Allowance for Finance Receivable Losses |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Finance Receivable Losses |
We establish an allowance for finance receivable losses through the provision for finance receivable losses. We evaluate our finance receivable portfolio by the level of contractual delinquency in the portfolio, specifically in the late-stage delinquency buckets and inclusive of the migration of the loans through the delinquency buckets. We estimate and record an allowance for finance receivable losses to cover the estimated lifetime expected credit losses on our finance receivables. Our allowance for finance receivable losses may fluctuate based upon changes in portfolio growth, credit quality, and economic conditions. Our current methodology to estimate expected credit losses used the most recent macroeconomic forecasts, which incorporated the impacts and expected recovery of the global outbreak of a novel strain of coronavirus (“COVID-19”) on the U.S. economy. Our forecast leveraged economic projections from an industry leading forecast provider. We also incorporated estimated impacts from known government stimulus measures, the involuntary unemployment insurance coverage of our portfolio, and our borrower assistance efforts. At June 30, 2021, our economic forecast used a reasonable and supportable period of 12 months. The decrease in our allowance for finance receivable losses for the three and six months ended June 30, 2021 was primarily due to an improved outlook for unemployment and macroeconomic conditions. In the near-term, we may experience further changes to the macroeconomic assumptions within our forecast which could lead to further changes in our allowance for finance receivable losses, allowance ratio, and provision for finance receivable losses. Changes in the allowance for finance receivable losses were as follows:
* As a result of the adoption of ASU 2016-13, on January 1, 2020, we recorded a one-time adjustment to the allowance for finance receivable losses and a corresponding cumulative reduction to retained earnings, net of tax. See Note 4 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for additional information on the adoption of ASU 2016-13. The allowance for finance receivable losses and net finance receivables by impairment method were as follows:
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