Doug Shulman: Yes. Michael, thank you. Let me take those in order. The CFPB credit card fee proposal, we’ve got the advantage that we’re just rolling out a new product. So we are not wed to any of the economic levers. We have a lot of levers in the credit card including pricing. So, we’re going to monitor it and see how it rolls — see what happens with that fee proposal. And obviously, we’ll abide by whatever — wherever it lands. But we don’t feel at this point that, it really affects our outlook or it doesn’t affect us being excited about the product. Our real focus is we have this unique value proposition in the market of reciprocity, where as a customer pays on time, we will share in economics and either increase the line or decrease the APR.
And our real focus is access to credit for the nonprime customer and have a great product in the market that works for them and obviously economically works for us. And so, we’re watching the proposal, but we feel like we’ve got plenty of room to make sure the economics work, as well as the value proposition works. I tried in my — in the previous question to emphasize that, while we are now rolling out in some specific segments, we are rolling out in segments that the credit card will meet our return hurdles, even if we move into a mild recession. And so said another way, we’re assuming from the test sells, a certain credit performance and we put stress on top of that for our decision criteria for credit cards. Right now, we’re not seeing that stress occur.
So our credit cards are exceeding our return hurdles. But if employment ticks up, we go into a recession, the business we’re booking today and the business that we predicted, we would book today €“ or the growth that we told you we thought we’d have this year is going to be profitable growth even, if we see some deterioration in the macro economy.
Michael Kaye: Okay.
Micah Conrad: Yeah. Let me just add to that on the delinquency, Michael. Yeah. You quoted the 13% or so. Keep in mind, as we mentioned that’s got a lot of these credit cards in it that we would not book, to think it’s more than half of the portfolio at year-end, and that’s got delinquency levels that are call it twice what we’re thinking about originating going forward. So we do expect that to roll down. It’s just a function of really that test environment.
Michael Kaye: Okay. Okay. That’s great. Second follow-up question is on funding. Can you maybe talk about some of your plans to raise debt in 2023? I know, it’s partially opportunistic, but what would you consider a base case scenario for secured and unsecured funding this year? And would you be okay raising on secured debt in the 8% plus range?
Micah Conrad: Yeah. It’s a good question. I think as everything with us you should expect us to be opportunistic. We’re going to go in the markets that we think are most accretive for us. We did a good amount of ABS issuance in 2022. As you know, we were leaning heavily into the unsecured markets in the prior two years. We €“ I think €“ I think we’re comfortable, if all we need to do is issue ABS in 2023. Obviously, the unsecured markets have rallied a lot over the last several weeks. And they’re starting to look a little bit more interesting to us. I think the balance of are complex is in the 7s, so 8 it’s a little bit above that. We €“ we’d like to see that stick around for a little bit, but I think it’s starting to become interesting to us.
We tend €“ even with all the ABS issuance, we’ve done we’re still at 51% secured mix on the debt side at the end of fourth quarter. So €“ we’ve got a lot of flexibility. We also have the unique advantage of having $7.4 billion of committed bank lines. So, it gives us a lot of flexibility, and I think we’ll just be opportunistic this year and see where we go.
Michael Kaye: Okay. Thank you.
Operator: Our next question comes from Rick Shane from JPMorgan.
Rick Shane: Thanks, guys for taking my question. Most of them have been asked. Wanted to talk a little bit €“ a question that comes up for us in the current environment with cost funds ticking up a little bit given rates. How much pricing power do you have? And specifically, what I’m interested in is that as you high-grade your portfolio in terms of credit quality, are you able to do that in this environment and not compromise pricing? So, is there a distortion that we’re seeing in terms of yields?
Micah Conrad: Rick, this is Micah. So I think a couple of embedded questions there. We do have some pricing leverage within certain segments of our current business, particularly within the higher credit quality and the secured segments. When we sort of restrict the credit box or tighten a bit what we end up doing is remixing towards a higher credit quality customer. And therefore that tends to have some pressure on the APR because those customers are definitely €“ there’s more offers there. We’re giving a little bit of a risk-based pricing and so that does impact APR. But over the course of the last year, we €“ just because of the competitive environment, we have been able to make some positive influence on price in certain spots.
And most of that is in that higher credit quality segment. So I would go the opposite of the question which is we’ve actually increased price in some of those better credit quality segment and we’re still getting a lot more volume in that area. And I think it’s because competition has tightened pricing dramatically not because €“ I guess more because of the underpricing potentially in 2021 period. And so €“ we’ve always had price discipline. We’re always testing in those markets. We feel good about the business we’re getting there and we’ve been able to increase price a little bit accordingly.
Rick Shane: Got it. No that actually clearly misstated the question because that was exactly what I was trying to understand. And when you think about it now and that pricing power that you have in that segment and the remixing of the portfolio do you think on a net basis you get to a the same risk-adjusted margin or do you get to a slightly lower risk-adjusted margin but with lower volatility and definitionally less risk?
Micah Conrad: Yes. I mean we certainly haven’t changed any of the expectations on our sort of at the margin minimum risk €“ minimum return hurdles. So I would say generally speaking, we’re going to get to a very similar outcome on ROR, return on receivables. We just have potentially less price for less €“ for lower losses and we end up kind of in the same place as the bottom line.
Rick Shane: Okay. That’s great. Thanks for taking my questions this morning, guys.
Doug Shulman: Thanks, Rick.
Operator: Your next question comes from John Hecht from Jefferies.
John Hecht: Good morning, guys. Thanks for taking my questions. And most of them have been asked. I’m wondering
Doug Shulman: Hey, John.
