What changed in this filing

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Item 1A. Risk Factors

2024-05-23 compared with 2023-06-01 · 55 added, 56 removed, 381 unchanged (23% of the section changed)

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This annual report contains various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s beliefs and assumptions, as well as information currently available to management.

Statements other than those of historical fact, including, but not limited to those identified by the use of words such as “anticipate,” “estimate,” “intend,” “plan,” “expect,” “believe,” “may,” “will,” “should,” “would,” “could,” and any variations of the foregoing and similar expressions, are forward-looking statements.

Statements other than those of historical fact, including, but not limited to those identified by the use of words such as “anticipate,” “estimate,” “intend,” “plan,” “expect,” "project," “believe,” “may,” “will,” “should,” “would,” “could,” "continue," "forecast," and any variations of the foregoing and similar expressions, are forward-looking statements.

Although we believe that the expectations reflected in any such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct.

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Investors should consider the risk factors described in this annual report, in addition to the other information presented in this annual report and the other reports and registration statements the Company files with or furnishes to the SEC from time to time, in evaluating us, our business, and an investment in our securities.

Any of the risk factors described in this annual report, as well as other risks, uncertainties, and possibly inaccurate assumptions underlying our plans and expectations, could result in

harm to our business, results of operations and financial condition and cause the value of our securities to decline, which in turn could cause investors to lose all or part of their investment in our Company.

Any of the risk factors described in this annual report, as well as other risks, uncertainties, and possibly inaccurate assumptions underlying our plans and expectations, could result in harm to our business, results of operations and financial condition and cause the value of our securities to decline, which in turn could cause investors to lose all or part of their investment in our Company.

These factors, among others, could also cause actual results to differ materially from those we have experienced in the past or those we may express or imply from time to time in any forward-looking statements we make.

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In addition, our profitability may be directly affected by the level of and fluctuations in interest rates, whether caused by changes in economic conditions or other factors that affect our borrowing costs.

Changes in monetary policy, including changes in interest rates, could influence the amount of interest we pay on our revolving credit facility or any other floating interest rate obligations we may incur.

Changes in monetary policy, including changes

in interest rates, could influence the amount of interest we pay on our revolving credit facility or any other floating interest rate obligations we may incur.

Our profitability and liquidity could be materially adversely affected during any period of higher interest rates.

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Insurance claims and policyholder liabilities are difficult to predict and may exceed the related reserves set aside for claims (losses) and associated expenses for claims adjudication (loss adjustment expenses).

Additionally, events such as cyber security attacks and breaches and other types of catastrophes, and prolonged economic downturns, could adversely affect our financial condition and results of operations.

Additionally, events such as cybersecurity attacks and breaches and other types of catastrophes, and prolonged economic downturns, could adversely affect our financial condition and results of operations.

Other risks relating to our insurance operations include changes to laws and regulations applicable to us, as well as changes to the regulatory environment, such as:

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frequency and type of regulatory monitoring and reporting;

consumer privacy, use of customer data and data security;

restrictions on sales process, consumer privacy, use of customer data and data security;

benefits or loss ratio requirements;

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The new approach requires entities to measure all expected credit losses for financial assets based on historical experience, current conditions, and reasonable forecasts of collectability.

As such, the expected credit loss model requires earlier recognition of credit losses than the incurred loss approach.

expected credit loss model requires earlier recognition of credit losses than the incurred loss approach.

CECL became effective for the Company April 1, 2020.

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Currently, due to a number of factors, the global economy is experiencing inflationary pressures not seen in a significant period of time.

We cannot predict the timing or the

duration of any inflation or downturn in the economy and we are not immune to the effects of general worldwide economic conditions.

We cannot predict the timing or the duration of any inflation or downturn in the economy and we are not immune to the effects of general worldwide economic conditions.

During an economic downturn or recession, demand for credit products often decreases and credit losses in the financial services industry generally increase.

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Our primary business activity is offering small consumer installment loans together with, in some states in which we operate, related ancillary products.

Thus, any developments, whether regulatory, economic or otherwise, that would hinder, reduce the profitability of, or limit our ability to operate our small consumer installment loan business on the terms currently conducted would have a direct and adverse impact on our business, profitability, and perhaps even our viability.

would have a direct and adverse impact on our business, profitability, and perhaps even our viability.

Our current lack of product and business diversification could inhibit our opportunities for growth, reduce our revenues and profits, and make us more susceptible to earnings fluctuations than many other financial institutions whose operations are more diversified.

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If such improper applications were to increase, delinquency and losses on our loan portfolio could increase and could increase significantly.

In addition, we rely on certain third-party service providers in connection with loan

underwriting and origination.

In addition, we rely on certain third-party service providers in connection with loan underwriting and origination.

Any error or failure by a third-party service provider in providing loan underwriting and origination services may cause us to originate loans to borrowers that do not meet our underwriting standards.

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We process a significant number of customer transactions on a continuous basis through our computer systems and networks and are subject to increasingly more risk related to security systems as we enhance our mobile payment technologies and otherwise attempt to keep pace with rapid technological changes in the financial services industry.

While we commit resources to the design, implementation, maintenance, and monitoring of our networks and systems, we may be required to expend significant additional resources in the future to modify and enhance our security controls in response to new or more sophisticated threats, new regulations related to cybersecurity and other developments.

Additionally, there is no guarantee that our security controls can provide absolute security.

While we commit resources to the design, implementation, maintenance, testing, and monitoring of our networks and systems and training of our employees, we may be required to expend significant additional resources in the future to modify and enhance our security controls in response to new or more sophisticated threats, new regulations related to cybersecurity and other developments.

Additionally, there is no guarantee that our security controls can provide absolute security or that our cybersecurity risk management program will be fully implemented, complied with or effective in preventing or mitigating future cybersecurity risks or successfully protect the confidentiality, integrity, and availability of our critical systems and information.

Despite the measures we implement to protect our systems and data, we may not be able to anticipate, identify, prevent or detect cyber-attacks, ransomware, computer viruses or other security breaches, particularly because the techniques used by attackers change frequently and often are not immediately detected, and because cyber-attacks can originate from a wide variety of sources, including third parties who are or may be involved in organized crime or linked to terrorist organizations or hostile foreign governments.

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Or, they may seek to disrupt or disable our services through attacks such as denial-of-service attacks and ransomware attacks.

In addition, we may be unable to identify, or may be significantly delayed in identifying, cyber-attacks and incidents due to the increasing use of techniques and tools that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic artifacts.

In addition, while we have a third-party risk management process for service providers, suppliers, and vendors, we cannot guarantee that their security controls and other protective measures will be successful in preventing an attack on their systems, which could negatively impact our operations or data.

We may be unable to identify, or may be significantly delayed in identifying, cyber-attacks and incidents due to the increasing use of techniques and tools that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic artifacts.

As a result, our computer systems, software and networks, as well as those of third-party vendors we utilize, may be vulnerable to unauthorized access, computer viruses, malicious attacks and other events that could have a security impact beyond our control.

Our staff, technologies, systems, networks, and those of third-parties we utilize also may become the target of cyber-attacks, unauthorized access, malicious code, computer viruses, denial of service attacks, ransomware, and physical attacks that could result in information security breaches, the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and other information, or otherwise disrupt our or our customers’ operations.

We also routinely transmit and receive personal, confidential and proprietary information through third parties, which may be vulnerable to interception, misuse, or mishandling.

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A disruption could impair our ability to offer and process our loans, provide customer service, perform collections or other necessary business activities, which could result in a loss of customer confidence or business, subject us to additional regulatory scrutiny or negative publicity, or expose us to civil litigation and possible financial liability, or otherwise materially adversely affect our financial condition and operating results.

Furthermore, we may not be able to immediately detect any such breach, which may increase the losses that we would suffer.

Furthermore, we may not be able to immediately detect any such breach,

which may increase the losses that we would suffer.

In addition, our existing insurance policies may not reimburse us for all of the damages that we might incur as a result of a breach or other information system failure or network disruption.

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We also retain physical records in various storage locations.

The loss or theft of customer information and data from our branch offices, headquarters, or other storage

locations could subject us to additional regulatory scrutiny and penalties and could expose us to civil litigation and possible financial liability, which could have a material adverse effect on our results of operations, financial condition and liquidity.

The loss or theft of customer information and data from our branch offices, headquarters, or other storage locations could subject us to additional regulatory scrutiny and penalties and could expose us to civil litigation and possible financial liability, which could have a material adverse effect on our results of operations, financial condition and liquidity.

In addition, if we cannot locate original documents (or copies, in some cases) for certain loans receivables, we may not be able to collect on those loans receivables.

Our off-site data center and centralized IT functions are susceptible to disruption by catastrophic events, which could have a material adverse effect on our business, results of operations, and financial condition.

Our off-site data centers and centralized IT functions are susceptible to disruption by catastrophic events, which could have a material adverse effect on our business, results of operations, and financial condition.

Our information systems, and administrative and management processes could be disrupted if a catastrophic event, such as severe weather, natural disaster, power outage, act of war or terror or similar event, destroyed or severely damaged our infrastructure.

Any such catastrophic event or other unexpected disruption of our headquarters' functions or off-site data center could have a material adverse effect on our business, results of operations, and financial condition.

Any such catastrophic event or other unexpected disruption of our headquarters' functions or off-site data centers could have a material adverse effect on our business, results of operations, and financial condition.

A small number of our shareholders have the ability to significantly influence matters requiring shareholder approval and such shareholders may have interests which conflict with the interests of our other security holders.

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We depend to a substantial extent on borrowings under our revolving credit agreement to fund our liquidity needs.

Our revolving credit agreement allows us to borrow up to $685.0 million, with an accordion feature permitting the maximum aggregate commitments to increase to $785.0 million provided that certain conditions are met, through June 7, 2024.

Our revolving credit agreement allows us to borrow up to $580.0 million, with an accordion feature permitting the maximum aggregate commitments to increase to $730.0 million provided that certain conditions are met.

The maturity date of the revolving credit agreement is June 7, 2026.

Pursuant to the terms of our revolving credit agreement, we are required to comply with a number of covenants and conditions, including a minimum borrowing base calculation.

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In the event our creditors accelerate the repayment of our debt, there can be no assurance that we would have sufficient assets to repay that debt, and our financial condition, liquidity and results of operations would suffer.

A breach of our covenants under the Notes would have similar consequences.

A breach of our

covenants under the Notes would have similar consequences.

Additional information regarding our revolving credit facility and Notes is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”

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Should we become subject to such an investigation, examination, or proceeding, the matter could result in material adverse consequences to us, including, but not limited to, increased compliance costs, adverse judgments, significant settlements, fines, penalties, injunction, or other actions.

Although these laws and regulations have remained substantially unchanged for many years, the laws and regulations directly affecting our lending activities have been under review and subject to change in recent years as a result of various developments and changes in economic conditions, the make-up of the executive and legislative branches of government, and the political and

media focus on issues of consumer and borrower protection.

The laws and regulations directly affecting our lending activities have been under review and subject to change in recent years as a result of various developments and changes in economic conditions, the make-up of the executive and legislative branches of government, and the political and media focus on issues of consumer and borrower protection.

Any changes in such laws and regulations could force us to modify, suspend, or cease part or, in the worst case, all of our existing operations.

It is also possible that the scope of federal regulations could change or expand in such a way as to preempt what has traditionally been state law regulation of our business activities.

See Part I, Item 1, “Description of Business-Government Regulation” for more information regarding legislation we are subject to and related risks.

The Company is under the supervisory authority of the CFPB.

Regulations issued by the CFPB or examinations by the CFPB could adversely impact earnings due to, among other things, increased compliance costs or costs due to noncompliance.

In July 2010 the Dodd-Frank Act was enacted.

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In 2022, the CFPB announced that it has begun using this “dormant authority” to examine nonbank entities and the CFPB is attempting to expand the number of nonbank entities it currently supervises.

Specifically, the CFPB has notified the Company that it is seeking to establish such supervisory authority over the Company.

The Company disagrees that the CFPB has reasonable cause to to supervise the Company, has responded to the CFPB's notice, and is awaiting further response from the CFPB.

If the CFPB ultimately determines it has supervisory authority over the Company, then the Company may be subject to, among other things, examination by the CFPB.

Specifically, the CFPB previously

notified the Company that it was seeking to establish such supervisory authority over the Company.

Since then, the CFPB has issued a public designation order setting forth its determination that the Company has met the legal requirements for supervision (the "Order").

Pursuant to the terms of the Order, the CFPB has supervisory authority over the Company until such time as the Order is terminated.

Importantly, while the Order establishes that the CFPB has supervisory authority over the Company, it does not constitute a finding that the Company has engaged in wrongdoing, nor does it require any immediate action on the part of the Company.

However, the outcome of such supervision could result in operational changes which could reduce our ability to operate profitably or increase compliance costs.

The supervision could also result in additional examinations, litigation, consent orders or administrative proceedings, which could require considerable resources, time, effort and attention from our management, and may result in operational changes, monetary penalties or declines in our stock price.

Although the Dodd-Frank Act prohibits the CFPB from setting interest rates on consumer loans, efforts to create a federal usury cap, applicable to all consumer credit transactions and substantially below rates at which the Company could continue to operate profitably, are still ongoing.

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however, these regulations have increased and are expected to further increase our cost of doing business and time spent by management on regulatory matters, which may have a material adverse effect on the Company’s operations and results.

In 2017, the CFPB issued a final rule (the "Rule") under its unfair, deceptive and abusive acts and practices rulemaking authority relating to payday, vehicle title, and similar loans.

The final rule originally required lenders originating short-term loans and longer-term balloon payment loans to first make a good-faith reasonable determination that the consumer has the ability to repay the covered loan along with current obligations and expenses (“ability to repay requirements”);

however, the ability to repay requirements was rescinded in July 2020.

The final rule also curtails repeated unsuccessful attempts to debit consumers’ accounts for short-term loans, balloon payment loans, and installment loans that involve a payment authorization and an annual percentage rate over 36% (“payment requirements”).

Although the Company does not make loans with terms of 45 days or less or obtain access to a customer’s bank account or paycheck for repayment of any of its loans, it does make some vehicle-secured loans with an annual percentage rate within the scope of the final rule.

The final rule has significant differences from the CFPB’s proposed rules announced on June 2, 2016.

In 2017, the CFPB issued a final rule under its unfair, deceptive and abusive acts and practices rulemaking authority relating to payday and certain high-cost installment loans (the "Rule").

The Rule curtails repeated unsuccessful attempts to debit consumers’ accounts for short-term loans, balloon payment loans, and installment loans that involve a payment authorization and an annual percentage rate over 36% (“payment requirements”).

The Rule's ability to repay requirements were rescinded in July 2020.

Implementation of the Rule’s payment requirements may require changes to the Company’s practices and procedures for such loans, which could materially and adversely affect the Company’s ability to make such loans, the cost of making such loans, the Company’s ability to, or frequency with which it could, refinance any such loans, and the profitability of such loans.

Additionally, any further regulatory changes could have effects beyond those currently contemplated that could further materially and adversely impact our business and operations.

In addition to the specific matters described above, other aspects of our business may be the subject of future CFPB rule-making.

The enactment of one or more of such regulatory changes, or the exercise of broad regulatory authority by regulators, including but not limited to, the CFPB, having jurisdiction or supervisory authority over the Company’s business or discretionary consumer financial transactions, generically, could materially and adversely affect our business, results of

operations and prospects.

Additionally, any further regulatory changes to the Rule could have effects beyond those currently contemplated that could further materially and adversely impact our business and operations.

In addition to the specific matters described above, other aspects of our business may be the subject of future CFPB rulemaking.

See Part I, Item 1, “Description of Business-Government Regulation” for more information regarding legislation we are subject to and related risks.

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Changes in laws or regulations may have a material adverse effect on all aspects of our business in a particular state and on our overall business, financial condition, and results of operations, including our ability to generate new loans and the manner in which existing loans are serviced and collected.

We may be exposed to liabilities under follow-on litigation from our previous settlement with the SEC and DOJ for our previously disclosed FCPA issue in Mexico, which could have a material adverse effect on our business and liquidity.

On August 6, 2020, the Company announced that it had reached resolution with both the SEC and the DOJ with respect to the FCPA matter in Mexico.

See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Matters,” for more information.

The Company could face additional third-party claims by shareholders and/or other stakeholders of the Company relating to this settlement.

Any such litigation may be expensive and would likely consume significant time and attention of the Company’s senior management.

We may incur substantial expenses responding to such actions, which may have a material impact on our business.

Our use of third-party vendors and service providers is subject to regulatory review.

The CFPB and other regulators have issued regulatory guidance focusing on the need for financial institutions to perform due diligence and ongoing monitoring of third-party vendor and service provider relationships, which increases the scope of management involvement and decreases the benefit that we receive from using third-party vendors.

Moreover, if our regulators conclude that we have not met the standards for oversight of our third-party vendors, we could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist or other remedial actions, which could have a material adverse effect on our business, reputation, financial condition and operating results.

Defaults by, or force majeure events involving, our third-party vendors and service providers could adversely impact our business.

We rely upon third parties for the performance of certain functions within our operations.

If the third-party contracts were breached or disrupted by events of force majeure, we may be unable to service the needs of our customers or replace the third party with an alternative provider in a timely manner.

Such failure could have a material adverse impact on our business, results of operations, and financial condition.

Further, federal and state regulators have been scrutinizing the practices of lead aggregators and providers recently.

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Additionally, we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial condition, customer relationships and ability to attract future customers.

Employee or third-party misconduct could prompt regulators to allege or to determine based upon such misconduct that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect

violations of such rules.

Our branches have experienced employee fraud from time to time, and it is not always possible to deter employee or third-party misconduct.

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Misconduct by our employees or third-party contractors, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our reputation and our business.

General Risk Factor s

We sell loan accounts that are charged-off, which may result in increased regulator scrutiny, potential reputational damage and financial loss.

As part of our business, from time to time, we may sell loans that are charged off.

If we do not appropriately assess a debt buyer’s collection practices for compliance with laws and regulations, there is risk potential.

Failure to appropriately select and manage debt buyers can lead to additional regulatory scrutiny, penalties and potentially limit our collection practices on certain debts.

In addition, if we do not maintain and provide sufficient documentation of the loans sold, debt buyers may pursue collection without complete and accurate information, subjecting us to potential fines by regulators as well as repurchase risk from debt buyers.

General Risk Factors

Our risk management efforts may not be effective.

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In addition, management transition inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution, and our results of operations and financial condition could be negatively impacted as a result.

The loss of services of one or more other members of senior management, or the inability to attract qualified permanent replacements, could have a material adverse effect on our business.

The loss of services of one or more other members of senior management, or the inability to attract qualified permanent replacements, could have a

material adverse effect on our business.

If we fail to successfully attract and appoint permanent replacements with the appropriate expertise, we could experience increased employee turnover and harm to our business, results of operations, cash flow and financial condition.

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Negative publicity regarding our Company (or others engaged in a similar business or similar activities), whether or not accurate, may damage our reputation, which could have a material adverse effect on our business, results of operations, and financial condition.

We have goodwill, which is subject to periodic review and testing for impairment.

At March 31, 2023, our total assets contained $7.4 million of goodwill.

Under GAAP, goodwill is subject to periodic review and testing to determine if it is impaired.

Unfavorable trends in our industry and unfavorable events or disruptions to our operations resulting from adverse legislative or regulatory actions or from other unpredictable causes could result in goodwill impairment charges.

If we fail to maintain appropriate controls and procedures, we may not be able to accurately report our financial results, which could have a material adverse effect on our operations, financial condition, and the trading price of our common stock.

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Any shares of common stock issued in connection with acquisitions, the exercise of outstanding stock options, or otherwise would dilute the percentage ownership held by our existing shareholders.

Unresolved Staff Comments

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 1A. Risk Factors