3.	Loans and Finance Receivables, Credit Quality Information and Allowances and Liabilities for Estimated Losses on Loans and Finance Receivables

Revenue generated from the Company’s loans and finance receivables for the three months ended March 31, 2016 and 2015 was as follows (dollars in thousands):

	Three Months Ended
	March 31,
	2016		2015
Short-term loans	$	47,598	$	50,861
Line of credit accounts		48,973		55,653
Installment loans and RPAs		77,506		58,757
Total loans and finance receivables revenue		174,077		165,271
Other		576		405
Total revenue	$	174,653	$	165,676

Current and Delinquent Loans and Finance Receivables

The Company classifies its loans and finance receivables as either current or delinquent. Short-term loans are considered delinquent when payment of an amount due is not made as of the due date. If a line of credit account or installment loan customer misses one payment, that payment is considered delinquent and the balance of the loan is considered current. The Company does not accrue interest on the delinquent payment portion of the loan but does continue to accrue interest on the remaining portion of the loan. If a line of credit account or installment loan customer does not make two consecutive payments, the entire account or loan is classified as delinquent and placed on a non-accrual status. The Company allows for normal payment processing time before considering a loan delinquent but does not provide for any additional grace period.

The Company does not accrue interest on delinquent loans and does not resume accrual of interest on a delinquent loan unless it is returned to current status. In addition, delinquent loans generally may not be renewed, and if, during its attempt to collect on a delinquent loan, the Company allows additional time for payment through a payment plan or a promise to pay, it is still considered delinquent. Generally, all payments received are first applied against accrued but unpaid interest and fees and then against the principal balance of the loan.

Allowance and Liability for Estimated Losses on Loans and Finance Receivables

The Company monitors the performance of its loan and finance receivable portfolios and maintains either an allowance or liability for estimated losses on loans and finance receivables (including revenue, fees and/or interest) at a level estimated to be adequate to absorb losses inherent in the portfolio. The allowance for losses on the Company’s owned loans and finance receivables reduces the outstanding loans and finance receivables balance in the consolidated balance sheets. The liability for estimated losses related to loans guaranteed under its CSO programs is initially recorded at fair value and is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.

In determining the allowance or liability for estimated losses on loans and finance receivables, the Company applies a documented systematic methodology. In calculating the allowance or liability for receivable losses, outstanding loans and finance receivables are divided into discrete groups of short-term loans, line of credit accounts, installment loans and RPAs and are analyzed as current or delinquent. Increases in either the allowance or the liability, net of charge-offs and recoveries, are recorded as a “Cost of revenue” in the consolidated statements of income.

The allowance or liability for short-term loans classified as current is based on historical loss rates adjusted for recent default trends for current loans. For delinquent short-term loans, the allowance or liability is based on a six-month rolling average of loss rates by stage of collection. For line of credit account and installment loan and RPA portfolios, the Company generally uses a migration analysis to estimate losses inherent in the portfolio. The allowance or liability calculation under the migration analysis is based on historical charge-off experience and the loss emergence period, which represents the average amount of time between the first occurrence of a loss event and the charge-off of a loan or RPA. The factors the Company considers to assess the adequacy of the allowance or liability include past due performance, historical behavior of monthly vintages, underwriting changes and recent trends in delinquency in the migration analysis.

The Company fully reserves for loans and finance receivables once the receivable or a portion of the receivable has been classified as delinquent for 60 consecutive days and generally charges off loans and finance receivables between 60 – 65 days delinquent. If a loan or finance receivable is deemed uncollectible before it is fully reserved, it is charged off at that point. Loans and finance receivables classified as delinquent generally have an age of one to 64 days from the date any portion of the receivable became delinquent, as defined above. Recoveries on loans and finance receivables previously charged to the allowance are credited to the allowance when collected.

The components of Company-owned loans and finance receivables at March 31, 2016 and 2015 and December 31, 2015 were as follows (dollars in thousands):

	As of March 31, 2016
	Short-term			Line of Credit			Installment Loans and
	Loans			Accounts			RPAs			Total
Current receivables	$	36,263		$	91,482		$	317,467		$	445,212
Delinquent receivables:
Delinquent payment amounts⁽¹⁾		—			3,105			1,469			4,574
Receivables on non-accrual status		16,118			3,764			26,238			46,120
Total delinquent receivables		16,118			6,869			27,707			50,694
Total loans and finance receivables, gross		52,381			98,351			345,174			495,906
Less: Allowance for losses		(11,693	)		(15,284	)		(40,727	)		(67,704	)
Loans and finance receivables, net	$	40,688		$	83,067		$	304,447		$	428,202

	As of March 31, 2015
	Short-term			Line of Credit			Installment Loans and
	Loans			Accounts			RPAs			Total
Current receivables	$	31,678		$	69,912		$	187,639		$	289,229
Delinquent receivables:
Delinquent payment amounts⁽¹⁾		—			3,158			1,302			4,460
Receivables on non-accrual status		17,334			3,126			16,126			36,586
Total delinquent receivables		17,334			6,284			17,428			41,046
Total loans and finance receivables, gross		49,012			76,196			205,067			330,275
Less: Allowance for losses		(12,744	)		(12,340	)		(26,136	)		(51,220	)
Loans and finance receivables, net	$	36,268		$	63,856		$	178,931		$	279,055

	As of December 31, 2015
	Short-term			Line of Credit			Installment Loans and
	Loans			Accounts			RPAs			Total
Current receivables	$	37,951		$	92,732		$	317,231		$	447,914
Delinquent receivables:
Delinquent payment amounts⁽¹⁾		—			3,072			1,510			4,582
Receivables on non-accrual status		20,842			5,051			23,566			49,459
Total delinquent receivables		20,842			8,123			25,076			54,041
Total loans and finance receivables, gross		58,793			100,855			342,307			501,955
Less: Allowance for losses		(14,652	)		(15,727	)		(36,943	)		(67,322	)
Loans and finance receivables, net	$	44,141		$	85,128		$	305,364		$	434,633

(1)	Represents the delinquent portion of installment loans and line of credit account balances for customers that have only missed one payment. See “Current and Delinquent Loans and Finance Receivables” above for additional information.

Changes in the allowance for losses for the Company-owned loans and finance receivables and the liability for losses on the Company’s guarantees of third-party lender-owned loans during the three months ended March 31, 2016 and 2015 were as follows (dollars in thousands):

	Three Months Ended March 31, 2016
	Short-term			Line of Credit			Installment Loans and
	Loans			Accounts			RPAs			Total
Allowance for losses for Company-owned loans and finance receivables:
Balance at beginning of period	$	14,652		$	15,727		$	36,943		$	67,322
Cost of revenue		13,669			16,471			40,011			70,151
Charge-offs		(21,576	)		(20,599	)		(42,799	)		(84,974	)
Recoveries		5,036			3,685			6,258			14,979
Effect of foreign currency translation		(88	)		—			314			226
Balance at end of period	$	11,693		$	15,284		$	40,727		$	67,704
Liability for third-party lender-owned loans:
Balance at beginning of period	$	1,298		$	—		$	458		$	1,756
Decrease in liability		(393	)		—			(181	)		(574	)
Balance at end of period	$	905		$	—		$	277		$	1,182

	Three Months Ended March 31, 2015
	Short-term			Line of Credit			Installment Loans and
	Loans			Accounts			RPAs			Total
Allowance for losses for Company-owned loans and finance receivables:
Balance at beginning of period	$	14,324		$	19,749		$	30,875		$	64,948
Cost of revenue		12,512			7,813			18,876			39,201
Charge-offs		(19,778	)		(20,833	)		(29,882	)		(70,493	)
Recoveries		5,870			5,907			6,580			18,357
Effect of foreign currency translation		(184	)		(296	)		(313	)		(793	)
Balance at end of period	$	12,744		$	12,340		$	26,136		$	51,220
Liability for third-party lender-owned loans:
Balance at beginning of period	$	1,575		$	—		$	1		$	1,576
(Decrease) increase in liability		(669	)		—			38			(631	)
Balance at end of period	$	906		$	—		$	39		$	945

Guarantees of Consumer Loans

In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term and installment loans and is required to purchase any defaulted loans it has guaranteed. The guarantee represents an obligation to purchase specific loans that go into default. As of March 31, 2016 and 2015 and December 31, 2015, the amount of consumer loans guaranteed by the Company was $26.7 million, $25.4 million and $34.1 million, respectively, representing amounts due under consumer loans originated by third-party lenders under the CSO programs. The estimated fair value of the liability for estimated losses on consumer loans guaranteed by the Company of $1.2 million, $0.9 million and $1.7 million, as of March 31, 2016 and 2015 and December 31, 2015, respectively, is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.