small number of our shareholders have the ability to significantly influence matters requiring shareholder approval and such shareholders have interests which may conflict with the interests of our other security holders.
It is possible as well that changes in climate and related environmental risks, perceptions of them, and governmental responses to them may occur more rapidly than our ability to adapt without disrupting our business, which could have a material adverse effect on our financial position and results of operations.
There can be no assurance that our forecasts will be accurate or that Consumer Loan performance will be as expected. In periods with changing economic conditions, accurately forecasting the performance of Consumer Loans is more difficult. In the event that our forecasts are not accurate, our financial position, liquidity, and results of operations could be materially adversely affected.
There can be no assurance that our forecasts will be accurate or that Consumer Loan performance will be as expected. In periods with changing economic conditions, accurately forecasting the performance of Consumer Loans is more difficult.
We monitor the interest rate environment and employ strategies designed to partially mitigate the impact of increases in interest rates.
We monitor the interest rate environment and employ strategies designed to partially mitigate the impact of increases in interest rates. We can provide no assurance, however, that our strategies will mitigate the impact of increases in interest rates.
A violation of any of these obligations or covenants by us or the special purpose subsidiaries, respectively, may result in our being unable to obtain additional funding under our Warehouse facilities, the termination of our servicing rights, and the loss of servicing fees, and may result in amounts outstanding under our Term ABS financings and our Warehouse facilities becoming immediately due and payable.
A violation of any of these obligations or covenants in any of our Term ABS financings or our Warehouse facilities by us or the special purpose subsidiaries, respectively, may result in an early termination of the revolving period, repurchase or indemnification obligations on our part, and the termination of our servicing rights (and, accordingly, the loss of servicing fees), and may further result in amounts outstanding under such Term ABS financings and Warehouse facilities becoming immediately due and payable.
We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to secure online transmission of confidential consumer and team member information.
Other liabilities could include claims alleging misrepresentation of our privacy and data security practices. 21 We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to secure online transmission of confidential consumer and team member information.
Foss’s family and representing 11.4% of our common stock as of December 31, 2022. The shares in the trust are subject to the terms of a shareholder agreement, entered into by Mr. Foss on January 3, 2017. Under the terms of that agreement that became applicable to the trustees of the trust upon Mr.
The shares in the trust are subject to the terms of a shareholder agreement, entered into by Mr. Foss on January 3, 2017. Under the terms of that agreement that became applicable to the trustees of the trust upon Mr.
Finally, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in finance charge revenue. Any sustained period of increased delinquencies, defaults, repossessions, or losses or increased servicing costs could also materially adversely affect our financial position, liquidity, and results of operations and our ability to enter into future financing transactions.
Any sustained period of increased delinquencies, defaults, repossessions, or losses or increased servicing costs could also materially adversely affect our financial position, liquidity, and results of operations and our ability to enter into future financing transactions.
The COVID-19 pandemic could continue to, and may materially—and any future contagious-disease outbreak or other public health emergency could materially—adversely affect our business, financial condition, liquidity, and results of operations and also intensify the risks described in the other risk factors disclosed in this Form 10-K.
A future contagious-disease outbreak or other public health emergency could materially adversely affect our business, financial condition, liquidity, and results of operations and also intensify the risks described in the other risk factors disclosed in this Form 10-K. The concentration of Dealers in several states could adversely affect us. Dealers are located throughout the United States.
We may be unable to execute our business strategy due to current economic conditions. Our financial position, liquidity, and results of operations depend on management’s ability to execute our business strategy.
Our financial position, liquidity, and results of operations depend on management’s ability to execute our business strategy.
High levels of Dealer attrition, due to a general economic downturn or otherwise, could materially adversely affect our operations. In addition, we rely on vendors to provide us with services we need to operate our business. Any disruption in our operations due to the untimely or discontinued supply of these services could substantially adversely affect our operations.
We rely on Dealers to originate Consumer Loans for assignment under our programs. High levels of Dealer attrition, due to a general economic downturn or otherwise, could materially adversely affect our operations. In addition, we rely on vendors to provide us with services we need to operate our business.
All Consumer Loans submitted to us for assignment are processed through our internet-based CAPS application, which enables our Dealers to interact with our proprietary credit scoring system. Our Consumer Loan servicing platform is also technology based. We rely on these systems to record and process significant amounts of data quickly and accurately.
Technology and Cybersecurity Risks Our dependence on technology could have a material adverse effect on our business. All Consumer Loans submitted to us for assignment are processed through our internet-based CAPS application. Our Consumer Loan servicing platform is also technology based. We rely on these systems to record and process significant amounts of data quickly and accurately.
These covenants limit the manner in which we can conduct our business and could prevent us from engaging in favorable business activities or financing future operations and capital needs and impair our ability to successfully execute our strategy and operate our business. 19 A breach of any of the covenants in our debt instruments would result in an event of default thereunder if not promptly cured or waived.
These covenants limit the manner in which we can conduct our business and could prevent us from engaging in favorable business activities or financing future operations and capital needs and impair our ability to successfully execute our strategy and operate our business.
The lack of availability from any or all of these Term ABS facilities and Warehouse facilities may have a material adverse effect on our financial position, liquidity, and results of operations. Our substantial debt could negatively impact our business, prevent us from satisfying our debt obligations, and adversely affect our financial condition.
The occurrence of any of the events described in the immediately-preceding paragraph could have a material adverse effect on our financial position, liquidity, and results of operations. Our substantial debt could negatively impact our business, prevent us from satisfying our debt obligations, and adversely affect our financial condition.
Disruptions in our workforce, decreases in collections from our consumers, declines in Consumer Loan assignments, or extended periods of economic or supply chain disruptions resulting from the COVID-19 pandemic or from future contagious-disease outbreaks or other public health emergencies could cause a material adverse effect on our financial position, liquidity, and results of operations.
Contagious-disease outbreaks or other public health emergencies could cause a deterioration in the U.S. economy and our industry, disruptions in our workforce, decreases in collections from our consumers, declines in Consumer Loan assignments, or extended periods of economic or supply chain disruptions.
Failure by our lenders to perform under the terms of our lending arrangements could cause us to incur additional costs that may adversely affect our liquidity, financial condition, and results of operations.
Failure by our lenders to perform under the terms of our lending arrangements could cause us to incur additional costs that may adversely affect our liquidity, financial condition, and results of operations. There can be no assurance that future disruptions in the financial sector will not occur that could have similar adverse effects on our business.
Providers of automobile financing have traditionally competed based on the interest rate charged, the quality of credit accepted, the flexibility of loan terms offered, and the quality of service provided to dealers and consumers.
Many of these companies are much larger and have greater financial resources than are available to us, and many have long standing relationships with automobile dealerships. Providers of automobile financing have traditionally competed based on the interest rate charged, the quality of credit accepted, the flexibility of loan terms offered, and the quality of service provided to dealers and consumers.
Although the cybersecurity incidents we have experienced to date have not had a material effect on our business, financial condition, or results of operations, there can be no assurance that cybersecurity incidents will not have a material adverse effect on us in the future.
Although Company systems and systems of third party service providers are subject to risks from cybersecurity threats and incidents, these have not materially affected the Company, including its business strategy, results of operations, or financial condition, though there can be no assurance that cybersecurity threats and incidents will not have a material adverse effect on us in the future.
Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us. The concentration of our Dealers in several states could adversely affect us. Dealers are located throughout the United States.
Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us. An outbreak of contagious disease or other public health emergency could materially and adversely affect our business, financial condition, liquidity, and results of operations.
Due to competition from traditional financing sources and non-traditional lenders, we may not be able to compete successfully. The automobile finance market for consumers who do not qualify for conventional automobile financing is large and highly competitive. The market is served by a variety of companies, including “buy here, pay here” dealerships.
The automobile finance market for consumers who do not qualify for conventional automobile financing is large and highly competitive. The market is served by a variety of companies, including “buy here, pay here” dealerships. The market is also currently served by banks, captive finance affiliates of automobile manufacturers, credit unions, and independent finance companies both publicly and privately owned.
The relief requested by plaintiffs varies but may include requests for compensatory, statutory, and punitive damages and injunctive relief, and plaintiffs may seek treatment as purported class actions. A significant judgment against us in connection with any litigation or arbitration could have a material adverse effect on our financial position, liquidity, and results of operations.
A significant judgment against us in connection with any litigation or arbitration or the requirement to pay filing fees for a large number of individual arbitration demands could have a material adverse effect on our financial position, liquidity, and results of operations.
As of December 31, 2022, based on filings made with the SEC and other information made available to us, Allan V. Apple beneficially owned 24.6% of our common stock, Prescott General Partners, LLC and its affiliates beneficially owned 18.3% of our common stock, Jill Foss Watson beneficially owned 16.2% of our common stock, and John P.
Apple beneficially owned 22.5% of our common stock, Prescott General Partners, LLC and its affiliates beneficially owned 18.7% of our common stock, Jill Foss Watson beneficially owned 16.5% of our common stock, and John P.
Increasing advance rates on Loans has the impact of reducing the return on capital we expect to earn on Loans. Additionally, if we are unsuccessful in maintaining and expanding our relationships with Dealers, we may be unable to accept Consumer Loans in the volume and on the terms that we anticipate.
Increasing advance rates on Loans has the impact of reducing the return on capital we expect to earn on Loans.
Removed
The market is also currently served by banks, captive finance affiliates of automobile manufacturers, credit unions, and independent finance companies both publicly and privately owned. Many of these companies are much larger and have greater financial resources than are available to us, and many have long standing relationships with automobile dealerships.
Added
In the event that our forecasts are not accurate in the aggregate, our financial position, liquidity, and results of operations could be materially adversely affected. Due to competition from traditional financing sources and non-traditional lenders, we may not be able to compete successfully.
Removed
An outbreak of contagious disease, such as the COVID-19 pandemic, or other public health emergency could materially and adversely affect our business, financial condition, liquidity, and results of operations. The COVID-19 pandemic caused a deterioration in the U.S. economy and our industry, resulted in a period of substantial economic and financial market turmoil and adversely affected our business.
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Any disruption in our operations due to the untimely or discontinued supply of these services could substantially adversely affect our operations. Finally, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in finance charge revenue.
Removed
In the early stages of the pandemic, certain state governments implemented social distancing guidelines, travel bans and restrictions, quarantines, stay-at-home orders, and shutdowns of non-essential businesses. These actions caused economic hardship in the areas in which they were implemented. Though such restrictions have lessened, uncertainty remains as to when economic conditions will fully return to normal.
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A small number of our shareholders have the ability to significantly influence matters requiring shareholder approval and such shareholders have interests which may conflict with the interests of our other security holders. As of December 31, 2023, based on filings made with the SEC and other information made available to us, Allan V.
Removed
Additionally, the automotive industry experienced many supply chain disruptions, which resulted in low dealer inventories and elevated used vehicle prices. As a result, we experienced a significant decline in Consumer Loan assignments.
Added
In addition, an event of default under our revolving credit facility would permit the lenders thereunder to terminate all commitments to extend further credit under our revolving credit facility.
Removed
While unit volume for the year ended December 31, 2022 increased from the prior year, it remained below pre-pandemic levels. 15 The ultimate impact of the COVID-19 pandemic, and the potential impact of future contagious-disease outbreaks or other public health emergencies, are highly uncertain.
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We cannot assure that adequate capital resources will be available to us at the appropriate time. 20 We depend on secure information technology, and a breach of our systems or those of our third-party service providers could result in our experiencing significant financial, legal, and reputational exposure and could materially adversely affect our business, financial condition, and results of operations.
Removed
We can provide no assurance, however, that our strategies will mitigate the impact of increases in interest rates. 20 The phaseout of the London Interbank Offered Rate (“LIBOR”), or the replacement of LIBOR with a different reference rate, could result in a material adverse effect on our business.
Added
We and our third-party service providers face ongoing threats to our systems and data and from time to time experience cyberattacks and other security incidents. There is no guarantee that our security controls, or those of our third-party service providers, will protect against all threats.
Removed
In July 2017, the United Kingdom Financial Conduct Authority, or the FCA (the authority that regulates LIBOR), announced that it would phase out LIBOR by the end of 2021. The FCA-regulated and authorized administrator of LIBOR indicated in 2020 that U.S.-dollar LIBOR for certain maturities would continue to be available until the end of June 2023.
Added
Our and our third-party service providers’ security measures may not be able to anticipate, prevent, detect or identify cybersecurity incidents in a timely manner or at all.
Removed
During 2022, we entered into amendments for most of our LIBOR-based facilities to transition to alternative benchmark rates. One of our Warehouse facilities and the corresponding interest rate cap agreement continue to utilize LIBOR as a benchmark for calculating the applicable interest rates.
Added
As a result, our computer systems, software, and networks, as well as those of our third-party service providers, are vulnerable to unauthorized access, computer viruses, malware attacks, and other events that could have a security impact beyond our control, and information we transmit and receive may be vulnerable to interception, misuse, or mishandling.
Removed
We plan to transition the remaining LIBOR-based facility and its related interest rate cap to an alternative benchmark.
Added
Cybersecurity incidents, including such occurrences that compromise information processed by, stored in, or transmitted through our computer systems and networks, or those of our third-party service providers, or that cause interruptions or malfunctions in our or our service providers’ operations could result in losses, loss of business by us and loss of confidence in us, consumer and Dealer dissatisfaction, significant litigation, regulatory exposures, and harm to our reputation, any of which could have a material adverse impact on our business, financial condition, and results of operations.
Removed
Any market volatility or disruption or changes in effective interest rates resulting from the discontinuance or replacement of LIBOR, or any failure to transition our remaining LIBOR-based facility and its related interest rate cap to an alternative benchmark, could adversely affect our access to the debt, securitization or derivative markets and increase our costs of funding and hedging.
Added
While we have not been materially affected by cybersecurity incidents to date, we may be required to expend significant additional resources in the future to enhance our security controls, modify our protective measures, investigate the circumstances surrounding cybersecurity incidents, and implement mitigation and remediation measures in response to cybersecurity incidents and new or more sophisticated threats, as well as in response to new regulations related to cybersecurity.
Removed
Such market volatility or disruption or higher costs of funding and hedging or any other similar increases in our cost of capital resulting from the phaseout or replacement of LIBOR could materially adversely affect our financial position, liquidity, and results of operations.
Added
Cybersecurity incidents may result in our being subject to fines, penalties, litigation (including securities fraud class action lawsuits) and regulatory investigation costs and settlements and other financial losses, which could have a material adverse effect on our business, financial condition and results of operations.
Removed
Alternatives to LIBOR that have been incorporated into our borrowings to date, such as the Bloomberg Short-Term Bank Yield Index Rate (“BSBY”) and the Secured Overnight Financing Rate (“SOFR”), are relatively new reference rates with limited histories. The future performance of these alternatives to LIBOR cannot reliably be predicted based on their limited historical performance.
Added
The relief requested by plaintiffs varies but may include requests for compensatory, statutory, and punitive damages and injunctive relief, and plaintiffs may seek treatment as purported class actions or they may file individual arbitration demands for which arbitration providers may request separate filings fees.
Removed
Additionally, any other successor rates to LIBOR or successors to these initial alternatives to LIBOR may have different characteristics from those of LIBOR and these initial alternatives.
Removed
As a result, the manner in which and degree to which the interest rates on our variable-interest-rate debt fluctuate relative to market interest rates may be more difficult to predict than prior to the phaseout of LIBOR.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe COVID-19 pandemic had a significant impact on our work environment, as the vast majority of our team members began working remotely. Because our remote operations and processes proved successful early on, we now pursue a “remote first” strategy to take advantage of the national talent pool and an increased rate of team member satisfaction.
Biggest changeBecause our remote operations and processes proved successful early on, we now pursue a “remote first” strategy to take advantage of the national talent pool and an increased rate of team member satisfaction.
If we were to reclassify one or both of these buildings as held for sale, we would be required to record an impairment charge to reduce the carrying value of the buildings held for sale to their estimated market value less costs to sell.
If we were to reclassify one or both of these buildings as held for sale, we would be required to record an impairment charge to reduce the carrying value of the buildings held for sale to their estimated market value less costs to sell. 24
As there is currently a significant amount of unoccupied office space in Southfield, we believe the market value of our buildings and improvements, land and land improvements, and office furniture and equipment is significantly less than their combined carrying value of $38.2 million.
As there is currently a significant amount of unoccupied office space in Southfield, we believe the market value of our buildings and improvements, land and land improvements, and office furniture and equipment is significantly less than their combined carrying value of $34.4 million.
We have a mortgage loan from a commercial bank that is secured by a first mortgage lien on the second office property. We previously leased office space in Henderson, Nevada. We elected not to renew that lease, and it expired on December 31, 2022.
We have a mortgage loan from a commercial bank that is secured by a first mortgage lien on the second office property. The COVID-19 pandemic had a significant impact on our work environment, as the vast majority of our team members began working remotely.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe relief requested by plaintiffs varies but may include requests for compensatory, statutory, and punitive damages and injunctive relief, and plaintiffs may seek treatment as purported class actions. An adverse ultimate disposition in any action to which we are a party or otherwise subject could have a material adverse impact on our financial position, liquidity, and results of operations.
Biggest changeAn adverse ultimate disposition in any action to which we are a party or otherwise subject, or the requirement to pay filing fees for a large number of individual arbitration demands, could have a material adverse impact on our financial position, liquidity, and results of operations.
As the assignee of Consumer Loans originated by Dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against Dealers. We may also have disputes and litigation with Dealers. The claims may allege, among other theories of liability, that we breached our Dealer servicing agreement.
As the assignee of Consumer Loans originated by Dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against Dealers. We may also have disputes and litigation with Dealers. The claims may allege, among other theories of liability, that we breached the Dealer servicing agreement.
Added
The relief requested by plaintiffs varies but may include requests for compensatory, statutory, and punitive damages and injunctive relief, and plaintiffs may seek treatment as purported class actions or they may file individual arbitration demands for which arbitration providers may request separate filing fees.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAll rights reserved. 25 Stock Repurchases The following table summarizes our stock repurchases for the three months ended December 31, 2022: ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1 through October 31, 2022 — $ — — 365,838 November 1 through November 30, 2022 — — — 365,838 December 1 through December 31, 2022 207,769 455.68 207,769 158,069 207,769 $ 455.68 207,769 (1) On September 28, 2021, our board of directors authorized the repurchase by us from time to time of up to two million shares of our common stock (the “September 2021 Authorization”).
Biggest changeAll rights reserved. 26 Stock Repurchases The following table summarizes our stock repurchases for the three months ended December 31, 2023: ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1 through October 31, 2023 1,650 (2) $ 407.27 — 1,886,035 November 1 through November 30, 2023 — — — 1,886,035 December 1 through December 31, 2023 102,174 (3) 515.23 80,028 1,806,007 103,824 $ 513.52 80,028 (1) On August 21, 2023, our board of directors authorized the repurchase by us from time to time of up to two million shares of our common stock (the "August 2023 Authorization").
The September 2021 Authorization, which was announced on October 1, 2021, does not have a specified expiration date. Repurchases under the September 2021 Authorization may be made in the open market, through privately negotiated transactions, through block trades, pursuant to trading plans adopted in accordance with Rule 10b5‑1 under the Securities Exchange Act of 1934, or otherwise.
The August 2023 Authorization, which was announced on August 24, 2023, does not have a specified expiration date. Repurchases under the August 2023 Authorization may be made in the open market, through privately negotiated transactions, through block trades, pursuant to trading plans adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934 or otherwise.
Financial Services Index. The comparison assumes that $100 was invested on January 1, 2018 in our common stock and in the foregoing indices and assumes the reinvestment of dividends. Source: Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2022. Index Data: Copyright NASDAQ OMX, Inc. Used with permission. All rights reserved. Index Data: Copyright Dow Jones, Inc.
The comparison assumes that $100 was invested on December 31, 2018 in our common stock and in the foregoing indices and assumes the reinvestment of dividends. Source: Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2024. Index Data: Copyright NASDAQ OMX, Inc. Used with permission. All rights reserved. Index Data: Copyright Dow Jones, Inc. Used with permission.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on The Nasdaq Global Select Market ® under the symbol “CACC”. Holders As of February 2, 2023, we had 84 shareholders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on The Nasdaq Global Select Market ® under the symbol “CACC.” Holders As of February 1, 2024, we had 75 shareholders of record of our common stock.
Stock Performance Graph The following graph compares the percentage change in the cumulative total shareholder return on our common stock during the period beginning January 1, 2018 and ending on December 31, 2022 with the cumulative total return on the NASDAQ Composite Index and a peer group index based upon approximately 100 companies included in the Dow Jones U.S.
Stock Performance Graph The following graph compares the percentage change in the cumulative total shareholder return on our common stock during the five-year period ended December 31, 2023 with the cumulative total return on the NASDAQ Composite Index and a peer group index based upon approximately 100 companies included in the Dow Jones U.S. Financial Services Index.
Added
(2) Amount includes 1,650 shares of common stock released to us by team members as payment of tax withholdings upon the conversion of restricted stock units to common stock and the vesting of restricted stock units.
Added
(3) Amount includes 22,146 shares of common stock released to us by team members as payment of tax withholdings upon the conversion of restricted stock units to common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table provides additional information on the changes in Consumer Loan unit volume and active Dealers: For the Years Ended December 31, For the Years Ended December 31, 2022 2021 % Change 2021 2020 % Change Consumer Loan unit volume from new active Dealers 28,223 18,267 54.5 % 18,267 30,968 -41.0 % New active Dealers (1) 2,819 2,094 34.6 % 2,094 2,730 -23.3 % Average volume per new active Dealer 10.0 8.7 14.9 % 8.7 11.3 -23.0 % Attrition (2) -6.9 % -7.7 % -7.7 % -8.3 % (1) New active Dealers are Dealers who enrolled in our program and have received funding for their first Loan from us during the period.
Biggest changeThe following table summarizes the changes in Consumer Loan unit volume and active Dealers: For the Years Ended December 31, For the Years Ended December 31, 2023 2022 % Change 2022 2021 % Change Consumer Loan unit volume 332,499 280,467 18.6 % 280,467 268,730 4.4 % Active Dealers (1) 14,174 11,901 19.1 % 11,901 11,410 4.3 % Average volume per active Dealer 23.5 23.6 -0.4 % 23.6 23.6 0.0 % Consumer Loan unit volume from Dealers active both periods 282,008 259,999 8.5 % 250,114 250,214 0.0 % Dealers active both periods 9,506 9,506 — 8,691 8,691 — Average volume per Dealer active both periods 29.7 27.4 8.5 % 28.8 28.8 0.0 % Consumer Loan unit volume from Dealers not active both periods 50,491 20,468 146.7 % 30,353 18,516 63.9 % Dealers not active both periods 4,668 2,395 94.9 % 3,210 2,719 18.1 % Average volume per Dealer not active both periods 10.8 8.5 27.1 % 9.5 6.8 39.7 % (1) Active Dealers are Dealers who have received funding for at least one Consumer Loan during the period. 34 The following table provides additional information on the changes in Consumer Loan unit volume and active Dealers: For the Years Ended December 31, For the Years Ended December 31, 2023 2022 % Change 2022 2021 % Change Consumer Loan unit volume from new active Dealers 46,741 28,223 65.6 % 28,223 18,267 54.5 % New active Dealers (1) 4,070 2,819 44.4 % 2,819 2,094 34.6 % Average volume per new active Dealer 11.5 10.0 15.0 % 10.0 8.7 14.9 % Attrition (2) -7.3 % -6.9 % -6.9 % -7.7 % (1) New active Dealers are Dealers who enrolled in our program and have received funding for their first Loan from us during the period.
We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate of each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast.
We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate for each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast.
Because our business is focused on consumers who do not qualify for conventional automobile financing, the actual rates of delinquencies, defaults, repossessions, and losses on our Consumer Loans could be higher than those experienced in the general automobile finance industry and could be more dramatically affected by a general economic downturn. Premiums Earned Nature of Estimates Required.
Because our business is focused on consumers who do not qualify for conventional automobile financing, the actual rates of delinquencies, defaults, repossessions, and losses on our Consumer Loans could be higher than those experienced in the general automobile finance industry and could be more dramatically affected by a general economic downturn. 41 Premiums Earned Nature of Estimates Required.
We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and involve a high degree of subjective or complex judgment, and the use of different estimates or assumptions could produce materially different financial results. 36 Finance Charge Revenue & Allowance for Credit Losses Nature of Estimates Required.
We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and involve a high degree of subjective or complex judgment, and the use of different estimates or assumptions could produce materially different financial results. Finance Charge Revenue & Allowance for Credit Losses Nature of Estimates Required.
If the various financing alternatives were to become limited or unavailable to us, our operations and liquidity could be materially and adversely affected. 40 Market Risk We are exposed primarily to market risks associated with movements in interest rates. Our policies and procedures prohibit the use of financial instruments for speculative purposes.
If the various financing alternatives were to become limited or unavailable to us, our operations and liquidity could be materially and adversely affected. Market Risk We are exposed primarily to market risks associated with movements in interest rates. Our policies and procedures prohibit the use of financial instruments for speculative purposes.
The credit quality indicators considered in our model include attributes contained in the consumer’s credit bureau report, data contained in the consumer’s credit application, the structure of the proposed transaction, vehicle information, and other factors. We continue to evaluate the expected collection rate of each Consumer Loan subsequent to assignment primarily through the monitoring of consumer payment behavior.
The credit quality indicators considered in our model include attributes contained in the consumer’s credit bureau report, data contained in the consumer’s credit application, the structure of the proposed transaction, vehicle information, and other factors. We continue to evaluate the expected collection rate for each Consumer Loan subsequent to assignment primarily through the monitoring of consumer payment behavior.
To the extent we prevail in matters for which a liability has been established or are required to pay amounts in excess of our established liability, our effective income tax rate in future periods could be materially affected. Liquidity and Capital Resources We need capital to maintain and grow our business.
To the extent we prevail in matters for which a liability has been established or are required to pay amounts in excess of our established liability, our effective income tax rate in future periods could be materially affected. 42 Liquidity and Capital Resources We need capital to maintain and grow our business.
As of December 31, 2022, we had $200.0 million in floating rate debt outstanding under Term ABS 2022-2, which was covered by an interest rate cap with a cap rate of 6.50% on the underlying benchmark rate.
As of December 31, 2023, we had $200.0 million in floating rate debt outstanding under Term ABS 2022-2, which was covered by an interest rate cap with a cap rate of 6.50% on the underlying benchmark rate.
We estimate the amount and timing of future collections and Dealer Holdback payments. These estimates impact Loans receivable and allowance for credit losses on our balance sheet and finance charges and provision for credit losses on our income statement. Assumptions and Approaches Used.
We estimate the amount and timing of future collections and Dealer Holdback payments. These estimates impact Loans receivable and allowance for credit losses on our balance sheet and finance charges and provision for credit losses on our income statement. 39 Assumptions and Approaches Used.
Payments of Dealer Holdback and accelerated Dealer Holdback are not included. (2) Presented as a percentage of total forecasted collections. The risk of a material change in our forecasted collection rate declines as the Consumer Loans age.
Payments of Dealer Holdback and accelerated Dealer Holdback are not included. (2) Presented as a percentage of total forecasted collections. 31 The risk of a material change in our forecasted collection rate declines as the Consumer Loans age.
For 2018 and prior Consumer Loan assignments, the risk of a material forecast variance is modest, as we have currently realized in excess of 90% of the expected collections. Conversely, the forecasted collection rates for more recent Consumer Loan assignments are less certain as a significant portion of our forecast has not been realized.
For 2019 and prior Consumer Loan assignments, the risk of a material forecast variance is modest, as we have currently realized in excess of 90% of the expected collections. Conversely, the forecasted collection rates for more recent Consumer Loan assignments are less certain as a significant portion of our forecast has not been realized.
For every 100-basis-point increase in interest rates on Term ABS 2021-1 up to the cap rate of 5.50%, annual after-tax earnings would decrease by approximately $0.8 million, assuming we maintain a level amount of floating rate debt.
For every 100-basis-point increase in interest rates on Term ABS 2021-1 up to the cap rate of 5.46%, annual after-tax earnings would decrease by approximately $0.8 million, assuming we maintain a level amount of floating rate debt.
Expected future collections are forecasted for each individual Consumer Loan based on the historical performance of Consumer Loans with similar characteristics, adjusted for recent trends in payment patterns and economic conditions. Our forecast of expected future collections includes estimates for prepayments and post-contractual-term cash flows.
Expected future collections are forecasted for each individual Consumer Loan based on the historical performance of Consumer Loans with similar characteristics, adjusted for recent trends in payment patterns. Our forecast of expected future collections includes estimates for prepayments and post-contractual-term cash flows.
Our primary sources of capital are cash flows from operating activities, collections of Consumer Loans, and borrowings under: (1) a revolving secured line of credit; (2) Warehouse facilities; (3) Term ABS financings; and (4) senior notes.
Our primary sources of capital are cash flows from operating activities, collections of Consumer Loans, and borrowings under: (1) our revolving secured line of credit facility; (2) Warehouse facilities; (3) Term ABS financings; and (4) senior notes.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
For additional information, see Note 2 and Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
For additional information, see Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference.
The following table compares our forecast of Consumer Loan collection rates as of December 31, 2022, with the forecasts as of December 31, 2021, as of December 31, 2020, and at the time of assignment, segmented by year of assignment: Forecasted Collection Percentage as of (1) Current Forecast Variance from Consumer Loan Assignment Year December 31, 2022 December 31, 2021 December 31, 2020 Initial Forecast December 31, 2021 December 31, 2020 Initial Forecast 2013 73.5 % 73.4 % 73.4 % 72.0 % 0.1 % 0.1 % 1.5 % 2014 71.7 % 71.5 % 71.6 % 71.8 % 0.2 % 0.1 % -0.1 % 2015 65.2 % 65.1 % 65.2 % 67.7 % 0.1 % 0.0 % -2.5 % 2016 63.8 % 63.6 % 63.6 % 65.4 % 0.2 % 0.2 % -1.6 % 2017 64.7 % 64.4 % 64.1 % 64.0 % 0.3 % 0.6 % 0.7 % 2018 65.2 % 65.1 % 64.0 % 63.6 % 0.1 % 1.2 % 1.6 % 2019 66.6 % 66.5 % 64.4 % 64.0 % 0.1 % 2.2 % 2.6 % 2020 67.8 % 67.9 % 64.8 % 63.4 % -0.1 % 3.0 % 4.4 % 2021 66.2 % 66.5 % — 66.3 % -0.3 % — -0.1 % 2022 66.3 % — — 67.5 % — — -1.2 % (1) Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment.
The following table compares our aggregated forecast of Consumer Loan collection rates as of December 31, 2023, with the aggregated forecasts as of December 31, 2022, as of December 31, 2021, and at the time of assignment, segmented by year of assignment: Forecasted Collection Percentage as of (1) Current Forecast Variance from Consumer Loan Assignment Year December 31, 2023 December 31, 2022 December 31, 2021 Initial Forecast December 31, 2022 December 31, 2021 Initial Forecast 2014 71.7 % 71.7 % 71.5 % 71.8 % 0.0 % 0.2 % -0.1 % 2015 65.2 % 65.2 % 65.1 % 67.7 % 0.0 % 0.1 % -2.5 % 2016 63.8 % 63.8 % 63.6 % 65.4 % 0.0 % 0.2 % -1.6 % 2017 64.7 % 64.7 % 64.4 % 64.0 % 0.0 % 0.3 % 0.7 % 2018 65.5 % 65.2 % 65.1 % 63.6 % 0.3 % 0.4 % 1.9 % 2019 66.9 % 66.6 % 66.5 % 64.0 % 0.3 % 0.4 % 2.9 % 2020 67.6 % 67.8 % 67.9 % 63.4 % -0.2 % -0.3 % 4.2 % 2021 64.5 % 66.2 % 66.5 % 66.3 % -1.7 % -2.0 % -1.8 % 2022 62.7 % 66.3 % — 67.5 % -3.6 % — -4.8 % 2023 67.4 % — — 67.5 % — — -0.1 % (1) Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment.
There are various restrictive covenants to which we are subject under each financing arrangement, and we were in compliance with those covenants as of December 31, 2022.
There are various restrictive covenants to which we are subject under each financing arrangement, and we were in compliance with those covenants as of December 31, 2023.
As of December 31, 2022, we had interest rate cap agreements outstanding to manage the interest rate risk on Warehouse Facility II, Warehouse Facility IV, Warehouse Facility V and Warehouse Facility VIII. However, as of December 31, 2022, there was no floating rate debt outstanding under these facilities.
As of December 31, 2023, we had interest rate cap agreements outstanding to manage the interest rate risk on Warehouse Facility IV, Warehouse Facility V, and Warehouse Facility VIII. However, as of December 31, 2023, there was no floating rate debt outstanding under these facilities.
Access to Capital Our strategy for accessing capital on acceptable terms needed to maintain and grow the business is to: (1) maintain consistent financial performance; (2) maintain modest financial leverage; and (3) maintain multiple funding sources. Our funded debt to equity ratio was 2.8 to 1 as of December 31, 2022.
Access to Capital Our strategy for accessing capital on acceptable terms needed to maintain and grow the business is to: (1) maintain consistent financial performance; (2) maintain modest financial leverage; and (3) maintain multiple funding sources. Our funded debt to equity ratio was 2.9 to 1 as of December 31, 2023.
Forecasted Collection % as of Spread % as of Consumer Loan Assignment Year December 31, 2022 Initial Forecast Advance % (1) December 31, 2022 Initial Forecast % of Forecast Realized (2) 2013 73.5 % 72.0 % 47.6 % 25.9 % 24.4 % 99.8 % 2014 71.7 % 71.8 % 47.7 % 24.0 % 24.1 % 99.6 % 2015 65.2 % 67.7 % 44.5 % 20.7 % 23.2 % 99.1 % 2016 63.8 % 65.4 % 43.8 % 20.0 % 21.6 % 98.6 % 2017 64.7 % 64.0 % 43.2 % 21.5 % 20.8 % 97.3 % 2018 65.2 % 63.6 % 43.5 % 21.7 % 20.1 % 92.7 % 2019 66.6 % 64.0 % 44.0 % 22.6 % 20.0 % 83.7 % 2020 67.8 % 63.4 % 43.9 % 23.9 % 19.5 % 69.6 % 2021 66.2 % 66.3 % 46.0 % 20.2 % 20.3 % 47.7 % 2022 66.3 % 67.5 % 47.4 % 18.9 % 20.1 % 14.6 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program as a percentage of the initial balance of the Consumer Loans.
Forecasted Collection % as of Spread % as of Consumer Loan Assignment Year December 31, 2023 Initial Forecast Advance % (1) December 31, 2023 Initial Forecast % of Forecast Realized (2) 2014 71.7 % 71.8 % 47.7 % 24.0 % 24.1 % 99.8 % 2015 65.2 % 67.7 % 44.5 % 20.7 % 23.2 % 99.5 % 2016 63.8 % 65.4 % 43.8 % 20.0 % 21.6 % 99.1 % 2017 64.7 % 64.0 % 43.2 % 21.5 % 20.8 % 98.7 % 2018 65.5 % 63.6 % 43.5 % 22.0 % 20.1 % 96.9 % 2019 66.9 % 64.0 % 44.0 % 22.9 % 20.0 % 92.5 % 2020 67.6 % 63.4 % 43.9 % 23.7 % 19.5 % 83.7 % 2021 64.5 % 66.3 % 46.0 % 18.5 % 20.3 % 69.1 % 2022 62.7 % 67.5 % 47.4 % 15.3 % 20.1 % 43.5 % 2023 67.4 % 67.5 % 46.2 % 21.2 % 21.3 % 14.2 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program as a percentage of the initial balance of the Consumer Loans.
For information regarding these financings and the covenants included in the related documents, see Note 9 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference. On June 16, 2022, we completed a $350.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
For information regarding these financings and the covenants included in the related documents, see Note 9 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference. On March 16, 2023, we completed a $400.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
Additionally, higher gasoline prices, increased focus on climate-related initiatives and regulation, declining stock market values, unstable real estate values, resets of adjustable rate mortgages to higher interest rates, increasing unemployment levels, general availability of consumer credit, or other factors that impact consumer confidence or disposable income could increase loss frequency and decrease consumer demand for automobiles as well as weaken collateral values of automobiles.
Additionally, inflation, higher gasoline prices, the deferral or resumption of student loan payments, increased focus on climate-related initiatives and regulation, declining stock market values, unstable real estate values, resets of adjustable rate mortgages to higher interest rates, increasing unemployment levels, general availability of consumer credit, or other factors that impact consumer confidence or disposable income could increase loss frequency and decrease consumer demand for automobiles as well as weaken collateral values of automobiles.
Key Factors. Variances in the amount and timing of future net cash flows from current estimates could materially impact earnings in future periods. A 1% decline in the forecasted future net cash flows on Loans as of December 31, 2022 would have reduced 2022 consolidated net income by approximately $45.9 million.
Key Factors. Variances in the amount and timing of future net cash flows from current estimates could materially impact earnings in future periods. A 1% decline in the forecasted future net cash flows on Loans as of December 31, 2023 would have reduced 2023 consolidated net income by approximately $51.2 million.
Dealer Loans Purchased Loans Consumer Loan Assignment Year Forecasted Collection % (1) Advance % (1)(2) Spread % Forecasted Collection % (1) Advance % (1)(2) Spread % 2013 73.4 % 47.2 % 26.2 % 74.3 % 51.5 % 22.8 % 2014 71.6 % 47.2 % 24.4 % 72.5 % 51.8 % 20.7 % 2015 64.5 % 43.4 % 21.1 % 68.9 % 50.2 % 18.7 % 2016 63.0 % 42.1 % 20.9 % 66.0 % 48.6 % 17.4 % 2017 64.0 % 42.1 % 21.9 % 66.3 % 45.8 % 20.5 % 2018 64.6 % 42.7 % 21.9 % 66.4 % 45.2 % 21.2 % 2019 66.3 % 43.1 % 23.2 % 67.2 % 45.6 % 21.6 % 2020 67.7 % 43.0 % 24.7 % 68.0 % 45.5 % 22.5 % 2021 66.0 % 45.1 % 20.9 % 66.7 % 47.7 % 19.0 % 2022 65.8 % 46.4 % 19.4 % 67.4 % 50.1 % 17.3 % (1) The forecasted collection rates and advance rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.
Dealer Loans Purchased Loans Consumer Loan Assignment Year Forecasted Collection % (1) Advance % (1)(2) Spread % Forecasted Collection % (1) Advance % (1)(2) Spread % 2014 71.6 % 47.2 % 24.4 % 72.6 % 51.8 % 20.8 % 2015 64.6 % 43.4 % 21.2 % 68.9 % 50.2 % 18.7 % 2016 63.0 % 42.1 % 20.9 % 66.1 % 48.6 % 17.5 % 2017 64.0 % 42.1 % 21.9 % 66.3 % 45.8 % 20.5 % 2018 64.9 % 42.7 % 22.2 % 66.8 % 45.2 % 21.6 % 2019 66.5 % 43.1 % 23.4 % 67.5 % 45.6 % 21.9 % 2020 67.4 % 43.0 % 24.4 % 67.8 % 45.5 % 22.3 % 2021 64.2 % 45.1 % 19.1 % 65.0 % 47.7 % 17.3 % 2022 62.0 % 46.4 % 15.6 % 64.3 % 50.1 % 14.2 % 2023 66.4 % 44.8 % 21.6 % 70.1 % 49.8 % 20.3 % (1) The forecasted collection rates and advance rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.
The decrease in consolidated net income was primarily due to an increase in provision for credit losses, a decrease in finance charges, and an increase in operating expenses. The increase in provision for credit losses was primarily due to a decline in Consumer Loan performance.
The decrease in consolidated net income was primarily due to an increase in provision for credit losses, a decrease in finance charges, and an increase in operating expenses.
Variances in the pattern of future claims from our current estimates would impact the timing of premiums recognized in future periods. A 10% change in premiums earned for the year ended December 31, 2022 would have affected 2022 consolidated net income by approximately $4.8 million. 38 Contingencies Nature of Estimates Required.
Variances in the pattern of future claims from our current estimates would impact the timing of premiums recognized in future periods. A 10% change in premiums earned for the year ended December 31, 2023 would have affected 2023 consolidated net income by approximately $6.1 million. Contingencies Nature of Estimates Required.
As of December 31, 2022 and 2021, the net Dealer Loans receivable balance was 64.7% and 61.3%, respectively, of the total net Loans receivable balance. 33 Results of Operations The following is a discussion of our 2022 and 2021 results of operations and income statement data on a consolidated basis, including year-to-year comparisons between 2022 and 2021.
As of December 31, 2023 and 2022, the net Dealer Loans receivable balance was 67.7% and 64.7%, respectively, of the total net Loans receivable balance. 35 Results of Operations The following is a discussion of our 2023 and 2022 results of operations and income statement data on a consolidated basis, including year-to-year comparisons between 2023 and 2022.
The results for 2022 include the impact of forecasting methodology changes implemented during the first quarter, which upon implementation increased our estimate of future net cash flows by $95.7 million and reduced our provision for credit losses by $70.6 million.
The $59.7 million decrease in forecasted net cash flows during 2022 included the impact of forecasting methodology changes implemented during the first quarter of 2022, which upon implementation increased our estimate of future net cash flows by $95.7 million and reduced our provision for credit losses by $70.6 million.
As of December 31, 2022, we had $30.9 million of floating rate debt outstanding on our revolving secured line of credit, without interest rate protection. For every 100-basis-point increase in interest rates on our revolving secured line of credit, annual after-tax earnings would decrease by approximately $0.2 million, assuming we maintain a level amount of floating rate debt.
As of December 31, 2023, we had $79.2 million of floating rate debt outstanding under our revolving secured lines of credit, without interest rate protection. For every 100-basis-point increase in interest rates on our revolving secured lines of credit, annual after-tax earnings would decrease by approximately $0.6 million, assuming we maintain a level amount of floating rate debt.
As of December 31, 2022, we did not have a balance outstanding under Warehouse Facility VI, which does not have interest rate protection. As of December 31, 2022, we had $100.0 million in floating rate debt outstanding under Term ABS 2021-1, which was covered by an interest rate cap with a cap rate of 5.50% on the underlying benchmark rate.
As of December 31, 2023, we did not have a balance outstanding under Warehouse Facility II and Warehouse Facility VI, which do not have interest rate protection. 44 As of December 31, 2023, we had $100.0 million in floating rate debt outstanding under Term ABS 2021-1, which was covered by an interest rate cap with a cap rate of 5.46% on the underlying benchmark rate.
The following table shows the percentage of Consumer Loans assigned to us under each of the programs for each of the last three years: Unit Volume Dollar Volume (1) For the Years Ended December 31, Portfolio Program Purchase Program Portfolio Program Purchase Program 2020 64.1 % 35.9 % 60.6 % 39.4 % 2021 67.9 % 32.1 % 65.0 % 35.0 % 2022 73.5 % 26.5 % 69.8 % 30.2 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
The following table shows the percentage of Consumer Loans assigned to us under each of the programs for each of the last three years: Unit Volume Dollar Volume (1) For the Years Ended December 31, Portfolio Program Purchase Program Portfolio Program Purchase Program 2021 67.9 % 32.1 % 65.0 % 35.0 % 2022 73.5 % 26.5 % 69.8 % 30.2 % 2023 74.0 % 26.0 % 70.7 % 29.3 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
The financing has an expected annualized cost of approximately 5.4% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the contributed Loans.
The financing has an expected average annualized cost of 7.3% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
Based on the actual principal amounts outstanding under our revolving secured line of credit, our Warehouse facilities, our Term ABS financings, and our senior notes as of December 31, 2022, the forecasted principal amounts outstanding on all other debt, and the actual interest rates in effect as of December 31, 2022, interest is expected to be approximately $164.5 million during 2023; $145.7 million during 2024; and $99.9 million during 2025 and thereafter.
Based on the actual principal amounts outstanding under our revolving secured line of credit facility, our Warehouse facilities, our Term ABS financings, and our senior notes as of December 31, 2023, the forecasted principal amounts outstanding on all other debt, and the actual interest rates in effect as of December 31, 2023, interest is expected to be approximately $303.0 million during 2024; $249.7 million during 2025; and $219.4 million during 2026 and thereafter.
Prior to this amendment, the amount of the facility was set to decrease by $35.0 million on June 22, 2022; however, this amendment increased the amount of the facility by $10.0 million, resulting in a net decrease of $25.0 million, from $435.0 million to $410.0 million.
Prior to this amendment, the amount of the facility was set to decrease by $25.0 million on June 22, 2023; however, this amendment increased the amount of the facility by $5.0 million, resulting in a net decrease of $20.0 million, from $410.0 million to $390.0 million.
The decrease of $56.3 million, or 3.2%, was due to a decline in the average net Loans receivable balance, partially offset by an increase in the average yield on our Loan portfolio, as follows: (Dollars in millions) For the Years Ended December 31, 2022 2021 Change Average net Loans receivable balance $ 6,311.3 $ 6,694.9 $ (383.6) Average yield on our Loan portfolio 26.7 % 26.0 % 0.7 % The following table summarizes the impact each component had on the overall decrease in finance charges for the year ended December 31, 2022: (In millions) Impact on finance charges: For the Year Ended December 31, 2022 Due to a decrease in the average net Loans receivable balance $ (99.8) Due to an increase in the average yield 43.5 Total decrease in finance charges $ (56.3) The decrease in the average net Loans receivable balance was primarily due to the principal collected on Loans receivable exceeding the dollar volume of new Consumer Loan assignments.
The increase of $69.1 million, or 4.1%, was primarily due to an increase in the average net Loans receivable balance, as follows: (Dollars in millions) For the Years Ended December 31, 2023 2022 Change Average net Loans receivable balance $ 6,627.8 $ 6,311.3 $ 316.5 Average yield on our Loan portfolio 26.5 % 26.7 % -0.2 % The following table summarizes the impact each component had on the overall increase in finance charges for the year ended December 31, 2023: (In millions) Impact on finance charges: For the Year Ended December 31, 2023 Due to an increase in the average net Loans receivable balance $ 84.6 Due to a decrease in the average yield (15.5) Total increase in finance charges $ 69.1 37 The increase in the average net Loans receivable balance was primarily due to the dollar volume of new Consumer Loan assignments exceeding the principal collected on Loans receivable.
Under CECL, changes in the amount and timing of forecasted net cash flows are recorded as a provision for credit losses in the period of change. 37 The removal of the COVID forecast adjustment and the implementation of the enhanced forecasting methodology during the first quarter of 2022 impacted forecasted net cash flows and provision for credit losses as follows: (In millions) Increase / (Decrease) in Forecasting Methodology Changes Forecasted Net Cash Flows Provision for Credit Losses Removal of COVID forecast adjustment $ 149.5 $ (118.5) Implementation of enhanced forecasting methodology (53.8) 47.9 Total $ 95.7 $ (70.6) Our provision for credit losses for the year ended December 31, 2022, included: • $343.7 million provision for credit losses on new Consumer Loan assignments, which reduced consolidated net income by $264.6 million, or $19.42 per diluted share; and • $137.7 million provision for credit losses on forecast changes related to changes in the amount and timing of expected future net cash flows, which reduced consolidated net income by $106.0 million, or $7.78 per diluted share.
The removal of the COVID forecast adjustment and the implementation of the enhanced forecasting methodology during the first quarter of 2022 impacted forecasted net cash flows and provision for credit losses as follows: (In millions) Increase / (Decrease) in Forecasting Methodology Changes Forecasted Net Cash Flows Provision for Credit Losses Removal of COVID forecast adjustment $ 149.5 $ (118.5) Implementation of enhanced forecasting methodology (53.8) 47.9 Total $ 95.7 $ (70.6) Our provision for credit losses for the year ended December 31, 2023, included: • $322.5 million provision for credit losses on new Consumer Loan assignments, which reduced consolidated net income by $248.3 million, or $19.08 per diluted share; and • $413.7 million provision for credit losses on forecast changes related to changes in the amount and timing of expected future net cash flows, which reduced consolidated net income by $318.5 million, or $24.48 per diluted share.
New Accounting Update Not Yet Adopted See Note 2 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference, for information concerning the following new accounting update and the impact of the implementation of this update on our financial statements: • Troubled Debt Restructurings and Vintage Disclosures. 41 Forward-Looking Statements We make forward-looking statements in this report and may make such statements in future filings with the SEC.
New Accounting Update Not Yet Adopted See Note 2 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference, for information concerning the following new accounting update and the impact of the implementation of this update on our financial statements: • Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. • Improvements to Reportable Segment Disclosures • Improvements to Income Tax Disclosures Forward-Looking Statements We make forward-looking statements in this report and may make such statements in future filings with the SEC.
As of December 31, 2022 and December 31, 2021, we had $4,590.7 million and $4,616.3 million, respectively, of total balance sheet indebtedness.
As of December 31, 2023 and December 31, 2022, we had $5,067.5 million and $4,590.7 million, respectively, of total balance sheet indebtedness.
(4) Purchase obligations consist primarily of contractual obligations related to our information system and facility needs. Based upon anticipated cash flows, management believes that cash flows from operations and our various financing alternatives will provide sufficient financing for debt maturities and for future operations. Our ability to borrow funds may be impacted by economic and financial market conditions.
Based upon anticipated cash flows, management believes that cash flows from operations and our various financing alternatives will provide sufficient financing for debt maturities and for future operations. Our ability to borrow funds may be impacted by economic and financial market conditions.
The decrease in the spread from 2021 to 2022 was primarily the result of the performance of 2022 Consumer Loans, which performed worse than our initial estimates. 30 The following table compares our forecast of Consumer Loan collection rates as of December 31, 2022 with the forecasts at the time of assignment, for Dealer Loans and Purchased Loans separately: Dealer Loans Purchased Loans Forecasted Collection Percentage as of (1) Forecasted Collection Percentage as of (1) Consumer Loan Assignment Year December 31, 2022 Initial Forecast Variance December 31, 2022 Initial Forecast Variance 2013 73.4 % 72.1 % 1.3 % 74.3 % 71.6 % 2.7 % 2014 71.6 % 71.9 % -0.3 % 72.5 % 70.9 % 1.6 % 2015 64.5 % 67.5 % -3.0 % 68.9 % 68.5 % 0.4 % 2016 63.0 % 65.1 % -2.1 % 66.0 % 66.5 % -0.5 % 2017 64.0 % 63.8 % 0.2 % 66.3 % 64.6 % 1.7 % 2018 64.6 % 63.6 % 1.0 % 66.4 % 63.5 % 2.9 % 2019 66.3 % 63.9 % 2.4 % 67.2 % 64.2 % 3.0 % 2020 67.7 % 63.3 % 4.4 % 68.0 % 63.6 % 4.4 % 2021 66.0 % 66.3 % -0.3 % 66.7 % 66.3 % 0.4 % 2022 65.8 % 67.3 % -1.5 % 67.4 % 68.0 % -0.6 % (1) The forecasted collection rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.
The following table compares our forecast of aggregate Consumer Loan collection rates as of December 31, 2023 with the forecasts at the time of assignment, for Dealer Loans and Purchased Loans separately: Dealer Loans Purchased Loans Forecasted Collection Percentage as of (1) Forecasted Collection Percentage as of (1) Consumer Loan Assignment Year December 31, 2023 Initial Forecast Variance December 31, 2023 Initial Forecast Variance 2014 71.6 % 71.9 % -0.3 % 72.6 % 70.9 % 1.7 % 2015 64.6 % 67.5 % -2.9 % 68.9 % 68.5 % 0.4 % 2016 63.0 % 65.1 % -2.1 % 66.1 % 66.5 % -0.4 % 2017 64.0 % 63.8 % 0.2 % 66.3 % 64.6 % 1.7 % 2018 64.9 % 63.6 % 1.3 % 66.8 % 63.5 % 3.3 % 2019 66.5 % 63.9 % 2.6 % 67.5 % 64.2 % 3.3 % 2020 67.4 % 63.3 % 4.1 % 67.8 % 63.6 % 4.2 % 2021 64.2 % 66.3 % -2.1 % 65.0 % 66.3 % -1.3 % 2022 62.0 % 67.3 % -5.3 % 64.3 % 68.0 % -3.7 % 2023 66.4 % 66.8 % -0.4 % 70.1 % 69.4 % 0.7 % (1) The forecasted collection rates presented for Dealer Loans and Purchased Loans reflect the Consumer Loan classification at the time of assignment.
A summary as of December 31, 2022 of our material financial obligations requiring future repayments is as follows: (In millions) Payments Due as of December 31, 2022 In less than 12 months In 12 months or more Total Long-term debt, including current maturities (1) $ 1,507.9 $ 3,108.6 $ 4,616.5 Dealer Holdback (2) 215.7 741.5 957.2 Operating lease obligations (3) 0.7 0.7 1.4 Purchase obligations (4) 2.7 7.1 9.8 Total financial obligations $ 1,727.0 $ 3,857.9 $ 5,584.9 (1) The amounts presented consist solely of principal and do not reflect deferred debt issuance costs of $22.4 million and unamortized debt discount of $3.4 million.
A summary as of December 31, 2023 of our material financial obligations requiring future repayments is as follows: (In millions) Payments Due as of December 31, 2023 In less than 12 months In 12 months or more Total Long-term debt, including current maturities (1) $ 953.4 $ 4,153.2 $ 5,106.6 Dealer Holdback (2) 202.9 562.9 765.8 Operating lease obligations (3) 1.5 1.5 3.0 Purchase obligations (4) 7.0 4.6 11.6 Total financial obligations $ 1,164.8 $ 4,722.2 $ 5,887.0 (1) The amounts presented consist solely of principal and do not reflect deferred debt issuance costs of $36.6 million and unamortized debt discount of $2.5 million.
On November 3, 2022, we completed a $389.9 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
On November 30, 2023, we completed a $200.0 million Term ABS financing, which was used to repay outstanding indebtedness and for general corporate purposes.
Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints. During 2022, unit and dollar volumes increased 4.4% and 14.5%, respectively, as the number of active Dealers increased 4.3% while average volume per active Dealer remained consistent with prior year.
Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints. During 2023, unit and dollar volumes increased 18.6% and 14.4%, respectively, as the number of active Dealers increased 19.1% while average volume per active Dealer decreased 0.4%.
Our results for the year ended December 31, 2022 included: • A decrease in forecasted collection rates for Consumer Loans assigned in 2021 and 2022, which decreased forecasted net cash flows from our loan portfolio by $59.7 million, or 0.7%. • Forecasted profitability per Consumer Loan assignment that significantly exceeded our initial estimates for Consumer Loans assigned in 2018 through 2020 and was significantly less than our initial estimates for Consumer Loans assigned in 2022. • An increase in Consumer Loan assignment volume, as unit and dollar volumes increased 4.4% and 14.5%, respectively, as compared to 2021. • Stock repurchases of approximately 1.5 million shares, which represented 10.4% of the shares outstanding at the beginning of the year.
Our results for the year ended December 31, 2022 included: • A decrease in forecasted collection rates The decrease in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $59.7 million, or 0.7%, compared to an increase in forecasted collection rates during 2021 that increased forecasted net cash flows from our Loan portfolio by $326.1 million, or 3.4%. • A decrease in forecasted profitability for Consumer Loans assigned in 2021 and 2022 Forecasted profitability for Consumer Loans assigned in 2022 was lower than our initial estimates and forecasted profitability for Consumer Loans assigned in 2021 was lower than our estimates at December 31, 2021, due to a decline in forecasted collection rates during 2022. • Growth in Consumer Loan assignment volume and a decline in the average balance of our Loan portfolio Unit and dollar volumes grew 4.4% and 14.5%, respectively, as compared to 2021.
Consumer Loan Volume The following table summarizes changes in Consumer Loan assignment volume in each of the last three years as compared to the same period in the previous year: Year over Year Percent Change For the Year Ended December 31, Unit Volume Dollar Volume (1) 2020 -7.5 % -3.5 % 2021 -21.4 % -13.0 % 2022 4.4 % 14.5 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
We currently utilize the following primary forms of debt financing: (1) our revolving secured line of credit facility; (2) Warehouse facilities; (3) Term ABS financings; and (4) senior notes. 33 Consumer Loan Volume The following table summarizes changes in Consumer Loan assignment volume in each of the last three years as compared to the same period in the previous year: Year over Year Percent Change For the Year Ended December 31, Unit Volume Dollar Volume (1) 2021 -21.4 % -13.0 % 2022 4.4 % 14.5 % 2023 18.6 % 14.4 % (1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.
We also recognize provision for credit losses on forecast changes in the amount and timing of expected future net cash flows subsequent to assignment.
We recognize provision for credit losses on new Consumer Loan assignments for contractual net cash flows that are not expected to be realized at the time of assignment. We also recognize provision for credit losses on forecast changes in the amount and timing of expected future net cash flows subsequent to assignment.
We do not believe the CECL methodology we employ under GAAP provides sufficient transparency into the economics of our business due to its asymmetry requiring us to recognize a significant provision for credit losses expense at the time of assignment for contractual net cash flows we never expect to realize and to recognize in subsequent periods finance charge revenue that is significantly in excess of our expected yields.
Under the GAAP methodology we employ, which is known as the current expected credit loss model, or CECL, we are required to recognize: • a significant provision for credit losses expense at the time of the Loan’s assignment to us for contractual net cash flows we do not expect to realize; and • finance charge revenue in subsequent periods that is significantly in excess of our expected yields.
Our provision for credit losses for the year ended December 31, 2021, included: • $365.1 million provision for credit losses on new Consumer Loan assignments, which reduced consolidated net income by $281.1 million, or $17.46 per diluted share; and • $356.7 million reversal of provision for credit losses on forecast changes related to changes in the amount and timing of expected future net cash flows, which increased consolidated net income by $274.7 million, or $17.06 per diluted share.
Our provision for credit losses for the year ended December 31, 2022, included: • $343.7 million provision for credit losses on new Consumer Loan assignments, which reduced consolidated net income by $264.6 million, or $19.42 per diluted share; and • $137.7 million provision for credit losses on forecast changes related to changes in the amount and timing of expected future net cash flows, which reduced consolidated net income by $106.0 million, or $7.78 per diluted share.
Dollar volume increased more than unit volume in 2022 due to an increase in the average advance paid per unit. This increase was the result of an increase in the average size of the Consumer Loans assigned, primarily due to an increase in the average vehicle selling price.
This increase was the result of an increase in the average size of the Consumer Loans assigned, primarily due to an increase in the average vehicle selling price.
Cash and cash equivalents decreased to $7.7 million as of December 31, 2022 from $23.3 million as of December 31, 2021. As of December 31, 2022 and December 31, 2021, we had $1,554.1 million and $1,532.4 million, respectively, in unused and available lines of credit.
Cash and cash equivalents increased to $13.2 million as of December 31, 2023 from $7.7 million as of December 31, 2022. As of December 31, 2023 and December 31, 2022, we had $1,505.8 million and $1,554.1 million, respectively, in unused and available lines of credit.
(2) We have contractual obligations to pay Dealer Holdback to our Dealers. Payments of Dealer Holdback are contingent upon the receipt of consumer payments and the repayment of advances. The amounts presented represent our forecast as of December 31, 2022. (3) A lease liability of $1.3 million is recognized within accounts payable and accrued liabilities in our consolidated balance sheets.
(2) We have contractual obligations to pay Dealer Holdback to Dealers. Payments of Dealer Holdback are contingent upon the receipt of consumer payments and the repayment of advances. The amounts presented represent our forecast as of December 31, 2023.
Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates in the table.
Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates. 32 The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate) as of December 31, 2023 for Dealer Loans and Purchased Loans separately.
The increase of $30.3 million, or 57.1%, was primarily due to: • A $20.4 million increase in ancillary product profit sharing income, primarily due to a decrease in average claim rates on GAP contracts and $5.9 million of income recognized in 2022 related to an inception-to-date adjustment to premium recognition timing based on our historical claims experience on GAP contracts. • A $5.6 million increase in remarketing fee income for fees related to the repossession and remarketing of vehicles, which included $3.1 million of fees charged to dealers in 2022 for repossession activity that occurred from August 2020 through December 2021. • A $5.4 million increase in interest income earned on restricted cash and cash equivalents primarily due to an increase in benchmark interest rates.
The decrease of $16.5 million, or 19.8%, was primarily due to: • A $26.5 million decrease in ancillary product profit sharing income, primarily due to: • Increases in average claim rates and volume of claims on GAP contracts. • $5.9 million of income recognized in 2022 related to an inception-to-date adjustment to premium recognition timing based on our historical claims experience on GAP contracts. • A $2.7 million decrease in remarketing fee income for fees charged to Dealers related to the repossession and remarketing of vehicles.
The financing has an expected annualized cost of approximately 8.5% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the contributed Loans. On December 15, 2022, we completed a $200.0 million Term ABS financing, which was used to repay outstanding indebtedness.
The financing has an expected average annualized cost of 6.8% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
The following table summarizes the provision for credit losses for each of these components: (In millions) For the Years Ended December 31, Provision for Credit Losses 2022 2021 Change New Consumer Loan assignments $ 343.7 $ 365.1 $ (21.4) Forecast changes 137.7 (356.7) 494.4 Total $ 481.4 $ 8.4 $ 473.0 The decrease in provision for credit losses related to new Consumer Loan assignments was due to a decrease in the average provision for credit losses per Consumer Loan assignment primarily due to a decrease in Purchased Loans as a percentage of total unit volume, partially offset by a 4.4% increase in Consumer Loan assignment unit volume.
The following table summarizes the provision for credit losses for each of these components: (In millions) For the Years Ended December 31, Provision for Credit Losses 2023 2022 Change Forecast changes $ 413.7 $ 137.7 $ 276.0 New Consumer Loan assignments 322.5 343.7 (21.2) Total $ 736.2 $ 481.4 $ 254.8 The increase in provision for credit losses related to forecast changes was primarily due to a greater decline in Consumer Loan performance during 2023 compared to 2022.
The spread between the forecasted collection rate and the advance rate has ranged from 18.9% to 25.9% over the last 10 years. The spreads in 2019 and 2020 were positively impacted by Consumer Loan performance, which has exceeded our initial estimates by a greater margin than the other years presented.
The spreads with respect to 2019 and 2020 Consumer Loans have been positively impacted by Consumer Loan performance, which has exceeded our initial estimates by a greater margin than the other years presented.
Additionally, 2022 Consumer Loans in our Purchased Loan portfolio had a lower initial spread, primarily due to the advance rate increasing by a greater margin than the initial forecast on 2022 Consumer Loans in our Purchased Loan portfolio.
The increase was primarily as a result of Consumer Loan performance, as the performance of 2022 Dealer Loans has been significantly lower than our initial estimates. Additionally, 2023 Dealer Loans had a higher initial spread, due to the advance rate decreasing by a greater margin than the initial forecast.
The COVID-19 pandemic created conditions that increased the level of uncertainty associated with our estimate of the amount and timing of future net cash flows from our Loan portfolio.
The implementation of the adjustment to our forecasting methodology during the second quarter of 2023 reduced forecasted net cash flows by $44.5 million, or 0.5%, and increased provision for credit losses by $71.3 million. 40 The COVID-19 pandemic created conditions that increased the level of uncertainty associated with our estimate of the amount and timing of future net cash flows from our Loan portfolio.
With this in mind, we establish advance rates that are intended to allow us to achieve acceptable levels of profitability, even if collection rates are less than we initially forecast. 29 The following table presents forecasted Consumer Loan collection rates, advance rates, the spread (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of December 31, 2022, as well as the forecasted collection rates and spread at the time of assignment.
The following table presents aggregate forecasted Consumer Loan collection rates, advance rates, and spreads (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of December 31, 2023, as well as forecasted collection rates and spreads at the time of assignment.
The decrease in provision for credit losses was primarily due to an improvement in Consumer Loan performance and a decrease in new Consumer Loan assignment volume.
The decrease in provision for credit losses related to new Consumer Loan assignments was due to a 20.9% decrease in the average provision per new Consumer Loan assignment, partially offset by an 18.6% increase in Consumer Loan assignment unit volume.
Contractual repayments include both principal and interest. Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates in the table.
Forecasted collection rates are negatively impacted by canceled Consumer Loans as the contractual amount owed is not removed from the denominator for purposes of computing forecasted collection rates. 29 Consumer Loans assigned in 2018 through 2020 have yielded forecasted collection results significantly better than our initial estimates, while Consumer Loans assigned in 2015, 2016, 2021, and 2022 have yielded forecasted collection results significantly worse than our initial estimates.
On June 16, 2022, we extended the date on which our $300.0 million Warehouse Facility IV will cease to revolve from November 17, 2023 to May 20, 2025. On June 22, 2022, we extended the maturity of our revolving secured line of credit facility from June 22, 2024 to June 22, 2025.
On June 22, 2023, we extended the maturity of our revolving secured line of credit facility from June 22, 2025 to June 22, 2026.
For the year ended December 31, 2021, forecasted collection rates improved for Consumer Loans assigned in 2017 through 2021 and were generally consistent with expectations at the start of the period for all other assignment years presented. 28 The changes in forecasted collection rates impacted forecasted net cash flows (forecasted collections less forecasted Dealer Holdback payments) as follows: (In millions) For the Years Ended December 31, Increase (Decrease) in Forecasted Net Cash Flows 2022 2021 2020 Dealer Loans $ (41.6) $ 87.7 $ (41.1) Purchased Loans (18.1) 238.4 (5.2) Total $ (59.7) $ 326.1 $ (46.3) The following table presents information on the average Consumer Loan assignment for each of the last 10 years: Average Consumer Loan Assignment Year Consumer Loan (1) Advance (2) Initial Loan Term (in months) 2013 $ 15,445 $ 7,344 47 2014 15,692 7,492 47 2015 16,354 7,272 50 2016 18,218 7,976 53 2017 20,230 8,746 55 2018 22,158 9,635 57 2019 23,139 10,174 57 2020 24,262 10,656 59 2021 25,632 11,790 59 2022 27,242 12,924 60 (1) Represents the repayments that we were contractually owed on Consumer Loans at the time of assignment, which include both principal and interest.
Forecasting collection rates accurately is challenging, so we have designed our business model to produce acceptable levels of profitability across our portfolio, even if Loan performance is less than forecasted in the aggregate. 30 The following table presents information on Consumer Loan assignments for each of the last 10 years: Average Total Assignment Volume Consumer Loan Assignment Year Consumer Loan (1) Advance (2) Initial Loan Term (in months) Unit Volume Dollar Volume (2) (in millions) 2014 $ 15,692 $ 7,492 47 223,998 $ 1,675.7 2015 16,354 7,272 50 298,288 2,167.0 2016 18,218 7,976 53 330,710 2,635.5 2017 20,230 8,746 55 328,507 2,873.1 2018 22,158 9,635 57 373,329 3,595.8 2019 23,139 10,174 57 369,805 3,772.2 2020 24,262 10,656 59 341,967 3,641.2 2021 25,632 11,790 59 268,730 3,167.8 2022 27,242 12,924 60 280,467 3,625.3 2023 27,025 12,475 61 332,499 4,147.8 (1) Represents the repayments that we were contractually owed on Consumer Loans at the time of assignment, which include both principal and interest.
For the year ended December 31, 2021, consolidated net income was $958.3 million, or $59.52 per diluted share, compared to $421.0 million, or $23.47 per diluted share, for the same period in 2020. The increase in consolidated net income was primarily due to a decrease in provision for credit losses and an increase in finance charges.
For the year ended December 31, 2023, consolidated net income was $286.1 million, or $21.99 per diluted share, compared to $535.8 million, or $39.32 per diluted share, for the same period in 2022. The decrease in consolidated net income was primarily due to increases in provision for credit losses and interest expense.
For additional information, see Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference. Provision for Income Taxes. For the year ended December 31, 2022, the effective income tax rate increased to 24.7% from 24.0% for the year ended December 31, 2021.
For additional information, see Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference. 38 During 2022, we reduced our estimate of future net cash flows by $59.7 million, or 0.7%, to reflect a decline in Consumer Loan performance during the period.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 (Dollars in millions, except per share data) For the Years Ended December 31, 2022 2021 $ Change % Change Revenue: Finance charges $ 1,686.3 $ 1,742.6 $ (56.3) -3.2 % Premiums earned 62.7 60.3 2.4 4.0 % Other income 83.4 53.1 30.3 57.1 % Total revenue 1,832.4 1,856.0 (23.6) -1.3 % Costs and expenses: Salaries and wages (1) 262.0 218.1 43.9 20.1 % General and administrative (1) 88.7 100.3 (11.6) -11.6 % Sales and marketing (1) 75.6 65.3 10.3 15.8 % Provision for credit losses 481.4 8.4 473.0 5,631.0 % Interest 166.6 164.2 2.4 1.5 % Provision for claims 46.4 38.8 7.6 19.6 % Total costs and expenses 1,120.7 595.1 525.6 88.3 % Income before provision for income taxes 711.7 1,260.9 (549.2) -43.6 % Provision for income taxes 175.9 302.6 (126.7) -41.9 % Net income $ 535.8 $ 958.3 $ (422.5) -44.1 % Net income per share: Basic $ 39.50 $ 59.57 $ (20.07) -33.7 % Diluted $ 39.32 $ 59.52 $ (20.20) -33.9 % Weighted average shares outstanding: Basic 13,563,885 16,085,823 (2,521,938) -15.7 % Diluted 13,625,081 16,100,552 (2,475,471) -15.4 % (1) Operating expenses $ 426.3 $ 383.7 $ 42.6 11.1 % 34 Finance Charges.
For additional information, see Note 2 and Note 5 to the consolidated financial statements contained in Item 8 of this Form 10-K, which is incorporated herein by reference. 36 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 (Dollars in millions, except per share data) For the Years Ended December 31, 2023 2022 $ Change % Change Revenue: Finance charges $ 1,755.4 $ 1,686.3 $ 69.1 4.1 % Premiums earned 79.6 62.7 16.9 27.0 % Other income 66.9 83.4 (16.5) -19.8 % Total revenue 1,901.9 1,832.4 69.5 3.8 % Costs and expenses: Salaries and wages 280.2 262.0 18.2 6.9 % General and administrative 87.2 88.7 (1.5) -1.7 % Sales and marketing 91.7 75.6 16.1 21.3 % Total operating expenses 459.1 426.3 32.8 7.7 % Provision for credit losses on forecast changes 413.7 137.7 276.0 200.4 % Provision for credit losses on new Consumer Loan assignments 322.5 343.7 (21.2) -6.2 % Total provision for credit losses 736.2 481.4 254.8 52.9 % Interest 266.5 166.6 99.9 60.0 % Provision for claims 70.7 46.4 24.3 52.4 % Loss on extinguishment of debt 1.8 — 1.8 — % Total costs and expenses 1,534.3 1,120.7 413.6 36.9 % Income before provision for income taxes 367.6 711.7 (344.1) -48.3 % Provision for income taxes 81.5 175.9 (94.4) -53.7 % Net income $ 286.1 $ 535.8 $ (249.7) -46.6 % Net income per share: Basic $ 22.09 $ 39.50 $ (17.41) -44.1 % Diluted $ 21.99 $ 39.32 $ (17.33) -44.1 % Weighted average shares outstanding: Basic 12,953,424 13,563,885 (610,461) -4.5 % Diluted 13,010,735 13,625,081 (614,346) -4.5 % Finance Charges.
During 2021, we increased our estimate of future net cash flows by $326.1 million, or 3.4%, to reflect improvements in Consumer Loan performance during the period.
During 2023, we decreased our estimate of future net cash flows by $206.3 million, or 2.3%, to reflect a decline in forecasted collection rates during the period and slowed our forecasted net cash flow timing to reflect a decrease in Consumer Loan prepayments to below-average levels.
The following table presents forecasted Consumer Loan collection rates, advance rates, and the spread (the forecasted collection rate less the advance rate) as of December 31, 2022 for Dealer Loans and Purchased Loans separately. All amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).
All amounts are presented as a percentage of the initial balance of the Consumer Loan (principal + interest).
The increase of $473.0 million, or 5,631.0%, was primarily due to an increase in provision for credit losses on forecast changes. We recognize provision for credit losses on new Consumer Loan assignments for contractual net cash flows that are not expected to be realized at the time of assignment.
Provision for Credit Losses . The increase of $254.8 million, or 52.9%, was primarily due to an increase in provision for credit losses on forecast changes, partially offset by a decrease in provision for credit losses on new Consumer Loan assignments.
Under the amendment effecting the extension, the date on which the financing will cease to revolve has been extended from February 15, 2023 to December 16, 2024. The amendment also increased the interest rate under the financing from SOFR plus 208.5 basis points to SOFR plus 220 basis points.
On April 28, 2023, we extended the date on which our $400.0 million Warehouse Facility II will cease to revolve from April 30, 2024 to April 30, 2026. The interest rate on borrowings under the facility has been increased from LIBOR plus 175 basis points to SOFR plus 230 basis points.
Consumer Loans assigned in 2013 and 2018 through 2020 have yielded forecasted collection results significantly better than our initial estimates, while Consumer Loans assigned in 2015, 2016, and 2022 have yielded forecasted collection results significantly worse than our initial estimates. For all other assignment years presented, actual results have been close to our initial estimates.
For all other assignment years presented, actual results have been close to our initial estimates.
Although the advance rate on Purchased Loans is higher as compared to the advance rate on Dealer Loans, Purchased Loans do not require us to pay Dealer Holdback. 31 The spread on Dealer Loans decreased from 20.9% in 2021 to 19.4% in 2022, primarily as a result of the performance of the 2022 Consumer Loans in our Dealer Loan portfolio, which performed worse than our initial estimates by a greater margin than those assigned to us in 2021.
Although the advance rate on Purchased Loans is higher as compared to the advance rate on Dealer Loans, Purchased Loans do not require us to pay Dealer Holdback. The spread as of December 31, 2023 on 2023 Dealer Loans was 21.6%, as compared to a spread of 15.6% on 2022 Dealer Loans.
The spread on Purchased Loans decreased from 19.0% in 2021 to 17.3% in 2022 primarily as a result of the performance of the 2022 Consumer Loans in our Purchased Loan portfolio, which performed worse than our initial estimates, while the performance of the Consumer Loans in our Purchased Loan portfolio assigned during 2021 has exceeded our initial estimates.
The increase was primarily as a result of Consumer Loan performance, as the performance of 2022 Purchased Loans has been significantly lower than our initial estimates, while the performance of 2023 Purchased Loans has exceeded our initial estimates. Additionally, 2023 Purchased Loans had a higher initial spread, due to a higher initial forecast and a lower advance rate.
During 2021, unit and dollar volumes decreased 21.4% and 13.0%, respectively, as the number of active Dealers declined 10.1% while average volume per active Dealer decreased 12.3%.
During 2022, unit and dollar volumes increased 4.4% and 14.5%, respectively, as the number of active Dealers increased 4.3% while average volume per active Dealer remained consistent with the prior year. Dollar volume increased more than unit volume in 2022 due to an increase in the average advance paid per unit.
The increase was primarily due to changes in state and local tax laws that were enacted during the third quarter of 2022 and non-deductible executive compensation expense. The impact of non-deductible executive compensation expense on our effective income tax rate increased in magnitude from 2021 to 2022 due to a decrease in pre-tax income.
The decrease was primarily due to the impact of tax benefits related to our stock-based compensation plan and the settlement of an uncertain tax position for state income taxes during the second quarter of 2023, partially offset by an increase in non-deductible executive compensation expense.
The interest rate on borrowings under the facility has been increased from SOFR plus 235 basis points to SOFR plus 245 basis points. On December 27, 2022, we extended the $100.0 million Term ABS financing that we entered into on January 29, 2021 and to which we refer as Term ABS 2021-1.
On September 21, 2023, we extended the date on which our $200.0 million Warehouse Facility VIII will cease to revolve from September 1, 2024 to September 21, 2026. The interest rate on borrowings under the facility has been increased from SOFR plus 201.4 basis points to SOFR plus 225 basis points.
The financing will bear interest at SOFR plus 235 basis points, and it will revolve for 36 months, after which it will amortize based upon the cash flows on the contributed Loans.
The financing has an expected average annualized cost of 7.3% (including the initial purchasers’ fees and other costs), and it will revolve for 24 months, after which it will amortize based upon the cash flows on the underlying Loans.
Our results for the year ended December 31, 2021 included: • An increase in forecasted collection rates for Consumer Loans assigned in 2017 through 2021, which increased forecasted net cash flows from our loan portfolio by $326.1 million, or 3.4%. • Forecasted profitability per Consumer Loan assignment that exceeded our initial estimate for Consumer Loans assigned in 2021 and significantly exceeded our initial estimates for Consumer Loans assigned in 2018 through 2020. • A decline in Consumer Loan assignment volume, as unit and dollar volumes declined 21.4% and 13.0%, respectively, as compared to 2020. • Stock repurchases of approximately 2.9 million shares, which represented 16.8% of the shares outstanding at the beginning of the year. 27 Critical Success Factors Critical success factors include our ability to accurately forecast Consumer Loan performance, access capital on acceptable terms, and maintain or grow Consumer Loan volume at the level and on the terms that we anticipate, with the objective to maximize economic profit over the long term.
Our results for the year ended December 31, 2023 included: • A larger decrease in forecasted collection rates The decrease in forecasted collection rates decreased forecasted net cash flows from our Loan portfolio by $206.3 million, or 2.3%, compared to a decrease in forecasted collection rates during 2022 that decreased forecasted net cash flows from our Loan portfolio by $59.7 million, or 0.7%. • A decrease in forecasted profitability for Consumer Loans assigned in 2020 through 2022 Forecasted profitability was lower than our estimates at December 31, 2022, due to a decline in forecasted collection rates during 2023 and slower forecasted net cash flow timing during 2023, primarily as a result of a decrease in Consumer Loan prepayments to below-average levels. • Growth in Consumer Loan assignment volume and the average balance of our Loan portfolio Unit and dollar volumes grew 18.6% and 14.4%, respectively, as compared to 2022.
Removed
The decrease in finance charges was primarily the result of a decrease in the average net Loans receivable balance, which was primarily due to the principal collected on Loans receivable exceeding the dollar volume of new Consumer Loan assignments. The increase in operating expenses was primarily related to an increase in the number of team members in our engineering department.

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