Subprime auto lender Consumer Portfolio Services reported strong volume growth in the fourth quarter and for all of 2014, despite a run-in with the Federal Trade Commission last year.
Originations in the fourth quarter were $264.4 million, up 52 percent from the year-earlier period. For 2014, originations were $944.9 million, up 24 percent compared with the previous year, the company said last week.
“Overall, it’s a real strong picture,” said Charles Bradley Jr., CEO of Consumer Portfolio Services, during a conference call for investors, analysts and media on Feb. 18.
Net income for the fourth quarter was $8 million, up 23 percent from the same quarter a year ago. For the full year, net income was $29.5 million, up 41 percent.
Consumer Portfolio, of Irvine, Calif., buys loans from more than 12,000 mostly franchised dealerships in 48 states.
Besides the increase in volume, there were increases in delinquencies and charge-offs for bad loans. For the fourth quarter, net charge-offs were 6.4 percent of the total outstanding, up from 5.6 percent in the year-earlier period. Thirty-day delinquencies were 7.2 percent, up from 6.9 percent.
In May 2014, Consumer Portfolio entered into a consent order with the FTC in which the company agreed to pay a $2 million civil penalty plus an additional $3.5 million in refunds or adjustments to customer accounts.
The FTC said the lender harassed customers in the collections process and in some cases collected amounts customers did not actually owe.
In last week’s conference call, Bradley said the company is still spending time and resources retraining collectors. “Down the road, I think we can see very significant improvement in terms of how we collect our loans,” he said.
In addition, Bradley said Consumer Portfolio is analyzing loans to make sure minorities and other legally protected classes of borrowers pay the same rates for dealer reserve as everyone else.
When legally protected classes pay more, the Consumer Financial Protection Bureau calls it a “disparate impact,” which qualifies as discrimination. Bradley said Consumer Portfolio’s monitoring program has turned up a few, but only a few, examples.
“Out of the 8,000 or 10,000 dealers we work with on a regular basis, about once a quarter we notify eight dealers or so -- and I mentioned 8,000 -- that there might be some disparity of impact in the way they make car loans,” he said. Bradley said those dealerships are cut off until they can demonstrate they have made changes to correct the problem.