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Note 2 - Significant Accounting Policies and Consolidated Financial Statement Components | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Significant Accounting Policies [Text Block] |
2. | Significant Accounting Policies and Consolidated Financial Statement Components
The following is a summary of significant accounting policies we follow in preparing our consolidated financial statements, as well as a description of significant components of our consolidated financial statements. Basis of Presentation and Use of Estimates We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”). The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated financial statements, as well as the reported amounts of revenues and expenses during each reporting period. We base these estimates on information available to us as of the date of the financial statements. Actual results could differ materially from these estimates. Certain estimates, such as credit losses, payment rates, costs of funds, discount rates and the yields earned on credit card receivables, significantly affect the reported amount (and changes thereon) of our Loans, interest and fees receivables, at fair value and Notes payable associated with structured financings recorded at fair value on our consolidated balance sheets and consolidated statements of income. Additionally, estimates of credit losses have a significant effect on loans, interest and fees receivable, net, as shown on our consolidated balance sheets, as well as on the provision for losses on loans, interest and fees receivable within our consolidated statements of income. We have eliminated all significant intercompany balances and transactions for financial reporting purposes. Unrestricted Cash and Cash Equivalents Unrestricted cash and cash equivalents consist of cash, money market investments and overnight deposits. We consider all highly liquid cash investments with low interest rate risk and original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market. We maintain unrestricted cash and cash equivalents for general operating purposes and to meet our longer term debt obligations. The majority of these cash balances are not insured. Restricted Cash Restricted cash as of December 31, 2021 and 2020 includes certain collections on loans, interest and fees receivable, the cash balances of which are required to be distributed to noteholders under our debt facilities. Our restricted cash balances also include minimum cash balances held in accounts at the request of certain of our business partners. Loans, Interest and Fees Receivable We maintain two categories of Loans, Interest and Fees Receivable on our consolidated balance sheets: those that are carried at fair value (Loans, interest and fees receivable, at fair value) and those that are carried at net amortized cost (Loans, interest and fees receivable, gross). For both categories of loans, interest and fees receivable, other than our Auto Finance receivables, interest and fees are discontinued when loans, interest and fees receivable become contractually 90 or more days past due. We charge off our CaaS and Auto Finance segment receivables when they become contractually more than 180 days past due. For all of our receivables portfolios, we charge off receivables within 30 days of notification and confirmation of a customer’s bankruptcy or death. However, in some cases of death, we do not charge off receivables if there is a surviving, contractually liable individual or estate large enough to pay the debt in full. Loans, Interest and Fees Receivable, at Fair Value. Loans, interest and fees receivable held at fair value represent both the receivables underlying credit card securitization trusts (the "Securitized Receivables") and those receivables for which we elected the fair value option on January 1, 2020 (the "Fair Value Receivables"). Both the Securitized Receivables and the Fair Value Receivables are held by entities that qualify as variable interest entities ("VIE"), and are consolidated onto our consolidated balance sheets, some portfolios of which are unencumbered and some of which are still encumbered under structured or other financing facilities. Loans and finance receivables include accrued and unpaid interest and fees. Under the fair value option for both our Securitized Receivables and our Fair Value Receivables, direct loan origination fees (such as annual and merchant fees) are taken into income when billed to the consumer or upon loan acquisition and direct loan origination costs are expensed in the period incurred. The Company estimates the fair value of the loans using a discounted cash flow model, which considers various unobservable inputs such as remaining cumulative charge-offs, remaining cumulative prepayments, average life and discount rate. The Company re-evaluates the fair value of loans receivable at the close of each measurement period. Changes in the fair value of loans, interest and fees receivable are recorded as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value" in the consolidated statements of income in the period of the fair value changes. Changes in the fair value of loans, interest and fees receivable recorded at fair value include the impact of current period charge offs associated with these receivables. Further details concerning our loans, interest and fees receivable held at fair value are presented within Note 6, “Fair Values of Assets and Liabilities.” Loans, Interest and Fees Receivable, Gross. Our loans, interest and fees receivable, gross, currently consist of receivables associated with (a) a portion (those which are not part of our Fair Value Receivables) of our private label credit and general purpose credit card receivables within our CaaS segment and (b) our Auto Finance segment’s operations. Our CaaS segment loans, interest and fees receivable generally are unsecured, while our Auto Finance segment loans, interest and fees receivable generally are secured by the underlying automobiles for which we hold the vehicle title. We purchased auto loans with outstanding principal of $194.8 million and $185.0 million for the years ended December 31, 2021 and 2020, respectively, through our pre-qualified network of independent automotive dealers and automotive finance companies. We show both an allowance for uncollectible loans, interest and fees receivable and unearned fees (or “deferred revenue”) for our loans, interest and fees receivable that are not carried at fair value. The allowance is an estimate of the probable losses inherent within loans, interest and fees receivable that the Company does not report at fair value. Our loans, interest and fees receivable consist of smaller-balance, homogeneous loans, divided into two portfolio segments: CaaS and Auto Finance. While each of these categories has unique features, they share many of the same credit risk characteristics and thus share a similar approach to the establishment of an allowance for loan losses. Each portfolio segment is divided into pools based on common characteristics such as contract or acquisition channel. For each pool, we determine the necessary allowance for uncollectible loans, interest and fees receivable by analyzing some or all of the following unique attributes for each type of receivable pool: historical loss rates; current delinquency and roll-rate trends; vintage analyses based on the number of months an account has been in existence; the effects of changes in the economy on consumers; changes in underwriting criteria; and estimated recoveries. For our Auto Finance segment we may further reduce the expected charge-off, taking into consideration specific dealer level reserves which may allow us to offset our losses and, in the case of secured loans, the impact of collateral available to offset a potential loss. Conversely, for receivables in our CaaS segment, which generally do not have a secured interest in collateral, we look to reserve for the gross expected exposure to charge-offs. These reserves are considered in conjunction with (and potentially reduced by) any unearned fees and discounts that may be applicable for an outstanding loan receivable. A considerable amount of judgment is required to assess the ultimate amount of uncollectible loans, interest and fees receivable, and we continuously evaluate and update our methodologies to determine the most appropriate allowance necessary. We may individually evaluate a receivable or pool of receivables for impairment if circumstances indicate that the receivable or pool of receivables may be at higher risk for non-performance than other receivables (e.g., if a particular retail or auto-finance partner has indications of non-performance (such as a bankruptcy) that could impact the underlying pool of receivables we purchased from the partner). Certain of our loans, interest and fees receivable also contain components of deferred revenue including merchant fees on the purchases of receivables for our private label credit receivables and annual fee billings for our general purpose credit card receivables. Our private label credit and auto finance loans, interest and fees receivable include principal balances and associated fees and interest due from customers which are earned each period a loan is outstanding, net of the unearned portion of merchant fees and loan discounts. Additionally, many of our general purpose credit card receivables have an annual membership fee that is billed to the consumer on card activation and on each anniversary of that date thereafter. As of December 31, 2021 and December 31, 2020, the weighted average remaining accretion period for the $29.3 million and $39.5 million of deferred revenue reflected in the consolidated balance sheets was 15 months and 14 months, respectively. Included within deferred revenue, are merchant fees and discounts on purchased loans of $20.4 million and $28.2 million as of December 31, 2021 and December 31, 2020, respectively. As a result of the COVID-19 pandemic and subsequent declaration of a national emergency in March 2020 under the National Emergencies Act, certain consumers have been offered the ability to defer their payment without penalty during the national emergency period. In March 2020, the federal bank regulatory agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” ("COVID-19 Guidance"). The COVID-19 Guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. In accordance with the COVID-19 Guidance, certain consumers negatively impacted by COVID-19 have been provided short-term payment deferrals and fee waivers. Receivables enrolled in these short-term payment deferrals continue to accrue interest and their delinquency status will not change through the deferment period. Through December 31, 2021 we continued to actively work with consumers that indicated hardship as a result of COVID-19; however, the number of impacted consumers continued to be a diminishing part of our overall receivable base. In order to establish appropriate reserves for this population, we considered various factors such as subsequent payment behavior and additional requests by the consumer for further deferrals or hardship claims. Our CaaS segment consists of two classes of receivable: credit cards and other unsecured lending products. A roll-forward (in millions) of our allowance for uncollectible loans, interest and fees receivable by class of receivable is as follows:
For the Year Ended December 31, 2021 |  | Credit Cards |  |  | Auto Finance |  |  | Other Unsecured Lending Products |  |  | Total |
Allowance for uncollectible loans, interest and fees receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | (88.2 | ) |  | $ | (1.7 | ) |  | $ | (35.1 | ) |  | $ | (125.0 | )
Provision for loan losses |  |  | (34.9 | ) |  |  | (0.2 | ) |  |  | (1.4 | ) |  |  | (36.5 | )
Charge offs |  |  | 88.6 |  |  |  | 1.5 |  |  |  | 31.1 |  |  |  | 121.2 |
Recoveries |  |  | (8.9 | ) |  |  | (1.0 | ) |  |  | (7.0 | ) |  |  | (16.9 | )
Balance at end of period |  | $ | (43.4 | ) |  | $ | (1.4 | ) |  | $ | (12.4 | ) |  | $ | (57.2 | )
As of December 31, 2021 |  | Credit Cards |  |  | Auto Finance |  |  | Other Unsecured Lending Products |  |  | Total |
Allowance for uncollectible loans, interest and fees receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at end of period individually evaluated for impairment |  | $ | — |  |  | $ | (0.1 | ) |  | $ | — |  |  | $ | (0.1 | )
Balance at end of period collectively evaluated for impairment |  | $ | (43.4 | ) |  | $ | (1.3 | ) |  | $ | (12.4 | ) |  | $ | (57.1 | )
Loans, interest and fees receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans, interest and fees receivable, gross |  | $ | 259.5 |  |  | $ | 94.6 |  |  | $ | 116.2 |  |  | $ | 470.3 |
Loans, interest and fees receivable individually evaluated for impairment |  | $ | — |  |  | $ | 0.4 |  |  | $ | — |  |  | $ | 0.4 |
Loans, interest and fees receivable collectively evaluated for impairment |  | $ | 259.5 |  |  | $ | 94.2 |  |  | $ | 116.2 |  |  | $ | 469.9 |
For the Year Ended December 31, 2020 |  | Credit Cards |  |  | Auto Finance |  |  | Other Unsecured Lending Products |  |  | Total |
Allowance for uncollectible loans, interest and fees receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | (121.3 | ) |  | $ | (1.6 | ) |  | $ | (63.4 | ) |  | $ | (186.3 | )
Provision for loan losses |  |  | (112.1 | ) |  |  | (2.0 | ) |  |  | (28.6 | ) |  |  | (142.7 | )
Charge offs |  |  | 155.1 |  |  |  | 3.0 |  |  |  | 72.1 |  |  |  | 230.2 |
Recoveries |  |  | (9.9 | ) |  |  | (1.1 | ) |  |  | (15.2 | ) |  |  | (26.2 | )
Balance at end of period |  | $ | (88.2 | ) |  | $ | (1.7 | ) |  | $ | (35.1 | ) |  | $ | (125.0 | )
As of December 31, 2020 |  | Credit Cards |  |  | Auto Finance |  |  | Other Unsecured Lending Products |  |  | Total |
Allowance for uncollectible loans, interest and fees receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at end of period individually evaluated for impairment |  | $ | — |  |  | $ | (0.3 | ) |  | $ | — |  |  | $ | (0.3 | )
Balance at end of period collectively evaluated for impairment |  | $ | (88.2 | ) |  | $ | (1.4 | ) |  | $ | (35.1 | ) |  | $ | (124.7 | )
Loans, interest and fees receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans, interest and fees receivable, gross |  | $ | 364.2 |  |  | $ | 93.2 |  |  | $ | 210.2 |  |  | $ | 667.6 |
Loans, interest and fees receivable individually evaluated for impairment |  | $ | — |  |  | $ | 2.3 |  |  | $ | — |  |  | $ | 2.3 |
Loans, interest and fees receivable collectively evaluated for impairment |  | $ | 364.2 |  |  | $ | 90.9 |  |  | $ | 210.2 |  |  | $ | 665.3 |
Delinquent loans, interest and fees receivable reflect the principal, fee and interest components of loans we did not collect on or prior to the contractual due date. Amounts we believe we will not ultimately collect are included as a component in our overall allowance for uncollectible loans, interest and fees receivable. Recoveries, noted above, consist of amounts received from the efforts of third-party collectors we employ and through the sale of charged-off accounts to unrelated third-parties. All proceeds received, associated with charged-off accounts, are credited to the allowance for uncollectible loans, interest and fees receivable and effectively offset our provision for losses on loans, interest and fees receivable recorded at net realizable value on our consolidated statements of income. For the year ended December 31, 2021, $8.7 million of our recoveries noted above related to collections from third-party collectors we employ and $8.2 million related to sales of charged-off accounts to unrelated third-parties. For the year ended December 31, 2020, $12.4 million of our recoveries noted above related to collections from third-party collectors we employ and $13.8 million related to sales of charged-off accounts to unrelated third-parties. We consider loan delinquencies a key indicator of credit quality because this measure provides the best ongoing estimate of how a particular class of receivables is performing. An aging of our delinquent loans, interest and fees receivable, gross (in millions) by class of receivable as of December 31, 2021 and December 31, 2020 is as follows:
As of December 31, 2021 |  | Credit Cards |  |  | Auto Finance |  |  | Other Unsecured Lending Products |  |  | Total |
30-59 days past due |  | $ | 7.3 |  |  | $ | 7.2 |  |  | $ | 3.3 |  |  | $ | 17.8 |
60-89 days past due |  |  | 6.9 |  |  |  | 2.6 |  |  |  | 2.6 |  |  |  | 12.1 |
90 or more days past due |  |  | 17.9 |  |  |  | 2.0 |  |  |  | 6.8 |  |  |  | 26.7 |
Delinquent loans, interest and fees receivable, gross |  |  | 32.1 |  |  |  | 11.8 |  |  |  | 12.7 |  |  |  | 56.6 |
Current loans, interest and fees receivable, gross |  |  | 227.4 |  |  |  | 82.8 |  |  |  | 103.5 |  |  |  | 413.7 |
Total loans, interest and fees receivable, gross |  | $ | 259.5 |  |  | $ | 94.6 |  |  | $ | 116.2 |  |  | $ | 470.3 |
Balance of loans greater than 90-days delinquent still accruing interest and fees |  | $ | — |  |  | $ | 1.5 |  |  | $ | — |  |  | $ | 1.5 |
As of December 31, 2020 |  | Credit Cards |  |  | Auto Finance |  |  | Other Unsecured Lending Products |  |  | Total |
30-59 days past due |  | $ | 12.4 |  |  | $ | 7.6 |  |  | $ | 5.1 |  |  | $ | 25.1 |
60-89 days past due |  |  | 8.0 |  |  |  | 2.8 |  |  |  | 3.8 |  |  |  | 14.6 |
90 or more days past due |  |  | 19.9 |  |  |  | 2.1 |  |  |  | 9.5 |  |  |  | 31.5 |
Delinquent loans, interest and fees receivable, gross |  |  | 40.3 |  |  |  | 12.5 |  |  |  | 18.4 |  |  |  | 71.2 |
Current loans, interest and fees receivable, gross |  |  | 323.9 |  |  |  | 80.7 |  |  |  | 191.8 |  |  |  | 596.4 |
Total loans, interest and fees receivable, gross |  | $ | 364.2 |  |  | $ | 93.2 |  |  | $ | 210.2 |  |  | $ | 667.6 |
Balance of loans greater than 90-days delinquent still accruing interest and fees |  | $ | — |  |  | $ | 1.5 |  |  | $ | — |  |  | $ | 1.5 |
Troubled Debt Restructurings. As part of ongoing collection efforts, once an account, the receivable of which is included in our CaaS segment, becomes 90 days or more past due, the related receivable is placed on a non-accrual status. Placement on a non-accrual status results in the use of programs under which the contractual interest associated with a receivable may be reduced or eliminated, or a certain amount of accrued fees is waived, provided a minimum number or amount of payments have been made. Following this adjustment, if a customer demonstrates a willingness and ability to resume making monthly payments and meets certain additional criteria, we will re-age the customer’s account. When we re-age an account, we adjust the status of the account to bring a delinquent account current, but generally do not make any further modifications to the payment terms or amount owed. Once an account is placed on a non-accrual status, it is closed for further purchases. Accounts that are placed on a non-accrual status and thereafter make at least one payment qualify as troubled debt restructurings (“TDRs”). The above referenced COVID-19 Guidance issued by federal bank regulatory agencies, in consultation with the FASB staff, concluded that short-term modifications (e.g., six months) made on a good faith basis to borrowers who were impacted by COVID-19 and who were less than 30 days past due as of the implementation date of a relief program are not TDRs. Although we are not a financial institution and therefore not directly subject to the COVID-19 Guidance, we believe this constitutes an interpretation of GAAP and therefore should be applied to our accounting circumstances. As a result, the below tables exclude certain accounts that are included under that guidance. The following table details by class of receivable, the number and amount of modified loans, including TDRs that have been re-aged, as of December 31, 2021 and December 31, 2020:
|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | Private label credit |  |  | General purpose credit card |  |  | Private label credit |  |  | General purpose credit card |
Number of TDRs |  |  | 14,919 |  |  |  | 39,322 |  |  |  | 12,394 |  |  |  | 37,784 |
Number of TDRs that have been re-aged |  |  | 812 |  |  |  | 2,035 |  |  |  | 2,788 |  |  |  | 7,846 |
Amount of TDRs on non-accrual status (in thousands) |  | $ | 17,152 |  |  | $ | 25,154 |  |  | $ | 14,537 |  |  | $ | 26,989 |
Amount of TDRs on non-accrual status above that have been re-aged (in thousands) |  | $ | 1,205 |  |  | $ | 1,553 |  |  | $ | 4,662 |  |  | $ | 6,890 |
Carrying value of TDRs (in thousands) |  | $ | 11,173 |  |  | $ | 15,502 |  |  | $ | 9,583 |  |  | $ | 14,287 |
TDRs - Performing (carrying value, in thousands)* |  | $ | 8,797 |  |  | $ | 13,387 |  |  | $ | 7,420 |  |  | $ | 11,855 |
TDRs - Nonperforming (carrying value, in thousands)* |  | $ | 2,376 |  |  | $ | 2,115 |  |  | $ | 2,163 |  |  | $ | 2,432 |
*“TDRs - Performing” include accounts that are current on all amounts owed, while “TDRs - Nonperforming” include all accounts with past due amounts owed. We do not separately reserve or impair these receivables outside of our general reserve process. The Company modified 65,125 and 60,908 accounts, with a carrying amount of $70.0 million and $70.3 million during the twelve month periods ended December 31, 2021 and December 31, 2020, respectively, that qualified as TDRs. The following table details by class of receivable, the number of accounts and balance of loans that completed a modification (including those that were classified as TDRs) within the periods indicated and subsequently defaulted.
|  | Twelve Months Ended |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | Private label credit |  |  | General purpose credit card |  |  | Private label credit |  |  | General purpose credit card |
Number of accounts |  |  | 3,119 |  |  |  | 7,765 |  |  |  | 3,065 |  |  |  | 7,665 |
Loan balance at time of charge off (in thousands) |  | $ | 4,642 |  |  | $ | 6,455 |  |  | $ | 4,352 |  |  | $ | 6,745 |
Property at Cost, Net of Depreciation We capitalize costs related to internal development and implementation of software used in our operating activities in accordance with applicable accounting literature. These capitalized costs consist almost exclusively of fees paid to third-party consultants to develop code and install and test software specific to our needs and to customize purchased software to maximize its benefit to us. We record our property at cost less accumulated depreciation or amortization. We compute depreciation expense using the straight-line method over the estimated useful lives of our assets, which are approximately 5 years for furniture, fixtures and equipment, and 3 years for computers and software. We amortize leasehold improvements over the shorter of their estimated useful lives or the terms of their respective underlying leases. We periodically review our property to determine if it is impaired. We incurred no impairment costs in 2021 and no impairment costs in 2020. Investment in Equity-Method Investee We account for an investment using the equity method of accounting if we have the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist based on ownership interest, although other factors, such as representation on an investee’s board of managers, specific voting and veto rights held by each investor and the effects of commercial arrangements, are considered in determining whether equity method accounting is appropriate. We record interests in the income of an equity-method investee within the equity in income of equity-method investee category on our consolidated statements of income. We used the equity method for our 66.7% investment in a limited liability company formed in 2004 to acquire a portfolio of credit card receivables. Prior to the acquisition of the outstanding noncontrolling interest in September 2021 (and subsequent consolidation), we accounted for this investment using the equity method of accounting due to specific voting and veto rights held by each investor, which did not allow us to control this investee. Prepaid Expenses and Other Assets Prepaid expenses and other assets include amounts paid to third parties for marketing and other services as well as amounts owed to us by third parties. Prepaid amounts are expensed as the underlying related services are performed. Also included are (1) commissions paid associated with our various office leases which we amortize into expense over the lease terms, (2) ongoing deferred costs associated with service contracts and (3) investments in consumer finance technology platforms carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses reflect both the billed and unbilled amounts owed at the end of a period for services rendered. Commencing in July 2019, accounts payable and accrued expenses includes payments owed under a deferred payment program started with an unrelated third-party for a portion of our marketing expenditures. As a result of this agreement, we were able to extend the payment terms associated with our growing marketing spend between 10-37 months. Revenue Recognition and Revenue from Contracts with Customers Consumer Loans, Including Past Due Fees Consumer loans, including past due fees reflect interest income, including finance charges, and late fees on loans in accordance with the terms of the related customer agreements. Premiums, discounts and merchant fees paid or received associated with installment or auto loans that are not included as part of our Fair Value Receivables are deferred and amortized over the average life of the related loans using the effective interest method. Premiums, discounts and merchant fees paid or received associated with Fair Value Receivables are recognized upon receivable acquisition. Finance charges and fees, net of amounts that we consider uncollectible, are included in loans, interest and fees receivable and revenue when the fees are earned based upon the contractual terms of the loans. Fees and Related Income on Earning Assets Fees and related income on earning assets primarily include fees associated with the credit products, including the receivables underlying our private label credit and general purpose credit card platform, and our legacy credit card receivables which include the recognition of annual fee billings and cash advance fees among others. We assess fees on credit card accounts underlying our credit card receivables according to the terms of the related cardholder agreements and, except for annual membership fees, we recognize these fees as income when they are charged to the customers’ accounts. We accrete annual membership fees associated with our credit card receivables into income on a straight-line basis over the cardholder privilege period which is generally 12 months for our amortized cost receivables, and when billed for those receivables that are included as part of our Fair Value Receivables. Similarly, fees on our other credit products are recognized when earned, which coincides with the time they are charged to the customers' accounts. Fees and related income on earning assets, net of amounts that we consider uncollectible, are included in loans, interest and fees receivable and revenue when the fees are earned based upon the contractual terms of the loans. The election of the fair value option to account for certain loans receivable that were acquired on or after January 1, 2020, resulted in increased fees recognized on credit products throughout the periods presented. Other revenue Other revenue includes revenues associated with interchange revenues, servicing income and ancillary product offerings (primarily associated with a credit protection program offered by our lending partner). We recognize these fees as income in the period earned. Other non-operating revenue Other non-operating revenue includes revenues associated with investments in equity method investees and other revenues not associated with our ongoing business operations. During the year ended December 31, 2020, we received $2.0 million in distributions from an investment in a consumer finance technology company. We retained our minority ownership stake in this company and will continue to carry the investment on our books at cost minus impairment, if any, plus or minus changes resulting from observable price changes. Revenue from Contracts with Customers The majority of our revenue is earned from financial instruments and is not included within the scope of ASU No. 2014-09, "Revenue from Contracts with Customers". We have determined that revenue from contracts with customers would primarily consist of interchange revenues in our CaaS segment and servicing revenue and other customer-related fees in both our CaaS segment and our Auto Finance segment. Interchange fees are earned when our customer's cards are used over established card networks. We earn a portion of the interchange fee the card networks charge merchants for the transaction. Servicing revenue is generated by meeting contractual performance obligations related to the collection of amounts due on receivables, and is settled with the customer net of our fee. Service charges and other customer related fees are earned from customers based on the occurrence of specific services. None of these revenue streams result in an ongoing obligation beyond what has already been rendered. Revenue from these contracts with customers is included as a component of Other revenue on our consolidated statements of income. Components (in thousands) of our revenue from contracts with customers is as follows:
For the Year Ended December 31, 2021 |  | CaaS |  |  | Auto Finance |  |  | Total |
Interchange revenues, net (1) |  | $ | 18,134 |  |  | $ | — |  |  | $ | 18,134 |
Servicing income |  |  | 1,871 |  |  |  | 1,224 |  |  |  | 3,095 |
Service charges and other customer related fees |  |  | 9,317 |  |  |  | 60 |  |  |  | 9,377 |
Total revenue from contracts with customers |  | $ | 29,322 |  |  | $ | 1,284 |  |  | $ | 30,606 |
(1) Interchange revenue is presented net of customer reward expense.
For the Year Ended December 31, 2020 |  | CaaS |  |  | Auto Finance |  |  | Total |
Interchange revenues, net (1) |  | $ | 9,500 |  |  | $ | — |  |  | $ | 9,500 |
Servicing income |  |  | 1,187 |  |  |  | 994 |  |  |  | 2,181 |
Service charges and other customer related fees |  |  | 3,685 |  |  |  | 65 |  |  |  | 3,750 |
Total revenue from contracts with customers |  | $ | 14,372 |  |  | $ | 1,059 |  |  | $ | 15,431 |
(1) Interchange revenue is presented net of customer reward expense. Card and Loan Servicing Expenses Card and loan servicing costs primarily include collections and customer service expenses. Within this category of expenses are personnel, service bureau, cardholder correspondence and other direct costs associated with our collections and customer service efforts. Card and loan servicing costs also include outsourced collections and customer service expenses. We expense card and loan servicing costs as we incur them, with the exception of prepaid costs, which we expense over respective service periods. Marketing and Solicitation Expenses We expense product solicitation costs, including printing, credit bureaus, list processing, telemarketing, postage, and internet marketing fees, as we incur these costs or expend resources. Loss on repurchase and redemption of convertible senior notes In periods where we repurchased or redeemed outstanding 5.875% convertible senior notes (“convertible senior notes”), we recorded any discount or premium paid for the repurchase or redemption (including accrued interest) relative to the amortized book value of the notes. For the year ended December 31, 2021, we repurchased or redeemed $33.8 million in face amount of our outstanding convertible senior notes for $54.3 million in cash (including accrued interest). The repurchase and redemption resulted in an aggregate loss of approximately $29.4 million (including the convertible senior notes’ applicable share of deferred costs, which were written off in connection with the repurchase). Upon acquisition, the notes were retired. See Note 11,"Convertible Senior Notes" for more information. Recent Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Measurement of Credit Losses on Financial Instruments. The guidance requires an assessment of credit losses based on expected rather than incurred losses (known as the current expected credit loss model). This generally will result in the recognition of allowances for losses earlier than under current accounting guidance for trade and other receivables, held to maturity debt securities and other instruments. The FASB has added several technical amendments (ASU 2018-19, 2019-04, 2019-10 and 2019-11) to clarify technical aspects of the guidance and applicability to specific financial instruments or transactions. In May 2019, the FASB issued ASU 2019-05, which allows entities to measure assets in the scope of ASC 326-20, except held to maturity securities, using the fair value option when they adopt the new credit impairment standard. The election can be made on an instrument by instrument basis. ASU 2016-13 (and ASU 2019-05) was initially effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The FASB delayed the effective date of this standard until annual and interim periods beginning after December 15, 2022 for filers that qualified as smaller reporting companies at the time of the delay, with early adoption permitted. We plan to adopt ASU 2016-13 beginning January 1, 2022, using the modified retrospective method of adoption. We plan to elect the fair value option for all receivables in our CaaS segment currently measured at amortized cost. For all other receivables we will record an increase to our allowance for loan losses using the current expected credit loss model. As a result of our adoption, we expect an increase to our Loans, interest and fees receivable (net of the related revaluation), at fair value of approximately $315 million (with a corresponding decrease to Loans, interest and fees receivable, gross of approximately $375 million), a decrease to our Allowances for uncollectible loans, interest and fees receivable of approximately $55 million, a decrease to our Deferred revenue of approximately $15 million, a decrease to Accounts payable and accrued expenses of approximately $600 thousand, an increase to our deferred tax liability of approximately $2 million, and an increase to our retained earnings of approximately $8 million. These amounts are subject to change as we finalize our adoption efforts. The aforementioned impacts associated with our planned adoption of ASU 2016-13 primarily relate to those assets within our CaaS segment with an immaterial impact to our Auto Finance segment receivables. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance provides an optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU can be adopted no later than December 1, 2022, with early adoption permitted. In January 2021, FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which refines the scope of ASC 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate reform. Based on our preliminary analysis, LIBOR impacts us in limited circumstances primarily related to our existing debt agreements. We have not yet adopted this ASU and are evaluating the effect of adopting this new accounting guidance. Subsequent Events We evaluate subsequent events that occur after our consolidated balance sheet date but before our consolidated financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements; and (2) nonrecognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. We have evaluated subsequent events occurring after December 31, 2021, and based on our evaluation we did not identify any recognized or nonrecognized subsequent events that would have required further adjustments to our consolidated financial statements other than the developments described below. In February 2022, options to purchase our common stock were exercised resulting in an increase to our common shares outstanding of 526,864 (net, after common stock withheld to satisfy the exercise price and tax withholding). These shares were previously included in our diluted share counts. We purchased 451,407 shares of common stock through March 8, 2022, which were subsequently retired.

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