Santander Consumer USA Holdings said that it is changing certain accounting practices after the Securities and Exchange Commission raised questions about the firm’s methodology.
With the SEC’s inquiry still unresolved, the Dallas-based auto lender missed its second deadline Tuesday to file its annual report, known as a 10-K.
The first deadline came on Feb. 29, at which point Santander Consumer filed a notice with the SEC stating that it planned to file late. A Santander Consumer spokeswoman said at the time that the firm planned to meet the March 15 extension deadline.
But in a second filing with the SEC late Tuesday, Santander Consumer said that its 10-K would again be delayed. “The company is working diligently to file the Form 10-K as soon as practicable,” the document stated.
To that end, Santander Consumer said that it is changing its methodology for estimating the credit loss allowance on individually acquired retail installment contracts. The firm, which specializes in loans to auto buyers with blemished credit histories, said that it will correct prior filings.
The decision by Santander Consumer to change its accounting methodology came after the SEC inquired about its credit-loss allowance.
That inquiry appears to involve a change, announced in October 2015, in how Santander Consumer determined its quarterly provision for credit losses.
During a third-quarter 2015 earnings call, company executives said that the accounting change would help the firm adjust for seasonality in its business.
As a result of the change, Santander Consumer's loss provision shrunk by $134 million in the third quarter. Profits rose by 17% from the same period a year earlier.
The accounting change came at a time when Santander Consumer's loss provision had been steadily rising.
Since October, the credit quality outlook in subprime auto lending has continued to worsen. In announcing its fourth-quarter results, Santander Consumer warned investors that chargeoffs could increase during 2016.