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In addition, there have been significant inflation and labor shortages over the past two years which could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown or recession.
−Removed: The rapid development and fluidity of this situation preclude any accurate prediction as to the ultimate impact of inflation, rising interest rates and other consequences to the responses to COVID-19.
+Added: The rapid development and fluidity of this situation preclude any accurate prediction as to the ultimate impact of inflation and rising interest rates and other consequences to the responses to COVID-19.
The global response to COVID-19 presents material uncertainty and risk with respect to our performance and financial results.
−Removed: For additional information, see "—Other Risks to Our Business— The reaction to COVID-19 caused severe disruptions in the U.S.
−Removed: economy and may have further adverse impacts on our performance, results of operations and access to capital."
Our Cash Flows and Net Income Are Dependent Upon Payments from Our Investments in Receivables
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Unfavorable economic and political conditions, including future recessions, political instability, geopolitical turmoil and foreign hostilities, energy disruptions, inflation, disease, pandemics and other serious health events, also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
−Removed: The reaction to COVID-19 adversely impacted global commercial activity and contributed to significant volatility in financial markets.
−Removed: COVID-19, in part, caused disruptions in global supply chains that adversely impacted a number of industries, such as transportation, hospitality and entertainment.
−Removed: In addition, there have been significant inflation and labor shortages over the past two years.
−Removed: The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.
−Removed: The rapid development and fluidity of this situation preclude any accurate prediction as to the ultimate adverse impact of the coronavirus response.
−Removed: Nevertheless, COVID-19 presents material uncertainty and risk with respect to our performance and financial results.
We may in the future have difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may cause us to reduce the volume of receivables we purchase or otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows.
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The recent growth of our investments in private label credit and general purpose credit card receivables may not be indicative of our ability to grow such receivables in the future.
−Removed: Our period-end managed receivables balance for private label credit and general purpose credit card receivables grew to $2,317.6 million at March 31, 2024, from $2,055.0 million at March 31, 2023.
+Added: Our period-end managed receivables balance for private label credit and general purpose credit card receivables grew to $2,414.7 million at June 30, 2024, from $2,173.4 million at June 30, 2023.
The amount of such receivables has fluctuated significantly over the course of our operating history.
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Reliance upon relationships with a few large retailers in the private label credit operations may adversely affect our revenues and operating results from these operations.
−Removed: Our five largest retail partners accounted for 70% of our outstanding private label credit receivables as of March 31, 2024.
+Added: Our five largest retail partners accounted for over 70% of our outstanding private label credit receivables as of June 30, 2024.
Although we are adding new retail partners on a regular basis, it is likely that we will continue to derive a significant portion of this operations’ receivables base and corresponding revenue from a relatively small number of partners in the future.
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Although the practical consequences of Madden have diminished since the initial ruling, uncertainty remains in this area of law.
−Removed: A bank that we support in connection with its extension of loans and one of our subsidiaries was involved in a dispute with the Maryland Commissioner of Financial Regulation with respect to the extent to which federal preemption preempts state regulation of bank activities related to the lending process, such as lender licensing requirements and aspects of those licensing requirements that purport to limit the rate of interest that can be charged.
−Removed: The Commissioner issued a "charge letter" making various assertions regarding the applicability of the licensing requirements and interest rate limitations.
−Removed: The ultimate remedy sought by the Commissioner was the invalidation of loans to Maryland residents.
−Removed: We were successful in demonstrating that federal preemption applied and that the licensing requirements did not apply to the bank in its making loans in Maryland and the matter is closed.
The CFPB recently issued a final rule regarding credit card late fees, which represents a significant departure from the rules that are currently in effect.
−Removed: Absent a successful legal challenge, we expect the rule will have a significant adverse impact on our business, results of operations and financial condition for at least the short term and, depending on the effectiveness of our actions taken in response to the rule, potentially over the long term.
+Added: Absent a successful legal challenge, we expect the rule would have an adverse impact on our business, results of operations and financial condition for at least the short term and, depending on the effectiveness of our actions taken in response to the rule, potentially over the long term.
In March 2024, the CFPB published a final rule that would significantly reduce the safe harbor amount for late fees that credit card issuers are authorized to charge.
−Removed: Absent a successful legal challenge, the rule will:
+Added: This rule is currently on hold, pending litigation.
+Added: The rule, if implemented, would:
(i) decrease the safe harbor amount for credit card late fees to $8 and eliminate a higher safe harbor dollar amount for subsequent late payments;
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Accordingly, the $8 safe harbor amount on late fees (and the elimination of the annual inflation-based adjustment thereto) would represent a significant decrease from the current safe harbor amounts.
−Removed: The final rule is currently slated to become effective on May 14, 2024, subject to any court-imposed injunction resulting from litigation.
+Added: The final rule was slated to become effective on May 14, 2024, subject to any court-imposed injunction resulting from litigation.
Shortly after the final rule was published, a lawsuit was filed in U.S.
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Chamber of Commerce, the American Bankers Association and various other parties, challenging the rule and seeking a preliminary injunction enjoining the rule from becoming effective during the pendency of the litigation.
−Removed: The lawsuit asserts that the rule would ultimately harm those consumers the CFPB is charged with protecting and seeks to have the rule vacated on various grounds, including that the CFPB (i) violated the CARD Act by preventing issuers from collecting reasonable and proportional late fees when cardholders do not pay their bills on time, (ii) violated the Administrative Procedure Act by promulgating a final rule that is arbitrary and capricious, relying on inappropriate, incomplete and non-public data;
−Removed: and (iii) issued the rulemaking with funds drawn in violation of the U.S.
−Removed: Constitution’s Appropriations Clause.
−Removed: Assuming these legal challenges are not successful and the CFPB’s final rule becomes effective, whether that be on May 14, 2024 or at a later date, this rule will represent an approximately 75% reduction in the amount of late fees that may be charged under the CARD Act safe harbor, which we expect will have a significant adverse impact on our revenue, results of operations and other financial metrics for at least the short term and, depending on the effectiveness of the mitigating actions that we take in response to the rule, potentially over the long term.
+Added: The lawsuit asserts that the rule would ultimately harm those consumers the CFPB is charged with protecting and seeks to have the rule vacated on various grounds, including that the CFPB (i) violated the CARD Act by preventing issuers from collecting reasonable and proportional late fees when cardholders do not pay their bills on time, and (ii) violated the Administrative Procedure Act by promulgating a final rule that is arbitrary and capricious, relying on inappropriate, incomplete and non-public data.
+Added: An injunction against implementation was entered on May 10, 2024.
+Added: Assuming these legal challenges are not successful and the CFPB’s final rule becomes effective, this rule would represent an approximately 75% reduction in the amount of late fees that may be charged under the CARD Act safe harbor.
We have already executed on a number of strategies designed to limit the impact of the final rule on us and we continue to evaluate various other mitigating strategies, but it may not be feasible for us to fully implement these strategies in the short term, and these efforts ultimately may not be successful even if and when fully implemented.
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If we are unable to compete with such companies or fail to meet the need for innovation in our industry, the use of our platform could stagnate or substantially decline, or our products could fail to maintain or achieve more widespread market acceptance, which would materially and adversely affect our business, results of operations, financial condition, and future prospects.
−Removed: The reaction to COVID-19 caused severe disruptions in the U.S.
−Removed: economy and may have further adverse impacts on our performance, results of operations and access to capital.
−Removed: In March 2020, a national emergency was declared under the National Emergencies Act due to a new strain of coronavirus ("COVID-19").
−Removed: Measures initially taken across the U.S.
−Removed: and worldwide to mitigate the spread of the virus significantly impacted the macroeconomic environment, including consumer confidence, unemployment and other economic indicators that contribute to consumer spending behavior and demand for credit.
−Removed: More recently, policy responses to COVID-19 have, in part, caused, supply chain disruptions, significant inflation, labor shortages and in turn, rising interest rates.
−Removed: Our results of operations are impacted by the relative strength of the overall economy.
−Removed: As general economic conditions improve or deteriorate, the amount of consumer disposable income tends to fluctuate, which, in turn, impacts consumer spending levels and the willingness of consumers to finance purchases.
−Removed: Furthermore, to the extent that supply chain disruptions result in deferred purchases, there will be a corresponding decrease in our receivable purchases.
−Removed: For additional discussion of the impact of COVID-19 on our business, see additional risk factors included in this Part II, Item 1A, as well as Part I, Item 2 "Management’s Discussion and Analysis of Financial Condition and Results of Operations."
Our business and operations may be negatively affected by rising prices and interest rates.
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The Federal Reserve has raised interest rates to combat inflation.
−Removed: Increased interest rates may adversely impact the spending levels of consumers and their ability and willingness to borrow money.
+Added: Increased interest rates adversely impact the spending levels of consumers and their ability and willingness to borrow money.
Higher interest rates often lead to higher payment obligations, which may reduce the ability of consumers to remain current on their obligations and, therefore, lead to increased delinquencies, defaults, customer bankruptcies and charge-offs, and decreased recoveries, all of which could have an adverse effect on our business.
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The rights of holders of the Series B preferred stock to participate in the distribution of our assets will rank junior to the prior claims of our current and future creditors, the Series A preferred stock and any future series or class of preferred stock we may issue that ranks senior to the Series B preferred stock.
−Removed: Our Articles of Incorporation authorize us to issue up to 10,000,000 shares of preferred stock in one or more series on terms determined by our board of directors, and as of March 31, 2024 we had outstanding 400,000 shares of Series A preferred stock and 3,300,704 shares of Series B preferred stock.
−Removed: As of March 31, 2024, we could issue up to 6,299,296 additional shares of preferred stock.
+Added: Our Articles of Incorporation authorize us to issue up to 10,000,000 shares of preferred stock in one or more series on terms determined by our board of directors, and as of June 30, 2024 we had outstanding 400,000 shares of Series A preferred stock and 3,300,704 shares of Series B preferred stock.
+Added: As of June 30, 2024, we could issue up to 6,299,296 additional shares of preferred stock.
In addition, the Series B preferred stock effectively ranks junior to all existing and future indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing subsidiaries and any future subsidiaries.
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We are allowed to issue additional shares of Series B preferred stock and additional series of preferred stock that would rank on a parity with the Series B preferred stock as to dividend payments and rights upon our liquidation, dissolution or winding up of our affairs pursuant to our Articles of Incorporation and the Amended and Restated Articles of Amendment Establishing the Series B preferred stock without any vote of the holders of the Series B preferred stock.
−Removed: Our Articles of Incorporation authorize us to issue up to 10,000,000 shares of preferred stock in one or more series on terms determined by our board of directors, and as of March 31, 2024 we had outstanding 400,000 shares of Series A preferred stock and 3,300,704 shares of Series B preferred stock.
−Removed: As of March 31, 2024, we could issue up to 6,299,296 additional shares of preferred stock.
+Added: Our Articles of Incorporation authorize us to issue up to 10,000,000 shares of preferred stock in one or more series on terms determined by our board of directors, and as of June 30, 2024 we had outstanding 400,000 shares of Series A preferred stock and 3,300,704 shares of Series B preferred stock.
+Added: As of June 30, 2024, we could issue up to 6,299,296 additional shares of preferred stock.
The issuance of additional shares of Series B preferred stock and additional series of parity preferred stock could have the effect of reducing the amounts available to the holders of Series B preferred stock upon our liquidation or dissolution or the winding up of our affairs.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.