| The prospectus and
other materials found on this web site provide more complete information
regarding renewable unsecured subordinated notes and Consumer Portfolio
Services, Inc. Please read these materials carefully before purchasing
any notes.
What
is a renewable unsecured subordinated note?
What are the available terms and interest rates?
How is the interest calculated and paid?
Will my interest rate change during the note term?
How do I purchase a note?
What is the minimum amount that I can invest?
Can I purchase a note in my IRA, SEP, 401(k), 403(b) or Keogh?
What happens after I invest?
Are only cash interest payments reported to the Internal Revenue Service?
Can I change my mind after purchasing a note?
Do I pay a commission to purchase a note?
What happens when my note matures?
Can I request that CPS repurchase my note prior to maturity?
Can I sell my note prior to maturity?
What are the risks related to the notes?
Are the notes insured?
Are the notes rated?
Are the notes secured by any collateral?
What is the priority of the notes?
Can CPS prepay my note prior to maturity?
How long has CPS been offering renewable notes?
Who is Sumner Harrington Ltd.?
What if I have more questions?
What is a renewable unsecured subordinated note?
A renewable unsecured subordinated note is a promise to pay the principal
and interest on the note to the holder by Consumer Portfolio Services, Inc.
By purchasing a note, you are lending money to CPS. The note represents CPS’s
obligation to repay your loan with interest.
When the loan matures, you can elect repayment of the note and your investment
will be returned to you along with any accrued but unpaid interest. However,
if neither you nor CPS elect repayment at maturity, the note automatically
renews for another term and continues to earn interest.
CPS is issuing the notes as a new financing.
What are the available terms and interest rates?
CPS notes have terms to maturity ranging from three months to ten years.
Depending on CPS’s capital needs, certain note terms may not always
be available.
Interest rates are determined at the time a note is purchased or renewed by
its term to maturity and the aggregate principal amount of all CPS notes
then owned by you and your immediate family members.
The notes earn incrementally higher interest rates when the aggregate principal
amount reaches $25,000, $50,000, $75,000 and $100,000.
Immediate family members include parents, children, siblings, grandparents,
and grandchildren. Members of sibling families are also considered immediate
family members if the holder’s sibling is also a note holder. Please
identify on the subscription agreement your immediate family members that currently
own or are concurrently purchasing notes.
The Interest Rates page found on this web site lists the current interest rates
and the effective net annual yields for the available note terms at different
aggregate principal amounts.
How is the interest calculated and paid?
Interest is compounded daily at an annual rate based on a 365-day calendar
year. Interest payments are made via direct deposit
into the account you specify on the direct deposit form.
You can choose to receive your interest payments monthly, quarterly, semiannually,
annually or at maturity. If you select the monthly payment option, you can
also choose the day on which you want your interest paid.
If the monthly interest payment date you select is within five business days
of the note issue date, your first interest payment will be made the following
month and will include all of the interest earned since the issue date.
For all other payment options, interest is paid on the quarterly, semiannual
or annual anniversary of the note issue date or at maturity.
If no payment option is selected, interest is paid at maturity. If a payment
date falls on a Saturday, Sunday or legal holiday, the interest payment will
be made on the next business day.
Will my interest rate change during the note term?
No. The interest rate is fixed on the note issue date and remains unchanged
until the note matures. If you choose to renew your note at maturity, the interest
rate for the new term will be the rate then being offered to other holders
with similar aggregate note portfolios for notes with the same term; or the
rate specified by CPS if the company is not then issuing new notes with the
same term.
How do I purchase a note?
Carefully read the prospectus and the
other materials included on this web site. Pay close attention to the section
of the prospectus entitled ‘Risk
Factors’.
If you conclude that a renewable note is an appropriate investment for you,
download and complete a subscription agreement, a direct deposit form and an
electronic delivery consent form and write a check payable to Consumer
Portfolio Services, Inc. for the full amount of your investment.
Mail your check, subscription agreement, direct deposit form and electronic delivery
consent form to Sumner Harrington Ltd., the investment firm that CPS has hired
to help service the notes. Sumner Harrington’s address is:
Sumner Harrington Ltd.
5400 Opportunity Court, Suite 160
Minneapolis, MN 55343
You can purchase multiple notes with different terms for the same investor
by filling in investment amounts for more than one term. However, if you want
to purchase multiple notes for several investors (for example, as custodian
for your children), you need to complete separate subscription agreements,
direct deposit forms, and electronic consent forms for each
investor.
All of the forms required to purchase a note can be downloaded from the prospectus page.
What is the minimum amount that I can invest?
$1,000. There is no maximum amount and odd amounts, such as $8,462.57, are
acceptable. If you purchase multiple notes with different terms or multiple
notes for different investors, the principal amount of each note must be at
least $1,000. You may not aggregate several smaller notes to meet the $1,000
minimum.
Can I purchase a note in my IRA, SEP, 401(k), 403(b) or Keogh?
Yes, if your custodian allows investments in securities that are not DTC
eligible. Your investment custodian should complete the subscription agreement
and the entity that will own the note should be identified in the section entitled ‘Other
Investor’. The address of the custodian should be listed as the primary
address. Your address should be listed as the secondary address so you can
receive copies of the correspondence sent to the custodian. The custodian should
issue the check for your investment.
What happens after I invest?
After your subscription agreement is accepted, you will receive a written
confirmation of your investment that includes pertinent information about the
notes you purchase, such as the note number, the issue date, interest payment
schedule and the interest rate.
The notes are issued in book entry form, which means that no physical note
is created. Evidence of your ownership is provided by the confirmation.
You will also receive quarterly statements that summarize the activity in your
account and a Form 1099 INT each January that lists the interest income that
was reported to the Internal Revenue Service for the previous year.
Are only cash interest payments reported to
the Internal Revenue Service?
No, all accrued interest is reported annually to the Internal Revenue Service.
Depending on your interest payment schedule, your reported interest income
could exceed the sum of your cash interest payments in some years. In this
event, you would be liable for income taxes on the accrued interest before
you were paid the same amount in cash.
Can I change my mind after purchasing a note?
Yes. You can rescind your initial investment within five business days of
the postmark date of your purchase confirmation without incurring an early
redemption penalty. If you rescind your investment, CPS will promptly return
the principal amount of your note. You will not earn any interest for the days
your note was outstanding.
Do I pay a commission to purchase a note?
No. You do not pay a commission to purchase or renew a note. CPS pays
commissions and fees to Sumner Harrington Ltd. and its affiliate for selling notes and providing marketing services but these do not affect your interest or principal.
What happens when my note matures?
You will be notified prior to the maturity date that your note is coming due.
An interest rate supplement will be provided that lists the current interest
rates and effective net annual yields for the available note terms and aggregate
principal amounts. As long as the notes are still available and CPS has
not elected to repay your note, you will have the opportunity to choose one
of the following options:
- You can do nothing and your note will automatically renew for a term equal
to the original term at the interest rate then being offered to other holders
with similar aggregate note portfolios for notes with the same term. If notes
of the same term are not then being offered, the interest rate upon renewal
will be the rate specified by CPS on or before the maturity date or the
rate of the existing note if no such rate is specified.
- You can elect repayment of your note and the principal amount plus any accrued
but unpaid interest will be returned to you. If you choose this option, your
note will not earn any interest on or after the maturity date.
- You can elect repayment of your note and use the proceeds to purchase a new note
with a different term or principal amount. The issue date of the new note will
be the maturity date of the old note. You will need to complete a new subscription
agreement to buy the new note.
- If your note pays interest only at maturity, you can receive the accrued interest
that your note has earned during the term just ended and allow only the principal
amount of your note to renew for the same term at the interest rate in effect
at the time of renewal. If notes with the same term are not then being offered,
the interest rate upon renewal will be the rate specified by CPS on or before
the maturity date or the rate of the existing note if no such rate is specified.
Can I request that CPS repurchase my note prior to maturity?
No. CPS is currently not repurchasing any notes prior to maturity except in the event of the note holder’s death or total permanent disability.
Can I sell my note prior to maturity?
No. There is no active secondary market for the notes. The notes are not
negotiable instruments and cannot be transferred without the prior written
consent of CPS. If you decide to liquidate your investment prior to maturity,
you would have to request that CPS consent to a transfer or repurchase your
note early, which may require CPS’s approval and would subject you
to the penalty and limitation described earlier.
What are the risks related to the notes?
You could lose the principal amount of your note plus all accrued but unpaid
interest if CPS encounters serious financial difficulties. Please read the section of the enclosed prospectus entitled "Risk Factors", which describes the material risks related to the notes and the business and litigation risks related to CPS. Unfavorable outcomes regarding any of these risks, including current and future litigation proceedings, could impair CPS's ability to make note payments.
Whether the notes are appropriate for you depends on your risk profile, return
objectives, investment experience, the diversity of your investment portfolio
and your ability to withstand a loss of interest or principal.
The notes may not be suitable for all investors.
Are the notes insured?
No. The notes are not insured by the Federal Deposit Insurance Corporation,
the Securities Investor Protection Corporation or any other agency or company.
They are obligations of CPS only.
Are the notes rated?
CPS has not requested a rating for the notes. However, third parties may
independently rate them.
Are the notes secured by any collateral?
No. The notes are unsecured. Note holders do not have a lien on any CPS
assets.
What is the priority of the notes?
The notes are subordinate to all other existing and future secured, unsecured,
senior and subordinate debt obligations of Consumer Portfolio Services, Inc.
If the company encounters serious financial difficulties, principal and interest
payments to secured and higher priority creditors would take precedence over
payments to the note holders.
The company currently has substantial debt and is likely to incur or issue additional
debt that would rank senior in priority of repayment to the notes. See the prospectus for
more details.
Can CPS prepay my note prior to maturity?
Yes. After giving you thirty days written notice, CPS can repay your note
at par prior to maturity without your consent. At that time, you would receive
your original principal amount and all accrued but unpaid interest earned through
the repayment date.
How long has CPS been issuing renewable notes?
CPS began issuing renewable notes in May of 2005.
Who is Sumner Harrington Ltd.?
Sumner Harrington Ltd. is CPS’s
selling agent for the notes. Sumner Harrington Ltd. is not affiliated with
CPS and does not guarantee any payments on the notes. Payment on the notes
is the sole obligation of CPS.
What if I have more questions?
Call Sumner Harrington Ltd. during regular business hours at 800-234-5777 to
speak with a service representative.
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