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Acquired Card Receivables
 12 Months Ended
Jun. 30, 2022
Acquired Card Receivables [Abstract]  
Acquired Card Receivables ACQUIRED CARD RECEIVABLES
Acquired Card Receivables
Acquired card receivables consisted of the following as of the dates presented (in thousands):
June 30,
20222021
Gross amount of acquired card receivables$261,806 $148,833 
Less: allowance for credit losses(5,414)(1,740)
Total$256,392 $147,093 
Certain lines of credit and acquired card receivable balances are collateralized by cash deposits held by the Issuing Banks. Before an account is charged off, the Company obtains any available cash collateral from the Issuing Banks. As of June 30, 2022, approximately $115.8 million of the acquired card receivable balance served as collateral for the Company’s borrowings from the 2021 Revolving Credit Agreement (see Note 10).
The Company also incurred losses related to card transactions disputed by spending businesses, which
amounted to $4.3 million during the year ended June 30, 2022 and an immaterial amount during the year ended
June 30, 2021.
The acquired card receivable balances above do not include purchases of card receivables from the Issuing Banks that have not cleared at the end of the reporting period. Purchases of card receivables that have not cleared as of June 30, 2022 totaled $55.2 million. The Company recognized an immaterial amount of expected credit losses on the purchased card receivables that have not cleared yet as of June 30, 2022 and 2021 (see Note 15).
Credit Quality Information
The Company regularly reviews collection experience, delinquencies, and net charge-offs in determining allowance for credit losses related to acquired card receivables. Historical collections rates have shown that days past due is the primary indicator of the likelihood of loss. The Company elected to use the delinquency trends or past due status of the acquired card receivables as the credit quality indicator. Acquired card receivables are considered past due if full payment is not received on the bill date or within a grace period,
which is generally limited to five days. Below is a summary of the acquired card receivables by class (i.e., past due status) as of the dates presented (in thousands):
June 30,
20222021
Current and less than 30 days past due$257,618 $145,993 
30 ~ 59 days past due1,677 1,188 
60 ~ 89 days past due1,199 580 
90 ~ 119 days past due1,186 713 
Over 119 days past due126 359 
Total$261,806 $148,833 
The amount of outstanding balance of acquired card receivables that is (i) 90 days or more past due that continue to accrue fees and have an allowance for outstanding balance and fees, and (ii) classified as nonperforming was not material as of June 30, 2022 and 2021.
Allowance for Credit Losses
Below is a summary of the allowance for credit losses as of the dates presented and the changes during the years ended June 30, 2022 and 2021 (in thousands):
June 30,
2022
2021 (1)
Balance, beginning
$1,740 $— 
Initial allowance for credit losses on purchased card receivables with credit deterioration
313 2,082 
Provision for expected credit losses19,566 462 
Charge-off amounts(18,005)(828)
Recoveries collected1,800 24 
Balance, ending
$5,414 $1,740 
(1) Amounts from the acquisition date of Divvy on June 1, 2021.
Card receivables acquired from the Issuing Banks and held for investment during the years ended June 30, 2022 and 2021 were $6.6 billion and $370.6 million, respectively. The allowance for credit losses related to acquired card receivables increased during the year ended June 30, 2022 due to portfolio growth, a decrease in the estimate of recoveries of previously written off card receivables based on current collection performance, and due to qualitative assumptions for macroeconomic factors.
Purchased Financial Assets with Credit Deterioration
A financial asset acquired is considered a purchased credit deteriorated (PCD) asset if, as of the acquisition date, such financial asset has experienced a more-than-insignificant deterioration in credit quality since origination. The Company used certain indicators, such as the past due status and charge-off status of the balances, in identifying and assessing whether the acquired card receivables are considered PCD assets.
The acquired card receivables that were considered PCD assets were not material during the year ended June 30, 2022. Below is a summary of the acquired card receivables that were considered PCD assets from the acquisition of Divvy on June 1, 2021 through June 30, 2021 (in thousands):
Purchase price$3,855 
Allowance for credit losses2,082 
Less: discount attributable to other factors(79)
Par value$5,858 
Card Receivables Held for Sale
The Company sells a portion of acquired card receivables to a Purchasing Bank at a discount. Card receivables held for sale, which are carried at the lower of cost or estimated market value at the individual user account level based on pricing agreed upon with the Purchasing Bank plus an estimate of the deferred purchased card receivables held for sale, are included in prepaid expenses and other current assets in the accompanying consolidated balance sheets, amounted to $8.7 million and $2.6 million as of June 30, 2022 and 2021, respectively.
Card Receivables Sold and Related Servicing and Beneficial Interest Derivative Retained

The Company accounts for the transfer of card receivables as a sale if all of the following conditions are met:

•the financial asset is isolated from the transferor and its consolidated affiliates as well as its creditors, even in bankruptcy or other receivership;

•the transferee or beneficial interest holders have the right to pledge or exchange the transferred financial asset; and

•the transferor, its consolidated affiliates and its agents do not maintain effective control over the transferred financial asset

The card receivables that the Company transferred to the Purchasing Bank during the years ended June 30, 2022 and 2021 met all of the requirements described above; therefore, the Company accounted for the transfer as a sale of financial assets. Accordingly, the Company measures gain or loss on the sales of financial assets as the net proceeds less the carrying amount of the card receivables sold. The net proceeds represent the fair value of any assets obtained or liabilities incurred as part of the transfer, including, but not limited to, servicing assets, servicing liabilities, or beneficial interest derivatives.

The Company has an agreement with the Purchasing Bank to sell its acquired card receivables. The Company has continuing involvement under this agreement as servicer, and by retaining a beneficial interest derivative in the form of a deferred purchase price. The beneficial interest derivative represents the Company’s right to receive a portion of collections based on the performance of each cohort of card receivables sold to the Purchasing Bank. The fair value of the beneficial interest derivative was immaterial as of June 30, 2022 and 2021, respectively, and is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. The servicing fee income was not material during the years ended June 30, 2022 and 2021. The initial fair value of the beneficial interest derivative includes key inputs and assumptions that qualify as Level 3 inputs in the fair value hierarchy including discount rates and delinquency rates. See Note 4 for additional information about the fair value measurement of the beneficial interest derivative as of June 30, 2022 and 2021.
Below is a summary of the fair value of consideration received from the transfer of card receivables accounted for as a sale during the periods presented (in thousands):
Year ended June 30,
2022
2021 (1)
Initial fair value of consideration received:
Cash$1,483,481 $59,105 
Beneficial interest derivative4,690 187 
Total$1,488,171 $59,292 
(1) Amounts from the acquisition date of Divvy on June 1, 2021.
The Company could experience losses on the beneficial interest derivative if the performance of the cohorts of card receivables sold to the Purchasing Bank is less than expected. The Company could also experience losses on card receivables sold if it were required to repurchase delinquent receivables due to a breach in representations and warranties associated with its sales of receivables.

Card receivable repurchases during the years ended June 30, 2022 and 2021 were not material.
Below is a summary of outstanding transferred card receivables by class (i.e., past due status) that have not been charged-off and have not been recorded on the Company's consolidated balance sheets, but with which the Company has a continuing involvement through its servicing agreements, as of the dates presented (in thousands):
June 30,
20222021
Current and less than 30 days past due$56,162 $25,098 
30 ~ 59 days past due292 240 
60 ~ 89 days past due375 165 
90 ~ 119 days past due422 301 
Over 119 days past due30 132 
Total$57,281 $25,936 
The difference between the outstanding balance of transferred card receivables as of June 30, 2022 and 2021 and the amount derecognized for which the Company has a continuing involvement as a servicer as of June 30, 2022 and 2021 was not material.