Annual report of employee stock purchase, savings and similar plans



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UNITED STATES< br>




SECURITIES AND EXCHANGE COMMISSION










Washington, D.C. 20549










FORM 11-K










ANNUAL REPORTS OF EMPLOYEE STOCK




PURCHASE, SAVINGS AND SIMILAR PLANS




PURSUANT TO SECTION 15(D) OF THE




SECURITIES EXCHANGE ACT OF 1934


















[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934










For the fiscal year ended December 31, 2020










OR












[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934










For the transition period from __________ to __________
















Commission File Number: 000-20202
















A. Full title of the plan and the address of the plan, if different from that of the issuer named below:










CREDIT ACCEPTANCE CORPORATION 401(k) PLAN AND TRUST
















B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:










CREDIT ACCEPTANCE CORPORATION










25505 West Twelve Mile Road




Southfield, Michigan 48034-8339






























































TABLE OF CONTENTS




































































































































Page Number






Report of Independent Registered Public Accounting Firm






3





Financial Statements:








Statements of Net Assets Available for Benefits as of December 31, 2020 and 2019





4




Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2020





5





Notes to Financial Statements






6





Supplemental Schedule:









Form 5500, Schedule H, Part IV, Line 4i—Schedule of Assets (Held at End of Year)






11





NOTE: All other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable.









Exhibit Index






12





Signature






13





Exhibit 23.1 – Consent of Independent Registered Public Accounting Firm




































































REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















Plan Administrator and Plan Participants




Credit Acceptance Corporation 401(k) Plan and Trust










Opinion on the financial statements




We have audited the accompanying statements of net assets available for benefits of Credit Acceptance Corporation 401(k) Plan and Trust (the “Plan”) as of December 31, 2020 and 2019, the related statement of changes in net assets available for benefits for the year ended December 31, 2020, and the related notes




(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2020 and 2019, and the changes in net assets available for benefits for the year ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.




Basis for opinion




These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.




We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.




Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.




Supplemental information




The accompanying schedule on Form 5500, Schedule H, Part IV, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2020 (“supplemental information”) has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.










/s/ Grant Thornton LLP










We have served as the Plan’s auditor since 2005.










Southfield, Michigan




June 16, 2021
























3






























CREDIT ACCEPTANCE CORPORATION 401(k) PLAN AND TRUST




STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS



























































































































As of December 31,






2020




2019




ASSETS:









Investments at fair value





$



155,870,439





$



130,413,372





Notes receivable from participants





4,922,886





5,476,648





Contributions receivable from the Company





229,605





228,737










NET ASSETS AVAILABLE FOR BENEFITS





$



161,022,930





$



136,118,757
















See accompanying notes to financial statements.








































4






























CREDIT ACCEPTANCE CORPORATION 401(k) PLAN AND TRUST




STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS




















































































































































































For the Year Ended


December 31, 2020




ADDITIONS:






Investment income:







Interest and dividends





$



4,324,638





Net appreciation in fair value of investments





13,800,171





Total investment income





18,124,809








Interest income on notes receivable from participants





300,294








Contributions:







Participant





12,668,190





Company





6,850,427





Rollovers





2,285,644





Total contributions





21,804,261








DEDUCTIONS:







Benefits paid to participants





(15,223,585)





Administrative expenses





(101,606)





Total deductions





(15,325,191)








Net increase





24,904,173








NET ASSETS AVAILABLE FOR BENEFITS:







Beginning of year





136,118,757





End of year





$



161,022,930














See accompanying notes to financial statements.








































5



















CREDIT ACCEPTANCE CORPORATION 401(k) PLAN AND TRUST




NOTES TO FINANCIAL STATEMENTS











1.    DESCRIPTION OF THE PLAN








The following brief description of the Credit Acceptance Corporation (the “Company”, “Credit Acceptance”, “we”, “our”, “us”) 401(k) Plan and Trust, as amended, (the “Plan”), provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.








General –


The Plan is a defined contribution plan available to all salaried and hourly employees on the first day of the month following the month of hire. In order to participate in the Plan, employees needed to be 18 years of age or older. The Plan's Investment Committee determines the appropriateness of the Plan’s investment offerings and monitors investment performance. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).








Contributions –


Participants can elect to contribute 1% to 75% of their pre-tax annual compensation, as defined by the Plan, subject to the limitations of the Internal Revenue Code (“IRC”). Participants are allowed to make after-tax contributions to the Plan subject to the same IRC limitations. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans (“Rollovers”). Participants direct the investment of their contributions into various investment options offered by the Plan. The Plan includes an auto-enrollment provision whereby all newly eligible employees are automatically enrolled in the Plan unless they affirmatively elect not to participate in the Plan.  The initial participant contribution percentage for all new employees automatically enrolled in the Plan is 6% of their eligible pay. The participant contribution percentage for employees automatically enrolled in the Plan is increased annually, on the first day of each calendar year, by 1% of participants’ eligible pay up to a maximum contribution of 10%. We match contributions equal to 100% on the first 4% participants contribute and an additional 50% on the next 2% participants contribute. We contribute a maximum of 5% for each participant’s eligible pay on a per pay period basis. We may also make a discretionary profit sharing contribution as described in the Plan agreement.  We did not make a discretionary profit sharing contribution during the year ended December 31, 2020.








Participant Accounts –


The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. Each participant’s account is credited with the participant’s contribution and our matching contributions plus an allocation of discretionary contributions, if any, and Plan earnings and losses.  Allocations are based on participant earnings or account balances, as defined by the Plan.  Participant accounts may also be charged with an allocation of certain administrative expenses.  Allocations are based on the number of participants in the Plan, the value of participant account balances, or specific participant transactions, as defined. Effective March 31, 2020, the Plan adopted the distribution and required minimum distribution (“RMD”) provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that was signed into law on March 27, 2020. The distribution provision waived early withdrawal penalties for Plan participants that took certain COVID-19 related distributions from the Plan during 2020. The RMD provision suspended required minimum distributions for Plan participants during 2020.








Vesting –


Participants are immediately vested in their voluntary contributions plus actual earnings thereon and become fully vested in our matching contributions and discretionary contributions after two years of service.










Forfeitures –


Forfeited matching contributions can be used to pay administrative expenses or reduce future Company contributions. For the year ended December 31, 2020, forfeited balances of $515,000 were used to offset Company matching contributions. As of December 31, 2020 and 2019 forfeited balances totaled $10,877 and $37,053, respectively.










Voting Rights –


Each participant who has an interest in the Credit Acceptance stock fund is entitled to exercise voting rights attributable to the shares held in his or her stock fund account and is notified by the Trustee, Fidelity Management Trust Company (“Fidelity”), as defined by the Plan, prior to the time that such rights are to be exercised. If the Trustee does not receive timely instructions, the Trustee itself or by proxy shall vote all such shares in the same ratio as the shares with respect to which instructions were received from participants.
















6

















CREDIT ACCEPTANCE CORPORATION 401(k) PLAN AND TRUST




NOTES TO FINANCIAL STATEMENTS











Notes Receivable from Participants –


Subject to predefined conditions and terms, participants may borrow from their account up to 50% of the participants’ vested account balance, not to exceed $50,000.  Notes receivable are secured by the balances in the participants’ accounts and bear interest rates from 3.25% to 6.50% for balances outstanding at December 31, 2020.  The interest rate is based on the prime rate (as reported by


Thomson Reuters


on the first business day of the month the loan is initiated) plus 1%. The notes receivable from participants generally have a maximum repayment period of 5 years, which may be extended up to 10 years for the purchase of a principal residence.  Principal and interest is paid ratably through bi-weekly or semi-monthly payroll deductions. Effective April 21, 2020, the Plan adopted the temporary loan repayment deferral provision of the CARES Act. The deferral provision adopted by the Plan allowed qualified Plan participants to defer loan repayments for one year on new or existing loans. The CARES Act also increased the amount participants may borrow as a loan from their accounts. These temporary provisions were in effect until December 31, 2020.










Payment of Benefits –


Upon termination of service, death, disability, or retirement, a participant may elect to receive the value of the participant’s vested account balance in either a lump-sum amount or in installment payments if certain criteria are met.  All benefits requested before December 31, 2020 were paid prior to year-end.












2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES








Basis of Presentation –


The accompanying financial statements of the Plan are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“GAAP”).








Valuation of Investments and Income Recognition –


Investments are recorded at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  See Note 3 for additional information regarding fair value measurements.  Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis.  Dividends are recorded on the ex-dividend date. Net appreciation includes the Plan’s gains and losses on investments bought and sold as well as held during the year.










Notes Receivable from Participants –


Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest.  No allowance for credit losses has been recorded as of December 31, 2020 or 2019. If a participant ceases to make loan repayments and the Plan Administrator deems this participant loan to be in default, the participant loan balance is reduced and a benefit payment is recorded.










Use of Estimates –


The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and the reported amounts of additions and deductions from net assets available for benefits during the reported period. Actual results could differ from those estimates.










Payment of Benefits –


Benefits are recorded when paid. The entire vested account balance can be received in a combination of cash and, to the extent the account is invested in Company Stock, an in-kind distribution of Company Stock.










Administrative Expenses –


Certain expenses of maintaining the Plan are paid by the Company and are excluded from these financial statements. Transactional fees and fees related to the administration of notes receivable from participants are charged directly to the respective participant’s account and are included in administrative expenses. Investment related expenses are included in net appreciation in fair value of investments.










Recently Adopted Accounting Pronouncements –


In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies the disclosure requirements of Accounting Standards Codification Topic 820. We adopted ASU 2018-13 on January 1, 2020. The adoption of the standard did not have an impact on the Plan's financial statements.










Subsequent Events –


We have evaluated events and transactions occurring subsequent to the statement of net assets available for benefits date of December 31, 2020 for items that could potentially be recognized or disclosed in these financial statements.  We did not identify any items which would require disclosure in or adjustment to the financial statements.






7



















CREDIT ACCEPTANCE CORPORATION 401(k) PLAN AND TRUST




NOTES TO FINANCIAL STATEMENTS (CONTINUED)















3.    FAIR VALUE MEASUREMENTS








Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. We group assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:








Level 1


– Valuation is based upon quoted prices for identical instruments traded in active markets.  A description of the investment assets measured at fair value using this methodology is as follows:








Mutual funds:




Mutual funds are valued at the daily closing price as reported by the funds. Mutual funds held by the Plan are open-end mutual funds that are registered with the Securities and Exchange Commission (“SEC”). These funds are required to publish their daily net asset value (“NAV”) and to transact at that price. The mutual funds held by the Plan are deemed to be actively traded.








Credit Acceptance stock fund:




This fund includes our publicly traded common stock and is valued at quoted prices available on The Nasdaq Global Select Market


®


.










Level 2


– Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.  None of our investment assets were measured at fair value using this methodology.








Level 3


– Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.  These unobservable assumptions reflect estimates or assumptions that market participants would use in pricing the asset or liability.  None of our investment assets were measured at fair value using this methodology.










In accordance with Topic 820, certain investments measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. A description of the investment assets measured using this methodology is as follows:










Collective trust fund:




The fair value of the collective trust fund is based on the NAV of the underlying investments, as reported to the Plan by the contract issuer. The NAV, as provided by Fidelity Management Trust Company (the “Trustee”), is used as a practical expedient to estimate fair value.












8

















CREDIT ACCEPTANCE CORPORATION 401(k) PLAN AND TRUST




NOTES TO FINANCIAL STATEMENTS (CONTINUED)













Investments measured at fair value on a recurring basis at December 31, 2020 and 2019 are as follows:



























































































































































































December 31, 2020







Level 1






Level 2






Level 3






Total





Mutual funds





$



138,148,630





$









$









$



138,148,630





Credit Acceptance stock fund





11,804,353

















11,804,353





Total investments in the fair value hierarchy





$



149,952,983





$









$









$



149,952,983





Investments measured at NAV (a)











5,917,456





Total investments at fair value











$



155,870,439



























































































































































































December 31, 2019







Level 1






Level 2






Level 3






Total





Mutual funds





$



110,842,304





$









$









$



110,842,304





Credit Acceptance stock fund





16,793,764

















16,793,764





Total investments in the fair value hierarchy





$



127,636,068





$









$









$



127,636,068





Investments measured at NAV (a)











2,777,304





Total investments at fair value











$



130,413,372






(a) In accordance with Topic 820, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statements of net assets available for benefits.








The following table summarizes investments for which fair value is measured using NAV per share practical expedient as of December 31, 2020 and 2019, respectively. There are no participant redemption restrictions for these investments; the redemption notice period is applicable only to the Plan.























































































































December 31, 2020


Fair Value






December 31, 2019 Fair Value






Unfunded Commitments






Redemption Frequency






Redemption Notice period





Collective trust fund





$



5,917,456





$



2,777,304






N/A






Daily






12 months














4.




RELATED PARTY AND PARTY-IN-INTEREST TRANSACTIONS








The Plan invests in the Credit Acceptance stock fund, which exclusively includes Credit Acceptance Corporation common stock. This is a related party and party-in-interest transaction.










Notes receivable from participants are also considered party-in-interest transactions. Under ERISA, these transactions are exempt from the prohibited transaction rules.












5.




PLAN TERMINATION








Although we have not expressed any intent to do so, we have the right under the Plan to discontinue our contributions at any time and to terminate the Plan subject to the provisions of ERISA.












6.




TAX STATUS








We use a volume submitter plan document created by Fidelity Management and Research Company (“FMR”). FMR received an advisory letter from the Internal Revenue Service (“IRS”), dated March 31, 2014, which states that the volume submitter plan document satisfies the applicable provisions of the IRC. Because the Plan has adopted a volume submitter plan document that has received a favorable advisory letter from the IRS, the Plan can rely on the advisory letter as evidence that the Plan is qualified under IRC section 401(a) to the extent prescribed by the IRS in applicable revenue procedures. Although the Plan has been amended since the prototype plan received the advisory letter, the Plan Administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income tax has been included in the Plan’s financial statements.






9

















CREDIT ACCEPTANCE CORPORATION 401(k) PLAN AND TRUST




NOTES TO FINANCIAL STATEMENTS (CONCLUDED)









GAAP requires Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2020 and 2019, there are no uncertain positions taken or expected to be taken that would require recognition of the liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions and the Plan could be subject to income tax if certain issues were found by the IRS that could result in the disqualification of the Plan’s tax-exempt status; however, there are currently no audits for any tax periods in progress.












7.




RISKS AND UNCERTAINTIES








The Plan invests in various investment securities, which in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balance and the amounts reported in the statements of net assets available for benefits.












10


















SUPPLEMENTAL SCHEDULE








CREDIT ACCEPTANCE CORPORATION




401(k) PLAN AND TRUST








FORM 5500, SCHEDULE H, PART IV, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)




AS OF DECEMBER 31, 2020








































































































































































































































































































































(a)





(b)






(c)






(e)






Identity of Issuer






Description of Investment






Current Value





Vanguard Group, Inc




Vanguard Target Retirement 2045 Fund




$



17,879,127




Vanguard Group, Inc




Vanguard Target Retirement 2040 Fund




17,133,392




Vanguard Group, Inc




Vanguard Target Retirement 2050 Fund




12,781,598




Vanguard Group, Inc




Vanguard Target Retirement 2035 Fund




12,231,992




Vanguard Group, Inc




Vanguard Target Retirement 2030 Fund




11,911,740



*



Credit Acceptance Corporation




Credit Acceptance Stock Fund




11,804,353




Vanguard Group, Inc




Vanguard 500 Index Fund (Admiral Shares)




11,129,476




T. Rowe Price Associates, Inc




T. Rowe Price New Horizons Fund




8,982,197




Vanguard Group, Inc




Vanguard Target Retirement 2025 Fund




7,807,470




Vanguard Group, Inc




Vanguard Target Retirement 2055 Fund




7,067,174




Putman Fiduciary Trust Company




Putnam Stable Value Fund




5,917,456




Capital Research and Management Co




American Funds - The Growth Fund of America (Class R6)




5,149,732




Capital Research and Management Co




American Funds - EuroPacific Growth Fund (Class R6)




2,735,223




Janus Capital Management LLC




Janus Enterprise Fund (Class N)




2,611,346




Vanguard Group, Inc




Vanguard Mid-Cap Index Fund (Admiral Shares)




2,475,317




Vanguard Group, Inc




Vanguard Total Bond Market Index Fund (Admiral Shares)




2,452,220




Capital Research and Management Co




American Funds - The Bond Fund of America R6




2,018,269




Vanguard Group, Inc




Vanguard Small-Cap Index Fund (Admiral Shares)




1,954,912




Vanguard Group, Inc




Vanguard Target Retirement 2020 Fund




1,885,999




Vanguard Group, Inc




Vanguard Target Retirement 2060 Fund




1,788,281




Pacific Investment Management Co LLC




PIMCO High Yield Fund (Institutional Class)




1,429,959




Capital Research and Management Co




American Funds - New World Fund (Class R6)




1,374,058




Vanguard Group, Inc




Vanguard Equity-Income Fund (Admiral Shares)




1,117,008




T. Rowe Price Associates, Inc




T. Rowe Price Mid-Cap Value Fund




1,112,526




Vanguard Group, Inc




Vanguard Total International Stock Index Fund (Admiral Shares)




875,052




Vanguard Group, Inc




Vanguard Real Estate Index Fund (Admiral Shares)




836,065




PGIM Investments




PGIM Global Total Return Fund (Class R6)




497,322




Vanguard Group, Inc




Vanguard Target Retirement 2015 Fund




421,156




American Beacon Advisors, Inc




American Beacon Small Cap Value Fund Class Y




286,993




Vanguard Group, Inc




Vanguard Target Retirement Income Fund




203,026




*





Participant






Loans to participants (3.25% to 6.50% maturing through 2030)





4,922,886








$



160,793,325






* Party-in-interest








Column (d), Cost, has been omitted as all investments are participant-directed












11
























EXHIBIT INDEX










Exhibit




Number




Description













23.1



Consent of Grant Thornton LLP
























12


























SIGNATURE










The Plan.


Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees of the Credit Acceptance Corporation 401(k) Plan and Trust (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.











































































CREDIT ACCEPTANCE CORPORATION






401(k) PLAN AND TRUST









Date: June 16, 2021




By:





/s/ Jay D. Martin








Jay D. Martin








Senior Vice President - Finance & Accounting




Credit Acceptance Corporation























































13




The above information was disclosed in a filing to the SEC. To see the filing, click here.

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