SOUTHFIELD, Mich. -

Investment analysts thought Credit Acceptance Corp. leadership would be a good source to gauge what might be in the subprime auto finance space and gather any clarity about whether turbulence might be ongoing.

Rather than just offering his opinion, chief executive officer Brett Roberts pointed to Credit Acceptance data that compared the company’s forecasted collection percentage against what the firm actually brought into its coffers. And the data Credit Acceptance shares on a quarterly basis goes back almost 10 years, which Roberts said “is pretty unique. I don't think anybody in the industry provides that level of disclosure.”

The actual collection reading has been above the forecast level since 2009, a feat Roberts insisted is the best analysis Credit Acceptance can offer about performance and current conditions. The spread between the projection and actual collected funds has been as high as 7.5 percent back in 2009 but has softened to about 1.0 percent a year ago.

“We tell you exactly what we thought when we originated the loan, how we thought it was going to perform, then we compare that to how it actually performs over time and tell you whether we were optimistic or the opposite when we wrote the loan,” Roberts said during Credit Acceptance’s most recently quarterly conference call.

“What you learn from that is that over the last 10 years we have an overall favorable variance with eight years that were positive and two that were negative. The two years that were unfavorable I think are remarkable because they both occurred during the financial crisis when those loans were serviced during a period of severe economic distress,” he continued. “And the variances, although they were negative, were very small in terms of magnitude.

“So, what we see more recently is that every pool still has a positive variance, at least the last eight years, but the magnitude of that positive variance has been decreasing,” Roberts went on to say. “Typically, when you go through a period where there is more competition that can show up in loan performance, so we've been expecting that sort of strong positive variance that we've seen to diminish.

“And so if you look at those static pools we provide, you can certainly see that trend,” he added.

Thus far in 2015, Credit Acceptance is collecting on its vehicle installment contracts at a clip of 68.2 percent, marking the first time the level has been below the 70-percent threshold since 2007.

Third-quarter originations

The company’s origination volume continues to surge as Credit Acceptance brought 73,614 contracts into its portfolio during the third quarter, representing a 41.3 percent spike year-over-year.

Through the first nine months of 2015, the company’s originations are up by 33.1 percent, coming in at 223,948 contracts.

Credit Acceptance’s active dealer network also is considerably stronger, standing at 6,406 when the company closed its third quarter on Sept. 30. Those active dealers are averaging 11.5 contracts per quarter.

Roberts applauded the work completed by the company workforce, which also led to consolidated net income of $74.0 million, or $3.53 per diluted share.

“I think from a sales execution standpoint, we’re pleased with our progress there,” Roberts said. “We did grow the sales force very rapidly for a period of time. We had some work to do to make that successful, and we’re starting to see a pay off in terms of the productivity per salesperson. I think it shows up most visibly in the new dealers that we're signing up.

“You know, volume per dealer can be affected by a lot of different things, but I think when we sign up a new dealer, we can attribute that to the sales team,” he continued. “So, I think they're doing a great job. We made some program changes. I think the changes we've made with respect to terms have been popular with the dealers. We've begun to originate all of our contracts electronically, and that's been a very popular add for our dealers.

“I think there are a lot of things that we're doing internally that we're proud of,” Roberts went on to say.

Regulatory discussion

As often arises, investment observers also wondered how Credit Acceptance is navigating today’s regulatory environment, especially in light of the Consumer Financial Protection Bureau intensifying its action in connection with dealer markup.

Roberts reiterated that Credit Acceptance handles its compensation differently than other finance companies.

“It’s a different issue for us,” Roberts said. “We don't do the traditional buy rate, sell rate methodology that has been talked about by the CFPB. So, we don’t give the dealer a rate so he can mark it up, and we’ll pay him the difference. That's not the way our program works. We typically set the rate for the dealer.”

Nevertheless, Roberts emphasized that Credit Acceptance maintains its diligence in regard to the moves the CFPB might be making.

“I think the way we look at it is anything that is a priority for the CFPB becomes a priority for us, so we watch everything that they say, everything they do,” he said. “We read everything that they publish, and we pay careful attention to it and we make sure that we're comfortable with the way we address those issues.”