Consumer Portfolio Services has been limiting the number of extensions it grants consumers who are having trouble making their payments.
“One thing we’ve done during the course of this year, beginning late last year and through the course of this year is significantly fewer extensions on accounts that are past due,” said Chief Financial Officer Jeff Fritz on an earnings call last week. “We’re really working with our collection branches to press the customers to make payments instead of granting them extensions, and we’ve traded off a few points of delinquency in that exchange.”
Third-quarter extensions were down about 380 basis points year over year, Fritz said, adding that “although the delinquencies were up, the losses are pretty flat.”
Delinquencies greater than 30 days clocked in at 15.74% of the total portfolio, compared with 11.58% in the third quarter of 2018. Yet, annualized net charge-offs inched up only 4 basis points year over year, to 8.07% of the average portfolio.
“There’s a lot of focus on other folks doing too many extensions,” company Chief Executive Charles Bradley said on the call. “We think our extension policy has always been very strong. But we didn’t really have a big problem of trying to tackle it [in] a little different way and put it back in the delinquency and then push delinquency down.”
CPS earned $1.8 million last quarter, down from $3.2 million in the prior-year period. The decline was driven, in part, by the company’s shift to fair-value accounting.
“We’re sort of laboring through 2019 with much better prospects next year,” Bradley said. “We’re still suffering through the accounting change that’s significant and having a material effect on some of the numbers. And we are also still going through the problems of the legacy portfolio.”
To date, underperforming assets account for about 25% of the portfolio, Bradley said, noting that the ratio should “decrease, and even more rapidly as time goes by.”
“So as much as it doesn’t look particularly perfect today, it’s going to get better,” Bradley said.
