What changed in this filing

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Item 1. Business

2024-02-12 compared with 2023-02-10 · 56 added, 81 removed, 302 unchanged (31% of the section changed)

7 unchanged sentences

During the 1980s, we began to market this service to non-affiliated dealers and, at the same time, began to offer dealers a non-recourse cash payment (referred to as an “advance”) against anticipated future collections on Consumer Loans serviced for that 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.

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.

The Dealer servicing agreement assigns the responsibilities for administering, servicing, and collecting the amounts due on Consumer Loans from the Dealers to us.

We are an indirect lender from a legal perspective, meaning the Consumer Loan is originated by the Dealer and assigned 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.

The following table shows the percentage of Consumer Loans assigned to us with either FICO ® scores below 650 or no FICO ® scores:

3 unchanged sentences

80.9 % 84.8 % 91.0 %

In 2020, we began piloting an option that expanded our financing programs to consumers with higher credit ratings.

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.

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.

Business Segment Information

2 unchanged sentences

Principal Business

We offer our Dealers financing programs that enable them to sell vehicles to consumers, regardless of their credit history.

We offer Dealers financing programs that enable them to sell vehicles to consumers, regardless of their credit history.

We have two programs:

2 unchanged sentences

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”.

The following table shows the percentage of Consumer Loans assigned to us under each of the programs for each of the last three years:

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)

50 unchanged sentences

• premiums earned on the reinsurance of vehicle service contracts;

• other income, which primarily consists of ancillary product profit sharing, remarketing fees, Dealer enrollment fees, Dealer support products and services, and interest.

• other income, which primarily consists of ancillary product profit sharing, remarketing fees, and interest.

For additional information, see Note 8 to the consolidated financial statements contained in Item 8 to this Form 10-K, which is incorporated herein by reference.

7 unchanged sentences

Sales and Marketing .

Our target market is approximately 60,000 i ndependent and franchised automobile dealers in the United States.

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.

24 unchanged sentences

Upon receipt of such amounts in full, we reassign the Consumer Loans and our security interest in the financed vehicles to the Dealer.

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.

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.

6 unchanged sentences

• we have made a funding decision and generally have provided funding to the Dealer in the form of either an advance under the Portfolio Program or one-time purchase payment under the Purchase Program.

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 the Consumer Loan consists of the total principal and interest that the consumer is required to pay over the term of the Consumer Loan.

9 unchanged sentences

All responses include the amount of funding (advance for a Dealer Loan or purchase price for a Purchased Loan), as well as any stipulations required for funding.

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.

The estimated future cash flows are determined based upon our proprietary credit scoring system, which considers numerous variables, including 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, to calculate a composite credit score that corresponds to an expected collection rate.

4 unchanged sentences

While a Dealer can submit any legally compliant Consumer Loan to us for assignment, the decision whether to provide funding to the Dealer and the amount of any funding is made solely by us.

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.

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.

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 Dealers are operating in accordance with the terms and conditions of the Dealer servicing agreement.

We occasionally identify breaches of the Dealer servicing agreement, and, depending upon the circumstances, and at our discretion, we may:

3 unchanged sentences

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.

We require repayment of the related advance or purchase payment and, if requested more than 90 days after assignment, payment of a fee;

• 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;

• 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.

4 unchanged sentences

We measure various criteria for each Dealer against other Dealers in their geographic area as well as the top performing Dealers.

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.

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.

We provide each Dealer under the Portfolio Program with a monthly statement summarizing all activity that occurred on their Consumer Loan assignments.

Our largest group of collectors services Consumer Loans that are in the early stages of delinquency.

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.

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.

We provide each Dealer under the Portfolio Program with a monthly statement summarizing all activity that occurred on its Consumer Loan assignments.

Our largest group of representatives services Consumer Loans that are in the early stages of delinquency.

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 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 contractor, 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.

If this process is unsuccessful, the vehicle is sold at a wholesale automobile auction.

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 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 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.

4 unchanged sentences

(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.

Our external collection team generally assigns Consumer Loans to third party collection attorneys who work on a contingency fee basis.

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:

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.

Our external collection team may assign Consumer Loans to third-party collection attorneys who work on a contingency fee basis.

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;

2 unchanged sentences

• broken promises;

• payment history;

• repossession orders;

15 unchanged sentences

We bear the risk of loss for claims on certain vehicle service contracts that are reinsured by us.

We market the vehicle service contracts directly to our Dealers.

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.

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.

26 unchanged sentences

Michigan $ 326.3 7.9 % 833 5.9 %

New York 229.8 6.3 % 687 5.8 %

Ohio 205.7 5.7 % 832 7.0 %

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 %

7 unchanged sentences

Texas 205.5 5.7 % 903 7.6 %

Tennessee 162.9 5.1 % 458 4.0 %

New Jersey 204.0 5.6 % 300 2.5 %

All other states 2,427.3 67.0 % 8,448 71.0 %

4 unchanged sentences

Michigan $ 343.4 10.8 % 747 6.5 %

Ohio 236.7 6.5 % 853 6.7 %

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 %

16 unchanged sentences

Failure to comply with these laws or regulations could have a material adverse effect on us by, among other things, limiting the jurisdictions in which we may operate, restricting our ability to realize the value of the collateral securing the Consumer Loans, making it more costly or burdensome to do business, or resulting in potential liability.

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.

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.

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”).

Congress, in state legislatures, and by various regulatory agencies.

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.

12 unchanged sentences

• On May 7, 2019, we received a subpoena from the Consumer Frauds and Protection Bureau of the Office of the New York State Attorney General, relating to the Company’s origination and collection policies and procedures in the state of New York.

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.

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.

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.

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.

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.

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 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).

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 Company intends to vigorously defend itself in this matter.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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).

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.

On March 7, 2022, we received another civil investigative demand from the Bureau seeking additional information relating to its investigation.

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.

After April 22, 2019 through March 7, 2022, we received additional subpoenas from the Bureau.

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.

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.

1 unchanged sentence

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.

Community Financial Services Association of America Ltd ., No.

The Company intends to vigorously defend itself in this matter.

3 unchanged sentences

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 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.

1 unchanged sentence

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 Dealers must also comply with credit and trade practice statutes and regulations.

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.

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.

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.

7 unchanged sentences

Originations.

The originations function includes team members that are responsible for marketing our programs to prospective Dealers, enrolling new Dealers, and supporting active Dealers.

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.

10 unchanged sentences

Total 2,232 2,246 2,073

As of December 31, 2022, we had 2,246 fu ll- and part-time team members.

As of December 31, 2023, we had 2,232 full- and part-time team members.

Our team members have no union affiliations, and we believe our relationship with our team members is in good standing.

1 unchanged sentence

All team members complete non-discrimination and anti-harassment training, promoting a safe and inclusive work environment.

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.

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.

10 unchanged sentences

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.

What changed 10-K

Item 1. Business