Atlanticus Holdings Profile
Atlanticus Holdings Corporation (Atlanticus) operates as a financial technology company.
The company leverages data, analytics, and innovative technology to unlock access to financial solutions for the millions of Americans who would otherwise be underserved.
The company is principally engaged in providing products and services to lenders in the U.S. and, in most cases, the company invests in the receivables originated by lenders who utilize the company’s technology platform and other related services. In the private label credit channel, the company partners with retailers and service providers in various industries across the U.S. to allow them to provide credit to their customers for the purchase of a variety of goods and services, including consumer electronics, furniture, elective medical procedures, healthcare, and home-improvements. From time to time, the company also purchases receivables portfolios from third parties.
Segments
The company operates through two segments: Credit as a Service and Auto Finance.
Credit as a Service
Within the company’s Credit as a Service (‘CaaS’) segment, the company applies its technology solutions to support lenders in offering more inclusive financial services. These products include private label credit and general purpose credit cards originated by lenders through multiple channels, including retail and healthcare, direct mail solicitation, digital marketing and partnerships with third parties. The services of the company’s bank partners are often extended to consumers who may not have access to financing options with larger financial institutions. The company specializes in supporting this ‘second-look’ credit service. The company’s flexible technology solutions allow the company’s bank partners to integrate the company’s paperless process and instant decisioning platform with the existing infrastructure of participating retailers and service providers. Using the company’s technology and proprietary predictive analytics, lenders can make instant credit decisions utilizing hundreds of inputs from multiple sources and thereby offer credit to consumers overlooked by many providers of financing who focus exclusively on consumers with higher FICO scores. Atlanticus’ underwriting process is enhanced by AI and machine learning, enabling lenders to make fast, sound decision-making when it matters most.
Using the company’s infrastructure and technology, the company also provides loan servicing, including risk management and customer service outsourcing, for third parties. Also through the company’s CaaS segment, the company engages in testing and limited investment in consumer finance technology platforms as the company seeks to capitalize on its expertise and infrastructure.
Additionally, the company reports within its CaaS segment: servicing income; and gains or losses associated with investments previously made in consumer finance technology platforms. These include investments in companies engaged in mobile technologies, marketplace lending and other financial technologies. One of these companies, Fintiv Inc., has sued Apple, Inc., Walmart, Inc., and PayPal Holdings, Inc. for patent infringement. Fintiv Inc. has approximately 150 patents related to secure money transfer on computer and mobile devices.
Auto Finance
The operations of the company’s Auto Finance segment are conducted through the company’s CAR platform, which the company acquired in 2005. CAR primarily purchases and/or services loans secured by automobiles from or for, and also provides floor-plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here used car business. The company has expanded these operations to also include certain installment lending products in addition to the company’s traditional loans secured by automobiles both in the U.S. and the U.S. territories.
Through the company’s CAR operations, it generates revenues on purchased loans through interest earned on the face value of the installment agreements combined with the accretion of discounts on loans purchased. The company generally earns discount income over the life of the applicable loan. Additionally, the company generates revenues from servicing loans on behalf of dealers for a portion of actual collections and by providing back-up servicing for similar quality assets owned by unrelated third parties. The company offers a number of other products to its network of buy-here, pay-here dealers (including its floor-plan financing offering), but the majority of the company’s activities are represented by the company’s purchases of auto loans at discounts and the company’s servicing of auto loans for a fee. As of December 31, 2022, the company’s CAR operations served more than 610 dealers in 32 states and two U.S. territories.
Receivables Management and Risk Mitigation
CaaS Segment
The company manages its investments in receivables using credit scoring, credit file data, non-credit-bureau attributes. These strategies include assisting the company’s issuing bank partners with the management of transaction authorizations, account renewals, credit line modifications and collection programs. The company uses an adaptive control system to translate its strategies into account management processes. The system enables the company to develop and test multiple strategies simultaneously, allowing the company to continually refine account management activities. The company has incorporated its proprietary risk scores into this control system, in addition to standard credit behavior scores used widely in the industry, in order to segment, evaluate and manage the receivables.
For the company’s private label credit and general purpose credit card finance activities, as well as the accounts that are open to purchases, the company generally assists its issuing bank partners with managing credit lines to reward customers who are performing well and to mitigate losses from delinquent customer segments. The company also assists its issuing bank partners with employing strategies to reduce otherwise open credit lines for customers demonstrating indicators of increased credit or bankruptcy risk. Data relating to account performance are captured and loaded into the company’s proprietary database for ongoing analysis. Account management strategies are adjusted as necessary, based on the results of such analyses. Additionally, the company uses industry-standard fraud detection software to manage the portfolio. The company routes accounts to manual work queues and suspend charging privileges if the transaction-based fraud models indicate a probability of fraudulent use.
Auto Finance Segment
The company’s CAR operations manage credit quality and loss mitigation at the dealer portfolio level through the implementation of dealer-specific loss reserve accounts. In most instances, the reserve accounts are cross-collateralized across all accounts presented by any single dealer. CAR monitors performance at the dealer portfolio level (by product type) to adjust pricing, the reserve account, and to determine the size and scope of future account purchases from such dealer.
CAR provides dealers with specific purchase guidelines based upon each product offering and delegates approval authority to assist in the monitoring of transactions during the loan acquisition process. Dealers are subject to specific approval criteria, and individual accounts typically are verified for accuracy before, during and after the acquisition process. Dealer portfolios across the business segment are monitored and compared against expected collections and peer dealer performance. Monitoring of dealer pool vintages, delinquencies and loss ratios helps determine past performance and expected future results, which are used to adjust pricing and reserve requirements. The company’s CAR operations also manage risk through diversifying their receivables among multiple dealers.
Consumer and Debtor Protection Laws and Regulations
CaaS Segment
The company’s U.S. business is regulated directly and indirectly under various federal and state consumer protection, collection and other laws, rules and regulations, including the federal Credit Card Accountability Responsibility and Disclosure Act of 2009 (the ‘CARD Act’), the federal Dodd-Frank Wall Street Reform and Consumer Protection Act (‘Dodd-Frank’), the federal Truth In Lending Act (‘TILA’), the federal Equal Credit Opportunity Act, the federal Fair Credit Reporting Act, the federal Fair Debt Collection Practices Act, the Federal Trade Commission (‘FTC’) Act, the federal Gramm-Leach-Bliley Act and the federal Telemarketing and Consumer Fraud and Abuse Prevention Act.
Auto Finance Segment
This segment is regulated directly and indirectly under various federal and state consumer protection and other laws, rules and regulations, including the federal TILA, the federal Equal Credit Opportunity Act, the federal Fair Credit Reporting Act, the federal Fair Debt Collection Practices Act, Dodd-Frank, the federal Gramm-Leach-Bliley Act and the federal Telemarketing and Consumer Fraud and Abuse Prevention Act.
Privacy and Data Security Laws and Regulations
The company must comply with guidelines under the Gramm-Leach-Bliley Act that require each financial institution to develop, implement and maintain a written, comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities and the sensitivity of any customer information at issue.
Trademarks, Trade Names and Service Marks
Atlanticus owns Aspire, Emerge, Fortiva, Imagine, Salute, Tribute and other trademarks and service marks in the United States (‘U.S.’) and the United Kingdom (‘U.K.’).
History
The company was founded in 1996. It was incorporated in 2009. The company was formerly known as CompuCredit Holdings Corporation and changed its name to Atlanticus Holdings Corporation in 2012.
