(10) Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

(10) Commitments and Contingencies

(10) Commitments and Contingencies

Leases

The Company has operating leases for corporate offices, equipment, software and hardware. The Company has entered into operating leases for the majority of its real estate locations, primarily office space. These leases are generally for periods of three to seven years with various renewal options. The depreciable life of leased assets is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

We determine if a contract contains a lease at contract inception. Right-of-use assets and liabilities are recognized based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use the Company’s incremental borrowing rate. Right-of-use assets are included in other assets and lease liabilities are included in accounts payable and accrued expenses in our Condensed Consolidated Balance Sheet.

The following table presents the supplemental balance sheet information related to leases: 

	December 31,			December 31,
	2021			2020
	(In thousands)
Operating Leases
Operating lease right-of-use assets	$	25,819		$	23,735
Less: Accumulated amortization right-of-use assets		(17,624	)		(12,792	)
Operating lease right-of-use assets, net	$	8,195		$	10,943
Operating lease liabilities	$	(9,058	)	$	(12,096	)
		http://fasb.org/us-gaap/2021-01-31#OtherLiabilities			http://fasb.org/us-gaap/2021-01-31#OtherLiabilities
Finance Leases
Property and equipment, at cost	$	3,407		$	3,407
Less: Accumulated depreciation		(2,348	)		(1,226	)
Property and equipment, net	$	1,059		$	2,181
Finance lease liabilities	$	(1,124	)	$	(2,243	)
		http://fasb.org/us-gaap/2021-01-31#OtherLiabilities			http://fasb.org/us-gaap/2021-01-31#OtherLiabilities
Weighted Average Discount Rate
Operating lease		5.0%			5.0%
Finance lease		6.5%			6.5%

Maturities of lease liabilities were as follows:
(In thousands)		Operating			Finance
Year Ending December 31,		Lease			Lease
2022	$	6,434		$	1,050
2023		1,888			84
2024		920			26
2025		795			9
2026		501			–
Thereafter		1,160			–
Total undiscounted lease payments		11,698			1,169
Less amounts representing interest		(2,640	)		(45	)
Lease Liability	$	9,058		$	1,124

The following table presents the leases expense included in Occupancy, General and administrative on our Condensed Consolidated Statement of Operations: 

	Year Ended December 31,
	2021		2020		2019
	(In thousands)
Operating lease cost	$	7,184	$	7,523	$	7,521
Finance lease cost		1,229		1,179		160
Total lease cost	$	8,413	$	8,702	$	7,681

The following table presents the supplemental cash flow information related to leases: 

	Year Ended December 31,
	2021		2020		2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,474	$	7,762	$	7,584
Operating cash flows from finance leases		1,118		1,007		133
Financing cash flows from finance leases	$	111	$	172	$	27

Legal Proceedings

Consumer Litigation. We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Consumers can and do initiate lawsuits against us alleging violations of law applicable to collection of receivables, and such lawsuits sometimes allege that resolution as a class action is appropriate.

For the most part, we have legal and factual defenses to consumer claims, which we routinely contest or settle (for immaterial amounts) depending on the particular circumstances of each case. There are as of the date of this report two civil actions that could possibly result in a material liability, if resolved adversely and on a class basis, as the respective plaintiffs allege would be appropriate.

Following our filing of a complaint for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim alleging that our deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles we had repossessed.

The defendant’s contract provided for resolution of disputes exclusively by arbitration, and exclusively on an individual basis, not a class basis. Nevertheless, in August 2021, the court denied our motion to compel arbitration, without opinion. As of the date of this report, no motion for certification of a class has been filed or granted; however, it would be reasonable to expect that resolution of these claims will be on a class basis.

Wage and Hour Claim. On September 24, 2018, a former employee filed a lawsuit against us in the Superior Court of Orange County, California, alleging that we incorrectly classified our sales representatives as outside salespersons exempt from overtime wages, mandatory break periods and certain other employee protective provisions of California and federal law. The complaint seeks injunctive relief, an award of unpaid wages, liquidated damages, and attorney fees and interest. The plaintiff purports to act on behalf of a class of similarly situated employees and ex-employees. As of the date of this report, no motion for class certification has been filed or granted.

We believe that our compensation practices with respect to our sales representatives are compliant with applicable law. Accordingly, we have defended and intend to continue to defend this lawsuit. We have not recorded a liability with respect to this claim on the accompanying consolidated financial statements.

In General. There can be no assurance as to the outcomes of the matters described or referenced above. We record at each measurement date, most recently as of December 31, 2021, our best estimate of probable incurred losses for legal contingencies, including the matters identified above, and consumer claims. The amount of losses that may ultimately be incurred cannot be estimated with certainty. However, based on such information as is available to us, we believe that the total of probable incurred losses for legal contingencies as of December 31, 2021 is $3.4 million, and that the range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or identified above, as of December 31, 2021 does not exceed $11.3 million.

Accordingly, we believe that the ultimate resolution of such legal proceedings and contingencies should not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the uncertainties inherent in contested proceedings there can be no assurance that the ultimate resolution of these matters will not be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period.