Company: CPSS
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001683168-25-001548
Chunk: 39

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 1
Chunk 39
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 higher delinquencies and higher losses
than automobile contracts with more creditworthy customers. While we believe that our pricing of the automobile contracts and the underwriting
criteria and collection methods we employ enable us to control, to a degree, the higher risks inherent in automobile contracts with sub-prime
customers, no assurance can be given that such pricing, criteria and methods will afford adequate protection against such risks.

If automobile contracts that
we purchase and hold experience defaults to a greater extent than we have anticipated, this could materially and adversely affect our
results of operations, financial condition, cash flows and liquidity. Our results of operations, financial condition, cash flows and liquidity,
depend, to a material extent, on the performance of automobile contracts that we purchase, warehouse and securitize. A portion of the
automobile contracts that we acquire will default or prepay. In the event of payment default, the collateral value of the vehicle securing
an automobile contract realized by us in a repossession will generally not cover the outstanding principal balance on that automobile
contract and the related costs of recovery.

For our receivables originated
prior to January 2018, we maintain an allowance for credit losses on automobile contracts held on our balance sheet, which reflects our
estimates of probable credit losses that can be reasonably estimated. If the allowance is inadequate, then we would recognize the losses
in excess of the allowance as an expense and our results of operations could be adversely affected.

Receivables originated since
January 2018 are recorded at fair value and incorporate estimates include the timing and severity of future credit losses. If actual credit
losses were to exceed our estimates, we might be required to change our estimates, which could result in a fair value adjustment to those
receivables or reduced interest income for those receivables in subsequent periods.

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In addition, under the terms
of our warehouse credit facilities, we are not able to borrow against defaulted automobile contracts, including automobile contracts that
are, at the time of default, funded under our warehouse credit facilities, which will reduce the overcollateralization of those warehouse
credit facilities and possibly reduce the amount of cash flows available to us.

If We Lose Servicing Rights on Our Portfolio of Automobile Contracts,
Our Results of Operations Would Be Impaired.

We are entitled to receive
servicing fees only while we act as servicer under the applicable sale and servicing agreements governing our warehouse credit facilities
and securitizations. Under such agreements, we may be terminated