Company: CPSS
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001683168-25-001548
Chunk: 1148

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 7
Chunk 1148
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 cash in the spread accounts.
Cash held in the various spread accounts is invested in high quality, liquid investment securities, as specified in the securitization
agreements. The interest rate payable on the automobile contracts is significantly greater than the interest rate on the asset-backed
notes. As a result, the residual interests described above historically have been a significant asset of ours.

In all of our term securitizations
and warehouse credit facilities, whether treated as secured financings or as sales, we have sold the automobile contracts (through a subsidiary)
to the securitization entity. The difference between the two structures is that in securitizations that are treated as secured financings
we report the assets and liabilities of the securitization trust on our consolidated balance sheet. Under both structures, recourse to
us by holders of the asset-backed securities and by the trust, for failure of the automobile contract obligors to make payments on a timely
basis, is limited to the automobile contracts included in the securitizations or warehouse credit facilities, the spread accounts and
our retained interests in the respective trusts.

 38 

Accrual for Contingent Liabilities

We are routinely involved
in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Our legal
counsel has advised us on such matters where, based on information available at the time of this report, there is an indication that it
is both probable that a liability has been incurred and the amount of the loss can be reasonably determined.

We have recorded a liability
as of December 31, 2024, which represents our best estimate of probable incurred losses for legal contingencies at that date. The amount
of losses that may ultimately be incurred cannot be estimated with certainty. However, based on such information as is available to us,
we believe that the range of reasonably possible losses for the legal proceedings and contingencies described or referenced above, as
of December 31, 2024 does not exceed $3.2 million.

Accordingly, we believe that
the ultimate resolution of such legal proceedings and contingencies, after taking into account our current litigation reserves, should
not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the uncertainties inherent
in contested proceedings, there can be no assurance that the ultimate resolution of these matters will not significantly exceed the reserves
we have accrued; as a result, the outcome of a particular matter may be material to our