What changed in this filing

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Item 1. Business

2024-02-21 compared with 2023-02-22 · 46 added, 79 removed, 364 unchanged (26% of the section changed)

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In June 2015, CCM expanded in the United Kingdom by acquiring Hillesden Securities Ltd and its subsidiaries (“dlc”).

In March 2016, we completed the divestiture of our membership interests in Propel Acquisition LLC and its subsidiaries, our tax lien business.

In November 2017, CCM completed the acquisition of Wescot Credit Services Limited (“Wescot”), a leading UK contingency debt collection and BPO services company.

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Leveraging our database of financially-distressed consumers, our in-house team of statisticians, business analysts, and software programmers have developed, and continually enhance, proprietary behavioral and valuation models, custom software applications, and other business tools that guide our portfolio purchases.

We have been able to leverage over 20 years of data, insights, modeling and operational experience.

We have been able to leverage many years of data, insights, modeling and operational experience.

Each year we purchase significant amounts of credit bureau and customized consumer data that describe account level and macroeconomic factors related to credit, savings, and payment behavior.

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In developing our digital platform, we have allowed consumers to access account information, supporting documents and perform payments online.

By leveraging direct mail, email, text messaging and search engines, we have bolstered data accumulation and collections payments through our digital platform.

By leveraging direct mail, email, text messaging, web chat, and search engines, we have bolstered data accumulation and collections payments through our digital platform.

Innovation and investment in digital collection technology and speech analytics have enhanced our ability to collect and have enabled us to quickly adapt to changes in our operating environment, as they provide real-time insights that help optimize our interaction with consumers, as well as valuable information for training purposes.

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and (4) stable long term returns and resilience in the event of macroeconomic disruption.

In addition, we are strengthening our presence in Spain, France, Portugal and Ireland, each of which we believe shares a number of these same attractive market characteristics.

In addition, we are strengthening our presence in Spain, France, and Portugal, each of which we believe shares a number of these same attractive market characteristics.

Competitive Advantage.

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This includes increasing our cash flow generation through efficient collection operations.

Depending on our relative leverage, we may apply excess cash toward reducing our debt or, in circumstances in which we are operating within or below the lower end of our target leverage range, we may allocate capital toward share repurchases.

Depending on our relative leverage and a number of other factors, we may apply excess cash toward reducing our debt or, in circumstances in which we are operating within or below the lower end of our target leverage range, we may allocate capital toward share repurchases.

Furthermore, we believe our global funding structure enhances access to capital markets and provides us with financial flexibility, particularly with respect to our ability to allocate capital to our markets with the best risk-adjusted returns.

Depending on the capital markets, we consider additional financings to refinance debt or fund our operations and any potential acquisitions.

Our Priority Framework

Depending on the capital markets, we may consider additional financings to refinance debt or fund our operations and any potential acquisitions.

Our Financial Priorities

We have tailored our strategy to optimize our ability to achieve and maintain strong returns throughout the credit cycle.

With respect to our balance sheet, we will strive to maintain financial flexibility and operate with leverage in a range that we believe benefits the company, and we also target a strong debt rating.

Our capital allocation priorities include portfolio purchases at attractive returns, strategic merger and acquisition (M&A) consideration, and the return of capital to stockholders.

Purchasing Approach

With respect to our balance sheet objectives, we strive to preserve financial flexibility and operate with leverage in a range that we believe benefits the company, and we also target a strong debt rating.

Our capital allocation priorities include portfolio purchases at attractive returns, strategic merger and acquisition (M&A) consideration, and the return of capital to stockholders through share repurchases.

Debt Purchasing Approach

We provide sellers of delinquent receivables liquidity and immediate value through the purchase of charged-off consumer receivables.

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A “forward flow” contract is a commitment to purchase receivables over a duration that is typically three to twelve months, but can be longer, with specifically defined volume, frequency, and pricing.

Typically, these

forward flow contracts have provisions that allow for early termination or price renegotiation should the underlying quality of the portfolio deteriorate over time or if any particular month’s delivery is materially different than the original portfolio used to price the forward flow contract.

In the U.S., where we have the ability in many of our forward flow contracts to terminate upon a certain specified amount of notice, we generally attempt to secure forward flow contracts for receivables because a consistent volume of receivables over a set duration can enable us to more accurately forecast and plan our operational needs.

Typically, these forward flow contracts have provisions that allow for early termination or price renegotiation should the underlying quality of the portfolio deteriorate over time or if any particular month’s delivery is materially different than the original portfolio used to price the forward flow contract.

We also have the ability in many of our forward flow contracts to terminate after a certain

notice period.

We generally attempt to secure forward flow contracts for receivables because a consistent volume of receivables over a set duration can enable us to more accurately forecast and plan our operational needs.

Evaluate purchase opportunities using analytical models.

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We believe long-term success is best achieved by combining a diversified asset sourcing approach with an account-level scoring methodology and a disciplined evaluation process.

Collection Approach

Collections Approach related to Debt Purchasing

MCM (United States)

We continue to expand and build upon the insight developed from previous collections when developing our account collection strategies for portfolios we have acquired.

We refine our collection approach to determine the most effective collection strategy to pursue for each account.

We continue to expand and build upon the insight gained from previous collection activities and consumer interactions when developing our account-level collection strategies for portfolios we acquire.

We continuously refine our collection strategy to determine the most effective approach for each account.

Our current collection approaches consist of:

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Cloud, Minnesota, Troy, Michigan, and Roanoke, Virginia and international call centers in Gurgaon, India and San Jose, Costa Rica.

Call centers generally consist of multiple collection departments.

Account managers supervised by group managers are trained and divided into specialty teams.

Account managers assess our consumers’ willingness and capacity to pay.

Each call center generally consists of multiple collection departments.

Account managers receive extensive training and are divided into specialty teams, each of which is supervised by a group manager.

Account managers are trained to assess our consumers’ willingness and ability to pay.

They attempt to work with consumers to evaluate sources and means of repayment to achieve a lump sum settlement or develop payment programs customized to the individual’s ability to pay.

In cases where a payment plan is developed, account managers encourage consumers to pay through automatic payment arrangements.

We continuously educate account managers to understand and apply applicable laws and policies that are relevant in the account manager’s daily collection activities.

Our ongoing training and monitoring efforts help ensure compliance with applicable laws and policies by account managers.

We continuously educate account managers to understand and apply relevant laws and policies relating to the account manager’s daily collection activities.

We have robust training and monitoring programs to help ensure compliance with applicable laws and policies by our account managers.

• Digital Collections .

We have made significant progress in developing our digital strategies and continue to analyze and optimize our digital strategies and our collection website.

We have made significant progress in expanding our digital strategies to match consumer preferences and continue to analyze and optimize our digital strategies.

Currently, consumers can access their account information, view supporting documents and make payments through our website.

We leverage direct mail, email, text messaging, and search engines to promote our digital channel to our consumers.

We leverage email, text messaging and web chat to interact with our consumers.

Account managers in our call centers are also encouraged to make consumers aware of our digital channels including our website.

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When we decide to pursue legal action, we place the account into our internal legal channel or refer them to our network of retained law firms.

If placed to our internal legal channel, attorneys in that channel will evaluate the accounts and make the final determination whether to pursue legal action.

If referred to our network of retained law firms, we rely on our law firms’ expertise with respect to applicable debt collection laws to evaluate the accounts placed in that channel in

order to make the decision whether or not to pursue collection litigation.

If placed to our internal legal channel, attorneys in that channel will evaluate each account and make the final determination whether to pursue legal action.

If referred to our network of retained law firms, we rely on our law firms’ expertise with respect to applicable debt collection laws to evaluate each account placed in that channel in order to make the decision whether or not to pursue collection litigation.

Prior to engaging an external law firm (and throughout our engagement of any external law firm), we monitor and evaluate the firm’s compliance with consumer credit laws and regulations, operations, financial condition, and experience, among other key criteria.

The law firms we hire may also attempt to communicate with the consumers in an attempt to collect their debts prior to initiating litigation.

law firms we hire are encouraged to communicate with consumers in an attempt to collect their debts prior to initiating litigation.

We pay these law firms a contingent fee based on amounts they collect on our behalf.

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Collection agencies receive a contingent fee based on amounts they collect on our behalf.

Generally, we use these agencies to service specialized account segments for which they can generate more collections than our internal call centers or can do so at a lower cost.

Generally, we use these agencies to service specialized account segments.

We strive to use our financial resources judiciously and efficiently by not deploying resources on accounts where the prospects of collection are remote based on a consumer’s situation.

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Our policy is to not resell accounts to third parties in the ordinary course of business.

We expand and build upon the insight developed during our purchase process when developing our account collection strategies for portfolios we have acquired.

We expand and build upon the insight developed during our purchase process when developing our account collection strategies for portfolios we acquire.

Our proprietary consumer-level collectability analysis is the primary determinant of whether an account is actively serviced post-purchase.

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Again, scoring is used to vary the intensity of contact effort, mirroring the likelihood of a consumer’s financial situation having changed.

In the event that a

consumer breaks their plan, segmentation is used to tailor the communication and contact intensity as we seek to re-engage with the consumer and understand the reason for the break.

In the event that a consumer breaks their plan, segmentation is used to tailor the communication and contact intensity as we seek to re-engage with the consumer and understand the reason for the break.

By understanding the reason for the break we can tailor the solutions we recommend to rehabilitate the plan and put the consumer back on the path to financial recovery.

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We respond to these reports in the ordinary course of business and make changes to our practices and procedures that we believe are appropriate to address any issues raised in such reports.

Information Technology

Our Technology.

We strive to utilize best of breed technologies throughout our business from our core collection platforms and decision engines to our enterprise wide predictive dialer capability.

Using these industry leading platforms in conjunction with certain company-specific integrations, provides us with an overall solution that enables us to both interact with consumers in their preferred manner, such as telephone calls, texts, email, web chat, etc., as well as monitor such consumer interactions for compliance with applicable rules and regulations.

Process Control.

To provide assurance that our technology solutions continue to operate efficiently and securely, we have developed strong process and control environments.

These governance, risk management, and control protocols govern all areas of the enterprise, including from physical, information and cyber security, change management, data protection and segregation of duties.

Information Security.

We divide our information security program into the three core tenets that we believe result in a solid information security practice:

(1) Governance Risk and Compliance (GRC);

(2) Security Operations;

and (3) Security Engineering and Architecture.

We invest in technologies to protect our organization and consumer and proprietary data throughout its life cycle.

We believe that our adoption and implementation of leading security frameworks and certifications

demonstrate our commitment to protecting consumer information and our enterprise.

To ensure the integrity and reliability of our environment, we periodically engage outside specialists to examine and test our systems, technical posture as well as our detection and response capabilities, including our disaster recovery plans.

Through this work, we are able to adopt recommendations and adjust our information and cyber security posture to the constantly changing threat landscape.

The consumer credit recovery industry is highly competitive in the United States, the United Kingdom and throughout Europe.

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Our activities are also subject to federal and state laws concerning identity theft, data privacy, and cybersecurity.

The Gramm-Leach-Bliley Act and its implementing regulations, including the new FTC “Safeguards Rule,” require us generally to protect the confidentiality of our consumers’ nonpublic personal information and to disclose to our consumers our privacy policy and practices, including those regarding sharing consumers’ nonpublic personal information with third parties.

The Gramm-Leach-Bliley Act and its implementing regulations, including the FTC “Safeguards Rule,” require us generally to protect the confidentiality of our consumers’ nonpublic personal information, to disclose to our consumers our privacy policy and practices, including those regarding sharing consumers’ nonpublic personal information with third parties and to report certain data breaches and other security events to the FTC.

In addition, the FCRA requires us to prevent identity theft and to securely dispose of consumer credit reports.

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The FCA Handbook sets out the FCA rules and other provis ions.

Firms wishing to carry on regulated consumer credit activities must comply with all applicable sections of the FCA Handbook, including “Treating Customers Fairly” principles, as well as the applicable consumer credit laws and regulations.

Firms wishing to carry on regulated consumer credit activities must comply with all applicable sections of the FCA Handbook, including principles to “act to deliver good outcomes for retail customers,” as well as the applicable consumer credit laws and regulations.

The FCA also publishes guidance on various topics from time to time that it expects firms to comply with.

The FCA has app lied its rules to consumer credit firms in a number of areas, including its high-level principles and conduct of business standards.

In July 2022, the FCA published its new Consumer Duty, which aims to provide a higher level of consumer protection in retail financial markets and combines existing consumer treatment requirements with enha nced standards by requiring firms to act to deliver good outcomes for customers.

Implementation of the new requirements is required by July 2023.

The FCA has significant powers and , as the FCA deepens its understanding of the industry through continued supervision , it is likely that the regulatory requirements applicabl e to the debt purchase industry will continue to increase via requirements such as the Consumer Duty.

In addition, it is likely that the compliance framework that will be needed to continue to satisfy the FCA requirements will demand continued investment and resources in our compliance governance framework.

The Senior Managers and Certification Regime (“SMCR”), designed to drive accountability and risk ownership within businesses, came into effect for UK operations in December 2019, and affected the majority of colleagues who need to be aware and adhere to the required standards of conduct.

In July 2023, the FCA implemented its new Consumer Duty, which aims to provide a higher level of consumer protection in retail financial markets and combines existing consumer treatment requirements with enha nced standards by requiring firms to act to deliver good outcomes for customers.

The FCA has significant powers and , as the FCA

deepens its understanding of the industry through continued supervision , it is likely that the regulatory requirements applicabl e to the debt purchase industry will continue to increase via requirements such as the Consumer Duty.

In addition, it is likely that the compliance framework that will be needed to continue to satisfy the FCA requirements will demand continued investment and resources.

Companies authorized by the FCA must be able to demonstrate that they meet the threshold conditions for authorization and comply on an ongoing basis with the FCA’s high level standards for authorized firms, such as its Principles for Business (including the principle of ‘‘treating customers fairly’’), and rules and guidance on systems and controls.

In addition to the full authorization of its business with the FCA, CCMG, Wescot and Mortimer Clarke have appointed certain individuals who have significant control or influence over the management of the respective businesses, known as Senior Management Function Managers (“SMF Managers”).

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The FCA has the ability to, among other things, impose significant fines, ban certain individuals from carrying on trade within the financial services industry, impose requirements on a firm’s permission, cease certain products from being collected upon and in extreme circumstances remove permissions to trade.

In addition to the permissions granted originally as part of its FCA authorization, in February 2017, CCMG was granted a variation of permissions from the FCA in order to administer regulated mortgage contracts.

Consumer protection.

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A failure to comply with these requirements can make agreements unenforceable or can result in a requirement that charged and collected interest be repaid.

The FCA continue to review the provisions of the UK Consumer Credit Act and having up to this point prioritized changes linked to Brexit are now working with the UK Government to focus on terms that have been identified as requiring the most urgent updates.

The FCA continues to review the provisions of the UK Consumer Credit Act and having up to this point prioritized changes linked to Brexit are now working with the UK Government to focus on terms that have been identified as requiring the most urgent updates.

Data protection.

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the conditions for obtaining consent to process personal data;

transparency and

providing information to individuals regarding the processing of their personal data;

transparency and providing information to individuals regarding the processing of their personal data;

enhanced rights for individuals;

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Data Protection Officer(s) have been appointed for the UK, Spain and Ireland who are supported by Privacy Champions at each European/UK site to promote and enforce good data protection practices.

The regulatory regime in Ireland has been subject to significant changes in recent years.

In July 2015, the Irish Parliament introduced the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (as amended, the “2015 Act”), which requires credit servicing firms to be regulated by the Central Bank of Ireland to ensure regulatory protection for consumers following the sale of consumer loan portfolios to unregulated entities.

Cabot Financial (Ireland) Limited is authorized by the Central Bank of Ireland under Part V of the Central Bank Act 1997 as amended by the 2015 Act as a Credit Servicing Firm.

As a result, Cabot Financial (Ireland) Limited (“CFI”) is authorized as a Credit Servicing firm with the Central Bank of Ireland (“CBI”), which means that it is subject to the provisions of Irish financial services law and consumer protection codes, and is within the CBI’s supervisory and enforcement regime.

CFI also provides credit servicing and collection activities to various other financial institutions, and in the provision of such services, is also required to ensure compliance with these codes through its contractual agreements.

CBI also maintains a register of pre-approved controlled functions within CFI and has powers to act where individuals fail to meet the required standards of conduct.

These powers are due to be further strengthened with the introduction of the Individual Accountability Regime (“IAF”) in 2023, which is expected to align to the UK’s SMCR.

The IAF will introduce common standards for staff, a senior executive accountability regime for individuals occupying prescribed functions, enhance the CBI’s current fitness and probity regime and create a unified enforcement process to sanction any breaches of the conduct standards.

In June 2016, the United Kingdom held a referendum in which voters approved the United Kingdom’s withdrawal from the European Union, commonly referred to as “Brexit.” The United Kingdom formally exited the European Union on January 31, 2020.

The EU-UK Trade and Cooperation Agreement – a key agreement that governs the relationship after Brexit – entered into force in May 2021.

During 2022 negotiations on the future partnership continued with an aim to improve the clarity on post-Brexit positions on trade arrangements and cross-border investments.

Talks between the UK and the EU continue on how to implement post-Brexit arrangements.

Nevertheless there remains ongoing risks resulting from a lack of clarity, which could potentially undermine bilateral cooperation and disrupt trade (including in the financial services sector) between the UK and the EU.

In October 2021 the Non Performing Loan Directive (“NPL Directive”) was approved by the European Council with the implementation period commencing in December 2021.

The purpose of the NPL Directive is to help develop an efficient, transparent and consistent secondary loan marketplace across Europe.

The NPL Directive does not impact the UK-based business and the full impact of the legislation on our business in Europe will be assessed over the coming months and will depend on current local regulatory regimes and the extent that the legislation is adopted by local governments.

Implementation of the NPL Directive is required by December 31, 2023.

Several EU countries have opened consultation on transposing the EU NPL Directive.

In addition, the other markets in which we currently operate (including Spain, France, Italy and Portugal) are subject to local laws and regulations, and we continue to review the required risk and compliance programs to facilitate compliance with applicable laws and regulations in those markets.

In the EU, there is a new regulatory framework under Directive 2021/2167 of the European Parliament and of the Council on credit servicers and credit purchasers, known as the Non-Performing Loan (“NPL”) Directive.

Member states within the EU must comply with this Directive and transpose it into local law.

The NPL Directive regulates the sale, purchase, and servicing of NPLs originated by EU credit institutions, and states that the activity of credit servicing is subject to authorization and defines the requirements for the granting of such authorization.

Member States must establish their authorization procedures and set up a national register of all credit servicers authorized to provide services within their territory.

The activities of credit servicers are subject to supervision by the competent authority of the home Member State.

To date, of the markets we operate in, Ireland and France are the only EU member states to transpose the NPL Directive into local law with our Irish entity automatically being given credit servicing authorization and our French entity currently working through the authorization process.

In addition, the other markets in which we currently operate are subject to local laws and regulations, and we continue to review the required risk and compliance programs to facilitate compliance with applicable laws and regulations in those markets.

Our operations outside the United States are subject to the U.S.

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We are committed to ensuring fundamental human rights across our business and in each region.

In 2022, we published a Global Human Rights Policy that outlines our commitment to respect and promote human rights in accordance with internationally recognized human rights standards.

We have published a Global Human Rights Policy that outlines our commitment to respect and promote human rights in accordance with internationally recognized human rights standards.

This policy details our actions concerning human rights, such as providing fair and competitive compensation, benefits and hours to our colleagues, freedom of association and collective bargaining, and our zero-tolerance policy for harassment and discrimination.

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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.

What changed 10-K

Item 1. Business