27 unchanged sentences
• Our quarterly results are likely to fluctuate significantly and may not fully reflect the underlying performance of our business.
−Removed: • The ongoing COVID-19 pandemic has and may continue to adversely impact our business operations, financial performance and results of operations.
+Added: • The COVID-19 pandemic has and may continue to adversely impact our business operations, financial performance and results of operations.
• Our results of operations and financial condition have been and may be adversely affected by economic conditions and other factors that we cannot control.
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Changes in regulations or in the way regulations are applied to our business could adversely affect our business.
−Removed: • Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses.
+Added: • Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses and reputational harm.
• Internet-based and electronic signature-based loan origination processes may give rise to greater risks than paper-based processes.
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In particular, it is important that we continue to ensure that our members with loans remain loyal to us and we continue to extend loans to members who have successfully repaid their previous loans.
−Removed: As of June 30, 2022 and 2021, members with repeat loans comprised 73% and 85%, respectively, of our Owned Principal Balance at End of Period.
+Added: As of September 30, 2022 and 2021, members with repeat loans comprised 76% and 81%, respectively, of our Owned Principal Balance at End of Period.
If our repeat loan rates decline, we may not realize consistent or improved operating results from our existing member base.
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If we are unable to arrange financing on favorable terms, we may not be able to grow our business as planned and we may have to curtail new originations and reduce credit lines to cardholders.
−Removed: In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced that it will no longer persuade or compel banks to submit LIBOR rates after 2021.
+Added: In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it will no longer persuade or compel banks to submit LIBOR rates after 2021.
At the end of 2021, the ICE Benchmark Administration, the administrator for LIBOR, ceased publishing one-week and two-month U.S.
2 unchanged sentences
Other regulators have suggested reforming or replacing other benchmark rates.
−Removed: These may be replaced by the Secured Overnight Financing Rate or other benchmark rates over the next several years.
+Added: These may be replaced by SOFR or other benchmark rates over the next several years.
Uncertainty as to the nature of such phase out and selection of an alternative reference rate, together with disruption in the financial markets, could increase in the cost of our credit facilities that are currently tied to LIBOR.
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We use estimates and assumptions in determining the fair value of our loans receivable held for investment and asset-backed notes.
−Removed: Our Loans Receivable at Fair Value represented 85% of our total assets and our asset-backed notes represented 72% of our total liabilities as of June 30, 2022.
+Added: Our Loans Receivable at Fair Value represented 85% of our total assets and our asset-backed notes represented 75% of our total liabilities as of September 30, 2022.
The fair value of our loans receivable held for investment are determined using Level 3 inputs and the fair value of our asset-backed notes are determined using Level 2 inputs.
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We have capped the APR for newly originated loans at 36% since August 2020.
+Added: Interest rates have been rising recently and may continue to rise, which increases our interest expense and cost of funds and may result in lower operating margins.
The interest rates we charge to our members and pay to our lenders could each be affected by a variety of factors, including our ability to access capital markets, the volume of loans we make to our members , product mix, competition and regulatory limitations.
Market interest rate changes may adversely affect our business forecasts and expectations and are highly sensitive to many macroeconomic factors beyond our control, such as inflation, recession, the state of the credit markets, global economic disruptions, unemployment and the fiscal and monetary policies of the federal government and its agencies.
−Removed: Interest rates have been rising recently and may continue to rise, which increases our interest expense.
Interest rate changes may require us to make adjustments to the fair value of our loans receivable held for investment or our asset-backed notes, which may in turn adversely affect our results of operations.
1 unchanged sentence
In addition, increasing interest rates also decrease the fair value of our asset-backed notes, which increases Net Revenue.
−Removed: Because the duration and fair value of our loans and asset- backed notes are different, the respective changes in
−Removed: fair value may not fully offset each other resulting in a negative impact on Net Revenue.
+Added: Because the duration and fair value of our loans and asset-
+Added: backed notes are different, the respective changes in fair value may not fully offset each other resulting in a negative impact on Net Revenue.
Any reduction in our interest rate spread could have an adverse effect on our business, results of operations, cash flows, and financial condition.
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If a significant percentage of our contact center workforce is unable to work because of illness, quarantines, ineffective remote work environments or technology, utility, or other failures or limitations, our ability to collect payment may be adversely affected.
−Removed: In November 2021 we voluntarily implemented the call limitations set forth in Regulation F, 12 CFR Part 1006 (“Regulation F”), which is not applicable to creditors such as us who are collecting their own debts.
+Added: In November 2021 we voluntarily implemented certain provisions of the call limitations set forth in Regulation F, 12 CFR Part 1006 (“Regulation F”), which is not applicable to creditors such as us who are collecting their own debts.
If we did not correctly estimate the impact of a reduced calling strategy, the effectiveness of our efforts to collect on defaulted loans may be impacted.
−Removed: Additionally, in August 2020, we changed our small claims filing practices, we dismissed all pending small claims court filings and suspended all new legal collection actions and have not restarted legal collections programs.
+Added: Additionally, in August 2020, we changed our small claims filing practices, including dismissing all pending small claims court filings and suspending all new legal collection actions.
+Added: We temporarily suspended our legal collections process, which may be resumed in the future.
If we are unable to employ alternative means of engaging severely delinquent members and collecting on defaulted loans, the effectiveness of our efforts to collect on defaulted loans may be impacted.
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Ongoing inflation can also adversely impact our borrowers, which may result in higher charge-offs and delinquencies.
+Added: In the three months ended September 30, 2022, we recorded a net loss of $105.8 million primarily driven by a non-cash goodwill impairment charge during the three months ended September 30, 2022 to write-down the carrying value of goodwill .
In the three months ended June 30, 2022, we recorded a net loss of $9.2 million primarily driven by the decrease in the fair value of our loan portfolio as a result of higher loss and discount rate assumptions and an increase in operating expenses.
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In some circumstances, we may determine to do so through the acquisition of complementary businesses and technologies rather than through internal development.
−Removed: The identification of suitable acquisition candidates can be
−Removed: difficult, time-consuming, and costly, and we may not be able to successfully complete identified acquisitions.
+Added: The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to successfully complete identified acquisitions.
We have previously acquired, and in the future, may acquire, complementary assets or businesses.
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We have also outsourced elements of our operations (including elements of our information technology infrastructure) to third parties, and as a result, we manage a number of third-party vendors who may have access to our computer networks or the information that we collect, process, transmit, and store.
−Removed: In addition, many of those third parties may in turn subcontract or outsource some of their responsibilities to third parties.
+Added: In addition, many of those third parties may in turn subcontract or outsource
+Added: some of their responsibilities to third parties.
As a result, our information technology systems, including the functions of third parties that are involved or have access to those systems, is very large and complex.
−Removed: While all information technology operations are inherently vulnerable to
−Removed: inadvertent or intentional security breaches, incidents, attacks and exposures, the size, complexity, accessibility and distributed nature of our information technology systems, and the large amounts of sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external attacks.
+Added: While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures, the size, complexity, accessibility and distributed nature of our information technology systems, and the large amounts of sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external attacks.
We have been and continue to be the subject of actual or attempted unauthorized access, mishandling or misuse of information, computer viruses or malware, and cyber-attacks that could obtain confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage, distributed denial of service attacks, security breaches and incidents, and other infiltration, exfiltration or other similar events.
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The loss or theft of, or other unauthorized access to or use of, member information and data from our retail locations or other storage locations could subject us to additional regulatory scrutiny, possible civil litigation and possible financial liability and losses.
−Removed: Further, any belief by members or others that a security breach or other incident has affected us or any of our service providers, even if a security breach or other incident has not affected us or any of our service providers or has not actually occurred, could have any or all of the
−Removed: foregoing impacts on us, including damage to our reputation.
+Added: Further, any belief by members or others that a security breach or other incident has affected us or any of our service providers, even if a security breach or other incident has not affected us or any of our service providers or has not actually occurred, could have any or all of the foregoing impacts on us, including damage to our reputation.
Even the perception of inadequate security may damage our reputation and negatively impact our ability to attract new members and retain existing members .
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We have limited experience in managing risks and the compliance requirements attendant to these additional legal and regulatory requirements in new geographies or related to strategic partnerships.
−Removed: The costs of compliance and any failure by us to comply with such regulatory requirements in new geographies could harm our business.
+Added: The costs of compliance and any failure by us to comply with such regulatory requirements in new
+Added: geographies could harm our business.
If our partners decide to or are no longer able to provide their services, we could incur temporary disruptions in our loan transactions or we may be unable to do business in certain states or certain locations.
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Further, the concentration of our outstanding receivables in one or more states would have a disproportionate effect on us if governmental authorities in any of those states take action against us or take action affecting how we conduct our business.
−Removed: As of June 30, 2022, 44.3%, 25.9%, 8.7% and 5.5% of our Owned Principal Balance at End of Period related to members from California, Texas, Florida, and Illinois, respectively .
+Added: As of September 30, 2022, 44.5%, 26.2%, 8.9% and 5.5% of our Owned Principal Balance at End of Period related to members from California, Texas, Florida, and Illinois, respectively .
If any of the events noted in these risk factors were to occur in or have a disproportionate impact in regions where we operate or plan to commence operations, it may negatively affect our business in many ways, including increased delinquencies and loan losses or a decrease in future originations.
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Our expansion into new channels, products or markets may introduce additional third-party service providers, strategic partners and other third parties on which we may become reliant.
−Removed: For example, in connection with the secured personal loan product, we work with third parties that provide information and/or services in connection with valuation, title management and title processing, repossessions, and
+Added: For example, in connection with the secured personal loan product, we work with third parties that provide information and/or services in connection with valuation, title management and title processing, repossessions, and remarketing.
These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by our partner banks' federal bank regulators (the Federal Reserve Board, the OCC and the FDIC) and our consumer financial services regulators, including state regulators and the CFPB, which could increase the scope of management involvement and decreasing the benefit that we receive from using third-party vendors.
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Our international operations and offshore service providers involve inherent risks which could result in harm to our business.*
−Removed: As of June 30, 2022, we had 1,596 employees related to three contact centers in Mexico.
+Added: As of September 30, 2022, we had 1,578 employees related to three contact centers in Mexico.
These employees provide certain English/Spanish bilingual support related to member-facing contact center activities, administrative and technology support of the contact centers and back-office support services.
We have also engaged outsourcing partners in the United States that provide offshore member-facing contact center activities in Colombia, Jamaica, and the Philippines, and may in the future include additional locations in other countries.
−Removed: In addition, our technology
−Removed: development center in India is staffed through outsourcing partners and our own employees.
+Added: In addition, our technology development center in India is staffed through outsourcing partners and our own employees.
We have engaged vendors that utilize employees or contractors based outside of the United States.
−Removed: As of June 30, 2022, our outsourcing partners have provided us, on an exclusive basis, the equivalent of 831 full-time equivalents in Colombia, Jamaica, Philippines, and India.
+Added: As of September 30, 2022, our outsourcing partners have provided us, on an exclusive basis, the equivalent of 862 full-time equivalents in Colombia, Jamaica, Philippines, and India.
These international activities are subject to inherent risks that are beyond our control, including:
5 unchanged sentences
• state or federal regulations that restrict offshoring of business operational functions or require offshore partners to obtain additional licenses, registrations or permits to perform services on our behalf;
−Removed: • geopolitical events, including natural disasters, public health issues, epidemics or pandemics, acts of war, and terrorism;
+Added: • natural disasters, public health issues, epidemics or pandemics, acts of war, and terrorism, and other events outside our control;
• the impact of, and response of local governments to, the COVID-19 pandemic;
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Our business is subject to the risks of natural disasters, public health crises and other catastrophic events, and to interruption by man-made problems.
−Removed: A significant natural disaster, such as an earthquake, fire, hurricanes, flood or other catastrophic event (many of which are becoming more acute and frequent as a result of climate change), or interruptions by strikes, crime, terrorism, social unrest, cyber-attacks, pandemics or other public health crises, power outages or other man-made problems, could have an adverse effect on our business, results of operations and financial condition.
+Added: A significant natural disaster, such as an earthquake, fire, hurricanes, flood or other catastrophic event (many of which are becoming more acute and frequent as a result of climate change), or interruptions by strikes, crime, terrorism, social unrest, cyber-attacks, pandemics or other public health crises, power outages, geopolitical unrest or other man-made problems, could have an adverse effect on our business, results of operations and financial condition.
For example, a significant natural disaster in Northern California or any other location in which we have offices or facilities or employees working remotely, could adversely affect our business operations, financial condition and future prospects, and our insurance coverage may be insufficient to compensate us for losses that may occur.
5 unchanged sentences
For example, during parts of the COVID-19 pandemic, we temporarily closed a few of our retail locations due to public health orders or other concerns, which we believe resulted in lower Aggregate Originations.
−Removed: While all of our retail locations are currently open, it is possible that we will have to temporarily close retail locations as necessary due to public health orders or other concerns relating to COVID-19 or other highly contagious disease.
+Added: While all of our retail locations are currently open, it is possible that we will have to temporarily close retail locations as necessary due to public health orders or other concerns relating to any public health crisis.
The closure of retail locations could further adversely affect our loan originations, member experience, results of operations and financial condition.
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and international tax laws could increase our liability and adversely affect our after-tax profitability.
−Removed: For example, the Biden administration has proposed to levy a financial statement minimum tax, increase the U.S.
−Removed: taxation of our international business operations and impose a global minimum tax.
+Added: For example, the United States recently enacted the Inflation Reduction Act, which implemented, among others, a 15% alternative minimum tax on adjusted financial statement income for certain large companies and a 1% excise tax on certain stock buybacks.
In addition, many countries and the Organisation for Economic Co-operation and Development have reached an agreement to implement a 15% global minimum tax.
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and require us to maintain various policies, procedures and internal controls.
−Removed: Federal and state agencies have broad enforcement powers over us, including powers to periodically examine and continuously monitor our operations and to investigate our business practices and broad discretion to deem particular practices unfair, deceptive, abusive or otherwise not in
−Removed: accordance with the law.
+Added: Federal and state agencies have broad enforcement powers over us, including powers to periodically examine and continuously monitor our operations and to investigate our business practices and broad discretion to deem particular practices unfair, deceptive, abusive or otherwise not in accordance with the law.
State attorneys general have a variety of legal mechanisms at their disposal to enforce state and federal consumer financial laws.
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We may not have adequate liquidity and resources to make such cash repurchases or swap for qualifying assets.
−Removed: Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses.
+Added: Litigation, regulatory actions and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses and reputational harm.
In the ordinary course of business, we have been named as a defendant in various legal actions, including class actions and other litigation.
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The CFPB is charged with the examination and supervision of certain participants in the consumer financial services market, including short-term, small dollar lenders, and larger participants in other areas of financial services.
−Removed: In recent publications, the CFPB has indicated that the agency is significantly increasing its oversight and scrutiny over consumer finance and on April 25, 2022, the CFPB announced that it was invoking a previously unused legal provision to examine nonbank financial companies that pose risk to consumers, subject to a 30-day comment period.
−Removed: While historically, we have not been subject to CFPB examination and supervisory authority, it is possible that we may become subject to additional regulatory scrutiny and compliance costs going forward.
+Added: While historically, we have not been subject to CFPB supervisory authority, it is possible that we may become subject to additional regulatory scrutiny and compliance costs going forward through supervision by the CFPB.
+Added: In recent publications, the CFPB has indicated that the agency is significantly increasing its oversight and scrutiny over consumer finance and on April 25, 2022, the CFPB announced that it was invoking a previously unused legal provision to examine nonbank financial companies that it believes pose risk to consumers, subject to a 30-day comment period.
+Added: On October 19, 2022, in Community Financial Services Association of America v.
+Added: Consumer Financial Protection Bureau, the U.S.
+Added: Court of Appeals for the Fifth Circuit found that the CFPB's independent funding through the Federal Reserve violated the U.S.
+Added: Constitution’s appropriations clause and invalidated the remaining portions of the CFPB’s restrictions on the lenders offering payday, auto title and other short-term, high-interest loans.
+Added: It is likely that this decision will be appealed and we are unable to predict the timing, outcome, and impact of this litigation.
In addition, the CFPB maintains an online complaint system that allows consumers to log complaints with respect to various consumer finance products, including the credit products we offer.
2 unchanged sentences
This system could inform future CFPB decisions with respect to its regulatory, enforcement or examination focus.
−Removed: The CFPB may also request reports concerning our organization, business conduct, markets and activities and conduct on-site examinations of our business on a periodic basis if the CFPB were to determine that we were engaging in activities that pose risks to consumers.
+Added: The CFPB may also request, through examination or investigation, reports concerning our organization, business conduct, markets and activities and if the CFPB were to determine that we were engaging in activities that pose risks to consumers, may conduct on-site examinations of our business on a periodic basis.
On March 3, 2021, we received a Civil Investigative Demand (CID) from the CFPB.
2 unchanged sentences
The information requests are focused on our legal collection practices from 2019 to 2021 and hardship treatments offered to members during the COVID-19 pandemic.
+Added: On September 15, 2022, we received a Notice and Opportunity to Respond and Advise (“NORA”) letter from the staff of the CFPB in connection with the CID, stating that it is considering whether to recommend that the CFPB take legal action against us based on alleged violations focused on our failure to timely dismiss certain lawsuits and the hardship treatments offered during the COVID-19 pandemic, including credit reporting related thereto.
+Added: On October 14, 2022, we provided the CFPB with a written response to the NORA letter disputing the allegations.
The Company is cooperating fully with the CFPB with respect to this matter and we believe that our business practices have been in full compliance with applicable laws.
−Removed: Because the CFPB has broad authority to determine what it views as potentially unfair, deceptive or abusive acts or practices, at this time, the Company is unable to predict the outcome of the Oportun investigation
+Added: Because the CFPB has broad authority to determine what it views as potentially unfair, deceptive or abusive acts or practices, at this time, the Company is unable to predict the ultimate outcome of this matter.
Digit received a CID from the CFPB in June 2020.
1 unchanged sentence
The stated purpose of the CID is to determine whether Digit, in connection with offering its products or services, misrepresented the terms, conditions, or costs of the products or services in a manner that is unfair, deceptive, or abusive.
−Removed: The Company, including Digit, have cooperated fully with the CFPB with respect to this matter and, while the Company believes that the business practices of the Company, including Digit, have been in full compliance with applicable laws, the Company and the CFPB have reached an agreement in principle with respect to resolution of the Digit matter.
−Removed: The settlement will include a civil monetary penalty and the Company has established a reserve of approximately $2.8 million that was recorded in the Condensed Consolidated Statements of Operations (Unaudited).
−Removed: for the six months ended June 30, 2022.
+Added: While the Company believes that the business practices of the Company, including Digit, have been in full compliance with applicable laws, in the interest of resolving this matter, on August 11, 2022, Digit agreed to a consent order with the CFPB resolving such CID.
+Added: In connection with such consent order, Digit agreed to implement a redress and compliance plan to pay at least $68,145 in consumer redress to consumers who may have been harmed and paid a $2.7 million civil penalty to the CFPB.
Other federal or state regulators could launch similar investigations or join the CFPB in its investigations.
5 unchanged sentences
The collection, storage, use, disclosure, and other processing of personal information could give rise to liabilities as a result of existing or new governmental regulation, conflicting legal requirements or differing views of personal privacy rights.*
−Removed: We receive, transmit, store, and otherwise process a large volume of personally identifiable information and other sensitive data from members and potential members, and otherwise collect, store, use, disclose, and process other personal information, including that relating to employees.
−Removed: There are federal, state and foreign laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and sensitive data.
−Removed: Cybersecurity and data privacy issues, particularly with respect to personally identifiable information are increasingly subject to legislation and regulations to protect the privacy and security of personal information that is collected, transmitted, stored or otherwise processed.
−Removed: 2021, federal banking regulators, including the Office of Comptroller of the Currency, Federal Reserve Board and the Federal Deposit Insurance Corporation, jointly announced a final rule that will require banking organizations to give notice to the regulators within 36 hours of a cyber incident.
−Removed: The rule extends to a bank’s service providers, requiring us to notify our bank partners in the event of such an incident.
−Removed: The California Consumer Privacy Act (the "CCPA"), went into effect in January 2020, and the California Privacy Rights Act of 2020 (the "CPRA"), which replaces the CCPA and goes into effect in January 2023 but has a one-year look back period, place additional requirements on the handling of personal data for us and our third-party providers.
+Added: We collect, store, use, disclose, and otherwise process a large volume of personal information about individuals (including members and employees).New laws and regulations concerning the processing of personal information continue to be vigorously debated and enacted at all levels of government across the United States and around the globe while existing laws, such as the Gramm-Leach-Bliley Act, are being amended or reinterpreted to account for the rapidly evolving data economy.
+Added: The California Consumer Privacy Act (the "CCPA"), which went into effect in January 2020, and the California Privacy Rights Act of 2020 (the "CPRA"), which replaces the CCPA and goes into effect in January 2023 but has a one-year look back period, place additional requirements on the handling of personal data for us and our third-party providers.
The CCPA and CPRA also provide for civil penalties for violations, as well as a private right of action for data breaches, which may increase the likelihood and cost of data breach litigation.
−Removed: The potential effects of this legislation, including any regulations implemented by the legislation, are far-reaching, uncertain, and evolving, and may require us to modify our data processing practices and policies, restrict our products and services or certain features, and incur substantial costs and expenses in an effort to comply.
Other state, federal, and foreign legislative and regulatory bodies have also implemented or may implement similar legislation regarding the handling of personal data.
−Removed: For example, Virginia, Colorado, Utah and Connecticut have recently enacted privacy legislation, which take effect in 2023.
−Removed: federal government is also contemplating federal privacy legislation.
−Removed: These newly proposed or enacted laws may impose obligations similar to or more stringent than those we may face under other data protection laws.
+Added: For example, Virginia, Colorado, Utah and Connecticut have recently enacted privacy legislation, which take effect in 2023 and similar laws are being considered in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States, which could further complicate compliance efforts.
+Added: Federal Trade Commission, for example, released its updated Standards for Safeguarding Customer Information (Safeguards Rule), effective December 9, 2022, which raises the bar for covered financial institutions’ information security programs through proscriptive requirements for things like accountability and oversight, performing risk assessments, encryption, and enabling multi-factor authentication to protect all forms of customer information.
+Added: The potential effects of applicable privacy, data protection, and data security legislation and regulation are far-reaching, uncertain, and evolving, and may require us to modify our data processing practices and policies, restrict our products and services or certain features, and incur substantial costs and expenses in an effort to comply.
Our failure, or the failure by our third-party providers or others with whom we do business, to comply with applicable laws or regulations or any other obligations relating to privacy, data protection or information security, or the perception that any of the foregoing has occurred, could damage our reputation and market reputation, harm our ability to obtain market adoption, discourage new and existing members and prospective members from using our products and services, require us to change our business practices or operational structure or result in fines, investigations, or proceedings by governmental agencies and private claims and litigation, any of which could adversely affect our business, financial condition and results of operations.
−Removed: In addition, an increase in third-party arrangements, including, for example, with lead aggregators, bank partners, Lending as a Service partners and affiliate relationships including our acquisition of Digit could lead to increased complexity around our compliance obligations with respect to privacy, data protection and information security laws or regulations.
+Added: In addition, privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards by which we may be legally or contractually bound.
+Added: In addition, an increase in third-party arrangements, including, for example, with lead aggregators, bank partners, Lending as a Service partners and affiliate relationships through our subsidiary Digit, could lead to increased complexity around our compliance obligations with respect to privacy, data protection and information security laws or regulations.
We could also be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that we are required to alter our systems, products or services or require changes to our business practices or policies relating to privacy, data protection, or information security.
Even if not subject to legal challenge, the perception of concerns relating to privacy, data protection and information security, whether or not valid, may harm our reputation and brand and adversely affect our business, financial condition, and results of operations.
−Removed: For example, on April 21, 2021, the United States Court of Appeals for the Eleventh Circuit issued an opinion in Hunstein v.
−Removed: Preferred Collection and Management Services, Inc., holding that a debt collector’s transmittal of the plaintiff’s personal information to the vendor used to generate and send collection letters violated the FDCPA provision which generally prohibits a debt collector from communicating with anyone other than the debtor in connection with the collection of any debt without the debtor’s consent.
−Removed: The Hunstein case resulted in a significant amount of litigation against debt collectors and creditors collecting their own debt.
−Removed: The Eleventh Circuit of Appeals has subsequently issued an opinion stating that the entire court will rehear this matter en banc and vacated all prior orders issued by the Eleventh Circuit.
−Removed: Depending on the outcome of the hearing or if other courts were to decide cases in a similar matter to Hunstein , we could determine that changes to our business practices, policies, and procedures are necessary, including the arrangements we have in place with certain of our third-party vendors that require us to share consumer information.
−Removed: These changes cou ld adversely affect our ability to collect and as a result, our results of operations and financial condition could be negatively impacted.
Our business is subject to the regulatory framework applicable to registered investment advisers, including regulation by the SEC.
15 unchanged sentences
The uncertainty of the federal and state regulatory environments around bank partnership programs means that our efforts to launch products and services through bank partners may not ultimately be successful, or may be challenged by legislation or regulatory action.
−Removed: If the legal structure
−Removed: underlying our relationship with our bank partners were to be successfully challenged, we may be found to be in violation of state licensing requirements and state laws regulating interest rates.
+Added: If the legal structure underlying our relationship with our bank partners were to be successfully challenged, we may be found to be in violation of state licensing
+Added: requirements and state laws regulating interest rates.
In the event of such a challenge or if our arrangements with our bank partners were to change or end for any reason, we would need to rely on an alternative bank relationship, find an alternative bank relationship, rely on existing state licenses, obtain new state licenses, pursue a national bank charter, and/or be subject to the interest rate limitations of certain states.
28 unchanged sentences
We depend on securitization transactions, warehouse facilities, whole loan and structured loan sales and other forms of debt financing in order to finance the growth of our business and the origination of most of the loans we make to our members.
+Added: In September 2022, we entered into a credit agreement for $150 million senior secured debt with certain investment funds.
+Added: See Note 9, Borrowings of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.
+Added: Our outstanding borrowings or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position.
+Added: If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds.
+Added: We do not know whether we will be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.
The incurrence of debt could have a variety of negative effects, including:
1 unchanged sentence
• mandatory repurchase obligations for any loans conveyed or sold into a debt financing or under a whole loan purchase facility if the representations and warranties we made with respect to those loans were not correct when made;
−Removed: • acceleration of obligations to repay the indebtedness (or other outstanding indebtedness to the extent of cross default triggers), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios with
−Removed: respect to us or the loan portfolio securing our indebtedness or the maintenance of certain reserves or tangible net worth and do not obtain a waiver for such breach or renegotiate our covenant;
+Added: • acceleration of obligations to repay the indebtedness (or other outstanding indebtedness to the extent of cross default triggers), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios with respect to us or the loan portfolio securing our indebtedness or the maintenance of certain reserves or tangible net worth and do not obtain a waiver for such breach or renegotiate our covenant;
• our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
9 unchanged sentences
A breach of early payment triggers or covenants or other terms of our agreements with lenders could result in an early amortization, default, and/or acceleration of the related funding facilities.*
−Removed: The primary funding sources available to support the maintenance and growth of our business include, among others, asset-backed securitization, revolving debt facilities (including the Secured Financing facilities) and whole loan sale facilities.
+Added: The primary funding sources available to support the maintenance and growth of our business include, among others, asset-backed securitizations, revolving debt facilities (including the Secured Financing facilities), Corporate Financing facility, and whole loan sale facilities.
If we are unable to comply with various conditions precedent to availability under these facilities (including the eligibility of our loans), covenants and other specified requirements set forth in our agreements with our lenders, this could result in the early amortization, default and/or acceleration of our existing facilities.
Such covenants and requirements include financial covenants, portfolio performance covenants and other events.
−Removed: For example, our securitizations contain collateral performance threshold triggers related to the three-month average annualized gross charge-off or net charge-off rate which, if exceeded, would lead to early amortization.
+Added: The Corporate Financing contains financial covenants requiring a minimum liquidity maintenance covenant, minimum asset coverage ratio, together with other customary affirmative and negative covenants, and events of default.
+Added: The obligations are secured by assets of the Company and its subsidiaries.
+Added: Compliance with these covenants may limit our ability to take actions that might be to our advantage or to the advantage of our stockholders.
+Added: Our securitizations contain collateral performance threshold triggers related to the three-month average annualized gross charge-off or net charge-off rate which, if exceeded, would lead to early amortization.
To support our collateral requirements under our financing agreements, we use a random selection process to take loans off our warehouse line to pledge to our securitizations.
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Any disruptions in services may cause the inability to collect and process repayments.
−Removed: For more information on covenants, requirements and events, see Note 9, Borrowings of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.
During an early amortization period or if an event of default exists, principal and interest collections from the loans in our asset-backed facilities would be applied to repay principal under such facilities and principal collections would no longer be available on a revolving basis to fund purchases of newly originated loans.
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If we were unable to arrange new or alternative methods of financing on favorable terms, we might have to curtail the origination of loans, and we may be replaced by our back-up servicer or another successor servicer.
+Added: Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial ratios.
+Added: Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions.
+Added: A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt.
+Added: Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations.
+Added: In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing.
+Added: For more information on covenants, requirements and events, see Note 9, Borrowings of the Notes to the Condensed Consolidated Financial Statements (Unaudited) included elsewhere in this report.
Our securitizations and loan sales may expose us to certain risks, and we can provide no assurance that we will be able to conduct such transactions in the future, which may require us to seek more costly financing.
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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.