Credit Acceptance chief executive officer Kenneth Booth highlighted the path the subprime auto finance company has enjoyed to getting to its largest outstanding portfolio in its 52-year history.

Booth reiterated to shareholders in a letter posted on Wednesday that Credit Acceptance closed 2023 with its portfolio sitting at $7.0 billion.

“With a year-over-year increase in vehicle supply, decreasing vehicle values, and fewer lenders offering financing to those with less than prime credit, we experienced an increased demand for our product starting in mid-2022 and continuing through 2023,” Booth told shareholders through the letter. “We were able to increase our margin of safety in the aggregate and grow our active dealer base, our loan assignment volume, and the average balance of our loan portfolio.

“We increased the initial spread to 21.3% in 2023 compared to 20.1% on loans assigned in 2022. Our unit and dollar volumes grew 18.6% and 14.4%, respectively, during a period with seven consecutive quarters of growth. The balance of our loan portfolio increased 10.4% from year-end 2022 to year-end 2023,” he continued.

To build on that record-setting portfolio, Booth explained how Credit Acceptance management “positioned the company for continued success if access to capital becomes limited.” He said the company made three important moves, including:

—Completing seven offerings of senior notes with terms of five to eight years, two series of which are currently outstanding and together provides the company with $1 billion of long-term debt capital

—Lengthening the terms of certain asset-backed financings to more than three years

—Increasing its revolving credit facilities to $1.6 billion currently from $540 million at the end of 2009

“Conditions in the capital markets can make it more difficult to access the capital needed to fund our business. As a result, we have applied lessons from the past seeking to best position the company if access to capital becomes limited. As of the date of this letter, we believe we have,” Booth told shareholders.

“We maintain a considerable amount of available borrowing capacity under our revolving credit facilities at all times and renew these facilities well before they mature. Although the capital markets have periodically been volatile, we recently secured $700 million in new asset-backed financing and, as of March 31, had $1.4 billion of unused capacity under our revolving credit facilities,” he continued.

“Lengthening the term of our debt facilities, issuing higher-cost long-term debt, and keeping available a significant portion of our revolving credit facilities increase our funding costs and reduce short-term profitability,” Booth went on to say.

Booth also addressed another topic shareholders likely want details about — the litigation and regulatory landscape. Booth acknowledged it’s likely triggered because Credit Acceptance is engaged in active litigation.

“It is a topic that I am unable to discuss in this letter in much detail. With that qualification, and it is a significant one, I share largely the same thoughts as last year,” Booth told shareholders.

“First, there are state and federal laws and regulations governing virtually every facet of the auto finance industry. We have a comprehensive compliance management system to oversee compliance with those laws,” he continued. “We first documented this system in 2002 and have enhanced it over time. We believe our compliance management system is among the best in the industry. Ultimately, we strive to do what is right and are dedicated to working with dealers to help change lives of consumers through our product.

“Second, we have observed that the regulatory landscape has changed dramatically over the last several years. Certain regulators are increasingly likely to move toward enforcement actions or litigation rather than work through perceived differences,” Booth went on to say. “Regulatory expectations are not always communicated clearly, and companies do not always get credit for strong internal controls. A regulatory environment is challenging if laws are not consistently and fairly applied to regulated entities or interpreted in a different manner by administration or entity.”

To manage this risk, Booth said Credit Acceptance closely follows how agencies such as the Consumer Financial Protection Bureau (CFPB), state attorneys general and financial services regulators are interpreting the existing laws. Booth said the company monitors their blog posts, circulars, changes to exam manuals, consent orders and enforcement actions.

Booth said the company adjusts policies and procedures as necessary.

“We support the mission of agencies such as the CFPB, which was created ‘to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive,’” Booth told shareholders.

“However, we speak up — and defend ourselves — when we believe that an agency has overstepped its bounds or has unfairly accused us of violating the law. Because we have a matter in active litigation, we must let our court filings speak for themselves on this point,” he added.

Booth pointed out that Credit Acceptance’s public disclosures include four pending regulatory matters, with one of those being in litigation. Credit Acceptance has closed six previously disclosed matters since 2014, “without any material changes to the company,” according to Booth.

The Credit Acceptance CEO said that developments during the past decade indicate “we have been subject to almost continuous scrutiny for the last 10 years. We have responded to informational requests on almost every aspect of our business and produced millions of pages of documents to support those responses.

“As I stated above, there is not much I can say about the ongoing matters other than that our intention is to seek common ground where we can and defend ourselves vigorously when a compromise is unavailable. We take these matters seriously, and they have our full attention,” Booth went on to say.