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CORRESP
 1
 filename1.htm

 atlc20250309_corresp.htm

 Troutman Pepper Locke LLP

 Bank of America Plaza, 600 Peachtree Street NE, Suite 3000

 a TLANTA , ga 30308

 troutman.com

 Paul Davis Fancher

 paul.fancher@troutman.com

 March 10, 2025

 FOIA CONFIDENTIAL TREATMENT REQUESTED

 This letter omits confidential information included in the unredacted version of this letter that was delivered to the Staff.

 Redacted information is reflected with an “[*****].”

 VIA EDGAR

 United States Securities and Exchange Commission

 Division of Corporation Finance

 100 F Street, N.E.

 Washington, D.C. 20549

 Attn: William Schroeder and Michael Volley

 Re:

 Atlanticus Holdings Corporation

 Form 10-K for Fiscal Year Ended December 31, 2023

 Form 10-Q for the Quarter Ended September 30, 2024

 Response Dated February 25, 2025

 File No. 001-40485

 Dear Mr. Schroeder and Mr. Volley:

 This letter is being submitted in response to the comments provided by the Staff of the Division of Corporation Finance of the United States Securities and Exchange Commission (the “SEC”) set forth in your letter dated March 5, 2025 (the “Comment Letter”) to William R. McCamey, Chief Financial Officer of Atlanticus Holdings Corporation (the “Company”), with respect to the Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”) and Form 10-Q for the Quarter Ended September 30, 2024 (the “Form 10-Q”).

 We are authorized by the Company to provide the responses contained in this letter on its behalf. The terms “we,” “us,” and “our” in the responses refer to the Company. For your convenience, we set forth each comment from the Comment Letter in bold typeface and include the Company’s response below it. The numbered paragraphs in this letter correspond to the numbered paragraphs of the Comment Letter.

 Because of the commercially sensitive nature of certain information contained herein, this submission is accompanied by a request for confidential treatment for a portion of this letter. We have filed a separate letter with the Office of Freedom of Information and Privacy Act Operations (the “FOIA Office”) in connection with the confidential treatment request, pursuant to Rule 83 of the SEC’s Rules on Information and Requests [17 C.F.R. § 200.83] (“Rule 83”). For the Staff’s reference, we have enclosed a copy of our letter to the FOIA Office (the “Request”) with this copy of the correspondence marked to show the portions redacted from the version filed via EDGAR and for which the Company is requesting confidential treatment.

 In accordance with Rule 83, the Company requests confidential treatment of (a) the marked portions (the “Confidential Information”) of this response letter (this “Letter”) and (b) the accompanying Request (collectively, the “Confidential Material”). Please promptly inform the undersigned of any request for disclosure of the Confidential Material made pursuant to the Freedom of Information and Privacy Act or otherwise so that the undersigned may substantiate the Request for confidential treatment in accordance with Rule 83.

 Confidential Treatment Requested by Atlanticus Holdings Corporation
AHC - 001

 United States Securities and Exchange Commission

 March 10, 2025

 Page 2

 In accordance with Rule 83, this Letter also has been clearly marked with the legend “Confidential Treatment Requested by Atlanticus Holdings Corporation” and each page is marked for the record with the identifying numbers and code “AHC – 001” through “AHC – 009.”

 Form 10-K for Fiscal Year Ended December 31, 2023

 Changes in Fair Value, page 25

 1.

 We note your proposed disclosure included in your response to prior comment 1. Please provide us additional information including an illustrative example explaining how “ increases in total operating revenue contributed to increased fair value losses period over period. ”

 Company Response:

 Finance and fees are an input within our valuation of Loans receivable at fair value. As a result, the timing of cash flows associated with the ultimate payment (or non-payment) of these fees typically results in them being marked to a value greater than or less than the fee recognized. This results from historical models that suggest some portion of finance and fees will be paid in full each month, some may never be collected and some will be paid over time (and result in additional fees or finance charges). For example, a fee of $20 billed in month 1 may be paid the following month, it may charge off with no payments, or it may get paid over several months in which case it would incur additional finance charges. These three scenarios will result in a fair value adjustment that is equal to, below, or above the fee recognized (as a payment over time would incur additional finance charges and fees), respectively. Our models determine expected payment behavior based on the historical performance of similar consumers and then assess the fair value of fee billings based on the expected cash flows. These fair values are not assessed at the consumer level but are instead applied at the individual pool level. As a result, an increase in fee revenues produces a higher fair value offset against that revenue absent other changes that may impact fair value rates. Examples of the above scenarios follow:

 Discount rate

 10%

 Example 1

 Example 2

 Example 3

 Fees in period 1 (recognized in Total operating revenue)

 $
 20.00

 $
 20.00

 $
 20.00

 Payment month

 1

 $
 (20.00
 )

 $
 -

 $
 (2.25
 )

 2

 $
 -

 $
 -

 $
 (2.25
 )

 3

 $
 -

 $
 -

 $
 (2.25
 )

 4

 $
 -

 $
 -

 $
 (2.25
 )

 5

 $
 -

 $
 -

 $
 (2.25
 )

 6

 $
 -

 $
 -

 $
 (2.25
 )

 7

 $
 -

 $
 -

 $
 (2.25
 )

 8

 $
 -

 $
 -

 $
 (2.25
 )

 9

 $
 -

 $
 -

 $
 (2.25
 )

 10

 $
 -

 $
 -

 $
 (2.25
 )

 NPV

 NPV

 NPV

 $
 20.00

 $
 0.00

 $
 21.68

 Statement of income

 Total operating revenue

 $
 20.00

 $
 20.00

 $
 20.00

 Changes in fair value of loans

 $
 -

 $
 (20.00
 )

 $
 1.68

 Net Margin

 $
 20.00

 $
 -

 $
 21.68

 As indicated above, the fair value mark can be positive or negative, however our Fair value to Total managed receivables (Total managed receivables equals our aggregate unpaid gross balance of loans at fair value) ratio as of September 30, 2024 was less than 100%, producing a reduction to those operating revenues. In the three and nine months ended September 30, 2024, we generated Total operating revenue of $351.0 million and $956.8 million, respectively. For the same periods in 2023, we generated Total operating revenue of $294.9 million and $846.6 million, respectively. If we applied the same Fair value to Total managed receivables ratio to both periods (thus isolating the fair value impact related to the increase in revenues), the negative fair value assessment against these revenues would increase.

 Confidential Treatment Requested by Atlanticus Holdings Corporation
AHC - 002

 United States Securities and Exchange Commission

 March 10, 2025

 Page 3

 Offsetting this negative fair value assessment is an increase in the Fair value to Total managed receivables ratio, which increased at September 30, 2024 when compared to September 30, 2023. This increase was due to the underlying performance of the receivables in the form of improved delinquencies and improved net returns. Additionally, the extension in assumed implementation dates of the CFPB late fee rule allows more time for our product, policy and pricing changes to take effect, further offsetting the negative impact of the rule’s implementation and increasing the overall value of the receivables. The Fair value to Total managed receivables ratio increased from 90.2% as of December 31, 2023 to 94.6% as of September 30, 2024 (as disclosed in the Form 10-Q). Applying this positive change in the fair value ratio of 4.4% (94.6%-90.2%) to our outstanding receivable base as of September 30, 2024 resulted in a positive fair value assessment of $117.6 million for the nine months ended September 30, 2024.

 In future filings, we will revise our disclosure to include the following within our discussion of Management’s Discussion and Analysis of Financial Condition and Results of Operations - Changes in fair value of loans.

 Changes in fair value of loans. We experienced losses in our total Changes in fair value of loans of $203.7 million and $549.2 million for the three and nine months ended September 30, 2024, respectively. This compares to losses of $177.9 million and $505.5 million for the three and nine months ended September 30, 2023, respectively. Changes in fair value of loans includes 1) current period principal and finance chargeoffs of fair value receivables, 2) the impact of assessing all finance and fee income billed during the period to fair value, 3) losses on acquisitions of our private label receivables and 4) the impact of changes in the assumptions underlying receivables at the end of the measurement period. The increase in losses for both the three and nine month periods were largely due to increases in principal and finance chargeoffs (net of recoveries), which totaled $201.4 million and $650.2 million for the three and nine months ended September 30, 2024, respectively, compared to $173.5 million and $545.4 million for the three and nine months ended September 30, 2023, respectively. These chargeoffs increased period over period primarily due to overall increases in our acquisition of receivables and not due to specific changes in the underlying performance of the receivables. Offsetting this increase in chargeoffs, was an increase in the Changes in fair value of loans at fair value, included in earnings, which increased to $101.0 million for the nine months ended September 30, 2024 compared to $39.9 million for the nine months ended September 30, 2023 primarily resulting from improvements in the fair value assessment for receivables. Results impacting the $101.0 million of Changes in fair value of loans at fair value, included in earnings for the nine months ended September 30, 2024 are as follows: 1) net gains of $106.0 million associated with fair value assessments on increases in finance and fee billings (net of subsequent payments) in excess of the billed amounts, 2) net losses of $122.6 million on the acquisition of receivables, primarily related to private label credit receivables which have below market pricing and 3) improvements in the underlying performance of our fair value receivables in the form of improved delinquencies and improved net returns as well as the extension in assumed implementation dates of recent CFPB rules limiting late fees charged to consumers. This extension allows more time for our product, policy and pricing changes to take effect, further offsetting the negative impact of the rule’s implementation and increasing the overall value of the receivables. These improvements in underlying performance and assumptions resulted in an increase in the fair value of consumer receivables of approximately $117.6 million.

 For the three months ended September 30, 2024, Changes in fair value of loans at fair value, included in earnings reduced to a loss of $2.3 million from a loss of $4.3 million for the three months ended September 30, 2023. Results impacting the $2.3 million loss in Changes in fair value of loans at fair value, included in earnings for the three months ended September 30, 2024 are as follows: 1) net gains of $52.4 million associated with fair value assessments on increases in finance and fee billings (net of subsequent payments) in excess of the billed amounts, 2) net losses of $63.5 million on the acquisition of receivables, primarily related to private label credit receivables which have below market pricing and 3) improvements in the underlying performance of our fair value receivables in the form of improved delinquencies and improved net returns as well as the extension in assumed implementation dates recent CFPB rules limiting late fees charged to consumers. This extension allows more time for our product, policy and pricing changes to take effect, further offsetting the negative impact of the rule’s implementation and increasing the overall value of the receivables. These improvements in underlying performance and assumptions resulted in an increase in the fair value of consumer receivables of approximately $8.8 million.

 Confidential Treatment Requested by Atlanticus Holdings Corporation
AHC - 003

 United States Securities and Exchange Commission

 March 10, 2025

 Page 4

 2.

 We note your response to prior comment 2 and your proposed disclosure included in your response to prior comment 1. Please revise your proposed MD&A disclosure in future filings to quantify the amount of “ Changes in fair value of loans at fair value, included in earnings ” recognized in each period presented. We also note you recognized total gains of $101 million in the nine months ended September 30, 2024. It appears that this $101 million gain included losses of $112 million related to merchant fees recognized in 2024 and some offsetting larger gains. Please revise your proposed MD&A disclosure in future filings to quantify and discuss the underlying causes of each material loss or gain item impacting fair value on a gross basis recognized within “ Changes in fair value of loans at fair value, included in earnings. ” Please include a draft of your proposed revised disclosure in your response using September 30, 2024 information.

 Company Response:

 In many cases where we have a loss on acquisition of a private label receivable, we have a merchant fee to offset that loss and provide an adequate return on the investment. The merchant fee is not a 1:1 offset for recognized losses on acquisition and in many cases will more than offset the loss on acquisition. In future filings, we will modify our disclosure within Management's Discussion and Analysis of Financial Condition and Results of Operations - Changes in fair value of loans, to include the proposed disclosure provided in our response to Comment 1 above.

 Critical Accounting Estimates - Measurements for Loans at Fair Value, page 37

 3.

 We note your response to prior comment 5 regarding the inclusion of expected subsequent purchases (and future merchant fees) in your fair value measurement for receivables. In your response, you refer to the guidance in ASC 820-10-35-10E and 35-11A as support for the inclusion of expected subsequent purchases in the fair measurement for your receivables. However, this guidance is not applicable for the measurement of financial assets. As discussed in paragraphs BC46 and BC47 of ASU 2011-04, the FASB Board does not believe the concepts of highest and best use and valuation premise are relevant when measuring the fair value of financial assets, at least in part due to the fact that financial assets do not have alternative uses because a financial asset has specific contractual terms and can have a different use only if the characteristics of the financial asset (that is, the contractual terms) are changed. Furthermore, a change in characteristics causes that particular asset to become a different asset, and the objective of a fair value measurement is to measure the asset that exists at the measurement date. Furthermore, you also state in your response that you do not believe you have a contractual right (i.e., firm commitment) related to subsequent purchases that would be eligible for fair value measurement under ASC 825. For these reasons, we do not believe the inclusion of expected subsequent purchases (and future merchant fees) in your fair value measurement is consistent with the guidance in ASC 820 and ASC 825. Please advise or revise your methodology to comply with the guidance in ASC 820.

 Company Response:

 Based on the above Staff comments, we have revised our fair value methodology to remove subsequent purchases (and all merchant fees associated with these subse