Frequently Asked Questions
Listed below are the common investor questions regarding CPS Notes
Frequently Asked Questions
The Prospectus and its supplements, found elsewhere on this web site, have detailed answers to these frequently asked questions. Please read these documents carefully before purchasing any notes.
What is a CPS note?
What note terms are available?
What are the current interest rates?
How are the interest rates assigned?
How is the interest calculated and paid?
What happens when my note matures?
Will CPS notify me when my note matures?
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 any commissions or fees?
Can I redeem 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 repayment priority of the notes?
Can CPS repay my note prior to maturity?
How long has CPS been issuing notes?
What if I have more questions?
You are lending money to Consumer Portfolio Services, Inc. when you purchase a note. The note represents our obligation to repay your loan when due with interest.
The notes are issued in book entry form, which means that no physical certificate is created. Evidence of your note ownership is provided by the written Purchase Confirmation we deliver after your investment.
What note terms are available?
CPS notes have terms to maturity ranging from three months to ten years. Depending on our capital needs, certain note terms may not always be available.
What are the current interest rates?
The Interest Rates page on this web site lists the annual rates for our available note terms at different investment amounts. We change our interest rates periodically. The Interest Rates page will always list our current rates.
How are the interest rates assigned?
Interest rates are determined at the time a note is purchased or renewed, according to its term to maturity and the aggregate principal amount of all the CPS notes currently owned by you and your immediate family members.
The notes are assigned incrementally higher interest rates, effective upon issuance or renewal, when the aggregate principal amount of all the notes then owned by you and your immediate family reaches $25,000, $50,000, $75,000 and $100,000.
Immediate family members include your parents, children, siblings, grandparents, and grandchildren. Investments by sibling family members also count, if your sibling owns a note. To take advantage of this feature, please identify on your Subscription Agreement the family members who currently own or are concurrently purchasing CPS notes.
How is the interest calculated and paid?
Interest compounds daily at the annual rate, based on a 365-day year. We will deposit your interest payments, and your principal repayment, directly into the account you specify on the Direct Deposit Authorization.
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 of the month 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 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 upon redemption. If no payment option is selected, interest is paid upon redemption. If a payment date falls on a Saturday, Sunday, or legal holiday, the payment will be made on the next business day.
You can change your interest payment schedule once during the note term, e.g., from monthly to annual or vice versa.
What happens when my note matures?
If we have not elected to repay your note, you can exercise one of the following options, up until fifteen days after the maturity date:
- You can do nothing, and your note will automatically renew for a new term equal to the original term, at the applicable interest rate then in effect at the time of renewal.
- You can redeem your note as of the maturity date and the principal amount plus any accrued but unpaid interest will be returned to you.
- You can change the term or principal amount of your note. You will need to complete a new Subscription Agreement to exercise this option.
- If your note pays interest only at maturity, you can receive the accrued interest that your note earned during the term just ended and renew only the principal amount for the new term.
Will CPS notify me when my note matures?
Yes. We will send you a Maturity Notice before your note comes due, along with an Interest Rate Supplement that lists the current annual interest rates for the available note terms and aggregate principal amounts. If your note renews, we will send you a Renewal Confirmation that gives you fifteen more days to exercise one of your maturity options.
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 renew your note at maturity, the interest rate for the new term will be the applicable rate currently in effect at that time.
- Carefully read the Prospectus, its supplements, and the other documents found on this web site.
- Complete a Subscription Agreement, a Direct Deposit Authorization, and a W-9. These documents can be found on the Invest Now page of this web site.
- Write a check made payable to Consumer Portfolio Services, Inc. for the aggregate principal amount of the notes you are purchasing.
- Mail your check, Subscription Agreement, Direct Deposit Authorization, and W-9 to CPS Notes, PO Box 5474, Hopkins, MN 55343.
What is the minimum amount that I can invest?
$1,000. There is no maximum amount. Odd amounts, such as $8,462.57, are acceptable. If you concurrently purchase multiple notes, 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 accepts note investments. Your custodian should complete the Subscription Agreement and issue the check for your investment.
The type of entity that will own the note should be identified next to the Form of Ownership box entitled "Other". The address of the custodian should be listed as the Primary Address. Your address should be listed as the Secondary Address.
If your custodian does not accept note investments, please email us at InvestorServices@CPSnotes.com, or call us at 888-776-1887, for information about custodians who do.
After your Subscription Agreement is accepted, we will send you a Purchase Confirmation that includes pertinent information about the note you purchased, such as the note number, interest rate, issue date, and interest payment schedule.
You will also receive quarterly statements that summarize the activity in your account and a Form 1099 INT each January that lists the accrued interest that was reported to the Internal Revenue Service for the previous year.
Are only cash interest payments reported to the Internal Revenue Service?
No. Because you can change your interest payment schedule during the note term, IRS rules require us to report all the accrued interest you earned in the prior year, not just the cash interest payments you received. 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 incur a tax liability for the accrued interest you had yet to receive 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. You will not earn any interest for the days your note was outstanding. You may also be eligible to rescind your initial investment for other reasons. See the Prospectus and its supplements for details.
Do I pay any commissions or fees?
No. You never pay a commission or fee to purchase or renew a note or to redeem it at maturity.
Can I redeem my note prior to maturity?
Notes can be redeemed before their maturity dates upon the death or total permanent disability of the investor. You can ask us to redeem your note early for other reasons, but we have the right to refuse your request or to charge you an early redemption penalty, if we honor it.
Can I sell my note prior to maturity?
There is no active secondary trading market for the notes. You cannot transfer ownership to another investor without our prior written consent. If you arrange for the private sale of your note, you need to obtain our approval before completing this transaction.
What are the risks related to the notes?
You could lose the principal amount of your notes, plus all accrued but unpaid interest, if we ever encountered serious financial difficulties. The section of the Prospectus supplement entitled "Risk Factors" describes the material risks related to the notes.
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 the loss of your investment. The notes may not be suitable for all investors.
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.
We have 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 of our assets.
What is the repayment priority of the notes?
The notes are subordinate to all our other existing and future secured, unsecured, senior, and subordinate debt obligations.
If we ever encountered serious financial difficulties, principal and interest payments to the secured and higher priority creditors would take precedence over payments to the note holders.
We currently have substantial debt and are likely to incur or issue additional debt that would rank senior in priority to the notes. See the Prospectus, its supplements, and our financial statements for more details.
Can CPS repay my note prior to maturity?
Yes. After giving you thirty days written notice, we can repay your note prior to maturity without your consent. At that time, you would receive the principal amount and all accrued but unpaid interest earned through the repayment date.
How long has CPS been issuing notes?
We began selling notes to retail investors in May 2005.
What if I have more questions?
Email InvestorServices@CPSnotes.com or call 888-776-1887.