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Note 2 - Significant Accounting Policies and Consolidated Financial Statement Components

12 Months Ended

Dec. 31, 2022

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. We maintain our cash and cash equivalents in accounts at regulated domestic financial institutions in amounts that exceed FDIC insured amounts of approximately $4.5 million based on our current banking relationships.

Restricted Cash

Restricted cash as of December 31, 2022 and 2021 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 receivables, against our Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value, when they become contractually more than 180 days past due. We charge off our Auto Finance segment receivables, against our Allowance for uncollectible loans, interest and fees receivable, 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.

We adopted Accounting Standards Update ("ASU") 2016-13, Measurement of Credit Losses on Financial Instruments on January 1, 2022. This ASU requires the use of an impairment model (the current expected credit loss (“CECL”) model) that is based on expected rather than incurred losses. The ASU also allows for a one-time fair value election for receivables. Upon adoption, we elected the fair value option for all remaining loans receivable associated with our private label credit and general purpose credit card platform previously measured at amortized cost and recorded an increase to our Allowances for uncollectible loans, interest and fees receivable for our remaining Loans, interest and fees receivable associated with our Auto Finance segment. The adoption of CECL resulted in an increase to our opening balance of retained earnings of $8.6 million.

Loans, Interest and Fees Receivable, at Fair Value. Loans, interest and fees receivable held at fair value represent receivables for which we have elected the fair value option (the "Fair Value Receivables"). 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. As discussed above, as of January 1, 2022 all receivables associated with our private label credit and general purpose credit cards are included within this category of receivables.

Under the fair value option, 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 our Auto Finance segment’s operations. Prior to January 1, 2022 this category of receivable also included a portion (those which were not part of our Fair Value Receivables) of our private label credit and general purpose credit card receivables within our CaaS segment. 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 $214.7 million and $194.8 million for the years ended December 31, 2022 and 2021, 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. Upon adoption of CECL, the allowance is an estimate of the expected losses (rather than incurred 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. 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 credit losses. Each portfolio 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. 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.

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 nonperformance 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 (including those receivables associated with our private label credit and general purpose credit card receivables prior to their adoption of fair value accounting) also contain components of deferred revenue including merchant fees on the purchases of receivables for our private label credit receivables, loan discounts on the purchase of our auto finance receivables and annual fee billings for our general purpose credit card receivables. Our private label credit, general purpose credit card 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, annual fees and loan discounts. As of December 31, 2022 and December 31, 2021, the weighted average remaining accretion period for the $16.2 million and $29.3 million of deferred revenue reflected in the consolidated balance sheets was 27 months and 15 months, respectively. Included within deferred revenue, are discounts on purchased auto loans of $16.2 million as of December 31, 2022 and merchant fees and discounts of $20.4 million as of December 31, 2021.

As a result of the COVID-19 pandemic and subsequent declaration of a national emergency in March 2020 under the National Emergencies Act and the associated government policy responses and corresponding inflation, 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, 2022 we continued to actively work with consumers that indicated hardship as a result of COVID-19 and inflation pressure; however, the number of impacted consumers is a small 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, 2022	*Credit Cards*			*Auto Finance*			*Other Unsecured Lending Products*			*Total*
Allowance for uncollectible loans, interest and fees receivable:
Balance at beginning of period	$	(43.4	)	$	(1.4	)	$	(12.4	)	$	(57.2	)
Cumulative effects from adoption of fair value under the CECL standard		43.4			—			12.4			55.8
Cumulative effects from adoption of the CECL standard		—			(0.2	)		—			(0.2	)
Provision for credit losses		—			(1.3	)		—			(1.3	)
Charge-offs		—			2.6			—			2.6
Recoveries		—			(1.3	)		—			(1.3	)
Balance at end of period	$	—		$	(1.6	)	$	—		$	(1.6	)

As of December 31, 2022	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	$	—	$	—		$	—	$	—
Balance at end of period collectively evaluated for impairment	$	—	$	(1.6	)	$	—	$	(1.6	)
Loans, interest and fees receivable:
Loans, interest and fees receivable, gross	$	—	$	105.3		$	—	$	105.3
Loans, interest and fees receivable individually evaluated for impairment	$	—	$	—		$	—	$	—
Loans, interest and fees receivable collectively evaluated for impairment	$	—	$	105.3		$	—	$	105.3

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 credit 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 credit 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 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 amortized cost on our consolidated statements of income. For the year ended December 31, 2022, $1.3 million of our recoveries noted above related to collections from third-party collectors and $0.0 million related to sales of charged-off accounts to unrelated third parties. 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 is as follows:

As of December 31, 2022	*Credit Cards*		*Auto Finance*		*Other Unsecured Lending Products*		*Total*
30-59 days past due	$	—	$	8.5	$	—	$	8.5
60-89 days past due		—		3.0		—		3.0
90 or more days past due		—		2.1		—		2.1
Delinquent loans, interest and fees receivable, gross		—		13.6		—		13.6
Current loans, interest and fees receivable, gross		—		91.7		—		91.7
Total loans, interest and fees receivable, gross	$	—	$	105.3	$	—	$	105.3
Balance of loans greater than 90-days delinquent still accruing interest and fees	$	—	$	1.7	$	—	$	1.7

As of December 31, 2021	*Credit Cards*		*Auto Finance*		*Other Unsecured Lending Products*		*Total*
30-59 days past due	$	7.3	$	7.0	$	3.3	$	17.6
60-89 days past due		6.9		2.5		2.6		12.0
90 or more days past due		17.9		1.8		6.8		26.5
Delinquent loans, interest and fees receivable, gross		32.1		11.3		12.7		56.1
Current loans, interest and fees receivable, gross		227.4		83.3		103.5		414.2
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 we serve demonstrates a willingness and ability to resume making monthly payments and meets certain additional criteria, the customer’s account is re-aged. When an account is re-aged, the status of the account is adjusted to bring a delinquent account current, but generally no further modifications to the payment terms or amounts owed are made. 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 Financial Accounting Standards Board (“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 whose accounts 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, 2022*				*December 31, 2021*				*December 31, 2020*
	*Private label credit*		*General purpose credit card*		*Private label credit*		*General purpose credit card*		*Private label credit*		*General purpose credit card*
Number of TDRs		24,594		171,729		14,919		39,322		12,394		37,784
Number of TDRs that have been re-aged		2,499		28,598		812		2,035		2,788		7,846
Amount of TDRs on non-accrual status (in thousands)	$	31,350	$	119,785	$	17,152	$	25,154	$	14,537	$	26,989
Amount of TDRs on non-accrual status above that have been re-aged (in thousands)	$	4,606	$	24,440	$	1,205	$	1,553	$	4,662	$	6,890
Carrying value of TDRs (in thousands)	$	18,827	$	70,519	$	11,173	$	15,502	$	9,583	$	14,287
TDRs - Performing (carrying value, in thousands)*	$	15,001	$	59,735	$	8,797	$	13,387	$	7,420	$	11,855
TDRs - Nonperforming (carrying value, in thousands)*	$	3,826	$	10,784	$	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 232,086, 65,125 and 60,908 accounts in the amount of $230.4 million, $70.0 million and $70.3 million during the twelve month periods ended December 31, 2022, 2021 and 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 prior twelve months and subsequently defaulted.


	*Twelve Months Ended*
	*December 31, 2022*				*December 31, 2021*				*December 31, 2020*
	*Private label credit*		*General purpose credit card*		*Private label credit*		*General purpose credit card*		*Private label credit*		*General purpose credit card*
Number of accounts		7,049		28,714		3,119		7,765		3,065		7,665
Loan balance at time of charge off (in thousands)	$	11,302	$	22,679	$	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 2022 and no impairment costs in 2021.

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.

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. Discounts received associated with 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, annual fees 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 credit products, including the receivables underlying the private label and general purpose credit cards we service, and our legacy credit card receivables which include the recognition of annual fee billings and cash advance fees among others.

Fees are assessed on credit card accounts underlying our credit card receivables according to the terms of the related cardholder agreements and we recognize these fees as income when 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 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 issuing bank 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.

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, 2022	CaaS		Auto Finance		Total
Interchange revenues, net (1)	$	24,926	$	—	$	24,926
Servicing income		3,259		888		4,147
Service charges and other customer related fees		13,658		67		13,725
Total revenue from contracts with customers	$	41,843	$	955	$	42,798

( 1) Interchange revenue is presented net of customer reward expense.

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 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.

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. We adopted ASU 2016-13 beginning January 1, 2022, using the modified retrospective method of adoption. We elected the fair value option for all receivables in our CaaS segment previously measured at amortized cost. For all other receivables, we recorded an increase to our Allowances for uncollectible loans, interest and fees receivable using the current expected credit loss model. As a result of our adoption, we increased our Loans, interest and fees receivable (net of the related revaluation), at fair value by $315.0 million (with a corresponding decrease to Loans, interest and fees receivable, gross of $375.7 million), a decrease to our Allowances for uncollectible loans, interest and fees receivable of $55.6 million, a decrease to our Deferred revenue of $15.6 million, a decrease to Accounts payable and accrued expenses of $600 thousand, an increase to our deferred tax liability of $2.5 million, and an increase to our retained earnings of $8.6 million. The aforementioned impacts associated with our 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. We have not yet adopted this ASU and are evaluating the effect of adopting this new accounting guidance. Based on our preliminary analysis, the London Interbank Offered Rate ("LIBOR") impacts us in limited circumstances primarily related to our existing debt agreements and will not have a material impact upon adoption.

On March 31, 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The ASU eliminates the accounting guidance for troubled debt restructurings by creditors while adding disclosures for certain loan restructurings by creditors when a borrower is experiencing financial difficulty. This guidance requires an entity to determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, the ASU requires disclosure of current period gross writeoffs by year of origination for financing receivables. The ASU is effective for the Company for fiscal years beginning after December 15, 2022. The disclosures required by this ASU are required for receivables held at amortized cost. As the significant majority of the Company's receivables are held at fair value, the Company does not believe the adoption of this ASU will have a material impact on its financial results or accompanying disclosures.