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ENOVA INTERNATIONAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-K)

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02/24/2017 | 10:42pm CET

RECENT REGULATORY DEVELOPMENTS

Consumer Financial Protection Bureau


On June 2, 2016, the CFPB issued its Proposed Rule on Payday, Vehicle Title, and
Certain High-Cost Installment Loans. The Proposed Rule would impose significant
limitations on all short-term and installment loans with APRs above 36%,
including all of our short-term loan products and certain of our installment
loan products. Among other provisions, the Proposed Rule requires lenders to
conduct a specific assessment regarding a borrower's ability to repay, including
a requirement to verify borrowers' income and major financial obligations. The
Proposed Rule also includes limitations on the number of loans that certain
borrowers can have within a specified time frame and requires additional
disclosures in loan documents and notices regarding payments. The Proposed Rule
was published in the Federal Register on July 22, 2016, and comments on the
Proposed Rule were due to the CFPB by October 7, 2016. The CFPB will review all
submitted comments before issuing a final rule. We do not currently know the
nature and extent of the final rule that the CFPB will adopt. As a result, it is
not currently possible to predict the ultimate scope, extent, nature, timing or
effect of any rule eventually adopted and made effective by the CFPB. We cannot
give any assurances that the effect of such rule will not have a material impact
on our  value="LC/us" idsrc="xmltag.org">U.S. products and services.

On July 28, 2016, the CFPB, pursuant to the authority provided in the Dodd-Frank
Act, issued an outline of proposals pertaining to third-party debt collectors
and others covered by the FDCPA that is intended to increase consumer protection
during debt collection ("Debt Collection Outline"). In the Debt Collection
Outline, the CFPB is considering substantive rules under the FDCPA that would,
among other proposals: (i) require collectors to substantiate the debt and
confirm that they have sufficient consumer information before starting
collection; (ii) limit communication attempts to six per week through any point
of contact; (iii) make it easier for consumers to stop specific ways collectors
are contacting them; (iv) prohibit collectors from communicating with certain
parties for 30 days after a consumer's death; (v) make it easier for consumers
to dispute debts by, among other proposals, requiring collectors to include more
specific information about the debt in the initial collection notices sent to
consumers as well as a "tear-off" portion of the notice that consumers could
send back to the collector; (vi) require collectors to verify a debt through a
written report if the debt is disputed in writing by a consumer; (vii) prohibit
collectors from continuing collection efforts or suing for debt until the
necessary documentation is checked if a consumer disputes the debt; and (viii)
require a subsequent holder of a debt to resolve any outstanding dispute about
the debt before attempting to collect.

The proposals in the Debt Collection Outline would apply to our collection of
debt originated by other lenders, including under our CSO programs and our Bank
Program. The proposals in the Debt Collection Outline would not apply to our
collection of debt that we originate; however, the CFPB has announced that it
plans to address consumer protection issues involving first-party debt
collectors and creditors separately. The CFPB published its Debt Collection
Outline in preparation for convening a Small Business Review Panel to determine
whether its proposal could have a significant economic impact on small
businesses. The Debt Collection Outline does not include proposed or final
rules, and any future rules could be significantly different from those in the
Debt Collection Outline. The CFPB has not yet defined a date for any proposed
rules related to debt collection nor has it defined the effective date for the
implementation of final rules. We cannot give any assurances that the effect of
such rules will not have a material impact on our  value="LC/us" idsrc="xmltag.org">U.S. products and services.

On May 5, 2016, the CFPB issued proposed rules prohibiting the use of mandatory
arbitration clauses and class action waiver provisions in consumer financial
services contracts. We do not currently know the nature and extent of the final
rule that the CFPB will adopt. As a result, it is not currently possible to
predict the ultimate scope, extent, nature, timing or effect of any rule
eventually adopted and made effective by the CFPB. Any final rule would apply to
consumer financial services agreements entered into after the final rule becomes
effective (and will not apply to prior arbitration agreements). We cannot give
any assurances that the effect of such rules will not have a material impact on
our  value="LC/us" idsrc="xmltag.org">U.S. products and services.

Military Lending Act


On October 3, 2016, the final rule published by the  value="ACORN:4095884156" idsrc="xmltag.org">Department of Defense
amending the Military Lending Act's ("MLA's") implementing regulation became
effective. The new rule expands the scope of the credit products covered by the
MLA. The rules under the MLA will restrict us from offering consumer loan
products to covered borrowers above the military annual percentage rate, which
is defined by the rules as 36%, and contain various disclosure requirements,
limitations on renewals and refinancing, as well as restrictions on the use of
prepayment penalties, arbitration provisions and certain waivers of rights. The
rule provides that a lender is subject to fines and other penalties if it
extends credit to a covered borrower on prohibited terms. The new rule provides
a safe harbor for a lender if it verifies that an applicant is not a covered
borrower before extending credit by checking the  value="ACORN:4095884156" idsrc="xmltag.org">Department of Defense's
database or a database of a national credit reporting agency that provides
military status information.

                                       48

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value="ACORN:1913488022" idsrc="xmltag.org">Financial Conduct Authority


During years ended December 31, 2016 and December 31, 2015, our  value="LC/gb" idsrc="xmltag.org">U.K. operations
generated 13.9% and 19.9%, respectively, of our consolidated total revenue.
Regulatory changes in the  value="LC/gb" idsrc="xmltag.org">United Kingdom during 2014 significantly affected our
results from our  value="LC/gb" idsrc="xmltag.org">U.K. operations as described below.

In the  value="LC/gb" idsrc="xmltag.org">United Kingdom, supervision of consumer credit was transferred on April
1, 2014 to the FCA, and pursuant to new legislation, the FCA is authorized to
adopt prescriptive rules and regulations. On February 28, 2014, the Consumer
Credit Sourcebook was issued as part of the FCA Handbook and incorporates
prescriptive regulations for lenders such as us, including mandatory
affordability assessments on borrowers, limiting the number of rollovers to two,
restricting how lenders can advertise, banning advertisements the FCA deems
misleading, and introducing a limit of two unsuccessful attempts on the use of
continuous payment authority (which provides a creditor the ability to directly
debit a customer's account for payment when authorized by the customer to do so)
to pay off a loan. As required by the 2013 amendment to the Financial Services
and Markets Act 2000, the FCA implemented a cap on the total cost of high-cost
short-term credit effective January 2, 2015. The final rule reflects a maximum
rate of 0.8% of principal per day, and limits the total fees, interest
(including post-default interest) and charges (including late fees which are
capped at £15) to an aggregate amount not to exceed 100% of the principal amount
loaned. The rule required us to make changes to all of our high-cost short-term
products in the  value="LC/gb" idsrc="xmltag.org">United Kingdom. As a result of the final rule, we discontinued
offering line of credit accounts to new customers in the  value="LC/gb" idsrc="xmltag.org">United Kingdom in late
2014 and effective January 1, 2015, we discontinued draws on existing line of
credit accounts in the  value="LC/gb" idsrc="xmltag.org">United Kingdom. Once  value="LC/gb" idsrc="xmltag.org">U.K. customers have paid off their
outstanding line of credit balance, they may be eligible for either a short-term
or installment loan.

On January 29, 2016, we received full authorization from the FCA to provide consumer credit and to perform related activities for both of our value="LC/gb" idsrc="xmltag.org">U.K. businesses. We will be required to continue to satisfy certain minimum standards set out in the FSMA, which may result in additional costs to us.


On February 24, 2015, the FCA issued a consultation paper that, among other
things, proposes to require that providers of high-cost short-term credit
include a risk warning in all financial promotions and to amend the FCA rules to
allow firms to introduce continuous payment authority to collect repayments
where a customer is in arrears or default and the lender is exercising
forbearance. The FCA published its response to this consultation on September
28, 2015, and confirmed the ability of firms to use continuous payment authority
to collect repayments where a customer is in arrears or default and the lender
is exercising forbearance. The FCA also imposed a number of regulatory changes
on credit brokers and lenders operating in the high-cost-short-term credit
market in the  value="LC/gb" idsrc="xmltag.org">United Kingdom. The FCA now requires that providers of high-cost
short-term credit include a risk warning in all financial promotions, including
previously exempted size-limited ads like SMS text messages and pay-per-click
ads. The majority of these changes came into force on November 2, 2015.

In addition, on August 13, 2015, the CMA published its final order which
requires online lenders to publish details of their products on at least one
price comparison website which is authorized by the FCA. It is anticipated that
the FCA will publish its price comparison website standards in mid-2016 with an
effective date at the end of 2016 or 2017. The CMA also ordered online and
storefront lenders to provide existing customers with a summary of their cost of
borrowing effective August 13, 2016. The CMA also published guidance on the
unfair contract provisions in the Consumer Rights Act of 2015, which sets out
the CMA's understanding of the provisions in the act which deal with unfair
contract terms and notices. The guidance supersedes the general unfair contract
terms guidance issued by the OFT

We are subject to ongoing examination and review by the FCA. During 2014 we were
in frequent communication with the FCA in an effort to demonstrate that we
satisfy the expectations of the FCA, and we made significant modifications to
many of our business practices to address the FCA's requirements. These
modifications included adjustments to our affordability assessment practices and
underwriting standards that govern who will qualify for a loan from us,
reductions in certain maximum loan amounts, alterations to advertising practices
and adjustments to collections processes (including our practices related to
continuous payment authority) and debt forbearance processes (or our practices
regarding customers who have indicated they are experiencing financial
difficulty). In addition, we previously did not have a physical presence in the
 value="LC/gb" idsrc="xmltag.org">United Kingdom as business functions were performed remotely from our facilities
in  value="LC/us" idsrc="xmltag.org">the United States. In order to alleviate concerns in relation to our ability
to demonstrate to the FCA that we are capable of being effectively supervised,
we established an office in  value="LU/gb.eng.london" idsrc="xmltag.org">London in 2014 for the management of our  value="LC/gb" idsrc="xmltag.org">U.K.
business.

In 2014, the FCA appointed an independent auditor, referred to as a skilled
person under section 166 of the FSMA, to undertake a review of certain of our
practices, as well as our ability to be effectively supervised. The first phase
of that review identified certain of our former business practices that were
deemed by the FCA to have caused some consumer detriment, the majority of which
were during the limited time frame prior to complete implementation of our
enhanced affordability assessment. On November 4, 2015, the FCA announced the
final redress program, in which we provided 3,940 customers total redress of
approximately $2.6 million through a combination of loan balance waivers and
cash refunds of interest and fees paid. The skilled person oversaw the execution
of the redress program, which was concluded in the latter part of the fourth
quarter of 2015. The remainder of the section 166 review has been completed and
has not identified further activities deemed by the FCA to have caused consumer
detriment or that are not in compliance with the FCA's requirements.

                                       49

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In connection with implementing the changes described above to our  value="LC/gb" idsrc="xmltag.org">U.K.
business, we experienced a significant year-over-year decrease in our  value="LC/gb" idsrc="xmltag.org">U.K. loan
volume,  value="LC/gb" idsrc="xmltag.org">U.K. loan balances and  value="LC/gb" idsrc="xmltag.org">U.K. revenue during 2015. We discontinued
offering line of credit accounts to new customers in the  value="LC/gb" idsrc="xmltag.org">United Kingdom in late
2014 and effective January 1, 2015, we discontinued draws on existing line of
credit accounts in the  value="LC/gb" idsrc="xmltag.org">United Kingdom. The implementation of stricter
affordability assessments and underwriting standards resulted in a
year-over-year decrease in the number of consumer loans written, the average
consumer loan amount and the total amount of consumer loans written to new and
returning customers. Additionally, we experienced an increase in compliance- and
administrative-related costs for the  value="LC/gb" idsrc="xmltag.org">United Kingdom, but the overall expenses of
our  value="LC/gb" idsrc="xmltag.org">U.K. business (including our cost of revenue) decreased as our  value="LC/gb" idsrc="xmltag.org">U.K. business
contracted. The ultimate impact of the changes we have made to our  value="LC/gb" idsrc="xmltag.org">U.K.
operations will be dependent on a number of factors (some of which may be
unforeseen), including the effectiveness of our execution of the operational
changes, the impact the FCA's requirements may have on our competitors that
could result in a potential increase in our market share, and consumer reaction
to the changes occurring to our services, among other things. The decline in
revenue and loan balances in the  value="LC/gb" idsrc="xmltag.org">United Kingdom has been offset to an extent by
improved performance of our  value="LC/gb" idsrc="xmltag.org">U.K. consumer loan portfolio as a result of stricter
affordability assessments and underwriting standards being implemented, which
has resulted in lower consumer loan loss rates, and by continued strong demand
for the online loan products we offer and receivables purchased in  value="LC/us" idsrc="xmltag.org">the United
States and other markets.

The results for the year ended December 31, 2014 do not include the full impact
of the changes described above. The results for that period are not indicative
of our future results of operations and cash flows from our operations in the
 value="LC/gb" idsrc="xmltag.org">United Kingdom.

Safe Harbor Provisions

On October 6, 2015, the European Court of Justice invalidated the so-called
"Safe Harbor" framework, which previously evidenced compliance with the  value="LC/gb" idsrc="xmltag.org">U.K.
Data Protection Act and the European Union Data Protection Directive and allowed
companies to pass European Union data to non-European Union countries if certain
certification requirements were met by the company. Although many companies,
including us, had Safe Harbor certification, the European Union and the  value="LC/gb" idsrc="xmltag.org">United
Kingdom provide other guidance regarding compliance with data protection laws
and regulations for companies who pass data outside the European Union. In
addition, there are circumstances under which a company is exempt from complying
with those laws and regulations. Despite the invalidation of the Safe Harbor
framework, we believe we are exempt from and/or in compliance with all E.U. and
 value="LC/gb" idsrc="xmltag.org">U.K. privacy laws and regulations.

On February 2, 2016, the  value="ACORN:3080131534" idsrc="xmltag.org">European Commission and  value="LC/us" idsrc="xmltag.org">the United States agreed on a
new framework for transatlantic data flows, the "EU-US Privacy Shield", which
will replace the invalidated Safe Harbor framework. The EU-US Privacy Shield is
a framework designed by the  value="ACORN:2093849922" idsrc="xmltag.org">U.S. Department of Commerce (the "Commerce
Department") and  value="ACORN:3080131534" idsrc="xmltag.org">European Commission to provide companies on both sides of the
Atlantic with a mechanism to comply with EU personal data from the European
Union to  value="LC/us" idsrc="xmltag.org">the United States in support of transatlantic commerce. On July 12,
2016, the  value="ACORN:3080131534" idsrc="xmltag.org">European Commission adopted the EU-US Privacy Shield, which consists
of four components: (i) the privacy shield principles, which is a code of
conduct outlining protections for the handling of personal data; (ii) oversight
and enforcement; (iii) ombudsperson mechanism; and (iv) safeguards and
limitations. The Commerce Department began accepting certifications to the EU-US
Privacy Shield on August 1, 2016. We expect to apply for certification to the
EU-US Privacy Shield, and in the interim, despite the invalidation of the Safe
Harbor framework, we believe we are exempt from and/or are in compliance with
all E.U. and  value="LC/gb" idsrc="xmltag.org">U.K. privacy laws and regulations.

On June 23, 2016, the  value="LC/gb" idsrc="xmltag.org">United Kingdom voted to exit the European Union. The
details and timeline of the exit have not yet been finalized. When the  value="LC/gb" idsrc="xmltag.org">United
Kingdom exits the European Union, it is expected that the  value="LC/gb" idsrc="xmltag.org">United Kingdom will
establish a new framework for data flow between the  value="LC/gb" idsrc="xmltag.org">United Kingdom and  value="LC/us" idsrc="xmltag.org">the
United States or will agree to continue the protections of the EU-US Privacy
Shield for the transfer of personal data into and out of the  value="LC/gb" idsrc="xmltag.org">United Kingdom. We
expect to comply with any framework established by the  value="LC/gb" idsrc="xmltag.org">United Kingdom for the
transfer of personal data into and out of the  value="LC/gb" idsrc="xmltag.org">United Kingdom.

BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES


 value="NYSE:ENVA" idsrc="xmltag.org">Enova International, Inc. was formed on September 7, 2011 by Cash America to
hold the assets of Cash America's online lending business. On September 13,
2011, Cash America contributed to  value="NYSE:ENVA" idsrc="xmltag.org">Enova International, Inc. all of the stock of
its wholly-owned subsidiary, Enova Online Services, Inc., in exchange for 33
million shares of our common stock. As of December 31, 2016, Enova offered,
arranged or purchased consumer and small business loans and receivables purchase
agreements (collectively referred to as "loans and finance receivables"
throughout this Management's Discussion and Analysis of Financial Condition and
Results of Operations) through a number of its subsidiaries to customers in all
50 states and  value="LU/us.dc.wash" idsrc="xmltag.org">Washington D.C. in  value="LC/us" idsrc="xmltag.org">the United States,  value="LC/gb" idsrc="xmltag.org">United Kingdom, and  value="LC/br" idsrc="xmltag.org">Brazil.

Prior to the Spin-off from Cash America, we operated as a division of Cash
America and not as a stand-alone company. Our historical consolidated financial
statements include the assets, liabilities, revenue and expenses directly
attributable to our operations carved out of Cash America's consolidated
financial statements. In addition, the historical financial statements for
periods prior to the Spin-off include allocations of costs relating to certain
functions historically provided by Cash America, including corporate services
such as executive oversight, insurance and risk management, government
relations, internal audit, treasury, licensing, and to a limited extent

                                       50

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finance, accounting, tax, legal, human resources, compensation and benefits,
compliance and support for certain information systems related to financial
reporting. The expense allocations were determined on a basis that Cash America
and we considered to be reasonable reflections of the utilization of services
provided by Cash America.

The amounts recorded for these transactions and allocations are not, however,
necessarily representative of the amounts that would have been incurred had we
been a separate, stand-alone entity that operated independently of Cash America.
As a separate stand-alone public company, our current and future results of
operations will include costs and expenses for us to operate as a stand-alone
company, and, consequently, these costs may be materially different than as
reflected in our historical results of operations. Accordingly, the financial
statements for the years when we were a division of Cash America may not be
indicative of our future results of operations, financial position and cash
flows.

Upon our separation from Cash America, we entered into a transition services
agreement with Cash America. Following the completion of the Spin-off and up
until December 31, 2015, Cash America provided support for certain information
systems related to financial reporting and payment processing to us in exchange
for compensation and reimbursement for all out-of-pocket costs and expenses
incurred in connection with providing such services.

Out-of-Period Adjustment


In a review of our revenue recognition policy during 2015, we determined that
certain fees on our line of credit product should be deferred over the period
the draw is outstanding rather than recognized as revenue when assessed. We
recorded a $2.5 million reduction to revenue in the fourth quarter of 2015 as an
out-of-period adjustment. This adjustment included a $2.8 million reduction of
revenue associated with periods prior to 2015. We believe this adjustment was
not material to any of the prior years' consolidated financial statements.

Revenue Recognition


We recognize revenue based on the financing products and services we offer.
"Revenue" in the consolidated statements of income includes: interest income,
finance charges, fees for services provided through the CSO programs ("CSO
fees"), revenue on RPAs, service charges, draw fees, minimum billing fees, late
fees and nonsufficient funds fees as permitted by applicable laws and pursuant
to the agreement with the borrower. For short-term loans that we offer, interest
and finance charges are recognized on an effective yield basis over the term of
the loan. For line of credit accounts, interest is recognized over the reporting
period based upon the balance outstanding and the contractual interest rate,
draw fees are recognized on an effective yield basis over the estimated
outstanding period of the draw, and minimum billing fees are recognized when
assessed to the customer. For installment loans, interest is recognized on an
effective yield basis over the term of the loan. For RPAs, revenue is recognized
on an effective yield basis over the projected delivery term of the agreements
and fees are recognized when assessed. CSO fees are recognized on an effective
yield basis over the term of the loan. Late and nonsufficient funds fees are
recognized when assessed to the customer. Direct costs associated with
originating loans and purchasing RPAs, such as third-party customer acquisition
costs, are deferred and amortized against revenue on an effective yield basis
over the term of the loan or the projected delivery term of the finance
receivable. Unpaid and accrued interest and fees and unamortized deferred
origination costs are included in "loans and finance receivables, net" in the
consolidated balance sheets.

Current and Delinquent Loan and Finance Receivables


We classify our 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. We do not accrue interest on the
delinquent payment portion of the loan but do 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. We allow for normal
payment processing time before considering a payment or a loan delinquent but do
not provide for any additional grace period.

Where permitted by law and as long as a loan is not considered delinquent, a
customer may choose to renew a short-term loan or installment loan or extend the
due date on a short-term loan. In order to renew or extend a short-term loan, a
customer must agree to pay the current finance charge for the right to make a
later payment of the outstanding principal balance plus an additional finance
charge. In order to renew an installment loan, the customer enters into a new
installment loan contract and agrees to pay the principal balance and finance
charge in accordance with the terms of the new loan contract. If a short-term
loan is renewed, but the customer fails to pay that loan's current finance
charge as of the due date, the unpaid finance charge is classified as
delinquent. References throughout Management's Discussion and Analysis of
Financial Condition and Results of Operations to renewed loans include both
renewals and extensions made by customers to their existing loans as discussed
above.

                                       51
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We generally do not accrue interest on delinquent loans and do 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 an attempt to collect on a delinquent loan, we allow 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


We monitor the performance of our loan and finance receivable portfolios and
maintain 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 credit losses inherent in the portfolio. The
allowance for losses on our owned loans and finance receivables reduces the
outstanding loan balance in the consolidated balance sheets. The liability for
estimated losses related to loans guaranteed under the CSO programs 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, we apply a documented systematic methodology. In
calculating the allowance or liability for loan 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, we generally use a migration
analysis to estimate losses inherent in the portfolio. The allowance 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. The factors
we consider 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.

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

Goodwill


Goodwill represents the excess of the purchase price over the fair value of the
net tangible and identifiable intangible assets acquired in each business
combination. In accordance with Accounting Standards Codification ("ASC") 350,
Goodwill, we test goodwill and intangible assets with an indefinite life for
potential impairment annually as of June 30 and between annual tests if an event
occurs or circumstances change that would more likely than not reduce the fair
value below its carrying amount.

We first assess qualitative factors to determine whether it is necessary to
perform the two-step quantitative goodwill impairment test. In assessing the
qualitative factors, we consider relevant events and circumstances including but
not limited to macroeconomic conditions, industry and market environment, our
overall financial performance, cash flow from operating activities, market
capitalization and stock price. If we determine that the two-step quantitative
impairment test is required, we use the income approach to complete our annual
goodwill assessment. The income approach uses future cash flows and our
estimated terminal values that are discounted using a market participant
perspective to determine the fair value, which is then compared to the carrying
value to determine if there is impairment. The income approach includes
assumptions about revenue growth rates, operating margins and terminal growth
rates discounted by an estimated weighted-average cost of capital derived from
other publicly-traded companies that are similar but not identical from an
operational and economic standpoint. We completed our annual assessment of
goodwill as of June 30, 2016 and determined that the fair value of our goodwill
exceeded carrying value, and, as a result, no impairment existed at that date.
Although no goodwill impairment was noted, there can be no assurances that
future goodwill impairments will not occur.

Long-lived Assets Other Than Goodwill


An evaluation of the recoverability of property and equipment and intangible
assets subject to amortization is performed whenever the facts and circumstances
indicate that the carrying value may be impaired. An impairment loss is
recognized if the future undiscounted cash flows associated with the asset and
the estimated fair value of the asset are less than the asset's corresponding
carrying value. The amount of the impairment loss, if any, is the excess of the
asset's carrying value over its estimated fair value.

We amortize finite-lived intangible assets subject to amortization on the basis
of their expected periods of benefit, generally three to 20 years. The costs of
start-up activities and organization costs are charged to expense as incurred.

                                       52

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Marketing Expenses


Marketing expenses consist of online marketing costs such as sponsored search
and advertising on social networking sites, and offline marketing costs such as
television, radio and direct mail advertising. In addition, marketing expenses
include lead purchase costs and broker commissions paid to marketers in exchange
for providing information or applications from potential customers interested in
using our services. Marketing costs directly related to loan and RPA
originations are deferred and amortized against revenue. Online marketing and
lead purchase costs not directly resulting in loan and RPA originations are
expensed as incurred. The production costs associated with offline marketing are
expensed as incurred. Other marketing costs are expensed as incurred.

We also had an agreement with an independent third party pursuant to which we
paid a portion of the net revenue received from the customers referred to us by
such third party. Prior to the Spin-off, we had an arrangement with Cash America
pursuant to which we paid either a lead purchase fee or a portion of the net
revenue received from the customers referred to us by Cash America. These
referral fees were included in "Marketing" in the consolidated statements of
income.

Operations and Technology Expenses


Operations and technology expenses include all expenses related to the direct
operations and technology infrastructure related to loan underwriting and
processing. This includes call center and operations personnel costs, software
maintenance expense, underwriting data from third-party vendors, and telephony
costs.

General and Administrative Expenses


General and Administrative expenses primarily include corporate personnel costs,
as well as legal, occupancy, and other related costs. In addition, prior to the
Spin-off from Cash America, general and administrative expenses included expense
allocations for certain corporate service functions historically provided by
Cash America, such as executive oversight, insurance and risk management,
government relations, internal audit, treasury, licensing, and to a limited
extent finance, accounting, tax, legal, human resources, compensation and
benefits, compliance and support for certain information systems related to
financial reporting. Cash America allocated these expenses to us based on our
share of Cash America's corporate services expenses incurred for the
consolidated entity.

Income Taxes


We account for income taxes under ASC 740, Income Taxes ("ASC 740"). Prior to
the spin-off, our operations had been included as part of consolidated and
unitary tax returns with Cash America and its affiliated companies. Prior to
May 30, 2014, we settled our current tax balances with Cash America on a
quarterly basis through an adjustment to our affiliate line of credit with Cash
America. With the exception of certain entities outside of  value="LC/us" idsrc="xmltag.org">the United States, we
settled our current tax balances with Cash America on a quarterly basis for the
period from May 31, 2014 until the Spin-off.

As part of the process of preparing our consolidated financial statements, we
are required to estimate income taxes in each of the jurisdictions in which we
operate. This process involves estimating the actual current tax expense
together with assessing temporary differences in recognition of income for tax
and accounting purposes. These differences result in deferred tax assets and
liabilities and are included within the consolidated balance sheets. We must
then assess the likelihood that the deferred tax assets will be recovered from
future taxable income and, to the extent it believes that recovery is not
likely, it must establish a valuation allowance. An expense or benefit is
included within the tax provision in the statement of operations for any
increase or decrease in the valuation allowance for a given period.

We perform an evaluation of the recoverability of our deferred tax assets on a
quarterly basis. We establish a valuation allowance if it is
more-likely-than-not (greater than 50 percent) that all or some portion of the
deferred tax asset will not be realized. We analyze several factors, including
the nature and frequency of operating losses, our carryforward period for any
losses, the reversal of future taxable temporary differences, the expected
occurrence of future income or loss and the feasibility of available tax
planning strategies to protect against the loss of deferred tax assets.

We account for uncertainty in income taxes in accordance with ASC 740, which
requires that a more-likely-than-not threshold be met before the benefit of a
tax position may be recognized in the consolidated financial statements and
prescribes how such benefit should be measured. We must evaluate tax positions
taken on our tax returns for all periods that are open to examination by taxing
authorities and make a judgment as to whether and to what extent such positions
are more likely than not to be sustained based on merit.

Our judgment is required in determining the provision for income taxes, the
deferred tax assets and liabilities and any valuation allowance recorded against
deferred tax assets. Our judgment is also required in evaluating whether tax
benefits meet the more-likely-than-not threshold for recognition under ASC 740.

                                       53

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Recent Accounting Pronouncements


See Note 2 in the Notes to the Audited Consolidated Financial Statements in Part
II, Item 8 "Financial Statements and Supplementary Data" in this report for a
discussion of recent accounting pronouncements.

RESULTS OF OPERATIONS

HIGHLIGHTS

Our financial results for the year ended December 31, 2016, or 2016, are summarized below.

Consolidated total revenue increased $93.0 million, or 14.2%, to $745.6

million in 2016 compared to $652.6 million in the year ended December 31,

2015, or 2015. A $112.8 million, or 22.1%, increase in domestic revenue to

$623.0 million in 2016 from $510.2 million for 2015 was offset by a $19.8, or

13.9% decline in international revenue to $122.6 million in 2016 from $142.4

million in 2015.

Consolidated gross profit decreased $18.1 million, or 4.2%, to $417.6 million

in 2016 compared to $435.7 million in 2015.

Consolidated income from operations decreased $2.9 million, or 2.3%, to $121.5

million in 2016, compared to $124.4 million in 2015.

Consolidated net income was $34.6 million in 2016, compared to $44.0 million

in 2015. Consolidated diluted earnings per share were $1.03 in 2016 compared

    to $1.33 in 2015.




                                       54

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OVERVIEW

The following tables reflect our results of operations for the periods indicated, both in dollars and as a percentage of total revenue (dollars in thousands, except per share data):




                                                         Year Ended December 31,
                                                    2016          2015          2014
  Revenue
  Loans and finance receivables revenue           $ 744,092     $ 650,921     $ 808,987
  Other                                               1,477         1,679           850
  Total Revenue                                     745,569       652,600       809,837
  Cost of Revenue                                   327,966       216,858       266,787
  Gross Profit                                      417,603       435,742       543,050
  Expenses
  Marketing                                          97,404       116,882       127,862
  Operations and technology                          85,202        74,012        73,573
  General and administrative                         97,956       102,073       107,875
  Depreciation and amortization                      15,564        18,388        18,732
  Total Expenses                                    296,126       311,355       328,042
  Income from Operations                            121,477       124,387       215,008
  Interest expense, net                             (65,603 )     (52,883 )     (38,474 )
  Foreign currency transaction gain (loss), net       1,562          (985 )         (35 )
  Income before Income Taxes                         57,436        70,519       176,499
  Provision for income taxes                         22,834        26,527        64,828
  Net Income                                      $  34,602     $  43,992     $ 111,671
  Diluted earnings per share                      $    1.03     $    1.33     $    3.38
  Revenue
  Loans and finance receivables revenue                99.8 %        99.7 %        99.9 %
  Other                                                 0.2           0.3           0.1
  Total Revenue                                       100.0         100.0         100.0
  Cost of Revenue                                      44.0          33.2          32.9
  Gross Profit                                         56.0          66.8          67.1
  Expenses
  Marketing                                            13.1          17.9          15.8
  Operations and technology                            11.4          11.4           9.1
  General and administrative                           13.1          15.6          13.4
  Depreciation and amortization                         2.1           2.8           2.3
  Total Expenses                                       39.7          47.7          40.6
  Income from Operations                               16.3          19.1          26.5
  Interest expense, net                                (8.8 )        (8.1 )        (4.7 )
  Foreign currency transaction gain (loss), net         0.2          (0.2 )         0.0
  Income before Income Taxes                            7.7          10.8          21.8
  Provision for income taxes                            3.1           4.1           8.0
  Net Income                                            4.6 %         6.7 %        13.8 %




NON-GAAP DISCLOSURE

In addition to the financial information prepared in conformity with generally
accepted accounting principles ("GAAP"), we provide historical non-GAAP
financial information. We believe that presentation of non-GAAP financial
information is meaningful and useful in understanding the activities and
business metrics of our operations. We believe that these non-GAAP financial
measures reflect an additional way of viewing aspects of our business that, when
viewed with its GAAP results, provide a more complete understanding of factors
and trends affecting our business.

We provide non-GAAP financial information for informational purposes and to
enhance understanding of our GAAP consolidated financial statements. Readers
should consider the information in addition to, but not instead of or superior
to, our financial statements prepared in accordance with GAAP. This non-GAAP
financial information may be determined or calculated differently by other
companies, limiting the usefulness of those measures for comparative purposes.

                                       55

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Adjusted Earnings Measures


In addition to reporting financial results in accordance with GAAP, we have
provided adjusted earnings and adjusted earnings per share, or, collectively,
the Adjusted Earnings Measures, which are non-GAAP measures. We believe that the
presentation of these measures provides investors with greater transparency and
facilitates comparison of operating results across a broad spectrum of companies
with varying capital structures, compensation strategies, derivative instruments
and amortization methods, which provides a more complete understanding of our
financial performance, competitive position and prospects for the future. We
also believe that investors regularly rely on non-GAAP financial measures, such
as the Adjusted Earnings Measures, to assess operating performance and that such
measures may highlight trends in our business that may not otherwise be apparent
when relying on financial measures calculated in accordance with GAAP. In
addition, we believe that the adjustments shown below are useful to investors in
order to allow them to compare our financial results during the periods shown
without the effect of each of these income or expense items.

The following table provides reconciliations between net income and diluted earnings per share calculated in accordance with GAAP to the Adjusted Earnings Measures, which are shown net of tax (in thousands, except per share data):



                                                      Year Ended December 31,
                                                  2016         2015         2014
Net Income                                      $ 34,602     $ 43,992     $ 111,671
Adjustments:
Acquisition-related costs(a)                      (3,300 )          -       

-

Lease termination and relocation costs(b)              -        3,270       

1,415

Intangible asset amortization                      1,137          494       

45

Stock-based compensation expense                   8,522        9,630       

664

Foreign currency transaction (gain) loss, net (1,562 ) 985

35

Cumulative tax effect of adjustments              (1,907 )     (5,373 )        (783 )
Adjusted earnings                               $ 37,492     $ 52,998     $ 113,047

Diluted earnings per share                      $   1.03     $   1.33     $    3.38
Adjustments:
Acquisition-related costs(a)                       (0.10 )          -             -
Lease termination and relocation costs(b)              -         0.10       

0.04

Intangible asset amortization                       0.04         0.01       

-

Stock-based compensation expense                    0.26         0.29       

0.02

Foreign currency transaction (gain) loss, net (0.05 ) 0.03

-

Cumulative tax effect of adjustments               (0.06 )      (0.16 )       (0.02 )
Adjusted earnings per share                     $   1.12     $   1.60     $    3.42




(a) For the year ended December 31, 2016, we recorded a $3.3 million fair value

adjustment ($2.0 million net of tax) to contingent consideration related to a

prior year acquisition.

(b) In May 2015, we relocated our headquarters and as a result incurred $3.3

million of facility cease-use charges ($2.1 million net of tax) consisting of

remaining lease obligations and disposal costs on its prior headquarters. In

June 2014, we incurred $1.4 million ($0.9 million net of tax) of early lease

    termination charges on our prior headquarters.


                                       56

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Adjusted EBITDA


The table below shows Adjusted EBITDA, which is a non-GAAP measure that we
define as earnings excluding depreciation, amortization, interest, foreign
currency transaction gains or losses, taxes and stock-based compensation
expense. We believe Adjusted EBITDA is used by investors to analyze operating
performance and evaluate our ability to incur and service debt and our capacity
for making capital expenditures. Adjusted EBITDA is also useful to investors to
help assess our estimated enterprise value. In addition, we believe that the
adjustments for acquisition-related costs and the lease termination and
relocation costs shown below are useful to investors in order to allow them to
compare our financial results during the periods shown without the effect of the
income or expense items. The computation of Adjusted EBITDA as presented below
may differ from the computation of similarly-titled measures provided by other
companies (dollars in thousands):



                                                           Year Ended December 31,
                                                      2016          2015          2014
 Net Income                                         $  34,602     $  43,992     $ 111,671
 Depreciation and amortization expenses                15,564        18,388 

18,732

 Interest expense, net                                 65,603        52,883 

38,474

Foreign currency transaction (gain) loss, net (1,562 ) 985

            35
 Provision for income taxes                            22,834        26,527 

64,828

 Stock-based compensation expense                       8,522         9,630 

664

Adjustments:

 Acquisition-related costs(a)                          (3,300 )           -             -
 Lease termination and relocation costs(b)                  -         3,270 

1,415

 Adjusted EBITDA                                    $ 142,263     $ 155,675 

$ 235,819

Adjusted EBITDA margin calculated as follows:

 Total Revenue                                        745,569       652,600 

809,837

 Adjusted EBITDA                                      142,263       155,675 

235,819

Adjusted EBITDA as a percentage of total revenue 19.1 % 23.9 % 29.1 %

(a) For the year ended December 31, 2016, we recorded a $3.3 million fair value

adjustment ($2.0 million net of tax) to contingent consideration related to a

prior year acquisition.

(b) In May 2015, we relocated our headquarters and as a result incurred $3.3

million of facility cease-use charges ($2.1 million net of tax) consisting of

remaining lease obligations and disposal costs on its prior headquarters. In

June 2014 we incurred $1.4 million ($0.9 million net of tax) of early lease

termination charges on our prior headquarters.

Constant Currency Basis


In addition to reporting financial results in accordance with GAAP, we have
provided certain other non-GAAP financial information on a constant currency
basis. We currently operate in the  value="LC/gb" idsrc="xmltag.org">United Kingdom and  value="LC/br" idsrc="xmltag.org">Brazil and have completed
a wind-down of our businesses in  value="LC/au" idsrc="xmltag.org">Australia and  value="LC/ca" idsrc="xmltag.org">Canada in 2016. During 2016, 2015
and 2014, 16.4%, 21.8% and 41.4% of our revenue, respectively, originated in
currencies other than the  value="LC/us" idsrc="xmltag.org">U.S. Dollar, principally the British Pound Sterling.
As a result, changes in our reported revenue and profits include the impacts of
changes in foreign currency exchange rates. As additional information to the
reader, we provide constant currency assessments in the following discussion and
analysis to remove and/or quantify the impact of the fluctuation in foreign
exchange rates and utilize constant currency results in our analysis of
performance. Our constant currency assessment assumes foreign exchange rates in
the current fiscal periods remained the same as in the prior fiscal year
periods. All conversion rates below are based on the  value="LC/us" idsrc="xmltag.org">U.S. Dollar equivalent to
one of the applicable foreign currency:




                                   Year Ended December 31,
                                     2016             2015         % Change
             British Pound             1.3554          1.5289          (11.3 )%
             Australian dollar         0.7438          0.7529           (1.2 )%
             Canadian dollar           0.7551          0.7838           (3.7 )%
             Brazilian real            0.2884          0.3057           (5.7 )%


                                   Year Ended December 31,
                                     2015             2014         % Change
             British Pound             1.5289          1.6480           (7.2 )%
             Australian dollar         0.7529          0.9028          (16.6 )%
             Canadian dollar           0.7838          0.9060          (13.5 )%
             Brazilian real            0.3057          0.4263          (28.3 )%


                                       57
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We believe that our non-GAAP constant currency assessments are a useful measure, indicating the actual growth and profitability of our operations.

Combined Loans and Finance Receivables


Combined loans and finance receivables is a non-GAAP measure that includes both
loans and RPAs we own and loans we guarantee, which are either GAAP items or
disclosures required by GAAP. See "-Basis of Presentation and Critical
Accounting Policies-Allowance and Liability for Estimated Losses on Loans and
Finance Receivables."

We believe this non-GAAP measure provides investors with important information
needed to evaluate the magnitude of potential receivable losses and the
opportunity for revenue performance of the loans and finance receivables
portfolio on an aggregate basis. We also believe that the comparison of the
aggregate amounts from period to period is more meaningful than comparing only
the amounts reflected on our balance sheet since both revenue and cost of
revenue are impacted by the aggregate amount of receivables we own and those we
guarantee as reflected in our financial statements.

YEAR ENDED 2016 COMPARED TO YEAR ENDED 2015

Revenue and Gross Profit


Revenue increased $93.0 million, or 14.2%, to $745.6 million for 2016 as
compared to $652.6 million for 2015. On a constant currency basis, revenue
increased by $107.5 million, or 16.5%, for 2016 compared to 2015. The change in
revenue is driven by an increase in revenue of $112.8 million from our domestic
operations, primarily resulting from a 32.2% increase in domestic installment
loan and RPA revenue and a 40.2% increase in domestic line of credit accounts
revenue in 2016 compared to 2015 driven by growth in these products. The
increase in revenue from domestic operations was partially offset by a decrease
in revenue of $19.8 million (or an increase of $5.3 million on a constant
currency basis) from our international operations, primarily due to regulatory
changes in the  value="LC/gb" idsrc="xmltag.org">United Kingdom and weakness in the British pound sterling since
the  value="LC/gb" idsrc="xmltag.org">U.K. vote to leave the European Union.

Our gross profit decreased by $18.1 million to $417.6 million for 2016 from
$435.7 million for 2015. On a constant currency basis, gross profit decreased by
$9.4 million for 2016 compared to 2015. Our consolidated gross profit as a
percentage of revenue, or our gross profit margin, decreased to 56.0% in 2016
from 66.8% in 2015. The decrease in gross profit margin was primarily driven by
the growth of our domestic near-prime installment portfolio and a higher mix of
new customers in all products, which require higher loss provisions as new
customers default at a higher rate than returning customers with a successful
history of loan performance. Although the growth in our domestic near-prime
installment portfolio contributed to the lower gross profit margin, as the
portfolio continues to scale and the underlying longer term loans continue to
season we expect to achieve increased marginal profitability. In addition, our
international gross profit margin decreased due to the continued wind down of
the  value="LC/gb" idsrc="xmltag.org">U.K. line of credit portfolio and lower margins from our other  value="LC/gb" idsrc="xmltag.org">U.K. products
due to regulatory changes.

The following tables set forth the components of revenue and gross profit,
separated between domestic and international for 2016 and 2015 (dollars in
thousands):



                                              Year Ended December 31,
                                                2016             2015         $ Change       % Change
Revenue by product:
Short-term loans                            $    196,255       $ 204,893     $   (8,638 )         (4.2 )%
Line of credit accounts                          220,462         185,521         34,941           18.8 %
Installment loans and RPAs                       327,375         260,507         66,868           25.7 %

Total loan and finance receivable revenue 744,092 650,921

     93,171           14.3 %
Other                                              1,477           1,679           (202 )        (12.0 )%
Total revenue                               $    745,569       $ 652,600     $   92,969           14.2 %

Revenue by product (% to total):
Short-term loans                                    26.3 %          31.4 %
Line of credit accounts                             29.6 %          28.4 %
Installment loans and RPAs                          43.9 %          39.9 %
Total loan and finance receivable revenue           99.8 %          99.7 %
Other                                                0.2 %           0.3 %
Total revenue                                      100.0 %         100.0 %






                                       58
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                              Year Ended December 31,
                                2016             2015        $ Change        % Change
      Domestic:
      Revenue               $    622,991       $ 510,242     $ 112,749            22.1 %
      Cost of revenue            291,264         196,963        94,301            47.9 %
      Gross profit          $    331,727       $ 313,279     $  18,448             5.9 %
      Gross profit margin           53.2 %          61.4 %        (8.2 )%        (13.4 )%
      International:
      Revenue               $    122,578       $ 142,358     $ (19,780 )         (13.9 )%
      Cost of revenue             36,702          19,895        16,807            84.5 %
      Gross profit          $     85,876       $ 122,463     $ (36,587 )         (29.9 )%
      Gross profit margin           70.1 %          86.0 %       (15.9 )%        (18.5 )%
      Total:
      Revenue               $    745,569       $ 652,600     $  92,969            14.2 %
      Cost of revenue            327,966         216,858       111,108            51.2 %
      Gross profit          $    417,603       $ 435,742     $ (18,139 )          (4.2 )%
      Gross profit margin           56.0 %          66.8 %       (10.8 )%        (16.2 )%



Loan and Finance Receivable Balances


The outstanding combined portfolio balance of loans and finance receivables, net
of allowance and liability for estimated losses, increased $124.8 million, or
26.7%, to $591.8 million as of December 31, 2016 from $467.0 million as of
December 31, 2015, primarily due to increased demand for our domestic near-prime
installment product and growth of our loan and finance receivable portfolios
serving the needs of small businesses, and an increase in international loan
balances (up 17.6% on a constant currency basis). The outstanding loan balance
for our domestic near-prime product increased 43.1% as of December 31, 2016
compared to December 31, 2015, resulting in a domestic near-prime portfolio
balance that comprises approximately 40% of our total loan and finance
receivables portfolio balance while domestic short-term loans comprise
approximately 9%. We expect this trend to continue as we expand our near-prime
installment product offering in 2017 by establishing loan programs with one or
more banks. We expect the loan balances for our domestic near-prime installment
loan product will continue to comprise a larger percentage of the total loan and
finance receivable portfolio, due to consumer demand for the product and its
longer loan term. Additionally, our portfolio of loans and finance receivables
serving the needs of small businesses has grown quickly over the last year and
has exceeded 12% of our total loan and finance receivables portfolio. See
"-Non-GAAP Disclosure-Combined Loans and Finance Receivables" above for
additional information related to combined loans and finance receivables.

The combined loan and finance receivable balance includes $660.5 million and
$502.0 million as of December 31, 2016 and 2015, respectively, of our owned
receivables balances before the allowance for losses of $98.9 million and $67.3
million provided in the consolidated financial statements for December 31, 2016
and 2015, respectively. The combined loan and finance receivable balance also
includes $32.2 million and $34.1 million as of December 31, 2016 and 2015,
respectively, of loan and finance receivable balances that are guaranteed by us,
which are not included in our financial statements, before the liability for
estimated losses of $2.0 million and $1.7 million provided in "Accounts payable
and accrued expenses" in the consolidated financial statements for December 31,
2016 and 2015, respectively.

The following tables summarize loan and finance receivable balances outstanding as of December 31, 2016 and 2015 (dollars in thousands):




                                                                          As of December 31,
                                                         2016                                             2015
                                                    Guaranteed                                       Guaranteed
                                      Company         by the                           Company         by the
                                     Owned(a)       Company(a)       Combined(b)      Owned(a)       Company(a)       Combined(b)
Ending loans and finance
receivables:
Short-term loans                     $  63,005     $     26,092     $      89,097     $  58,793     $     25,151     $      83,944
Line of credit accounts                144,183                -           144,183       100,855                -           100,855
Installment loans and RPAs             453,307            6,107           459,414       342,307            8,972           351,279
Total ending loans and finance
receivables, gross                     660,495           32,199           692,694       501,955           34,123           536,078
Less: Allowance and liabilities
for losses(a)                          (98,945 )         (1,996 )        

(100,941 ) (67,322 ) (1,756 ) (69,078 ) Total ending loans and finance receivables, net

                     $ 561,550     $     30,203     $     591,753     $ 434,633     $     32,367     $     467,000
Allowance and liability for losses
as a % of loans and finance
receivables, gross                        15.0 %            6.2 %            14.6 %        13.4 %            5.1 %            12.9 %






                                       59
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                                                                           As of December 31,
                                                          2016                                             2015
                                                     Guaranteed                                       Guaranteed
                                       Company         by the                           Company         by the
                                      Owned(a)       Company(a)       Combined(b)      Owned(a)       Company(a)       Combined(b)
Ending loans and finance
receivables:
Total domestic, gross                 $ 576,992     $     32,199     $     609,191     $ 422,399     $     34,123     $     456,522
Total international, gross               83,503                -            83,503        79,556                -            79,556
Total ending loans and finance
receivables, gross                    $ 660,495     $     32,199     $     692,694     $ 501,955     $     34,123     $     536,078



(a) GAAP measure. The loans and finance receivables balances guaranteed by us

relate to loans originated by third-party lenders through the CSO programs

and are not included in our financial statements.

(b) Except for allowance and liability for estimated losses, amounts represent

non-GAAP measures.

Average Amount Outstanding per Loan


The average amount outstanding per loan is calculated as the total combined
loans, gross balance at the end of the period divided by the total number of
combined loans outstanding at the end of the period. The following table shows
the average amount outstanding per loan by product at December 31, 2016 and
2015:

                                                           As of December 31,
                                                            2016          2015

Average amount outstanding per loan (in ones)(a)

      Short-term loans(b)                                $      484      $   485
      Line of credit accounts                                 1,289        1,046
      Installment loans(b)(c)                                 1,888        1,841
      Total loans(b)(c)                                  $    1,254      $ 1,132



(a) The disclosure regarding the average amount per loan is statistical data that

is not included in our financial statements.

(b) Includes loans guaranteed by us, which represent loans originated by

third-party lenders through the CSO programs and are not included in our

    financial statements.


(c) Excludes RPAs.


The average amount outstanding per loan increased to $1,254 from $1,132 during
2016 compared to 2015, mainly due to a greater mix of installment loans, which
have higher average amounts per loan relative to short-term loans, in 2016
compared to 2015.

Average Loan Origination


The average loan origination amount is calculated as the total amount of
combined loans originated and renewed for the period divided by the total number
of combined loans originated and renewed for the period. The following table
shows the average loan origination amount by product for 2016 compared to 2015:



                                                             Year Ended
                                                            December 31,
                                                          2016        2015
          Average loan origination amount (in ones)(a)
          Short-term loans(b)                            $   454     $   467
          Line of credit accounts(c)                         306         300
          Installment loans(b)(d)                          1,734      
1,630
          Total loans(b)(d)                              $   517     $   528



(a) The disclosure regarding the average loan origination amount is statistical

data that is not included in our financial statements.

(b) Includes loans guaranteed by us, which represent loans originated by

third-party lenders through the CSO programs and are not included in our

financial statements.



(c) Represents the average amount of each incremental draw on line of credit
    accounts.


(d) Excludes RPAs.


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The average loan origination amount decreased to $517 from $528 during 2016 compared to 2015, mainly due to a greater mix of line of credit draws, which have lower average amounts per loan relative short-term and installment loans.

LOANS AND FINANCE RECEIVABLES LOSS EXPERIENCE


The allowance and liability for estimated losses as a percentage of combined
loans and RPAs increased to 14.6% as of December 31, 2016 from 12.9% as of
December 31, 2015, primarily due to a greater concentration of loans to new
customers in the short-term and line of credit portfolios. New customers require
a greater reserve as these loans default at a higher rate than returning
customers with a successful history of loan performance.

The cost of revenue in 2016 was $328.0 million, which was composed of $327.7
million related to our owned loans and finance receivables and a $0.3 million
increase in the liability for estimated losses related to loans we guaranteed
through the CSO programs. The cost of revenue in 2015 was $216.9 million, which
was composed of $216.7 million related to our owned loans and finance
receivables, and a $0.2 million increase in the liability for estimated losses
related to loans we guaranteed through the CSO programs. Total charge-offs, net
of recoveries, were $295.5 million and $213.3 million in 2016 and 2015,
respectively.

The following tables show loans and finance receivable balances and fees
receivable and the relationship of the allowance and liability for losses to the
combined balances of loans and finance receivables for each of the last eight
quarters (dollars in thousands):



                                                                  2016
                                             First        Second         Third        Fourth
                                            Quarter       Quarter       Quarter       Quarter
Loans and finance receivables:
Gross - Company owned                      $ 495,906     $ 563,810     $ 637,612     $ 660,495
Gross - Guaranteed by the Company(a)          27,114        31,227        29,700        32,199
Combined loans and finance receivables,
gross(b)                                     523,020       595,037       667,312       692,694
Allowance and liability for losses on
loans and finance receivables                 68,886        75,653        96,474       100,941
Combined loans and finance receivables,
net(b)                                     $ 454,134     $ 519,384     $ 570,838     $ 591,753
Allowance and liability for losses as a
% of loans and finance receivables,
gross(b)                                        13.2 %        12.7 %        14.5 %        14.6 %






                                                                  2015
                                             First        Second         Third        Fourth
                                            Quarter       Quarter       Quarter       Quarter
Loans and finance receivables:
Gross - Company owned                      $ 330,275     $ 368,715     $ 445,547     $ 501,955
Gross - Guaranteed by the Company(a)          25,355        31,539        36,684        34,123
Combined loans and finance receivables,
gross(b)                                     355,630       400,254       482,231       536,078
Allowance and liability for losses on
loans and finance receivables                 52,165        52,689        66,718        69,078
Combined loans and finance receivables,
net(b)                                     $ 303,465     $ 347,565     $ 415,513     $ 467,000
Allowance and liability for losses as a
% of loans and finance receivables,
gross(b)                                        14.7 %        13.2 %        13.8 %        12.9 %



(a) Represents loans originated by third-party lenders through the CSO programs,

which are not included in our financial statements.

(b) Non-GAAP measure.

Loans and Finance Receivables Loss Experience by Product

We evaluate loss rates for all financing products in our portfolio to determine credit quality and evaluate trends. For our products, we evaluate loans and finance receivables losses as a percentage of the average loan and finance receivable balance outstanding or the average combined loan and finance receivable balance outstanding, whichever is applicable, for each portfolio.

Short-term Loans


Demand for our short-term loan product in  value="LC/us" idsrc="xmltag.org">the United States has historically
been highest in the third and fourth quarters of each year, and lowest in the
first quarter of each year, corresponding to our customers' receipt of income
tax refunds. Softer demand for short-term loans in  value="LC/us" idsrc="xmltag.org">the United States combined
with tighter underwriting standards in the  value="LC/gb" idsrc="xmltag.org">United Kingdom due to changes in the
regulatory environment during 2014 resulted in lower year-over-year average
balances during the second and third quarters of 2016. The higher

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allowance and liability for losses as a percentage of combined loan balance in
the second half of the year was attributable to an increase in originations to
new customers, which also led to year-over-year increases in the average and
ending short-term loan balances for the fourth quarter of 2016.

Our gross profit margin for short-term loans is typically highest in the first
quarter of each year, corresponding to the seasonal decline in consumer loan
balances outstanding. The cost of revenue as a percentage of the average
combined loan balance for short-term loans outstanding is typically lower in the
first quarter and generally peaks in the second half of the year with higher
loan demand.

The following table includes information related only to short-term loans and
shows our loss experience trends for short-term loans for each of the last eight
quarters (dollars in thousands):



                                                                  2016
                                             First        Second         Third        Fourth
                                            Quarter       Quarter       Quarter       Quarter
Short-term loans:
Cost of revenue                            $  13,276     $  14,214     $  20,531     $  21,600
Charge-offs (net of recoveries)               16,540        11,720        15,956        21,021
Average short-term combined loan
balance, gross:
Company owned(a)                              55,839        54,324        60,761        59,728
Guaranteed by the Company(a)(b)               25,151        21,443        24,678        24,709
Average short-term combined loan
balance, gross(a)(c)                       $  80,990     $  75,767     $  85,439     $  84,437
Ending short-term combined loan balance,
gross:
Company owned                              $  52,381     $  58,798     $  60,124     $  63,005
Guaranteed by the Company(b)                  20,534        24,451        23,379        26,092
Ending short-term combined loan balance,
gross(c)                                   $  72,915     $  83,249     $  83,503     $  89,097
Ending allowance and liability for
losses                                     $  12,598     $  14,746     $  

19,184 $ 19,486


Short-term loan ratios:
Cost of revenue as a % of average
short-term combined loan balance,
gross(a)(c)                                     16.4 %        18.8 %        24.0 %        25.6 %
Charge-offs (net of recoveries) as a %
of average short-term combined loan
balance, gross(a)(c)                            20.4 %        15.5 %        18.7 %        24.9 %
Gross profit margin                             72.1 %        69.5 %        60.5 %        56.8 %
Allowance and liability for losses as a
% of combined loan balance, gross(c)(d)         17.3 %        17.7 %        23.0 %        21.9 %






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                                                                  2015
                                             First        Second         Third        Fourth
                                            Quarter       Quarter       Quarter       Quarter
Short-term loans:
Cost of revenue                            $  11,843     $  14,299     $  18,315     $  17,837
Charge-offs (net of recoveries)               13,908        12,683        17,226        18,125
Average short-term combined loan
balance, gross:
Company owned(a)                              52,307        52,677        60,399        59,298
Guaranteed by the Company(a)(b)               28,626        25,699        26,761        24,215
Average short-term combined loan
balance, gross(a)(c)                       $  80,933     $  78,376     $  87,160     $  83,513
Ending short-term combined loan balance,
gross:
Company owned                              $  49,012     $  58,315     $  62,208     $  58,793
Guaranteed by the Company(b)                  24,394        27,717        25,966        25,151
Ending short-term combined loan balance,
gross(c)                                   $  73,406     $  86,032     $  88,174     $  83,944
Ending allowance and liability for
losses                                     $  13,650     $  15,472     $  16,380     $  15,950
Short-term loan ratios:
Cost of revenue as a % of average
short-term combined loan balance,
gross(a)(c)                                     14.6 %        18.2 %        21.0 %        21.4 %
Charge-offs (net of recoveries) as a %
of average short-term combined loan
balance, gross(a)(c)                            17.2 %        16.2 %        19.8 %        21.7 %
Gross profit margin                             76.7 %        70.5 %        66.4 %        65.0 %
Allowance and liability for losses as a
% of combined loan balance, gross(c)(d)         18.6 %        18.0 %        18.6 %        19.0 %



(a) The average short-term combined loan balance is the average of the month-end

balances during the period.

(b) Represents loans originated by third-party lenders through the CSO programs,

which are not included in our financial statements.

(c) Non-GAAP measure.

(d) Allowance and liability for losses as a % of combined loan balance, gross, is

determined using period-end balances.

Line of Credit Accounts


The cost of revenue as a percentage of average loan balance for line of credit
accounts exhibits a similar quarterly seasonal trend to short-term loan loss
rates as the ratio is typically lower in the first quarter and increases
throughout the remainder of the year, peaking in the second half of the year
with higher loan demand.

The gross profit margin is generally lower for line of credit accounts as
compared to short-term loans because the highest levels of default are exhibited
in the early stages of the account, while the revenue is recognized over the
term of the account. As a result, particularly in periods of higher growth for
line of credit account portfolios, the gross profit margin will be lower for
this product than for our short-term loan products. Conversely, in periods of
declining originations and portfolio contraction, as was the case in the first
half of 2015, the gross profit margin will be higher for this product. The
year-over-year increase in the allowance for losses as a percentage of loan
balance was primarily due to the decline during 2015 in the average line of
credit balance as a result of changes in business practices in the  value="LC/gb" idsrc="xmltag.org">United
Kingdom, partially offset by very strong demand for domestic line of credit
accounts in the second half of 2016. In the fourth quarter of 2014, we
discontinued offering line of credit accounts to new customers in the  value="LC/gb" idsrc="xmltag.org">United
Kingdom, and effective January 1, 2015, we discontinued offering draws on
existing