Consumer Portfolio Services, Inc. operates as a specialty finance company.
The company’s business is to purchase and service retail automobile contracts originated primarily by franchised automobile dealers, and to a lesser extent, by select independent dealers in the United States in the sale of new and used automobiles, light trucks and passenger vans. Through its automobile contract purchases, the company provides indirect financing to the customers of dealers who have limited credit histori...
Consumer Portfolio Services, Inc. operates as a specialty finance company.
The company’s business is to purchase and service retail automobile contracts originated primarily by franchised automobile dealers, and to a lesser extent, by select independent dealers in the United States in the sale of new and used automobiles, light trucks and passenger vans. Through its automobile contract purchases, the company provides indirect financing to the customers of dealers who have limited credit histories or past credit problems, who it refers to as sub-prime customers. The company serves as an alternative source of financing for dealers, facilitating sales to customers who otherwise might not be able to obtain financing from traditional sources, such as commercial banks, credit unions and the captive finance companies affiliated with major automobile manufacturers. In addition to purchasing installment purchase contracts directly from dealers, the company also has originated vehicle purchase money loans by lending directly to consumers and has acquired installment purchase contracts in four merger and acquisition transactions and purchased immaterial amounts of vehicle purchase money loans from non-affiliated lenders. The company refers to all of such contracts and loans as automobile contracts. The company services its automobile contracts from its California, Nevada, Virginia, Florida, and Illinois branches.
The company establishes relationships with dealers through its employee sales representatives, who contact prospective dealers to explain its automobile contract purchase programs, and thereafter provide dealer training and support services. The company’s sales representatives represent it exclusively. The company’s sales representatives present dealers with a sales package, which includes its promotional material containing the terms offered by it for the purchase of automobile contracts, a copy of its standard-form dealer agreement, and required documentation relating to automobile contracts. As of December 31, 2024, the company had 122 sales representatives, and in that month, it received applications from 8,600 dealers in 47 states. As of December 31, 2024, approximately 72% of the company’s active dealers were franchised new car dealers that sell both new and used vehicles, and the remainder were independent used car dealers.
The company generally solicits applications with the intent of originating contracts to hold as investments in its own portfolio. The company services all such contracts on behalf of the third-party.
For contracts the company originates for its own portfolio, it generally finances them on a long-term basis through securitizations. Securitizations are transactions in which the company sells a specified pool of automobile contracts to a special purpose subsidiary of it.
Contract Acquisitions
For the year ended December 31, 2024, the company received 3.3 million applications. Under its direct lending platform, the applicant submits a credit application directly to it via its website, or in some cases, through a third-party who accepts such applications and refers them to it for a fee. The company’s programs cover a wide band of the sub-prime credit spectrum and are labeled as follows:
First Time Buyer: This program accommodates an applicant who has limited significant past credit history, such as a previous auto loan. Since the applicant has limited credit history, the contract interest rate and dealer acquisition fees tend to be higher, and the loan amount, loan-to-value ratio, down payment, and payment-to-income ratio requirements tend to be more restrictive compared to the company’s other programs.
Mercury / Delta: This program accommodates an applicant who may have had significant past non-performing credit, including recent derogatory credit. As a result, the contract interest rate and dealer acquisition fees tend to be higher, and the loan amount, loan-to-value ratio, down payment, and payment-to-income ratio requirements tend to be more restrictive compared to the company’s other programs.
Standard: This program accommodates an applicant who may have significant past non-performing credit, but who has also exhibited some performing credit in their history. The contract interest rate and dealer acquisition fees are comparable to the First Time Buyer and Mercury/Delta programs, but the loan amount and loan-to-value ratio requirements are somewhat less restrictive.
Alpha: This program accommodates applicants who may have a discharged bankruptcy, but who have also exhibited performing credit. In addition, the program allows for homeowners who may have had other significant non-performing credit in the past. The contract interest rate and dealer acquisition fees are lower than the Standard program, down payment and payment-to-income ratio requirements are somewhat less restrictive.
Alpha Plus: This program accommodates applicants with past non-performing credit, but with a stronger history of recent performing credit, such as auto or mortgage related credit, and higher incomes than the Alpha program. Contract interest rates and dealer acquisition fees are lower than the Alpha program.
Super Alpha: This program accommodates applicants with past non-performing credit, but with a somewhat stronger history of recent performing credit, including auto or mortgage related credit, and higher incomes than the Alpha Plus program. Contract interest rates and dealer acquisition fees are lower, and the maximum loan amount is somewhat higher, than the Alpha Plus program.
Preferred: This program accommodates applicants with past non-performing credit, but who demonstrate a somewhat stronger history of recent performing credit than the Super Alpha program. Contract interest rates and dealer acquisition fees are lower, and the maximum loan amount is somewhat higher than the Super Alpha program.
Meta: This program accommodates applicants with past non-performing credit, but who demonstrate a stronger history of recent performing credit than the Preferred program. Contract interest rates and dealer acquisition fees are lower, and the maximum loan amount is somewhat higher than the Preferred program.
The company’s upper credit tier products, which are its Meta, Preferred, Super Alpha, Alpha Plus and Alpha programs, accounted for approximately 89% of its new contract acquisitions for its own portfolio in 2024.
The company attempts to control misrepresentation regarding the customer’s credit worthiness by carefully screening the automobile contracts it originates, by establishing and maintaining professional business relationships with dealers, and by including certain representations and warranties by the dealer in the dealer agreement. Pursuant to the dealer agreement, it may require the dealer to repurchase any automobile contract if the dealer breaches its representations or warranties.
Contract Funding
For automobile contracts that it purchases from dealers, the company requires that the contract be originated by a dealer that has entered into a dealer agreement with it. Under its direct lending platform, the company requires the customer to sign a note and security agreement. In each case, the contract is secured by a first priority lien on a new or used automobile, light truck or passenger van and must meet its funding criteria. In addition, each automobile contract requires the customer to maintain physical damage insurance covering the financed vehicle and naming it as a loss payee.
The company’s technology and human expertise provides for a 360-degree evaluation of an applicant’s employment and residence stability, income level and affordability, and creditworthiness in relation to the desired collateral securing the automobile contract. This perspective is used to assign application and structure allowances and limits related to price, term, amount of down payment, monthly payment, and interest rate; type of vehicle; and principal amount of the automobile contract in relation to the value of the vehicle.
Specifically, the company’s funding guidelines generally limit the maximum principal amount of a purchased automobile contract to 125% of wholesale book value in the case of used vehicles or to 125% of the manufacturer’s invoice in the case of new vehicles, plus, in each case, sales tax, licensing, and when the customer purchases such additional items, a service contract or a product to supplement the customer’s casualty policy in the event of a total loss of the related vehicle. Automobile contract purchase criteria are subject to change from time to time as circumstances may warrant.
Credit Scoring: The company uses proprietary scoring models to assign two internal ‘credit scores’ at the time the application is received. These proprietary scores are used to help determine whether the company wants to approve the application, and if so, the program and pricing it will offer either to the dealer or, in the case of its direct lending platform, directly to the customer. The company's internal credit scores are based on a variety of parameters, including traditional and alternative credit history, data derived from other sources such as house/rental payment, length of employment, residence stability, and total income.
Servicing and Collections
The company services all automobile contracts that it owns, as well as those automobile contracts it services for third parties. The company organizes its servicing activities based on the tasks performed by its personnel. The company’s servicing activities consist of mailing monthly billing statements; contacting obligors whose payments are late; accounting for and posting of all payments received; responding to customer inquiries; taking all necessary action to maintain the security interest granted in the financed vehicle or other collateral; skip tracing; repossessing and liquidating the collateral when necessary; collecting deficiency balances; and generally monitoring each automobile contract and the related collateral. For contracts that the company securitizes, it is typically entitled to receive a base monthly servicing fee equal to 2.5% per annum computed as a percentage of the declining outstanding principal balance of the non-charged-off automobile contracts. For contracts the company services for third parties, it receives a base monthly servicing fee equal to 2.5%, and certain other incentive fees tied to credit performance.
Regulation
The company is subject to supervision and examination by the Consumer Financial Protection Bureau (the ‘CFPB’), a federal agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘Dodd-Frank Act’). The CFPB has rulemaking, supervisory and enforcement authority over ‘non-banks,’ including the company. In addition, the Federal Trade Commission has jurisdiction to investigate aspects of the company’s business.
History
Consumer Portfolio Services, Inc. was founded in 1991. The company was incorporated in 1991.
The Analyst Price Target shows the analysts’ low, high, and average target at a glance.
