As filed with the Securities and Exchange Commission on February 8, 2022

Registration No. 333-_________

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM SF-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

USAA ACCEPTANCE, LLC

as Depositor to the Issuing Entities described herein

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		71-0898378
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Commission File Number of Depositor: 333-__________

Central Index Key Number of Depositor: 0001178049

Central Index Key Number of Sponsor: 0000908392

USAA Federal Savings Bank

(Exact name of sponsor as specified in its charter)

USAA Acceptance, LLC

1105 North Market Street, Suite 1300

Wilmington, Delaware 19801

(302) 651-8408

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Brett Seybold

President, Chief Executive Officer, Treasurer, Principal Financial Officer, Comptroller

and Senior Officer in Charge of Securitization

10750 McDermott Freeway

San Antonio, Texas 78288

(210) 913-8640

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

Stuart Litwin, Esq.

Mayer Brown LLP

71 South Wacker Drive

Chicago, Illinois 60606

(312) 782-0600

 

 

Approximate date of commencement of proposed sale to the public: From time to time after this registration statement becomes effective as determined by market conditions.

If any of the securities being registered on this Form SF-3 are to be offered pursuant to Rule 415 under the Securities Act of 1933, check the following box:  ☒

If this Form SF-3 is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

If this Form SF-3 is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

 

 

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE AN AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

 

 

 

The information in this preliminary prospectus is not complete and may be amended. We may not sell the notes described in this preliminary prospectus until we deliver a final prospectus. This preliminary prospectus is not an offer to sell the notes and is not seeking an offer to buy the notes in any state where the offer or sale is not permitted.

 

Subject to completion, dated [●][●], 20[●][●]

PROSPECTUS

$[●]^[(1)][(4)]

USAA AUTO OWNER TRUST 20[●]-[●]

Issuing Entity

Central Index Key Number: [                ]

USAA Acceptance, LLC

Depositor

Central Index Key Number: 0001178049

 

USAA FEDERAL SAVINGS BANK

Sponsor, Seller and Servicer

Central Index Key Number: 0000908392

		Payments on the Notes   •  The notes are payable solely from the assets of the issuing entity, which consist primarily of retail motor vehicle installment loans that are secured by new and used automobiles and light-duty trucks, [payments due under an interest rate [swap][cap] agreement] and funds on deposit in the reserve account. [A portion of the receivables may be acquired by the issuing entity subsequent to the closing date during the funding period described in this prospectus using amounts deposited in the pre-funding account on the closing date]. [[●] will be the counterparty to the interest rate swap agreement.] [[●] will be the cap provider under the interest rate cap agreement.]   •  The issuing entity will pay interest and principal on the notes on the [●] day of each month (or, if the [●] day is not a business day, the next business day). The first payment date will be [●][●], 20[●].   •  The issuing entity will pay principal on the notes in accordance with the payment priorities described in this prospectus. [The issuing entity will not pay principal during the revolving period, which is scheduled to terminate on [insert date not later than three years after the closing date.] However, if the revolving period terminated early as a result of an early amortization event, principal payments may commence prior to that date.]   Credit Enhancement   •  The issuing entity will also issue asset-backed certificates representing an equity interest in the issuing entity, which are not being offered hereby. The asset-backed certificates are subordinated to payments on the notes.   [•   Credit enhancement for the notes will consist of [a reserve account in an initial amount of at least $[●],] [a yield supplement account in an initial amount equal to at least $[●],] [excess interest on the receivables,] [the yield supplement overcollateralization amount,] [overcollateralization (in addition to the yield supplement overcollateralization amount),] and, in the case of the Class A notes, subordination of the Class B notes.]

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

UNDERWRITERS
[●]		[●]
Solely with respect to the Class A Notes:

 

[●]		[●]		[●]		[●]

The date of this prospectus is [●] [●], 20[●]

TABLE OF CONTENTS

 

SUMMARY OF TERMS OF THE NOTES			7
SUMMARY OF RISK FACTORS			24
RISK FACTORS			26
USE OF PROCEEDS			59
THE ISSUING ENTITY			59
Limited Purpose and Limited Assets			59
The Issuing Entity Property			60
Capitalization and Liabilities of the Issuing Entity			61
THE TRUSTEES			62
Owner Trustee			62
Indenture Trustee			62
Role of the Owner Trustee and the Indenture Trustee			62
THE DEPOSITOR			63
ORIGINATOR, SPONSOR, SELLER AND SERVICER			64
Credit Risk Retention			65
THE ASSET REPRESENTATIONS REVIEWER			69
[THE CAP PROVIDER] [THE SWAP COUNTERPARTY]			70
THE BANK’S PORTFOLIO OF MOTOR VEHICLE LOANS			70
Origination of Motor Vehicle Loans			70
Underwriting of Motor Vehicle Loans			71
THE RECEIVABLES POOL			74
Simple Interest Receivables			74
Criteria Applicable to Selection of Receivables			75
[Criteria Applicable to the Selection of Additional Receivables During the Revolving Period]			76
Exceptions to Underwriting Criteria			77
Asset-Level Information			77
Pool Stratifications			78
The Bank’s Delinquency, Loan Loss and Recovery Information			88
[FDIC Rule			89
Review of Pool Assets			90
Repurchases and Replacements			91
STATIC POOL DATA			92
HOW YOU CAN COMPUTE YOUR PORTION OF THE AMOUNT OUTSTANDING ON THE NOTES			92
MATURITY AND PREPAYMENT CONSIDERATIONS			92
Weighted Average Lives of the Notes			93
DESCRIPTION OF THE NOTES			101
General			101
Delivery of Notes			101
Book-Entry Registration			101
Definitive Notes			102
Notes Owned by Transaction Parties			102
Access to Noteholder Lists			103
Reports to Noteholders			103
Payments of Interest			105
Payments of Principal			106
[The Revolving Period]			106
[Interest Rate Swap Agreement]			107
[Interest Rate Cap Agreement]			109
Credit Enhancement			110
Optional Prepayment			112

 

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DESCRIPTION OF THE CERTIFICATES			113
PRINCIPAL DOCUMENTS			114
APPLICATION OF AVAILABLE FUNDS			115
Sources of Funds for Distributions			115
Fees and Expenses of the Issuing Entity			115
Indemnification of the Indenture Trustee and the Owner Trustee			115
Priority of Distributions			116
DESCRIPTION OF THE RECEIVABLES TRANSFER AND SERVICING AGREEMENTS			117
Sale and Assignment of Receivables			118
[Additional Sales of Receivables			118
Representations and Warranties			118
Repurchase Obligations			118
Asset Representations Review			119
Dispute Resolution			122
Servicing Procedures			123
Collections			124
Servicing Compensation and Expenses			125
Net Deposits			126
Evidence as to Compliance			126
Certain Matters Regarding the Servicer; Limitation on Liability			126
Servicer Replacement Events			127
Removal or Replacement of Servicer			128
Waiver of Past Servicer Replacement Events			129
Termination			129
Administration Agreement			129
Accounts			130
Deposits to the Collection Account			130
Reserve Account			131
[Risk Retention Reserve Account			131
Permitted Investments			132
[Pre-Funding Account]			132
Amendments			133
THE INDENTURE			133
Events of Default			133
Rights Upon an Event of Default			134
Modification of Indenture			136
The Issuing Entity Will be Subject to Covenants Under the Indenture			137
Security Interest in Receivables			138
Investor Communications			138
Annual Compliance Statement			139
Indenture Trustee’s Annual Report			139
Satisfaction and Discharge of Indenture			139
Documents to be Delivered by Indenture Trustee to Noteholders			139
Resignation or Removal of the Indenture Trustee			139
AFFILIATION AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			140
SOME IMPORTANT LEGAL ISSUES RELATING TO THE RECEIVABLES			140
Security Interests in the Receivables			140
Security Interests in the Financed Vehicles			140
Enforcement of Security Interests in Financed Vehicles			142
Repossession			142
Notice of Sale; Redemption Rights			143
Deficiency Judgments and Excess Proceeds			143

 

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Consumer Protection Law			143
Certain Matters Relating to Insolvency			145
Certain Regulatory Matters			146
Dodd Frank Orderly Liquidation Framework			146
Repurchase Obligation			149
Servicemembers Civil Relief Act			149
Other Limitations			150
LEGAL PROCEEDINGS			150
LEGAL INVESTMENT			150
[Money Market Fund Investment			150
Certain Investment Company Act Considerations			151
Requirements for Certain European Regulated Investors, UK Regulated Investors and Affiliates			151
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES			153
Tax Characterization of the Issuing Entity			153
Tax Consequences to Holders of the Notes			154
STATE TAX CONSEQUENCES			159
CERTAIN CONSIDERATIONS FOR ERISA AND OTHER U.S. EMPLOYEE BENEFIT PLANS			160
UNDERWRITING			161
LEGAL MATTERS			164
GLOSSARY OF TERMS			165
INDEX OF PRINCIPAL TERMS			I-1
APPENDIX A Static Pool Information about Certain Prior Securitizations			A-1

 

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WHERE TO FIND INFORMATION IN THIS PROSPECTUS

This prospectus provides information about the issuing entity and the notes offered by this prospectus.

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with other or different information. If you receive any other information, you should not rely on it. We are not offering the notes in any state where the offer is not permitted. We make no claim that the information in this prospectus is accurate on any date other than the dates stated on the cover.

We have started with an introductory section in this prospectus describing the notes and the issuing entity in abbreviated form, followed by a more complete description of the terms of the offering of the notes. The introductory section is a Summary of Terms, which provides important information concerning the amounts and the payment terms of each class of notes and gives a brief introduction to the key structural features. Immediately after the Summary of Terms, we have included Risk Factors, which describe the material risks to investors in the notes.

We include cross-references in this prospectus to captions where you can find additional related information. You can find page numbers on which these captions are located under the Table of Contents in this prospectus. You can also find a listing of the pages where the principal terms are defined under “Index of Principal Terms” beginning on page [●] of this prospectus. The capitalized terms used in this prospectus, unless defined elsewhere in this prospectus, have the meanings set forth in the glossary at the end of this prospectus.

In this prospectus, the terms “we,” “us” and “our” refer to USAA Acceptance, LLC.

This prospectus may contain forward-looking statements. Whenever we use words like “intends,” “anticipates” or “expects,” or similar words in this prospectus, we are making a forward-looking statement, or a projection of what we think will happen in the future. Forward-looking statements are inherently subject to a variety of uncertainties and circumstances, many of which are beyond our control and could cause actual results to differ materially from what we anticipate. Any forward-looking statements in this prospectus speak only as of the date of this prospectus. We do not assume any responsibility to update or review any forward-looking statement contained in this prospectus to reflect any change in our expectation about the subject of that forward-looking statement or to reflect any change in events, conditions or circumstances on which we have based any forward-looking statement.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

USAA Acceptance, LLC, as the depositor of the issuing entity, has filed a registration statement with the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended. This prospectus is part of the registration statement but the registration statement includes additional information.

The SEC maintains an Internet site at http://www.sec.gov containing reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to “incorporate by reference” information we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus from the dates of filing of the documents. Such information that we file later with the SEC will automatically update the information in this prospectus. In all cases, you should rely on the most recently printed information rather than contradictory information included in this prospectus. Any information that has been so updated by more recent information shall not, except as so updated, constitute part of this prospectus. We incorporate by reference any current reports on Form 8-K subsequently filed by or on behalf of the issuing entity prior to the termination of the offering.

 

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COPIES OF THE DOCUMENTS

You may receive a free copy of any or all of the documents incorporated by reference in this prospectus if:

 

•

you received this prospectus; and

 

•

you request such copies from USAA Acceptance, LLC, 1105 North Market Street, Suite 1300, Wilmington, Delaware 19801 (Telephone: (302) 651-8408).

This offer only includes the exhibits to such documents if such exhibits are specifically incorporated by reference in such documents. You may also read and copy these materials at the public reference facilities of the SEC in Washington, D.C. referred to above.

REPORTS TO BE FILED WITH THE SEC

After the notes are issued, unaudited monthly reports containing information concerning the issuing entity, the notes and the receivables will be prepared by USAA Federal Savings Bank (the “Bank”), and sent on behalf of the issuing entity to the indenture trustee, which will forward the same to Cede & Co. (“Cede”), as nominee of The Depository Trust Company (“DTC”).

The indenture trustee will also make such reports (and, at its option, any additional files containing the same information in an alternative format) available to noteholders each month via its Internet website, which is presently located at [●] Assistance in using this Internet website may be obtained by calling the indenture trustee’s customer service desk at ([●]) [●]-[●]. The indenture trustee will notify the noteholders in writing of any changes in the address or means of access to the Internet website where the reports are accessible.

The reports do not constitute financial statements prepared in accordance with generally accepted accounting principles. The Bank, the depositor and the issuing entity do not intend to send any of their financial reports to the beneficial owners of the notes. The issuing entity will file with the SEC all required annual reports on Form 10-K, distribution reports on Form 10-D, monthly asset-level data files and related documents on Form ABS-EE and current reports on Form 8-K. Those reports will be filed with the SEC under the name “USAA Auto Owner Trust 20[●]-[●]” and file number 333-[●]-[●]. The issuing entity’s annual reports on Form 10-K, distribution reports on Form 10-D, monthly asset-level data files and related documents on Form ABS-EE and current reports on Form 8-K, and amendments to those reports filed with, or otherwise furnished to, the SEC will not be made available on the Bank’s website because those reports are made available to the public on the SEC website as described above.

The depositor has filed with the SEC a Registration Statement on Form SF-3 that includes this prospectus and certain amendments and exhibits under the Securities Act of 1933, as amended, relating to the offering of the notes described herein. The SEC maintains a website (http://www.sec.gov) that contains reports, registration statements, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

 

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NOTICE TO RESIDENTS OF THE UNITED KINGDOM

THIS PROSPECTUS MAY ONLY BE COMMUNICATED OR CAUSED TO BE COMMUNICATED IN THE UNITED KINGDOM TO PERSONS AUTHORISED TO CARRY ON A REGULATED ACTIVITY UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED (“FSMA”) OR TO PERSONS OTHERWISE HAVING PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND QUALIFYING AS INVESTMENT PROFESSIONALS UNDER ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED, OR TO PERSONS WHO FALL WITHIN ARTICLE 49(2)(a) TO (d) (“HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS ETC.”) OF THAT ORDER OR TO ANY OTHER PERSON TO WHOM THIS PROSPECTUS MAY OTHERWISE LAWFULLY BE COMMUNICATED OR CAUSED TO BE COMMUNICATED IN THE UNITED KINGDOM.

NEITHER THIS PROSPECTUS NOR THE NOTES ARE OR WILL BE AVAILABLE TO OTHER CATEGORIES OF PERSONS IN THE UNITED KINGDOM AND NO ONE IN THE UNITED KINGDOM FALLING OUTSIDE SUCH CATEGORIES IS ENTITLED TO RELY ON, AND THEY MUST NOT ACT ON, ANY INFORMATION IN THIS PROSPECTUS. THE COMMUNICATION OF THIS PROSPECTUS TO ANY PERSON IN THE UNITED KINGDOM OTHER THAN PERSONS IN THE CATEGORIES STATED ABOVE IS UNAUTHORIZED AND MAY CONTRAVENE THE FSMA.

THE NOTES ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY UK RETAIL INVESTOR IN THE UNITED KINGDOM. FOR THESE PURPOSES, A “UK RETAIL INVESTOR” MEANS A PERSON WHO IS ONE (OR MORE) OF: (I) A RETAIL CLIENT, AS DEFINED IN POINT (8) OF ARTICLE 2 OF REGULATION (EU) NO 2017/565 AS IT FORMS PART OF THE DOMESTIC LAW OF THE UNITED KINGDOM BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (AS AMENDED, THE “EUWA”); OR (II) A CUSTOMER WITHIN THE MEANING OF THE PROVISIONS OF THE FSMA AND ANY RULES OR REGULATIONS MADE UNDER THE FSMA TO IMPLEMENT DIRECTIVE (EU) 2016/97 (AS AMENDED), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT, AS DEFINED IN POINT (8) OF ARTICLE 2(1) OF REGULATION (EU) NO 600/2014 AS IT FORMS PART OF THE DOMESTIC LAW OF THE UNITED KINGDOM BY VIRTUE OF THE EUWA; OR (III) NOT A QUALIFIED INVESTOR AS DEFINED IN ARTICLE 2 OF REGULATION (EU) 2017/1129 (AS AMENDED) AS IT FORMS PART OF THE DOMESTIC LAW OF THE UNITED KINGDOM BY VIRTUE OF THE EUWA (THE “UK PROSPECTUS REGULATION” ).

CONSEQUENTLY NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 (AS AMENDED) AS IT FORMS PART OF THE DOMESTIC LAW OF THE UNITED KINGDOM BY VIRTUE OF THE EUWA (THE “UK PRIIPS REGULATION” ) FOR OFFERING OR SELLING THE NOTES OR OTHERWISE MAKING THEM AVAILABLE TO UK RETAIL INVESTORS IN THE UNITED KINGDOM HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE NOTES OR OTHERWISE MAKING THEM AVAILABLE TO ANY UK RETAIL INVESTOR IN THE UNITED KINGDOM MAY BE UNLAWFUL UNDER THE UK PRIIPS REGULATION.

NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA

THIS PROSPECTUS IS NOT A PROSPECTUS FOR THE PURPOSES OF REGULATION (EU) 2017/1129 (AS AMENDED, THE “PROSPECTUS REGULATION”). THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFER OF NOTES IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA (EACH, A “RELEVANT MEMBER STATE”) WILL BE MADE TO A PERSON OR LEGAL ENTITY QUALIFYING AS A QUALIFIED INVESTOR (AS DEFINED IN THE PROSPECTUS REGULATION). ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER OF

 

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NOTES IN A RELEVANT MEMBER STATE WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY ONLY DO SO TO ONE OR MORE QUALIFIED INVESTORS. NONE OF THE ISSUING ENTITY, THE DEPOSITOR OR ANY OF THE UNDERWRITERS HAS AUTHORIZED, NOR DO THEY AUTHORIZE, THE MAKING OF ANY OFFER OF NOTES IN A RELEVANT MEMBER STATE TO ANY PERSON OR LEGAL ENTITY OTHER THAN A QUALIFIED INVESTOR.

THE NOTES ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY EU RETAIL INVESTOR IN THE EUROPEAN ECONOMIC AREA. FOR THESE PURPOSES, AN “EU RETAIL INVESTOR” MEANS A PERSON WHO IS ONE (OR MORE) OF: (I) A RETAIL CLIENT AS DEFINED IN POINT (11) OF ARTICLE 4(1) OF DIRECTIVE 2014/65/EU (AS AMENDED, “MIFID II”); OR (II) A CUSTOMER WITHIN THE MEANING OF DIRECTIVE (EU) 2016/97 (AS AMENDED), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT AS DEFINED IN POINT (10) OF ARTICLE 4(1) OF MIFID II; OR (III) NOT A QUALIFIED INVESTOR AS DEFINED IN THE PROSPECTUS REGULATION.

CONSEQUENTLY NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 (AS AMENDED, THE “PRIIPS REGULATION”) FOR OFFERING OR SELLING THE NOTES OR OTHERWISE MAKING THEM AVAILABLE TO EU RETAIL INVESTORS IN THE EUROPEAN ECONOMIC AREA HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE NOTES OR OTHERWISE MAKING THEM AVAILABLE TO ANY EU RETAIL INVESTOR IN THE EUROPEAN ECONOMIC AREA MAY BE UNLAWFUL UNDER THE PRIIPS REGULATION.

 

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(1)	The certificates are not being offered for sale by this prospectus. [We][One or more majority-owned affiliates of the Bank] will initially retain the certificates.]

(2)

[One or more majority-owned affiliates of the Bank will initially retain [all of the Class [    ] notes and ][●]% of the initial principal amount of each [other] class of notes. See “Originator, Sponsor, Seller and Servicer—Credit Risk Retention”. The depositor or one of its affiliates may initially retain an additional amount of all or one or more classes of notes.]

 

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1	For further detail, please see “Application of Available Funds—Priority of Distributions” and “Description of the Notes—Payments of Principal—The Indenture—Events of Default” in this prospectus.

 

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RISK FACTORS

An investment in the notes involves significant risks. Before you decide to invest, we recommend that you carefully consider the following risk factors.

RISKS RELATING TO THE NATURE OF THE NOTES AND THE STRUCTURE OF THE TRANSACTION

 

You must rely for repayment only upon the issuing entity’s assets, which may not be sufficient to make full payments on your notes

Neither the depositor, nor the Bank, nor any of their respective affiliates is obligated to make any payments relating to the notes of the issuing entity or the receivables owned by the issuing entity. Therefore, you must rely solely on the issuing entity’s assets for repayment of your notes. If these assets are insufficient, you may suffer losses on your notes. Further, neither the notes nor the receivables will be insured or guaranteed by the United States or any governmental entity [or by any provider of credit enhancement or cash flow enhancement].

 

The assets of the issuing entity will depend solely on the amount and timing of payments and other collections in respect of the receivables and [distributions from the reserve account] [distributions from the yield supplement account] [payments from the [swap counterparty] [cap provider]].

 

Amounts on deposit in the [reserve account] [yield supplement account] will be limited and subject to depletion. If the amounts in the [reserve account] [yield supplement account] are depleted as amounts are paid out to cover shortfalls in distributions of principal and interest on your notes, the issuing entity will depend solely on collections on the receivables to make payments on your notes. In addition, the minimum required balance in the [reserve account] [yield supplement account] may decrease as the outstanding balance of the receivables decreases. If delinquencies and losses create shortfalls that exceed the available credit enhancement, you may experience delays in payments due to you and you could suffer a loss.

 

You may suffer losses upon a liquidation of the receivables if the proceeds of the liquidation are less than the amounts due on the outstanding notes. Under certain circumstances described herein, the receivables of the issuing entity may be sold after the occurrence of an event of default. The noteholders will suffer losses if the issuing entity sells the receivables for less than the total amount due on the notes. We cannot assure you that sufficient funds would be available to repay those noteholders in full.

 

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Losses on your notes may result from an event of default under the indenture

An event of default under the indenture may result in:

 

•

losses on your notes if the receivables are sold and the sale proceeds, together with any other assets of the issuing entity, are insufficient to pay the amounts owed on the notes; and

 

•

your notes being repaid earlier than scheduled, which may require you to reinvest your principal at a lower rate of return.

 

See “The Indenture.”

 

Prepayments on the receivables may adversely affect the average life of and rate of return on your notes

Faster than expected prepayments on the receivables will cause the issuing entity to make payments on its notes earlier than expected. You may not be able to reinvest the principal repaid to you at a rate of return that is equal to or greater than the rate of return on your notes. We cannot predict the effect of prepayments on the average life of your notes.

 

All the receivables by their terms may be prepaid at any time. Prepayments include:

 

•

prepayments in whole or in part by the obligor;

 

•

liquidations due to default;

 

•

partial payments with proceeds from physical damage, credit life and disability insurance policies;

 

•

required purchases of receivables by the servicer or repurchases of receivables by the Bank for specified breaches of its representations or covenants; and

 

•

an optional repurchase of the issuing entity’s receivables as described under “Description of the Notes—Optional Prepayment.”

 

A variety of economic, social and other factors will influence the rate of optional prepayments on the receivables and defaults.

 

The final payment of each class of notes is expected to occur prior to its final scheduled payment date because of the prepayment and purchase considerations set forth above. If sufficient funds are not available to pay any class of notes in full on its final payment date, an event of default will occur and final payment of such class of notes will occur later than such date.

 

For more information regarding the timing of repayments of the notes, see “Maturity and Prepayment Considerations.”

 

You may not be able to resell your notes

The notes will not be listed on any securities exchange. If you want to sell your notes you must locate a purchaser that is willing to purchase

 

27

those notes. The underwriters intend to make a secondary market for the notes. The underwriters will do so by offering to buy the notes from investors that wish to sell. However, the underwriters will not be obligated to make offers to buy the notes and may stop making offers at any time. In addition, the prices offered, if any, may not reflect prices that other potential purchasers would be willing to pay, were they to be given the opportunity.

 

Additionally, continuing or potentially recurring events in the global financial markets, including the failure, acquisition or government seizure of several major financial institutions, the establishment of government initiatives such as bailout programs for financial institutions and other assistance programs designed to increase credit availability and support economic activity, problems related to subprime mortgages and other financial assets, the de-valuation of various assets in secondary markets, the forced sale of asset-backed and other securities as a result of the de-leveraging of structured investment vehicles, hedge funds, financial institutions and other entities, the lowering of ratings on certain asset-backed securities, downgrades of sovereign debt, devaluation of currencies by foreign governments, and uncertainty surrounding the effect of United Kingdom’s withdrawal from the European Union or the potential abandonment by any country of the euro, have caused in the past and may cause in the future a significant reduction in liquidity in the secondary market for some forms of asset-backed securities. Any period of illiquidity may continue, and even worsen, and may adversely affect both the market value of your notes and your ability to sell the notes. Illiquidity can have a severely adverse effect on the prices of securities that are especially sensitive to prepayment, credit or interest rate risk, such as the notes.

 

There have been times in the past where there have been very few buyers of asset-backed securities, and there may be these times again in the future. As a result, you may not be able to sell your notes when you want to do so or you may not be able to obtain the price that you wish to receive.

 

Class B Notes are subject to greater credit and other risk because the Class B Notes are subordinated to the Class A Notes

The Class B Notes bear greater credit risk than the Class A Notes because payments of interest on the Class B Notes are subordinated to payments of interest and, in certain circumstances, principal on the Class A Notes, and payments of principal on the Class B Notes are subordinated to payments of interest and principal on the Class A Notes, as described in this prospectus. Interest payments on the Class B Notes on each payment date will be subordinated to interest payments and any first allocation of principal on the Class A Notes on such payment date and, if payment of the notes has been accelerated because of an event of default, to principal payments on the Class A Notes. The Class B Notes also bear the risk that prepayments of

 

28

receivables result in the pool consisting of receivables with lower rates, including some receivables for which the interest rate is less than the Class B Note interest rate plus the servicing fee rate. The reserve account [and the yield supplement account] is intended to mitigate this risk.

 

Principal payments on the Class B Notes will be fully subordinated to principal payments on the Class A Notes since no principal will be paid on the Class B Notes until the Class A Notes have been paid in full.

 

The Class A Noteholders control removal of the servicer upon a default on its servicing obligations

Generally, the holders of 662⁄3% of the issuing entity’s Class A Notes (or the indenture trustee acting on their behalf) (excluding notes held by the issuing entity, any other obligor upon the notes, the depositor, the servicer or any affiliate of any of the foregoing) can remove the servicer if the servicer—

 

•

does not deliver to the indenture trustee the available funds for application to a required payment after a grace period after notice or discovery; or

 

•

defaults on a servicing obligation which materially and adversely affects the issuing entity or the noteholders after a grace period after notice.

 

The holders of a majority of the Class A Notes (excluding notes held by the issuing entity, any other obligor upon the notes, the depositor, the servicer or affiliate of any of the foregoing) may waive a default by the servicer. The Class B Noteholders do not have any rights to participate in such determinations for so long as any of the Class A Notes are outstanding, and the Class B Noteholders may be adversely affected by determinations made by the more senior classes.

 

See “Description of the Receivables Transfer and Servicing Agreements—Servicer Replacement Events” and “—Waiver of Past Servicer Replacement Events.”

 

[Risks associated with unknown initial principal amount of notes

It is not expected to be known until the day of pricing whether the trust will issue notes with an aggregate initial principal amount of either $[            ] or $[            ]. The Bank will determine such amount based on, among other factors, market conditions at the time of pricing. The size of a class of notes may affect the liquidity or lack thereof of such class, as smaller classes of notes may be less liquid than a larger class might otherwise be. In addition, the size of a class of notes is inversely proportional to the voting power of the related noteholders. If your class of notes is larger than you expected, then the voting power of your notes will be diluted.]

 

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[The allocation of the Class A-2 notes is unknown and if the principal balance of one class of such notes is small, liquidity on such class of notes could be reduced]

[The allocation of the principal balance between the class A-2-A notes and the class A-2-B notes may not be known until the day of pricing, and one of the two classes may not be issued or may have a very small principal balance. Therefore, investors should not expect further disclosure of these matters prior to their entering into commitments to purchase these classes of notes.

 

As the allocated principal balance of the floating rate class A-2-B notes is increased (relative to the corresponding class A-2-A fixed rate notes), there will be a greater amount of floating rate notes issued by the issuing entity, and therefore the issuing entity will have a greater exposure to increases in the floating rate payable on the floating rate notes.

 

Because the aggregate amount of class A-2 notes is fixed as set forth on the cover of this prospectus, the division of the aggregate class A-2 principal balance between the class A-2-A notes and the class A-2-B notes may result in one of such classes being issued in only a very small principal amount, which may reduce the liquidity of such class of notes.]

 

[Risks associated with unknown allocation between the Class A-3 notes and the Class A-4 notes]

[The allocation of the aggregate initial principal balance of the notes between the Class A-3 notes and the Class A-4 notes may not be known until the day of pricing and may result in any of a number of possible allocation scenarios, and we cannot predict with certainty what portion of the principal balance of the notes will be allocated to the Class A-3 notes and what portion of the principal balance will be allocated to the Class A-4 notes, although the principal balance of the Class A-3 notes and Class A-4 notes will equal $[        ] in the aggregate.

 

In addition, because the aggregate amount of Class A-3 notes and Class A-4 notes is predetermined, the division between the Class A-3 notes and the Class A-4 notes may result in one of such classes being issued in only a very small principal amount, which may reduce the liquidity of such class of notes.]

 

The failure to make principal payments on any notes will generally not result in an Event of Default under the indenture until the Final Scheduled Payment Date for the applicable class of notes

The amount of principal required to be paid to investors prior to the applicable Final Scheduled Payment Date set forth in this prospectus generally will be limited to amounts available for those purposes. Therefore, the failure to pay principal of a note generally will not result in an Event of Default under the indenture until the applicable Final Scheduled Payment Date for that class of notes.

 

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You may suffer losses because you have limited control over the actions of the issuing entity and conflicts between the Class A Noteholders and Class B Noteholders may occur

Under certain circumstances, a portion of the holders of the Class A Notes will have the right to control the issuing entity’s actions. For example, if an event of default should occur and be continuing with respect to notes, the indenture trustee or holders of a majority in principal amount of the “controlling class” may declare the principal on those notes to be immediately due and payable. The “controlling class” of notes will be the Class A Notes as long as they are outstanding, and after they have been paid in full, the Class B Notes will become the controlling class, so long as they are outstanding (excluding, in each case, notes held by the issuing entity, any other obligor upon the notes, the depositor, the servicer or any affiliate of any of the foregoing). Furthermore, following certain events of default relating to the failure to pay interest or principal when due and under certain circumstances, the consent of the holders of 662/3% of the aggregate outstanding amount of the controlling class will be required before the indenture trustee may sell the receivables of the issuing entity. The holders of the Class B Notes will not have any right to participate in those determinations for so long as any Class A Note is outstanding, and the Class B Notes may be adversely affected by determinations made by the controlling class. Furthermore, the holders of a majority of the aggregate outstanding amount of the controlling class, under certain circumstances, have the right to waive servicer replacement events and holders of 662/3% of the aggregate outstanding amount of the controlling class have the right to direct the indenture trustee to terminate the servicer as the servicer of the receivables, and such noteholder direction will be without consideration of the effect such waiver or termination would have on the holders of the Class B Notes. The holders of the Class B Notes will not have the ability to waive servicer replacement events or to remove the servicer until the Class A Notes have been paid in full. In exercising any rights or remedies under the indenture, the holders of the controlling class may be expected to act solely in their own interests.

 

See “Description of the Receivables Transfer and Servicing Agreements—Servicer Replacement Events,” “—Removal or Replacement of Servicer” and “—Waiver of Past Servicer Replacement Events.”

 

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You will be able to exercise your rights as a noteholder only through the clearing agency and your ability to transfer your notes may be limited, payments on your notes may be delayed, and the Book-entry system for the notes may decrease liquidity and delay payment

The notes will be delivered to you in book-entry form through the facilities of DTC or Clearstream or Euroclear. Consequently, your notes will not be registered in your name and you will not be recognized as a noteholder by the indenture trustee, except in the limited circumstance relating to an investor vote with respect to an asset representations review, as described under “Asset Representations Review,” a request that the sponsor repurchase any of the receivables, as described under “Repurchase Obligations,” and a request to the depositor to communicate with other noteholders, as described under “Investor Communications.” You will only be able to exercise the rights of a noteholder indirectly through DTC and its participating organizations. Specifically, you may be limited in your ability to resell the notes to a person or entity that does not participate in the DTC system or Clearstream or Euroclear. In addition, you may experience delays in your receipt of payments with respect to your beneficial interest in book-entry notes because payments will be made by the indenture trustee to Cede, as nominee for DTC rather than directly to you. You may also experience delays in receipt of payments in the event of misapplication of payments by DTC, participants or indirect participants or bankruptcy or insolvency of those entities and your recourse will be limited to your remedies against those entities.

 

Physical notes will only be issued in the limited circumstances described in this prospectus. See “Description of the Notes—Definitive Notes.”

 

Because the notes will generally be available only through DTC, participants and indirect participants:

 

•

your ability to pledge your beneficial interest in notes to someone who does not participate in the DTC system, or to otherwise take action relating to your beneficial interest in notes, may be limited due to the lack of a physical note;

 

•

you may experience delays in your receipt of payments with respect to your beneficial interest in notes because payments will be made by the indenture trustee, to Cede, as nominee for DTC, rather than directly to you, and DTC will then credit payments received from the issuing entity to the accounts of its participants which, in turn, will credit those amounts to noteholders either directly or indirectly through indirect participants; and

 

•

you may experience delays in your receipt of payments with respect to your beneficial interest in notes in the event of misapplication of payments by DTC, participants or indirect

 

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participants or bankruptcy or insolvency of those entities and your recourse will be limited to your remedies against those entities.

 

See “Description of The Notes—General,” “—Delivery of Notes” and “—Book-Entry Registration.”

 

The ratings of the notes may be withdrawn or lowered, or the notes may receive an unsolicited rating, which may have an adverse effect on the liquidity or the market price of the notes

Security ratings are not recommendations to buy, sell or hold the notes. Rather, the ratings are an assessment by the Hired Agency of the likelihood that any interest on a class of notes will be paid on a timely basis and that a class of notes will be paid in full by its Final Scheduled Payment Date. Ratings do not consider to what extent the notes will be subject to prepayment or that the principal of any class of notes will be paid prior to the Final Scheduled Payment Date for that class of notes, nor do the ratings consider the prices of the notes or their suitability to a particular investor. A rating agency may revise or withdraw the ratings at any time in its sole discretion, including as a result of a failure by the sponsor to comply with its obligation to post information provided to the Hired Agencies on a website that is accessible by a rating agency that is not a Hired Agency. The ratings of any notes may be lowered by a rating agency (including the Hired Agencies) following the initial issuance of the notes as a result of losses on the receivables in excess of the levels contemplated by a rating agency at the time of its initial rating analysis. Neither the depositor nor the sponsor nor any of their respective affiliates will have any obligation to replace or supplement any credit support, or to take any other action to maintain any ratings of the notes.

 

Accordingly, there is no assurance that the ratings assigned to any note on the date on which the note is originally issued will not be lowered or withdrawn by any rating agency at any time thereafter. If any rating with respect to the notes is revised or withdrawn, the liquidity or the market value of your note may be adversely affected.

 

It is possible that other rating agencies not hired by the sponsor may provide an unsolicited rating that differs from (or is lower than) the rating provided by the Hired Agencies. As of the date of this prospectus, the depositor was not aware of the existence of any unsolicited rating provided (or to be provided at a future time) by any rating agency not hired to rate the transaction. However, there can be no assurance that an unsolicited rating will not be issued prior to or after the closing date, and none of the sponsor, the depositor nor any underwriter is obligated to inform investors (or potential investors) in the notes if an unsolicited rating is issued after the date of this prospectus. Consequently, if you intend to purchase notes, you should monitor whether an unsolicited rating of the notes has been issued by a non-hired rating agency and should consult with your financial and

 

33

legal advisors regarding the impact of an unsolicited rating on a class of notes. If any non-hired rating agency provides an unsolicited rating that differs from (or is lower than) the rating provided by the Hired Agencies, the liquidity or the market value of your note may be adversely affected.

 

It may be perceived that the Hired Agencies have a conflict of interest that may affect the ratings assigned to the notes because, as is the industry standard and the case with the ratings of the notes, the sponsor, the depositor or the issuing entity pays the fees charged by the rating agencies for their rating services. Any potential conflict of interest may in turn have an adverse effect on the market value of your notes and the ability to resell your notes.

 

The notes may not be a suitable investment for you

The notes are not a suitable investment if you require a regular or predictable schedule of payments or payment on any specific date. The notes are complex investments and the notes should be considered only by investors who, either alone or with their financial, tax and legal advisors, have the resources and expertise to analyze the prepayment, reinvestment, default and market risk, the tax consequences of an investment, and the interaction of these factors. This may be the case because, among other things, a secondary market for the notes may not develop or provide noteholders with liquidity of investment.

 

Retention of some or all of one or more classes of notes by majority-owned affiliates of the Bank may reduce the liquidity of the notes

[By initial principal amount, [all of the Class [    ] notes and ]5% of each [other] class of notes will be retained by the Bank or one or more of its majority-owned affiliates as of the closing date.] The depositor or one of its affiliates may initially retain [an additional amount of all or] one or more classes of notes. See “Originator, Sponsor, Seller and Servicer—Credit Risk Retention.” Accordingly, the market for [the][such a retained class of] notes may be less liquid than would otherwise be the case. In addition, if any retained notes are subsequently sold in the secondary market, demand and market price for notes already in the market could be adversely affected. If any retained notes are subsequently sold in the secondary market, the voting power of the noteholders of the outstanding notes may be diluted.

 

[Risks associated with the interest rate swap]

[The issuing entity will enter into an interest rate swap transaction under an interest rate swap agreement because the receivables owned by the issuing entity bear interest at fixed rates while the Class [A-2-B] notes will bear interest at a floating rate. The issuing entity may use payments made by the swap counterparty to make interest and other payments on each payment date.

 

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During those periods in which the floating rate payable by the swap counterparty is substantially greater than the fixed rate payable by the issuing entity, the issuing entity will be more dependent on receiving payments from the swap counterparty in order to make interest payments on the notes without using amounts that would otherwise be paid as principal on the notes. If the swap counterparty fails to pay a net swap receipt, and collections on the receivables and funds on deposit in the reserve account are insufficient to make payments of interest on the notes, you may experience delays and/or reductions in the interest on and principal payments of your notes.

 

During those periods in which the floating rate payable by the swap counterparty under the interest rate swap agreement is less than the fixed rate payable by the issuing entity under the interest rate swap agreement, the issuing entity will be obligated to make a net swap payment to the swap counterparty. The issuing entity’s obligation to pay a net swap payment to the swap counterparty is secured by the issuing entity property.

 

An event of default under the indenture may result in payments on your notes being accelerated. The swap counterparty’s claim for a net swap payment will be higher in priority than all payments on the notes, and the swap counterparty’s claim for any due and unpaid senior swap termination payment will be equal in priority to payments of interest on the notes and higher in priority than all payments of principal on the notes. If a net swap payment is due to the swap counterparty on a payment date and there are insufficient collections on the receivables and insufficient funds on deposit in the reserve account to make payments of interest and principal on the notes, you may experience delays and/or reductions in the interest and principal payments on your notes.

 

The interest rate swap agreement generally may not be terminated except upon the occurrence of specific events described in this prospectus in “Description of the Notes—Interest Rate Swap Agreement.” Depending on the reason for the termination, a termination payment may be due to the issuing entity or to the swap counterparty. Any such termination payment could, if market interest rates and other conditions have changed materially, be substantial.

 

If the swap counterparty fails to make a termination payment owed to the issuing entity under the interest rate swap agreement, the issuing entity may not be able to enter into a replacement interest rate swap agreement. If this occurs, the amount available to pay principal of and interest on the notes will be reduced to the extent the interest rate on the [Class A-2-B] notes exceeds the fixed rate the issuing entity would have been required to pay the swap counterparty under the interest rate swap agreement.

 

If the interest rate swap agreement is terminated and no replacement is entered into and collections on the receivables and funds on deposit in the reserve account are insufficient to make payments of interest

 

35

and principal on your notes you may experience delays and/or reductions in the interest on and principal payments of your notes.]

 

[Risks associated with the interest rate cap agreement(s)]

[The amounts available to the issuing entity to pay interest on and principal of all classes of the notes depend in part on the operation of the interest rate cap agreement(s) and the performance by the cap provider of its obligations under the interest rate cap agreement(s). The ratings of all the notes take into account the provisions of the interest rate cap agreement(s) and the ratings currently assigned to the cap provider.

 

During those periods in which [insert applicable floating rate benchmark] is substantially greater than the cap rate of [●]%, the issuing entity will be more dependent on receiving payments from the cap provider in order to make payments on the notes. If the cap provider fails to pay the amounts due under the interest rate cap agreement(s), the amount of credit enhancement available in the current or any future period may be reduced and you may experience delays and/or reductions in the interest on and principal of your notes. Investors should make their own determinations as to the likelihood of performance by the cap provider of its obligations under the interest rate cap agreement.

 

Certain events (including some that are not within the control of the issuing entity or the cap provider) may cause the termination of the interest rate cap agreement. Certain of these events will not cause a termination of the interest rate cap agreement unless a majority of holders of notes vote to instruct the indenture trustee (as assignee of the rights of the owner trustee) to terminate the interest rate cap agreement. The holders of any class of notes may not have sufficient voting interests to cause or to prevent a termination of the interest rate cap agreement. In an early termination, a termination payment may be due to the issuing entity. The amount of any termination payment will be based on the market value of the interest rate cap agreement. Any termination payment could, if market interest rates and other conditions have changed materially, be substantial. If the cap provider fails to make a termination payment owed to the issuing entity, the issuing entity may not be able to enter into a replacement interest rate cap agreement and to the extent the interest rates on the Class A-[        ] notes exceed the fixed rate the issuing entity had been required to pay the cap provider under the interest rate cap agreement, the amount available to pay interest on and principal of the notes will be reduced. In addition, termination of the interest rate cap agreement may under certain circumstances constitute an event of default under the indenture. If the notes are accelerated after the interest rate cap agreement terminates, the indenture trustee may under certain circumstances liquidate the assets of the issuing entity. Liquidation would likely accelerate payment of all notes that are then outstanding. If a liquidation occurs close to the date when any class otherwise would have been paid in full, repayment of that class might be delayed while liquidation of the assets is occurring. The issuing entity cannot predict

 

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the length of time that will be required for liquidation of the assets of the issuing entity to be completed.

 

[The rating of a [swap counterparty] [cap provider] may affect the ratings of the notes]

[The issuing entity has entered into a [swap][ interest rate cap] agreement, and the rating agencies that rate the issuing entity’s notes will consider the provisions of the [swap][interest rate cap] agreement and the rating of the [swap counterparty][cap provider] in rating the notes. If a rating agency downgrades the debt rating of the [swap counterparty][cap provider], it is also likely to downgrade the rating of the notes. Any downgrade in the rating of the notes could have severe adverse consequences on their liquidity or market value.

 

To provide some protection against the adverse consequences of a downgrade, the [swap counterparty][cap provider] may be permitted, but generally not required, to take the following actions if the rating agencies reduce its debt ratings below certain levels:

 

1.

assign the [swap][interest rate cap] agreement to another party;

 

2.

obtain a replacement [swap][interest rate cap] agreement on substantially the same terms as the [swap][interest rate cap] agreement; or

 

3.

establish any other arrangement satisfactory to the rating agencies.

 

Any [swap][interest rate cap] involves a high degree of risk. The issuing entity will be exposed to this risk should it use this mechanism. For this reason, only investors capable of understanding these risks should invest in the notes. You are strongly urged to consult with your financial advisors before deciding to invest in the notes because a [swap][interest rate cap] is involved.]

 

[You may experience reduced returns on your notes resulting from distribution of amounts in the pre-funding account]

[On one or more occasions following the closing date, the issuing entity may purchase receivables from the depositor, which, in turn, will acquire these receivables from the Bank, with funds on deposit in the pre-funding account.

 

You will receive as a prepayment of principal any amounts remaining in the pre-funding account (excluding investment earnings) that have not been used to purchase receivables by the end of the Funding Period. See “Description of the Receivables Transfer and Servicing Agreements—Pre-Funding Account,” this prepayment of principal could have the effect of shortening the weighted average life of your notes. The inability of the depositor to obtain receivables meeting the requirements for sale to the issuing entity will increase the likelihood of a prepayment of principal. In addition, you will bear the risk that you may be unable to reinvest any principal prepayment at yields at least equal to the yield on your notes.]

 

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[Lack of availability of additional receivables during the revolving period could shorten the average life of your notes]

[During the revolving period, the issuing entity will not make payments of principal on the notes. Instead, the issuing entity will purchase additional receivables from the depositor. The purchase of additional receivables by the issuing entity will lengthen the average life of the notes compared to a transaction without a revolving period. However, an unexpectedly high rate of collections on the receivables during the revolving period, a significant decline in the number of receivables available for purchase or the inability of the depositor to acquire new receivables could affect the ability of the issuing entity to purchase additional receivables. If the issuing entity is unable to reinvest available funds by the end of the revolving period, then the average life of the notes may be less than anticipated.

 

A variety of unpredictable economic, social and other factors may influence the availability of additional receivables. You will bear all reinvestment risk resulting from a longer or shorter than anticipated average life of the notes.]

RISKS RELATING TO THE CHARACTERISTICS, SERVICING AND PERFORMANCE OF THE RECEIVABLES POOL

 

[Adverse events related to the Coronavirus outbreak could have an adverse effect on the performance of the receivables and the related vehicles, which could result in delays in payments and/or losses on your notes

An outbreak of Coronavirus Disease 2019 (“COVID-19”) has spread throughout the world, including to the United States. COVID-19 has been declared to be a public health emergency of international concern by the World Health Organization, and the President of the United States has made an emergency determination under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. A vast majority of state governments have also made emergency declarations related to COVID-19 and have attempted to slow community spread of the virus by providing social distancing guidelines, including issuing orders to suspend repossession activities, issuing stay-at-home orders and mandating the closure of certain non-essential businesses. The outbreak of COVID-19 has led, and may again lead, to disruptions in global financial markets and the economies of many nations and is resulting in adverse impacts on the economy of the United States (which include a significant increase in unemployment) and the global economy in general.

 

The long-term impacts of social, economic and financial disruptions caused by COVID-19 are unknown. While the U.S. Federal Reserve has implemented emergency interest rate cuts, and liquidity programs for businesses and financial markets and the U.S. government and other governments have implemented other

 

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measures in response to concerns surrounding the economic effects of COVID-19, the likelihood of such measures preventing volatility in the financial markets or the occurrence, length or severity of a national or global economic downturn cannot be predicted. The United States economy has entered into a recession as a result of COVID-19 and, further, it is unclear whether or how many obligors have been and will continue to be adversely affected by the outbreak and related efforts by the federal government and the state governments to slow the spread of COVID-19 throughout the nation and world. There have already been significant increases in unemployment claims, and such numbers may increase in the near future. As discussed under “—Geographic concentration of the obligors in the receivables pool and varying economic circumstances may increase the risk of losses or reduce the return on your notes,” these occurrences could have a negative impact on the ability of obligors to make timely payments on the receivables.

 

Additionally, the continued spread of COVID-19 may ultimately result in staffing problems in various industries and with third-party suppliers and businesses as portions of the workforce across the industry are unable to work effectively as a result of the COVID-19 pandemic, including because of illness, facility closures, ineffective remote work arrangements or technology failures or limitations. Consequently, the ability of the Bank, as originator and servicer, or other transaction parties to perform their respective obligations under the transaction documents could be diminished by regulatory action related to COVID-19 and disruptions in the economy and financial markets. Further, federal, state or local governments could enact, and in some cases already have enacted, laws, regulations, executive orders or other guidance that allow obligors to forgo making scheduled payments for some period of time or preclude creditors from exercising certain rights or taking certain actions with respect to the collateral, including repossession or liquidation of the financed vehicles. The ability of the Bank, as originator and servicer, to perform its obligations under the transaction documents could be diminished by disruptions in the economy and the financial markets due to COVID-19. The decreased servicing, manufacture, sale or distribution of financed vehicles could adversely affect the business of the Bank as discussed under “—Adverse events with respect to the servicer or its affiliates could affect the timing of payments on your notes or have other adverse effects on your notes” below.

 

Furthermore, it is unclear how many obligors have been and will continue to be adversely affected by the outbreak and whether related efforts by the Federal, state and local governments will be effective in mitigating the spread of COVID-19 throughout the nation. As discussed under “Description of the Receivables Transfer and Servicing Agreements—Servicing Procedures”, to the extent the current economic downturn results in increased delinquencies, losses and defaults by obligors on the receivables

 

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due to financial hardship or otherwise, the servicer may implement a range of additional actions with respect to affected obligors and the related receivables, including contract extensions, rebates, deferrals, amendments, modifications, adjustments or extensions. These reductions may stem not only from deferrals and delinquencies, but also servicing disruptions (including delayed repossessions and recoveries) and reduced collection effectiveness. Because a pandemic such as COVID-19 has not occurred in recent years, historical loss experience is unlikely to accurately predict the performance of the retail installment sale contracts. See “—FICO^® scores, proprietary credit scores and historical experience may not accurately predict the likelihood of losses on the receivables” below. All of the foregoing could have a negative impact on the performance of the retail installment sale contracts, and, as a result, you may experience delays in payments or losses on your notes.

 

Depending on the extent to which the COVID-19 pandemic adversely affects the United States economy, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those related to the business or operations of the sponsor or the servicer, the ability of obligors to make timely payments on the receivables, used vehicle values, the performance, market value, credit ratings and secondary market liquidity of your notes, and risks of geographic concentrations.]

 

Geographic concentration of the obligors in the receivables pool and varying economic circumstances may increase the risk of losses or reduce the return on your notes

The concentration of the receivables in specific geographic areas may increase the risk of loss. A deterioration in economic conditions and public health concerns (including pandemics) in the states where obligors reside could adversely affect the ability and willingness of obligors to meet their payment obligations under the receivables and may consequently affect the delinquency, loss and repossession experience of the issuing entity with respect to the receivables. The Bank and the depositor are unable to forecast, with respect to any state or region, whether any such conditions may occur, or to what extent such conditions may affect motor vehicle loans or the repayment of your notes. An improvement in economic conditions could result in prepayments by the obligors of their payment obligations under the receivables. As a result, you may receive principal payments of your notes earlier than anticipated. [If the aggregate principal amount issued is $[●], the][The] servicer’s records indicate that the billing addresses of the obligors of the

 

40

receivables in the pool described in this prospectus as of the cut-off date were primarily concentrated in the following states:

 

 

[If the aggregate principal amount issued is $[●], the servicer’s records indicate that the billing addresses of the obligors of the receivables in the pool described in this prospectus as of the cut-off date were primarily concentrated in the following states:

 

 

No other state, by those billing addresses, constituted more than [5.00]% of the aggregate principal balance of the receivables in the pool described in this prospectus as of the cut-off date. Economic factors like unemployment, interest rates, the lack of availability of consumer credit, the price of gasoline, travel restrictions, the rate of inflation, consumer perceptions of the economy and disruptions caused by directives (such as the “shelter-in-place” requirements) intended to limit the spread of COVID-19 or mitigate the effects of COVID-19 and the related economic hardships may affect the rate of prepayment and defaults on the receivables. Further, the effect of natural disasters, such as hurricanes and floods, on the performance of the receivables, is unclear, but there may be a significant adverse effect on general economic conditions, consumer confidence and general market liquidity. Because of the concentration of the obligors in certain states, any adverse economic factors, natural disasters or public health concerns (including pandemics) in those states may have a greater effect on the performance of the notes than if the concentration did not exist.

 

Additionally, during periods of economic slowdown or recession, delinquencies, defaults, repossessions and losses generally increase. These periods may also be accompanied by decreased consumer demand for light-duty trucks, SUVs or other vehicles and declining values of automobiles securing outstanding automobile loan contracts, which weakens collateral coverage and increases the amount of a loss in the event of default by an obligor. Significant increases in the inventory of used automobiles during periods of economic slowdown or recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of these sales.

 

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[This prospectus provides information regarding the characteristics of the receivables in the statistical pool as of the statistical cut-off date, which may differ from the characteristics of the [initial] receivables sold to the issuing entity on the closing date as of the cut-off date [and the subsequent receivables added to the receivables pool]]

[This prospectus describes the characteristics of the receivables in the statistical pool as of the statistical cut-off date. The [initial] receivables sold to the issuing entity on the closing date [and any subsequent receivables transferred to the issuing entity during the Funding Period,] may have characteristics that differ somewhat from the characteristics of the receivables in the statistical pool described in this prospectus. We do not expect the characteristics (as of the cut-off date) of the [initial] receivables sold to the issuing entity on the closing date [and subsequent receivables] to differ materially from the characteristics (as of the statistical cut-off date) of the receivables in the statistical pool described in this prospectus, and each [initial] receivable [and subsequent receivables] must satisfy the eligibility criteria specified in the transaction documents. If you purchase a note, you must not assume that the characteristics of the [initial] receivables sold to the issuing entity on the closing date [and subsequent receivables] will be identical to the characteristics of the receivables in the statistical pool disclosed in this prospectus.]

 

Adverse events with respect to the servicer or its affiliates could affect the timing of payments on your notes or have other adverse effects on your notes

Adverse events with respect to the servicer or any of its affiliates could result in servicing disruptions or reduce the market value of your notes. For example, in the event of a termination and replacement of the servicer, there may be some disruption of the collection activity with respect to the receivables owned by the issuing entity, leading to increased delinquencies, defaults and losses on the receivables. Any such disruptions may cause you to experience delays in payments or losses on your notes. See “Description of the Receivables Transfer and Servicing Agreements—Servicer Replacement Events.” USAA Federal Savings Bank may resign as servicer under certain circumstances described in this prospectus. See “Description of the Receivables Transfer and Servicing Agreements—Certain Matters Regarding the Servicer; Limitation on Liability.” [Additionally, servicing disruptions could result from unanticipated events beyond the servicer’s control, such as natural disasters, civil unrest, public health emergencies (including COVID-19 or similar outbreaks) and economic disruptions, particularly to the extent such events affect the servicer’s business or operations. Events related to COVID-19 have caused an increase in unemployment claims, are expected to result in decreased consumer spending, and could cause

 

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economic deterioration, which could result in increased delinquencies and dealer defaults, or cause other unpredictable and adverse events.]

 

The rate of depreciation of certain financed vehicles could exceed the amortization of the outstanding principal amount of the loan on those financed vehicles, which may result in losses

There can be no assurance that the value of any financed vehicle will be greater than the outstanding principal amount of the related receivable. New vehicles normally experience an immediate decline in value after purchase because they are no longer considered new. As a result, it is highly likely that the principal amount of a receivable will exceed the value of the related financed vehicle during the earlier years of a receivable’s term. The lack of any significant equity in their vehicles may make it more likely that those obligors will default in their payment obligations if their personal financial conditions change. Defaults during these earlier years are likely to result in losses because the proceeds of repossession of the related financed vehicle are less likely to pay the full amount of interest and principal owed on the receivable. The frequency and amount of losses may be greater for receivables with longer terms, because these receivables tend to have a somewhat greater frequency of delinquencies and defaults and because the slower rate of amortization of the principal balance of a longer term receivable may result in a longer period during which the value of the financed vehicle is less than the remaining principal balance of the receivable. Additionally, although the frequency of delinquencies and defaults tends to be greater for receivables secured by used vehicles, loss severity tends to be greater with respect to receivables secured by new vehicles because of the higher rate of depreciation described above.

 

The pricing of used vehicles is affected by the supply and demand for those vehicles, which, in turn, is affected by consumer tastes, economic factors (including the price of gasoline), the introduction and pricing of new vehicle models and other factors. Decisions by a manufacturer with respect to new vehicle production, pricing and incentives may affect used vehicle prices, particularly those for the same or similar models. Further, the insolvency of a manufacturer, a manufacturer recall or other negative publicity related to a manufacturer may negatively affect used vehicle prices for vehicles manufactured by that company. A decrease in the demand for used vehicles may impact the resale value of the financed vehicles securing the receivables. Decreases in the value of those vehicles may, in turn, reduce the incentive of obligors to make payments on the receivables and decrease the proceeds realized by the issuing entity from repossessions of financed vehicles. In any of the foregoing cases, the delinquency and net loss figures, shown in the tables appearing under “The Receivables Pool,” might be a less reliable indicator of the rates of delinquencies, repossessions and losses that could occur on the receivables than would otherwise be the case.

 

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Interests of other persons in the receivables could reduce the funds available to make payments on your notes

Financing statements under the Uniform Commercial Code will be filed reflecting the sale of the receivables by the Bank to the depositor and by the depositor to the issuing entity. The Bank’s accounting records and computer systems will also be marked to reflect a sale of the receivables, through the depositor, to the issuing entity. However, because the servicer will maintain possession of the receivables and not segregate or mark the receivables as belonging to the issuing entity, another person could acquire an interest in a receivable that is superior to the issuing entity’s interest by obtaining physical possession of the loan document representing that receivable in tangible form without knowledge of the assignment of the receivable to the issuing entity. In addition, another person could acquire an interest in a receivable that is superior to the issuing entity’s interest in the receivable if the receivable is evidenced by an electronic contract and the servicer loses control over the authoritative copy of the contract and another party purchases the receivable evidenced by the contract without knowledge of the issuing entity’s interest. If the servicer loses control over the contract through fraud, forgery, negligence or error, or as a result of a computer virus or a hacker’s actions or otherwise, a person other than the issuing entity may be able to modify or duplicate the authoritative copy of the contract. If another person acquires an interest in a receivable that is superior to the issuing entity’s interest in the receivable, some or all of the collections on that receivable may not be available to make payment on the notes.

 

If another person acquires a security or other interest in a financed vehicle that is superior to the issuing entity’s security interest in the vehicle, some or all of the proceeds from the sale of the vehicle may not be available to make payments on the notes.

 

The issuing entity’s security interest in the financed vehicles could be impaired for one or more of the following reasons:

 

•

the Bank might fail to perfect its security interest in a financed vehicle;

 

•

another person may acquire an interest in a financed vehicle that is superior to the issuing entity’s security interest through fraud, forgery, negligence or error because the servicer will not amend the certificate of title or ownership to identify the issuing entity as the new secured party;

 

•

the issuing entity may not have a security interest in the financed vehicles in certain states because the certificates of title to the financed vehicles will not be amended to reflect assignment of a security interest therein to the issuing entity;

 

•

holders of some types of liens, such as tax liens or mechanics liens, may have priority over the issuing entity’s security interest; and

 

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•

the issuing entity may lose its security interest in vehicles confiscated by the government.

 

Neither the Bank nor the servicer will be required to repurchase a receivable if the security interest in a related vehicle or the receivable becomes impaired after the receivable is sold to the issuing entity.

 

The servicer’s discretion over the servicing of the receivables could increase the average life of the notes and impact the amount and timing of funds available to make payments on the notes

The servicer is obligated to service the receivables in accordance with its customary practices. The servicer has discretion in servicing the receivables, including the ability to permit an extension on or deferral of payments due on receivables on a case-by-case basis. In addition, the servicer may from time to time solicit or offer obligors an opportunity to defer payments. [The servicer also may offer obligors other programs, consistent with its customary practices, that permit extensions or deferrals of payments due on receivables following natural disasters in certain geographic areas. See “Risk Factors—Geographic concentration of the obligors in the receivables pool and varying economic circumstances may increase the risk of losses or reduce the return on your notes” in this prospectus.] Any of these deferrals or extensions may extend the maturity of the receivables and increase the weighted average life of the notes. The weighted average life and yield on your notes may be adversely affected by extensions and deferrals on the receivables. However, the servicer must purchase a receivable from the issuing entity if any modification or extension extends the term of that receivable beyond the latest final scheduled payment date for the latest maturing class of notes issued by the issuing entity. In addition, the servicer’s customary practices may change from time to time and those changes could reduce collections on the receivables. The manner in which the servicer exercises its servicing discretion or changes its customary practices could have an impact on the amount and timing of collections on the receivables, which may impact the amount and timing of funds available to make payments on the notes.

 

FICO® scores, proprietary credit scores and historical experience may not accurately predict the likelihood of losses on the receivables.

Information regarding FICO® scores and credit scores for the obligors obtained at the time of acquisition of their contract is presented in “The Receivables Pool” in this offering memorandum. A FICO® score and credit score purports only to be a measurement of the relative degree of risk a borrower represents to a lender, i.e., that a borrower with a higher score is statistically expected to be less likely to default in payment than a borrower with a lower score. Neither the depositor, the Bank nor any other party makes any representations or

 

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warranties as to any obligor’s current FICO® score, current credit score or the actual performance of any motor vehicle, receivable or that a particular FICO® score or credit score should be relied upon as a basis for an expectation that a receivable will be paid in accordance with its terms. This is especially the case given the unprecedented number of recent first time unemployment claims.

 

Additionally, historical loss and delinquency information set forth in this offering memorandum under “Delinquencies, Repossessions and Credit Loss Information” was affected by several variables, including general economic conditions and market interest rates, that are likely to differ in the future. Therefore, there can be no assurance that the historical delinquency experience or the net credit loss experience calculated and presented in this offering memorandum with respect to the Bank’s entire portfolio of motor vehicle installment loans will reflect actual experience with respect to the receivables in the receivables pool. Especially given the current extremely challenging economic climate, there can be no assurance that the future delinquency or net credit loss experience of the servicer with respect to the receivables will be better or worse than that set forth in this offering memorandum with respect to the Bank’s entire portfolio of motor vehicle installment loans.

 

[You may suffer losses due to receivables with low contract rates]

[The receivables pool includes receivables which have contract rates that are less than the interest rates on certain classes of the notes. Interest paid on the receivables with annual percentage rates higher than the interest rate on the notes [and the yield supplement account] compensate for the receivables with relatively lower contract rates. Excessive prepayments on the receivables with relatively higher contract rates may adversely impact your notes by reducing such interest payments available. [The yield supplement account is intended to mitigate this risk.]]

RISKS RELATING TO THE TRANSACTION PARTIES

 

A servicer replacement event may result in additional costs, increased servicing fees by a successor servicer or a diminution in servicing performance, including higher delinquencies and defaults, any of which may have an adverse effect on your notes

In the event of the removal of the servicer and the appointment of a successor servicer, we cannot predict:

 

•

the costs of the transfer of servicing to the successor;

 

•

the ability of the successor to perform the obligations and duties of the servicer under the servicing agreement; or

 

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•

the servicing fees charged by the successor.

 

Furthermore, the indenture trustee or the noteholders may experience difficulties in appointing a successor servicer and during any transition phase it is possible that normal servicing activities could be disrupted, resulting in increased delinquencies and/or defaults on the receivables.

 

Paying the servicer a fee based on a percentage of the receivables may result in the inability to obtain a successor servicer

Because the servicer is paid its base servicing fee based on a percentage of the aggregate outstanding amount of the receivables, the fee the servicer receives each month will be reduced as the size of the pool decreases over time. At some point, if the need arises to obtain a successor servicer, the fee that such successor servicer would earn might not be sufficient to induce a potential successor servicer to agree to service the remaining receivables in the pool. In this event a higher servicing fee may need to be negotiated, resulting in less available funds that may be distributed to noteholders and certificateholders on a related payment date. Also, if there is a delay in obtaining a successor servicer, it is possible that normal servicing activities could be disrupted during this period, resulting in increased delinquencies and/or defaults on the receivables.

 

Bankruptcy of USAA Acceptance, LLC, as depositor, could result in delays in payment or losses on the notes

The depositor intends that its sale of the receivables to the issuing entity will be a valid sale and assignment of the receivables to the issuing entity. If USAA Acceptance, LLC, as depositor, were to become a debtor in a bankruptcy case and a creditor or trustee-in-bankruptcy of USAA Acceptance, LLC or USAA Acceptance, LLC itself were to take the position that the sale of receivables by the depositor to the issuing entity should instead be treated as a pledge of the receivables to secure a borrowing of USAA Acceptance, LLC, delays in payments of collections on the receivables to noteholders could occur. If a court ruled in favor of any such trustee, debtor or creditor, reductions in the amounts of those payments could result. A tax or governmental lien on the property of the depositor arising before the transfer of the receivables to the issuing entity may have priority over the issuing entity’s interest in those receivables even if the transfer of the receivables to the issuing entity is characterized as a sale.

 

FDIC receivership or conservatorship of the Bank could result in delays in payments or losses on your notes

The Bank is a federally chartered savings association and is subject to regulation and supervision by the Office of the Comptroller of the Currency (“OCC”) and whose deposits are insured to the applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). If the

 

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Bank becomes insolvent, is in an unsound condition or engages in violations of its by-laws or regulations applicable to it, or if similar circumstances occur, the OCC is authorized to appoint the FDIC as conservator and, if a receiver were appointed, the FDIC would act as a receiver for the Bank. As receiver, the FDIC would have broad powers to:

 

•

require the issuing entity, as assignee of the depositor, to go through an administrative claims procedure to establish its rights to payments collected on the receivables; or

 

•

request a stay of proceedings to liquidate claims or otherwise enforce contractual and legal remedies against the Bank; or

 

•

repudiate, without compensation, the Bank’s ongoing servicing obligations under the servicing agreement, such as its duty to collect and remit payments or otherwise service the receivables.

 

Another section of the Federal Deposit Insurance Act provides that, with certain exceptions, during the 45-day period beginning on the date of the appointment of the FDIC as conservator for a bank or the 90-day period beginning on the date of the appointment of the FDIC as receiver for a bank, no person may, without the consent of the FDIC as conservator or receiver, exercise any right or power to terminate, accelerate, or declare a default under any contract to which the bank is a party, or to obtain possession of or exercise control over any property of the bank or affect the contractual rights of the bank. In the event of conservatorship or receivership relating to the Bank, this section could be interpreted to prohibit the indenture trustee, noteholders or other persons from exercising contractual rights and remedies under any contract to which the Bank was deemed to be a party during the applicable period. Such interpretation, whether or not ultimately sustained, could lead to a delay and reduction in payments on your notes.

 

If the FDIC were to take any of those actions, payments on your notes could be delayed or reduced.

 

Under the Federal Deposit Insurance Act, the FDIC, as conservator or receiver of the Bank, is authorized to repudiate any “contract” of the Bank if the FDIC determines that the performance of the contract is burdensome and the repudiation would promote the orderly administration of the Bank’s affairs. Upon such repudiation the FDIC would be required to pay “actual direct compensatory damages.” This authority may be interpreted by the FDIC to permit it to repudiate the transfer of the receivables to the depositor. However, because we have structured the transfer of receivables from the Bank to the depositor with the intent that such transfers would be characterized as legal true sales, the FDIC likely would not be able to recover the transferred receivables using its repudiation powers.

 

If the FDIC nevertheless recharacterizes the transfer of motor vehicle loans to the issuing entity as a grant of a security interest to secure a

 

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debt, it could repudiate the debt and recover the motor vehicle loans as assets of the Bank. In this case, the amount of compensation that the FDIC would be required to pay would be limited to “actual direct compensatory damages” determined as of the date of the FDIC’s appointment as conservator or receiver. There is no statutory definition of “actual direct compensatory damages” but the term does not include damages for lost profits or opportunity. The staff of the FDIC takes the position that upon repudiation these damages would not include interest accrued to the date of actual repudiation, so that the issuing entity would have a claim for interest only through the date of the appointment of the FDIC as conservator or receiver. Since the FDIC may delay repudiation for up to one-hundred-eighty (180) days following that appointment, the issuing entity may not have a claim for interest accrued during this one-hundred-eighty (180) day period. In addition, in one case involving the repudiation by the Resolution Trust Corporation, formerly a sister agency of the FDIC, of certain secured zero-coupon bonds issued by a savings association, a United States federal district court held that “actual direct compensatory damages” in the case of a marketable security meant the market value of the repudiated bonds as of the date of repudiation. If that court’s view were applied to determine the issuing entity’s “actual direct compensatory damages” in the event the FDIC repudiated the transfer of motor vehicle loans to the issuing entity under the sale and servicing agreement, the amount paid to the issuing entity could, depending upon circumstances existing on the date of the repudiation, be less than the principal amount of the notes issued by the issuing entity and the interest accrued thereon and unpaid to the date of payment.

 

The FDIC has adopted regulations entitled “Treatment of financial assets transferred in connection with a securitization for participation” (the “FDIC Rule”). The FDIC Rule contains four different safe harbors, each of which limits the power that the FDIC can exercise in the insolvency of an insured depository institution when it is appointed as receiver or conservator. We do [not] intend to satisfy the conditions of the FDIC Rule and [no][a] legal opinion will be delivered in connection with the issuance of the notes as to the applicability of the FDIC Rule.

 

The FDIC could delay its decision whether to recognize the Bank’s transfer of the receivables for a reasonable period following its appointment as conservator or receiver for the Bank. If the FDIC were to refuse to recognize the Bank’s transfer of the receivables, payments on your notes could be delayed or reduced.

 

Delays in collecting payments could occur if USAA Federal Savings Bank ceases to be the servicer

If USAA Federal Savings Bank were to cease acting as servicer, the processing of payments on the receivables and information relating to collections could be delayed, which could delay payments to noteholders. See “Description of the Receivables Transfer and Servicing Agreements—Servicer Replacement Events.” USAA

 

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Federal Savings Bank may resign as servicer under certain circumstances described in this prospectus. See “Description of the Receivables Transfer and Servicing Agreements—Certain Matters Regarding the Servicer; Limitation on Liability.”

 

[You may suffer losses on your notes because the servicer will hold collections and commingle them with its own funds

The servicer generally will be permitted to hold with its own funds (1) collections it receives from obligors on the receivables for up to two Business Days after identification and (2) the purchase price of receivables required to be repurchased from the issuing entity until the day on which distributions are made on the notes. During this time, the servicer may invest those amounts at its own risk and for its own benefit and need not segregate them from its own funds. If the servicer is unable for any reason to pay these amounts to the issuing entity on the payment date, you might incur a loss on your notes.

 

For more information about the servicer’s obligations regarding payments on the receivables, see “Description of the Receivables Transfer and Servicing Agreements—Collections.”]

RISKS RELATING TO MACROECONOMIC, REGULATORY AND OTHER EXTERNAL FACTORS

 

Federal financial regulatory reform could have a significant impact on the servicer, the sponsor, the depositor or the issuing entity and could adversely affect the timing and amount of payments on your notes

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) is extensive and significant legislation that, among other things:

 

•

created a liquidation framework for purposes of liquidating certain bank holding companies or other nonbank financial companies determined to be “covered financial companies,” and certain of their respective subsidiaries, defined as “covered subsidiaries,” if, among other conditions, it is determined such a company is in default or in danger of default and the resolution of such a company under other applicable law would have serious adverse effects on financial stability in the United States;

 

•

created the Consumer Financial Protection Bureau (the “CFPB”), an agency with broad rule-making examination and enforcement authority with respect to the laws and regulations that apply to consumer financial products and services, such as the extension of credit to finance the purchase of automobiles and motorcycles;

 

•

created a new framework for the regulation of over-the-counter derivatives activities; and

 

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•

strengthened the regulatory oversight of securities and capital markets activities by the SEC.

 

The scope of the Dodd-Frank Act has broad implications for the financial services industry, including us, and requires the implementation of numerous rules and regulations. The Dodd-Frank Act impacts the offering, marketing, and regulation of consumer financial products and services offered by financial institutions. Compliance with the implementing regulations under the Dodd-Frank Act and the oversight of the SEC, CFPB or other government entities, as applicable, has imposed costs on, created operational constraints for, and placed limits on the pricing of consumer products with respect to banks such as the sponsor. Because of the complexity of the Dodd-Frank Act, the ultimate impact of the Dodd-Frank Act and its effects on the financial markets and their participants will not be fully known for an extended period of time. Therefore, requirements imposed by the Dodd-Frank Act may have a significant future impact on the servicing of the loans, or on the regulation and supervision of the servicer, the sponsor, the depositor, the issuing entity and/or their respective affiliates. Furthermore, on May 24, 2018, President Trump signed into law The Economic Growth, Regulatory Relief and Consumer Protection Act, which repeals or modifies certain provisions of the Dodd-Frank Act.

 

The CFPB has supervisory, examination and enforcement authority over certain banks and non-depository institutions, including those entities that are larger participants of a market for consumer financial products or services, as defined by rule. The Bank is subject to the CFPB’s supervision with respect to the Bank’s compliance with applicable consumer protection laws. Expanded CFPB jurisdiction over the Bank’s business may increase compliance costs and regulatory risks. For example, on January 31, 2019, the Bank agreed to a consent order with the CFPB related to, among other things, certain violations of the Electronic Fund Transfer Act and Regulation E involving preauthorized electronic fund transfers. Under the consent order, the Bank agreed to pay approximately $12 million in restitution to certain consumers, and pay a $3.5 million civil money penalty. The Bank submitted a comprehensive plan to the CFPB to comply with applicable laws and the terms of the Consent Order, and is currently executing on that plan.

 

Until all of the implementing regulations are issued, no assurance can be given that the requirements imposed by the Dodd-Frank Act will not have a significant impact on the servicing of the receivables or on the regulation and supervision of the Bank, the servicer, the sponsor, the originator, the depositor, the issuing entity or their respective affiliates. See “Some Important Legal Issues Relating to the Receivables—Dodd Frank Orderly Liquidation Framework—Potential Applicability to USAA Capital Corporation, USAA, the depositor and the issuing entity.”

 

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In addition, no assurances can be given that the framework for the liquidation of “covered financial companies” or their “covered subsidiaries” would not apply to USAA Capital Corporation, the parent of the Bank or its nonbank affiliates, United Services Automobile Association (“USAA”), the issuing entity or the depositor, or, if it were to apply, would not result in a repudiation of any of the transaction documents where further performance is required or an automatic stay or similar power preventing the indenture trustee or other transaction parties from exercising their rights. This repudiation power could also affect certain transfers of receivables pursuant to the transaction documents as further described under “Some Important Legal Issues Relating to the Receivables—Dodd Frank Orderly Liquidation Framework.” Application of this framework could materially adversely affect the timing and amount of payments of principal and interest on your notes.

 

In October 2020, the CFPB issued a final rule governing the activities of third-party debt collectors. On April 7, 2021, the CFPB issued a notice of proposed rulemaking to delay the effective date of the final rule until January 29, 2022. While the final rule did not address first-party debt collectors, the CFPB has previously indicated that it would address this activity in a later rule. It is unclear what effect, if any, this final rule or subsequent changes would have on the receivables or the servicer’s practices, procedures and other servicing activities relating to the receivables in ways that could reduce the associated recoveries.

 

Certain state and federal legislation implemented in response to the COVID-19 outbreak, including the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021, have provided funding for economic stimulus programs to various individuals. For example, Congress passed the American Rescue Plan Act of 2021, which extended unemployment benefits through September 6, 2021 (though some states have already discontinued, and other states may discontinue, the additional federal unemployment benefits ahead of this date), provided stimulus checks to certain individuals and families up to $1,400 per adult and eligible dependent, made the Paycheck Protection Program more accessible to businesses and nonprofits, added additional funding of $7.25 billion to the Paycheck Protection Program and provided additional relief to state and local communities.

 

Such economic relief programs have included unemployment compensation benefits, deferral of payroll tax collections and cash benefits. The Bank cannot predict the impact of the failure by Congress to renew or initiate other relief measures later this year. In addition, it is not known how many obligors may have been or are currently receiving any such additional unemployment benefits, or what the effect of any future reduction of such benefits may be on the ability of the obligors to meet their payment obligations under their contracts and, consequently, what impact such benefits have had on

 

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recent historical loss and delinquency information and static pool experience or what impact such benefits (or the discontinuation thereof) may have on the loss and delinquency performance of the receivables in the receivables pool.

 

Regulatory action could result in delayed or reduced payments to you

In April 2003, after the OCC found that a national bank was, contrary to safe and sound banking practices, receiving inadequate servicing compensation under its securitization agreements, that bank agreed to a consent order with the OCC. The consent order required the bank, among other things, to immediately resign as servicer and to cease performing its duties as servicer within one-hundred-twenty (120) days, to immediately withhold and segregate funds from collections for payment of its servicing fee (notwithstanding the priority of payments in the securitization agreements and the perfected security interest of the relevant issuing entity in those funds) and to increase its servicing fee percentage above that which was originally agreed upon in its securitization agreements.

 

While the Bank has no reason to believe that any applicable regulatory authority would consider provisions relating to the Bank or any of its affiliates or the payment or amount of a servicing fee to the Bank or any of its affiliates, or any other obligation of the Bank or any of its affiliates under the purchase agreement, sale and servicing agreement, trust agreement or indenture to be unsafe or unsound or violative of any law, rule or regulation applicable to them, there can be no assurance that any such regulatory authority would not conclude otherwise in the future. If such a bank regulatory authority did reach such a conclusion, and ordered the Bank or any of its affiliates to rescind or amend these agreements, payments to you could be delayed or reduced.

 

Failure to comply with consumer protection laws may result in losses on the notes

Federal and state consumer protection laws impose requirements upon creditors in connection with extensions of credit and collections on retail installment loans. Some of these laws make an assignee of the loan (such as the issuing entity) liable to the obligor for any violation by the lender. Additionally, the CARES Act includes various provisions, such as new requirements affecting credit reporting, designed to protect consumers. Some of these laws make an assignee of the loan (such as the issuing entity) liable to the obligor for any violation by the lender. Any liabilities of the issuing entity under these laws could reduce the funds that the issuing entity would otherwise have to make payments on your notes. The Bank may be obligated to repurchase from the issuing entity any receivable that fails to comply with federal and state consumer protection laws. If the Bank fails to repurchase that receivable, you might experience delays or reductions in payments on your notes. See “Some Important Legal Issues Relating to the Receivables—Consumer Protection Law.”

 

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Recent economic developments may adversely affect the performance of the receivables, which could result in losses on your notes

The United States has experienced a recession, which may adversely affect the performance of the receivables and market value of your notes. See “—Adverse events related to the Coronavirus outbreak could have an adverse effect on the performance of the receivables and the related vehicles, which could result in delays in payments and/or losses on your notes.” An economic downturn may adversely affect the performance of the receivables. During periods of economic slowdown or recession, delinquencies, defaults, repossessions and losses generally increase. High unemployment and a general reduction in availability of credit may lead to increased delinquencies and defaults by obligors, as well as decreased consumer demand for automobiles and reduced used vehicle prices, which could increase the amount of a loss in the event of a default by an obligor. Delinquencies and losses on automobile loans generally may increase in recent months as motor vehicle finance companies, including the sponsor, experience a sharp increase in delinquencies and requests for extensions, both of which may continue to increase. In response to the global health crisis, the servicer modified its collections activities, including the temporary stoppage of involuntary vehicle repossessions on active customer accounts and adjustments of outbound collections activities. The servicer has resumed most involuntary repossession activity where permitted by state and local law but may elect to suspend such activity at any time in the future. A reduction in the repossession rate in response to COVID-19 and the limited availability of used car auctions and other markets for the sale of repossessed vehicles resulted in delayed and decreased recoveries for non-performing auto loans across the industry. Although there has been a recent recovery in the availability of used car auctions and such prices, in certain cases to pre-COVID-19 levels, such prices may continue to fluctuate in the future and could decline again. If a vehicle is repossessed while the auction market is not fully functioning, it is likely that the sale proceeds for such vehicle will be lower than expected. If an economic downturn is experienced for a prolonged period of time, delinquencies and losses on the receivables could continue to increase, which could result in losses on your notes.

 

No prediction can be made and no assurance can be given as to the effect of an economic downturn or economic growth on the rate of delinquencies, prepayments and/or losses on the receivables.

 

You may experience reduced returns and delays on your notes from a vehicle recall

Obligors on receivables related to financed vehicles affected by a vehicle recall may be more likely to be delinquent in, or default on, payments on their receivables. Significant increases in the inventory of used motor vehicles subject to a recall may also depress the prices at which repossessed motor vehicles may be sold or delay the timing of those sales. If the default rate on the receivables increases and the price at which the related vehicles may be sold declines, you may

 

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experience losses with respect to your notes. If any of these events materially affect collections on the receivables, you may experience delays in payments or principal losses on your notes.

 

The return on your notes could be reduced by shortfalls due to the Servicemembers Civil Relief Act and other recent legislation

The Servicemembers Civil Relief Act (the “SCRA”), provides relief to obligors who enter active military service after the origination of their receivables. The response of the United States to the terrorist attacks on September 11, 2001 and the United States-led invasion and occupation of Iraq have included military operations that may increase the number of citizens who are in active military service, including persons in reserve status who have been called or will be called to active duty. The SCRA provides, generally, that an eligible obligor may not be charged interest on the receivable in excess of 6% per annum for the obligor’s auto loan during the period of the obligor’s military service. Any interest in excess of 6% must be forgiven. Interest shortfalls on the receivables due to the application of the SCRA or similar state laws or regulations will reduce the amount of interest collections available to make payments on the notes.

 

The SCRA also limits the ability of the servicer to repossess the financed vehicle securing a receivable during the related obligor’s period of military service for obligations incurred prior to military service. As of the date of this prospectus, the servicer sets a maximum interest rate on receivables affected by the application of the SCRA of 4% during the related obligor’s active duty status, and extends such maximum for 12 months beyond the end of such obligor’s active duty status. If, with respect to any receivable, the servicer reduces the related interest rate after the cut-off date other than as required by applicable law (including without limitation the SCRA) or court order, the servicer is obligated to repurchase such receivable from the issuing entity.

 

In addition, pursuant to laws of various states, under certain circumstances, payments on retail installment contracts or installment loans such as the receivables by residents in those states may be deferred and interest rates must be limited. These state laws may also limit the ability of the servicer to repossess the financed vehicle securing a receivable.

 

As a result of the SCRA and similar state legislation or regulations there may be delays or reductions in payment and increased losses on the receivables. Those delays, reductions and increased losses will be borne primarily by holders of the certificates, but if such reductions and losses are greater than anticipated, the holders of notes may suffer a loss.

 

We do not know how many receivables may be affected by the application of the SCRA or any similar state legislation or regulations.

 

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Climate related events and climate change risks may cause losses on your notes

The effects of climate change and the ongoing efforts to mitigate its impact, including through climate change-related legislation and regulation, may have a negative effect on the issuing entity.

 

Significant physical effects of climate change, such as extreme weather and natural disasters, may affect the obligors of the receivables. For example, obligors living in areas affected by extreme weather and natural disasters may suffer financial harm, reducing their ability to make timely payments on their receivables. The auto dealerships and physical auctions that facilitate the disposition of the financed vehicles after repossession are also subject to disruption as a result of extreme weather and natural disasters, which could result in an inability to sell repossessed vehicles or a temporary or permanent decline in the market value of those vehicles. In addition, extreme weather and natural disasters may have industry- or economy-wide effects due to the interdependence of market actors. If such extreme weather or a natural disaster were to occur in a geographic region in which a large number of obligors are located, these risks would be exacerbated. See “Risk Factors—Geographic concentration of the obligors in the receivables pool and varying economic circumstances may increase the risk of losses or reduce the return on your notes” in this prospectus.

 

Changes to laws or regulations enacted to address the potential impacts of climate change (including laws which may adversely impact the auto industry in particular as a result of efforts to mitigate the factors contributing to climate change) could have an adverse impact on the servicer, the sponsor, the depositor or the issuing entity and could adversely affect the timing and amount of payments on your notes.

 

Any of those effects or their confluence could adversely affect the performance of the receivables or the market value of the vehicles securing the receivables, which could result in losses or affect the timing of payments on your notes.

[RISKS RELATING TO THE ISSUANCE OF A FLOATING RATE CLASS OF NOTES]

 

[The issuing entity will issue floating rate notes, but the issuing entity will not enter into any interest rate swaps and you may suffer losses on your notes if interest rates rise]

[The receivables sold to the issuing entity on the closing date will bear interest at a fixed rate, while the floating rate notes will bear interest at a floating rate as set forth on the cover of this prospectus. Even though the issuing entity will issue floating rate notes, it will not enter into any interest rate swaps or interest rate caps in connection with the issuance of the notes.

 

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If the floating rate payable by the issuing entity increases to the point where the amount of interest and principal due on the notes, together with other fees and expenses payable by the issuing entity, exceeds the amount of collections and other funds available to the issuing entity to make such payments, the issuing entity may not have sufficient funds to make payments on the notes. If the issuing entity does not have sufficient funds to make payments, you may experience delays or reductions in the interest and principal payments on your notes.

 

If market interest rates rise or other conditions change materially after the issuance of the notes and certificates, you may experience delays or reductions in interest and principal payments on your notes. The issuing entity will make payments on the floating rate notes out of its generally available funds—not solely from funds that are dedicated to the floating rate notes. Therefore, an increase in interest rates would reduce the amounts available for distribution to holders of all notes, not just the holders of the floating rate notes, and a decrease in interest rates would increase the amounts available to the holders of all notes.]

 

[Negative [insert applicable floating rate benchmark] rates would reduce the rate of interest on the [Class A-2-B] notes]

[The interest rate to be borne by the [Class A-2-B] notes is based on a spread over [insert applicable floating rate benchmark] (and as further described in this prospectus)—which serves as a global benchmark for home mortgages, student loans and what various issuers pay to borrow money.

 

Changes in [insert applicable floating rate benchmark] will affect the rate at which the [Class A-2-B] notes accrue interest and the amount of interest payments on the [Class A-2-B] notes. To the extent that [insert applicable floating rate benchmark] decreases below 0.00% for any interest accrual period, the rate at which the [Class A-2-B] notes accrue interest for such interest accrual period will be reduced by the amount by which [insert applicable floating rate benchmark] is negative, provided that the interest rate on the [Class A-2-B] notes for any interest accrual period will not be less than 0.00%. A negative [insert applicable floating rate benchmark] rate could result in the interest rate applied to the [Class A-2-B] notes decreasing to 0.00% for the related interest accrual period.]

 

[insert applicable floating rate benchmark] is a relatively new reference rate and its composition and characteristics are not the same as LIBOR

[[insert applicable floating rate benchmark] is a relatively new interest rate index and may not become widely established in the market or could eventually be eliminated. Further, the way that [insert applicable floating rate benchmark], including any market accepted adjustments to [insert applicable floating rate benchmark], are determined may change over time.

 

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The composition and characteristics of [insert applicable floating rate benchmark] are not the same as those of London interbank offered rate (“LIBOR”) and other floating interest benchmark rates. [insert description of differences between benchmark rate and LIBOR]. As a result, there can be no assurance that [insert applicable floating rate benchmark] will perform in the same way as LIBOR would have at any time, including, without limitation, as a result of changes in interest and yield rates in the market, market volatility or global or regional economic, financial, political, regulatory, judicial or other events.

 

Very limited market precedent exists for securities that use [insert applicable floating rate benchmark] as the interest rate [and the method for calculating an interest rate based upon [insert applicable floating rate benchmark] in those precedents varies]. Similarly, if [insert applicable floating rate benchmark] does not become widely adopted for securities like the Class A-2-B notes, the trading prices of the Class A-2-B notes may be lower than those of securities like the Class A-2-B notes linked to indices that are more widely used. Investors in the Class A-2-B notes may not be able to sell the Class A-2-B notes at all or may not be able to sell the Class A-2-B notes at prices that will provide them with yields comparable to those of similar investments that have a developed secondary market, and may consequently experience increased pricing volatility and market risk.]

 

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USE OF PROCEEDS

The proceeds from the issuance of the notes will be used by the depositor (1) to purchase the receivables from the Bank under the purchase agreement[,] [and] (2) to fund the initial deposit into the Reserve Account [and (3) to deposit the pre-funded amount, if any, into the Pre-Funding Account] [and (4) to fund the initial deposit into the Yield Supplement Account].

The Bank or its affiliates may use all or a portion of the net proceeds of the offering of the notes to pay their respective debts and for general purposes.

THE ISSUING ENTITY

Limited Purpose and Limited Assets

USAA Auto Owner Trust 20[●]-[●] is a statutory trust governed under the laws of the State of Delaware by a trust agreement, as amended and restated as of the closing date, between the depositor and [●], as the owner trustee. The trust is referred to in this prospectus as either the “trust” or the “issuing entity.”

The issuing entity will not engage in any activity other than:

 

•

entering into and performing its obligations under the agreements to which it is a party;

 

•

acquiring, holding and managing the assets of the issuing entity, including the receivables, and the proceeds of those assets;

 

•

issuing the notes and the certificates;

 

•

making payments on the notes and distributions on the certificates;

 

•

selling, transferring and exchanging the notes and the certificates to the depositor;

 

•

pledging the receivables and other assets of the issuing entity pursuant to the indenture;

 

•

making deposits to and withdrawals from the Collection Account and the Reserve Account [and the Pre-Funding Account] [and the Yield Supplement Account];

 

•

paying organizational, start-up and transactional expenses of the issuing entity;

 

•

[entering into and performing its obligations under the interest rate [swap] [cap] agreement;] and

 

•

engaging in other activities that are necessary, suitable or convenient to accomplish any of the purposes listed above or are in any way connected with those activities or as may be required in connection with conservation of the issuing entity’s assets and the making of payments on the notes and distributions on the certificates.

The operations of the issuing entity are governed by the trust agreement and the indenture. Under the administration agreement the administrator will be obligated to perform certain administrative duties of the issuing entity and the owner trustee. The owner trustee will not have liability for obligations that the administrator agrees to perform. The issuing entity does not have the discretion to engage in activities other than those described above.

The issuing entity’s principal offices are located in [                    ], Delaware. The fiscal year of the issuing entity is the calendar year.

 

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The Issuing Entity Property

The notes will be collateralized by the assets of the issuing entity (“the issuing entity property”). The primary assets of the issuing entity will be the receivables, which are amounts owed by individuals under retail motor vehicle installment loans that are secured by new and used automobiles and light-duty trucks.

In addition to the receivables acquired by the issuing entity from the depositor on the closing date [and on each Funding Date], the issuing entity property also will include:

 

•

all collections on the receivables after the Cut-off Date;

 

•

the receivable files relating to the original motor vehicle loans evidencing the receivables;

 

•

the security interests in the financed vehicles;

 

•

any proceeds from claims on (1) any theft and physical damage insurance policy maintained by an obligor under a receivable, providing coverage against loss or damage to or theft of the related financed vehicle or (2) any credit life or credit disability insurance maintained by an obligor in connection with any receivable;

 

•

any other property securing the receivables;

 

•

the rights of the issuing entity to funds on deposit in the Reserve Account, [the Yield Supplement Account,] the Collection Account[, the Pre-Funding Account] and the Principal Distribution Account and any other accounts established pursuant to the indenture or sale and servicing agreement, and all cash, investment property and other property from time to time credited thereto and all proceeds thereof (including investment earnings, net of losses and investment expenses, on amounts on deposit);

 

•

rights of the issuing entity under the sale and servicing agreement and of the depositor, as buyer, under the purchase agreement;

 

•

[rights of the issuing entity under the interest rate cap agreement and payments made by the cap provider under the interest rate cap agreement;]

 

•

[rights of the issuing entity under the interest rate swap agreement and payments made by the swap counterparty under the interest rate swap agreement;] and

 

•

the proceeds of any and all of the above.

The issuing entity will pledge the issuing entity property to the indenture trustee under the indenture.

If the protection provided to the Class A Noteholders by the subordination of the Class B Notes and to all the noteholders by the Reserve Account [and the Yield Supplement Account] is insufficient, the issuing entity will have to look solely to the obligors on the receivables and the proceeds from the repossession and sale of the financed vehicles that secure defaulted receivables. In that event, various factors, such as the issuing entity not having perfected security interests in the financed vehicles securing the receivables in all states, may affect the servicer’s ability to repossess and sell the collateral securing the receivables, and thus may reduce the proceeds which the issuing entity can distribute to the noteholders. See “Application of Available Funds—Priority of Distributions,” “Description of the Receivables Transfer and Servicing Agreements—Reserve Account” and “Some Important Legal Issues Relating to the Receivables.”

 

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Capitalization and Liabilities of the Issuing Entity

[If the aggregate principal amount issued is $[●], the][The] following table illustrates the expected assets of the issuing entity as of the closing date, as if the issuance and sale of the notes had taken place on such date:

 

Receivables			$[●]
[Pre-Funding Account – Initial Balance]			$[●]
Reserve Account			$[●]
[Yield Supplement Overcollateralization Amount]			$[●]
[Risk Retention Reserve Account]			$[●]

[If the aggregate principal amount issued is $[●], the][The] following table illustrates the expected liabilities of the issuing entity as of the closing date, as if the issuance and sale of the notes had taken place on such date:

 

Class A-1 Notes			$[●]
Class A-2[-A] Notes			$[●]
[Class A-2-B Notes]			$[●]
Class A-3 Notes			$[●]
Class A-4 Notes			$[●]
Class B Notes			$[●]
Total			$[●]

[If the aggregate principal amount issued is $[●], the following table illustrates the expected assets of the issuing entity as of the closing date, as if the issuance and sale of the notes had taken place on such date:

 

Receivables			$[●]
[Pre-Funding Account – Initial Balance]			$[●]
Reserve Account			$[●]
[Yield Supplement Overcollateralization Amount]			$[●]
[Risk Retention Reserve Account]			$[●]

If the aggregate principal amount issued is $[●], the following table illustrates the expected liabilities of the issuing entity as of the closing date, as if the issuance and sale of the notes had taken place on such date:

 

Class A-1 Notes			$[●]
Class A-2[-A] Notes			$[●]
[Class A-2-B Notes]			$[●]
Class A-3 Notes			$[●]
Class A-4 Notes			$[●]
Class B Notes			$[●]
Total			$[●]]

[Overcollateralization is the amount by which the aggregate principal balance of the receivables exceeds the aggregate principal amount of the notes. [If the aggregate principal amount issued is $[●], the][The] initial amount of overcollateralization will be $[●] or approximately [●]% of the net pool balance as of the cut-off date. [If the aggregate principal amount issued is $[●], the initial amount of overcollateralization will be $[●] or approximately [●]% of the net pool balance as of the cut-off date.]]

[The issuing entity also will be liable for payments to the swap counterparty as described in “Description of the Notes—Interest Rate Swap Agreement.”] [The issuing entity will also be liable for the premium to the cap provider as described in “Description of the Notes—Interest Rate Cap Agreement.”]

 

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THE TRUSTEES

Owner Trustee

[●] will act as owner trustee under the trust agreement. [●] is a [●] existing under the laws of [●] and authorized to exercise trust powers. The owner trustee maintains its principal office at [●]. [●] has served and currently is serving as owner trustee for numerous securitization transactions and programs involving pools of motor vehicle receivables.

[Currently, there are no legal proceedings pending before any court or governmental authority against [●] that would have a material adverse effect on the ability of [●] to perform it obligations as owner trustee as provided in the trust agreement.]

The owner trustee’s liability in connection with the issuance and sale of the notes is limited solely to the express obligations of the owner trustee set forth in the trust agreement. The Bank, the depositor and their affiliates may maintain normal commercial banking relations with the owner trustee and its affiliates. The Bank, as servicer, will be responsible for paying the owner trustee’s fees and for indemnifying the owner trustee against specified losses, liabilities or expenses incurred by the owner trustee in connection with the transaction documents. To the extent these fees, expenses and indemnity payments are not paid by the Bank, they will be payable out of the issuing entity’s funds in the order of priority specified under “Application of Available Funds—Priority of Distributions.”

[Insert additional disclosure, if applicable, pursuant to Item 1109 of Regulation AB.]

Indenture Trustee

[●] will act as indenture trustee under the indenture. [●] is a [●] existing under the laws of [●]. [●] has served and currently is serving as indenture trustee for numerous securitization transactions and programs involving pools of motor vehicle receivables.

[[●] is subject to various legal proceedings that arise from time to time in the ordinary course of business. [●] does not believe that the ultimate resolution of any of these proceedings will have a materially adverse effect on its services as indenture trustee.]

The indenture trustee’s duties are limited solely to the express obligations of the indenture trustee set forth in the indenture. The Bank, the depositor and their affiliates may maintain normal commercial banking relations with the indenture trustee and its affiliates. The Bank, as servicer, will be responsible for paying the indenture trustee’s fees and for indemnifying the indenture trustee against specified losses, liabilities or expenses incurred by the indenture trustee in connection with the transaction documents. To the extent these fees, expenses and indemnity payments are not paid by the Bank, they will be payable out of the issuing entity’s funds in the order of priority specified under “Application of Available Funds—Priority of Distributions.”

[Insert additional disclosure, if applicable, pursuant to Item 1109 of Regulation AB.]

Role of the Owner Trustee and the Indenture Trustee

The owner trustee is obligated to perform only those duties that are specifically assigned to it in the trust agreement and the other transaction documents and will not be liable for any error in judgment made in good faith by any of its officers or employees unless such persons were negligent in ascertaining the pertinent facts. The owner trustee will not be required to expend its own funds or incur any financial liability in respect of its rights or powers.

 

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The owner trustee is not required to give any certificateholder or other person notice of any Event of Default under any of the transaction documents. The issuing entity is required to deliver to the certificateholders information required by the Code that is necessary for the preparation of their tax returns as they relate to the certificates. The holders of a majority interest in the certificates may direct the actions to be taken by the owner trustee so long as such actions are not contrary to the provisions of the trust agreement or any transaction document to which the issuing entity is a party.

The indenture trustee is obligated to perform only those duties that are specifically assigned to it in the indenture and the other transaction documents. If an Event of Default has occurred and is continuing, the indenture trustee is required to exercise its rights under the indenture and use the same degree of skill and care in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs. In the absence of bad faith, the indenture trustee may conclusively rely on certificates and opinions furnished to it in accordance with the indenture. The indenture does not require the indenture trustee to expend or risk its own funds or otherwise incur financial liability if it has reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. The indenture trustee is not liable for any error of judgment made by it in good faith unless it is proved that the indenture trustee was negligent in ascertaining pertinent facts. The indenture trustee will not be liable with respect to any action it takes or omits to take in good faith pursuant to directions from the noteholders in accordance with the indenture.

Upon receipt of instructions from the servicer for a payment date, the indenture trustee will apply the Available Funds to pay specified expenses of the issuing entity and to make payments on the notes.

The owner trustee and the indenture trustee, and any of their affiliates, may hold securities in their own names. In addition, for the purpose of meeting the legal requirements of local jurisdictions, the owner trustee and the indenture trustee, in some circumstances, acting jointly with the depositor or the administrator, respectively, will have the power to appoint co-trustees or separate trustees of all or any part of the issuing entity property. In the event of the appointment of co-trustees or separate trustees, all rights, powers, duties and obligations conferred or imposed upon the owner trustee or indenture trustee by the sale and servicing agreement, the trust agreement, the administration agreement or the indenture, as applicable, will be conferred or imposed upon the owner trustee or the indenture trustee and the separate trustee or co-trustee jointly, or, in any jurisdiction in which the owner trustee or the indenture trustee is incompetent or unqualified to perform specified acts, singly upon the separate trustee or co-trustee who will exercise and perform any rights, powers, duties and obligations solely at the direction of the owner trustee or the indenture trustee.

The owner trustee and the indenture trustee will be entitled to certain fees and indemnities described under “Application of Available Funds—Fees and Expenses of the Issuing Entity.”

For a further description of the roles and responsibilities of the indenture trustee, see “The Indenture.”

THE DEPOSITOR

USAA Acceptance, LLC (the “depositor”) is a limited liability company formed under the laws of the State of Delaware on July 22, 2002. The depositor maintains its principal office at 1105 North Market Street, Suite 1300, Wilmington, Delaware 19801. Its telephone number is (302) 651-8408.

The depositor is a wholly-owned, special purpose subsidiary of the Bank. The depositor was organized solely for the limited purpose of acquiring receivables and associated rights, issuing securities, selling and otherwise transferring receivables (including for the purpose of securitizing them) and engaging in related transactions. The depositor’s limited liability company agreement limits the activities of the depositor to the foregoing purposes and to any activities incidental to and necessary for these purposes. The depositor’s limited liability company agreement also includes a provision that requires the depositor to have at least two directors

 

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who are independent. Under the depositor’s limited liability company agreement, an independent director is a person who is not an employee, director, stockholder, partner or officer of the depositor or any of its affiliates (other than his or her service as an independent director of the depositor or any of its affiliates), a customer or supplier of the depositor or any of its affiliates, or any immediate family member of a person described in the foregoing.

The depositor will have no ongoing servicing obligations or responsibilities with respect to any financed vehicle. The depositor does not have, is not required to have, and is not expected in the future to have, any significant assets.

The depositor intends that the transfer of the receivables from the depositor to the issuing entity constitutes a sale, rather than a pledge of the receivables to secure indebtedness of the depositor. However, if the depositor were to become a debtor under the federal bankruptcy code, it is possible that a creditor or trustee in bankruptcy of the depositor, as debtor-in-possession, may argue that the sale of the receivables by the depositor was a pledge of the receivables rather than a sale. This position, if presented to or accepted by a court, could result in a delay in or reduction of distributions to the noteholders.

None of the depositor, the Bank, the servicer or any of their respective affiliates will insure or guarantee the receivables or the notes issued by the issuing entity.

ORIGINATOR, SPONSOR, SELLER AND SERVICER

USAA Federal Savings Bank (the “Bank”) is a federally chartered savings association and a member of the Federal Home Loan Bank System. The Bank is subject to the supervision of the Office of the Comptroller of the Currency (the “OCC”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Consumer Financial Protection Bureau (the “CFPB”). Deposits held by the Bank are insured up to the amount permitted by law by the Deposit Insurance Fund of the FDIC. As of [●][●] [●], 20[●], the Bank’s total assets and total common and preferred stockholders’ equity were $[●] billion and $[●] billion, respectively.

The Bank’s executive offices are located at 10750 McDermott Freeway, San Antonio, Texas 78288 and its telephone number is (210) 498-2265.

The Bank is an indirect wholly-owned subsidiary of United Services Automobile Association (“USAA”) and is engaged in providing consumer banking products and services primarily to the USAA membership. USAA and its various property and casualty insurance subsidiaries provide personal line insurance, which includes automobile, homeowners, and renters insurance, to their policyholders. In addition, through its various wholly-owned subsidiaries and affiliates, USAA offers personal financial service products, including life insurance, mutual funds, banking services and financial planning services. USAA is the [●] largest private passenger automobile and the [●] largest homeowners insurer in the United States, based on [●] direct written premiums. USAA markets its products and services principally through direct mail, telecommunication and electronic means. USAA is headquartered in San Antonio, Texas and employs more than [●] people.

USAA is a reciprocal interinsurance exchange formed in 1922. As of [●][●] [●], 20[●], USAA and its subsidiaries have a combined membership of approximately [●] million.

The Bank began its motor vehicles financing operations in 1984 and has serviced the receivables since that time. The Bank has been securitizing its motor vehicle loans since 1993 and has completed more than [●] public securitizations of its motor vehicle loans. The Bank also originates mortgage loans, credit card receivables, and other consumer loans. It securitized a portion of its portfolio of credit card receivables in 2005 through a private conduit facility, which was subsequently paid off in full in 2010. The Bank participates in the structuring of its securitizations, services the securitized assets and usually acts as administrator for the issuing entity.

 

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In the normal course of its servicing operations, the Bank outsources certain of its administrative functions to third party providers. With respect to its securitization trusts, the Bank remains responsible to the issuing entity for its obligations under the sale and servicing agreement regardless of whether the performance of an obligation has been outsourced to a third party. The Bank believes that such third parties can be replaced with other providers of such services.

The Bank outsources custody of the vehicle titles or other evidence of the perfected security interest of the Bank to Dealertrack Technologies, Inc., in Lake Success, NY. Dealertrack Technologies, Inc. is a Delaware corporation that has been in the business of title administration since 1990. Dealertrack holds such titles or other evidence in a fire-resistant vault; it has FM200 gas suppression.

No event of default or performance trigger event has occurred in securitizations sponsored by the Bank. The Bank has not taken any action outside of its contractual servicing obligations to prevent the occurrence of any such event.

The Bank engages investment banks for structuring its motor vehicle loan securitizations and selling the resulting asset-backed notes to investors.

[An affiliate of the Bank is the [swap counterparty] [cap provider].]

[To the extent not described in this prospectus, identify any servicer contemplated by Item 1108(a)(2) and provide the information required by paragraphs (b), (c) and (d) of Item 1108, as applicable, for each servicer contemplated by paragraphs (a)(2)(i), (ii) and (iv) of Item 1108 and each unaffiliated servicer identified in paragraph (a)(2)(iii) of Item  1108 that services 20% or more of the pool assets.]

Credit Risk Retention

[An affiliate of] [T][t]he depositor, a wholly owned subsidiary of the Bank, will be the initial holder of [a portion of] the issuing entity’s certificates [and will retain [insert any portion of any note retained by the depositor]]. The Bank, through its ownership of the depositor, intends to retain an interest in the transaction in the form of the certificates. The certificates represent 100% of the beneficial interest in the issuing entity and, [if the aggregate principal amount issued is $[●]] as of the closing date, [the Bank expects that[ the certificates will have a face amount of $[●]] [the residual value of the issuing entity’s assets, after payment in full of the notes, will be $[●]], which is equal to approximately [●]% of the net pool balance as of the Cut-off Date. [If the aggregate principal amount issued is $[●] as of the closing date, [the Bank expects that[ the certificates will have a face amount of $[●]] [the residual value of the issuing entity’s assets, after payment in full of the notes, will be $[●]], which is equal to approximately [●]% of the net pool balance as of the Cut-off Date.]]

[Insert disclosure required by Items 1104(g), 1108(e) or 1110(b)(3) of any hedges materially related to the credit risk of the securities.]

[Insert disclosure required by Item 1124 of any material change in the depositor’s, or an affiliate of the depositor’s, interest in the retained interest resulting from the purchase, sale or other acquisition or disposition of such interest by the depositor or an affiliate of the depositor.]

[Insert description of any retained notes.]

[Pursuant to Regulation RR, the Bank is required to retain an economic interest in the credit risk of the receivables, either directly or through a majority-owned affiliate. The Bank intends to satisfy this obligation [through the retention by [one or more majority-owned affiliates of][the depositor of]] [a combination of] an [“eligible vertical interest”] [and an] [“eligible horizontal residual interest”] [and] [the establishment of an “eligible horizontal cash reserve account” in the name of the indenture trustee for the benefit of the noteholders]

 

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in an [aggregate] amount equal to at least 5% of the initial principal amount of each class of [the fair value of] the notes and the certificates issued by the issuing entity on the closing date. [Each such majority-owned affiliate is required to retain its portion of the [“eligible vertical interest”] [or an] [“eligible horizontal residual interest”] and may not transfer (except to another majority-owned affiliate of the Bank) or hedge such interest until the latest of two years after the closing date, the date the pool balance is 33% or less of the initial pool balance, or the date the aggregate principal amount of the notes is 33% or less of the initial principal amount of the notes. The Bank may not transfer or hedge the retained interest during this period except as permitted under Regulation RR.]

[Retained vertical interest: The eligible vertical interest retained by [one or more of the Bank’s majority-owned affiliates][the depositor] will take the form of [[●]% of each class of notes and at least [●]% of the certificates issued by the issuing entity, though [any of the Bank’s majority-owned affiliates][the depositor] may retain an additional amount of one or more classes of notes or of the certificates. [[We][One or more majority-owned affiliates of the Bank] will initially retain the certificates.] The certificates represent 100% of the beneficial interest in the issuing entity] [a single vertical security, which, [if the aggregate principal amount issued is $[●], ]will have an initial principal amount of $[●] (which equals [●]% of the aggregate principal amount of the notes and the certificates) and which will be entitled to receive [●]% of all payments on the notes and the certificates]. [If the aggregate principal amount issued is $[●], the certificates will have an initial principal amount of $[●] (which equals [●]% of the aggregate principal amount of the notes and the certificates) and which will be entitled to receive [●]% of all payments on the notes and the certificates.]

By retaining the eligible vertical interest, each such majority-owned affiliate that is a noteholder will be entitled to receive the applicable percentage of all payments of interest and principal made on each class of notes and, if any class of notes incurs losses, will bear the applicable percentage of those losses. Each class of notes retained by a majority-owned affiliate of the Bank as part of the eligible vertical interest will have the same terms as all other notes in that class, except that the notes retained by any such majority-owned affiliate will not be included for purposes of determining whether a required percentage of any class of notes have taken any action under the indenture or any other transaction document, as described in “Description of the Notes—Notes Owned by Transaction Parties.” The material terms of the notes are described under “Description of the Notes,” and the material terms of the certificates are described under “Description of the Certificates.”]

[Retained horizontal interest: The eligible horizontal residual interest retained by [the depositor][one or more of the Bank’s majority-owned affiliates] is structured to be an “eligible horizontal interest” and will take the form of [retaining the issuing entity’s certificates, which[, if the aggregate principal amount issued is $[●],] the Bank expects [will have a face amount of $[●]] [to have a residual value, after payment in full of the notes, of $[●]], which is equal to approximately [●]% of the net pool balance as of the Cut-off Date] [and] [depositing an amount equal to $[●] into a risk retention reserve account]. [If the aggregate principal amount issued is $[●], the Bank expects [the certificates will have a face amount of $[●]] [to have a residual value, after payment in full of the notes, of $[●]], which is equal to approximately [●]% of the net pool balance as of the Cut-off Date] [and] [depositing an amount equal to $[●] into a risk retention reserve account.]

In general, the certificates represent the rights to the credit enhancement not needed to make payments on the notes or cover losses on the receivables. Because the certificates are subordinated to each class of notes and are only entitled to amounts not needed on a payment date to make payments on the notes or to make other required payments or deposits according to the priority of payments described in “Application of Available Funds—Priority of Distributions,” the certificates will absorb any losses incurred by the issuing entity on the receivables before any losses are incurred by the noteholders. For a description of the credit enhancement available for the notes, see “Description of the Notes—Credit Enhancement.” For a description of the terms of the certificate, see “Description of the Certificates.”]]

[Risk Retention Reserve Account: On or prior to the closing date, the Bank (itself or through a majority-owned affiliate) will establish or cause to be established an eligible account in the name of the indenture trustee for the benefit of the noteholders. The Risk Retention Reserve Account is structured to be an “eligible horizontal

 

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cash reserve account” and will be funded on the closing date by the retention of a portion of the purchase price for the notes in the amount equal to [at least] $[        ]. Funds on deposit in the Risk Retention Reserve Account may not be used to pay the servicing fee, as long as the Bank or an affiliate of the Bank is the servicer. For all other purposes, the Risk Retention Reserve Account may be used to make any payments that are due as described under “Application of Available Funds—Priority of Distributions” but are otherwise unpaid, including each of the notes on the related Final Scheduled Payment Date to the extent collections on the receivables are insufficient to make such payments. For a description of the terms of the Risk Retention Reserve Account, see “Description of the Notes—Credit Enhancement—Risk Retention Reserve Account.”]

[The fair value of the issuing entity’s certificates is expected to represent at least 5% of the sum of the fair value of the notes and the certificate on the closing date.]

[Fair Value:

The [expected]² fair value of the notes and the certificate is summarized below:

 

Class		Fair Value (in millions)				Fair Value (as a percentage)
Class A-1
Class A-2[-A]
[Class A-2-B]
Class A-3
Class A-4
Class B
Certificate
Total							100	%

The Bank and the depositor will use a fair value measurement framework under generally accepted accounting principles to calculate the fair value of the notes and the certificate. The fair value of the notes will be assumed to be equal to the initial principal amount of the notes[, as adjusted by any discount on the notes set forth on the cover page to this prospectus]. An internal valuation model using discounted cash flow analysis will be used to calculate fair value of the certificate.

The fair value measurement framework will consider various inputs including [(i) quoted prices for identical instruments, (ii) quoted prices for similar instruments, (iii) current economic conditions, including interest rates and yield curves, (iv) experience with similar receivables, including prepayments, net losses and recoveries based on information for receivables similar to the receivables sold to the issuing entity on the closing date, and (v) management judgment about the assumptions market participants would use in pricing the instrument].

The fair value of the notes is [assumed to be] equal to the initial principal amount of the notes, or par[, as adjusted by any discount on the notes set forth on the cover page to this prospectus]. This reflects the expectation that the final interest rates of the notes will be consistent with the interest rate assumptions below:

 

Class		Interest Rate
Class A-1
Class A-2[-A]
[Class A-2-B]
Class A-3
Class A-4
Class B

 

2	The bracketed term “expected” will be used for the preliminary prospectus as the final pricing information including the final prospectus will be used to calculate the actual fair value.

 

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These interest rates are estimated based on recent pricing of notes issued in similar securitization transactions and market-based expectations for interest rates and credit risk.

In addition, based on the assumptions set forth under “Maturity and Prepayment Considerations—Weighted Average Lives of the Notes” and using the ABS rate, the Bank calculated what the expected scheduled principal payments on each class of notes would be over the course of the transaction (the “Scheduled Principal Payments”) based on when principal payments were required to be made under the terms of the receivables during each Collection Period and which classes of notes would be entitled to receive principal payments based on the payment priorities described under “Application of Available Funds—Priority of Distributions.” On the basis of the Scheduled Principal Payments, the Bank calculated the weighted average life for each class of notes.

To calculate the fair value of the certificate, the Bank used an internal valuation model. This model projects future interest and principal payments of the pool of receivables, the interest and principal payments on each class of notes, and any other fees and expenses payable by the issuing entity. The resulting cash flows to the certificate are discounted to present value based on a discount rate that reflects the credit exposure to these cash flows. In completing these calculations, the Bank made the following assumptions:

 

•

interest accrues on the notes at the rates described above. [In determining the interest payments on the floating rate Class A-2-B notes, [insert applicable floating rate benchmark] is assumed to reset consistent with the applicable forward rate curve as of                 , 20    ].

 

•

principal and interest cash flows for the receivables are calculated using the assumptions as described in “Maturity and Prepayment Considerations—Weighted Average Lives of the Notes.”

 

•

receivables prepay at a __% ABS rate based on amortization resulting from both prepayments and losses.

 

•

cumulative net losses on the receivables, as a percentage of the initial pool balance, will be at the levels set forth in the chart below at the end of each month:

 

Month		Cumulative Net Losses (as a percentage of the initial pool balance)		Month		Cumulative Net Losses (as a percentage of the initial pool balance)		Month		Cumulative Net Losses (as a percentage of the initial pool balance)
1		[    ]%		11		[    ]%		21		[    ]%
2		[    ]%		12		[    ]%		22		[    ]%
3		[    ]%		13		[    ]%		23		[    ]%
4		[    ]%		14		[    ]%		24		[    ]%
5		[    ]%		15		[    ]%		25		[    ]%
6		[    ]%		16		[    ]%		26		[    ]%
7		[    ]%		17		[    ]%		27		[    ]%
8		[    ]%		18		[    ]%		28		[    ]%
9		[    ]%		19		[    ]%		29		[    ]%
10		[    ]%		20		[    ]%		30		[    ]%

 

•

certificate cash flows are discounted at [    ]%.

 

•

the servicer will [not] exercise its opportunity to purchase the receivables [at the earliest payment date it is permitted to do so].

The Bank developed these inputs and assumptions by considering the following factors:

 

•

ABS rate – estimated considering the composition of the receivables and the performance of the Bank’s prior securitized pools,

 

•

Cumulative net loss rate – estimated using assumptions for both the magnitude of lifetime cumulative net losses and the shape of the cumulative net loss curve. The lifetime cumulative net loss assumption

 

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was developed considering the composition of the Receivables, the performance of the Bank’s prior securitized pools, trends in used vehicle values, economic conditions, and the cumulative net loss assumptions of the Hired Agencies. The shape of the cumulative net loss curve is based on a historical average of the Bank’s prior securitized pools. Default and recovery rate estimates are included in the cumulative net loss assumption, and

 

•

Discount rate applicable to the residual cash flows – estimated to reflect the credit exposure to the residual cash flows. Due to the lack of an actively traded market in residual interests, the discount rate was derived from both quantitative factors, such as prevailing market rates of return for similar instruments, and qualitative factors that consider the equity-like component of the first-loss exposure.

The Bank believes that the inputs and assumptions described above include the inputs and assumptions that could have a material impact on the fair value calculation or a prospective noteholder’s ability to evaluate the fair value calculation. The fair value of the notes and the certificate was calculated based on the assumptions described above. You should be sure you understand these assumptions when considering the fair value calculation.

In accordance with Regulation RR, if the amount of the [eligible vertical interest] [eligible horizontal interest] [Risk Retention Reserve Account] retained on the closing date is materially different from the amount described above, within a reasonable time after the closing date, the Bank will disclose that material difference. [In addition, a description of any changes in the methodology or inputs and assumptions used to calculate the fair value will also be disclosed.] These disclosures will be made on [Form 8-K][Form 10-D] filed under the CIK number of the issuing entity.

[The Bank may not transfer or hedge the portion of [the eligible vertical interest] [and] [the eligible horizontal residual interest] that is intended to satisfy the requirements of Regulation RR except as permitted under Regulation RR. [All or a portion of the retained eligible vertical interest may be transferred to any other majority-owned affiliate of the Bank on or after the closing date.]]

THE ASSET REPRESENTATIONS REVIEWER

[●], a [●], has been appointed as asset representations reviewer pursuant to an agreement among the sponsor, the servicer, the issuing entity and the asset representations reviewer. [Insert description of the extent to which the asset representations reviewer has had prior experience serving as an asset representations reviewer for asset-backed securities transactions involving motor vehicle receivables.]

The asset representations reviewer is not affiliated with the sponsor, the servicer, the indenture trustee, the owner trustee or any of their affiliates, nor has the asset representations reviewer been hired by the Bank or an underwriter to perform pre-closing due diligence work on the receivables. The asset representations reviewer may not resign unless the asset representations reviewer is merged into or becomes an affiliate of the sponsor, the servicer, the indenture trustee, the owner trustee or any person hired by the Bank or an underwriter to perform pre-closing due diligence work on the receivables. Upon the occurrence of one of the foregoing events, the asset representations reviewer will promptly resign and the issuing entity will appoint a successor asset representations reviewer. Further, the issuing entity may (and in the case of clause (i), shall) terminate the rights and obligations of the asset representations reviewer if (i) the asset representations reviewer no longer meets certain eligibility requirements set forth in the asset representations review agreement, (ii) the asset representations reviewer breaches any of its representations, warranties, covenants or obligations under the asset representations review agreement or (iii) certain insolvency events occur with respect to the asset representations reviewer. The asset representations reviewer will pay the expenses (including the fees and expenses of counsel) associated with the resignation or removal of the asset representations reviewer and the appointment of a successor asset representations reviewer. With respect to any removal, resignation or replacement of the asset representations

 

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reviewer, we will include on the Form 10-D filed with the SEC with respect to the applicable Collection Period information specifying the date of such removal, resignation or replacement and the circumstances surrounding such change.

The asset representations reviewer will be responsible for reviewing the Subject Receivables (as defined below) for compliance with the representations and warranties made by the Bank on the receivables if the conditions described below under “Description of the Receivables Transfer and Servicing Agreements—Asset Representations Review” are satisfied. Under the asset representations review agreement, the asset representations reviewer will be entitled to be paid the fees and expenses set forth under “Application of Available Funds–Fees and Expenses of the Issuing Entity” below. The asset representations reviewer is required to perform only those duties specifically required of it under the asset representations review agreement, as described under “Description of the Receivables Transfer and Servicing Agreements—Asset Representations Review” below. The asset representations reviewer is liable for its own negligent action, its own bad faith, its own breach of contract or its own willful misconduct. The servicer is required under the asset representations review agreement to provide the asset representations reviewer copies of the receivable files and to make available to the asset representations reviewer the related accounts and records maintained by such person in connection with a review of the receivables. The asset representations reviewer will be required to keep all information about the receivables obtained by it in confidence and may not disclose that information other than as required by the terms of the asset representations review agreement and applicable law. The servicer will indemnify the asset representations reviewer for liabilities and damages resulting from the asset representations reviewer’s performance of its obligations under the asset representations review agreement unless caused by the negligent action, bad faith, breach of contract or willful misconduct of the asset representations reviewer.

[THE CAP PROVIDER] [THE SWAP COUNTERPARTY]

[[●] will be the [swap counterparty][cap provider] if any floating rate notes are issued. [●] is the principal subsidiary of [●], a [●]. [●] is a [●] with its principal place of business located at [●].

[Insert disclosure required by Item 1115 of Regulation AB.]

Upon the occurrence of an event of default or termination event specified in each Interest Rate [Cap][Swap] Agreement, if any, the Interest Rate [Cap][Swap] Agreement may be replaced with a replacement interest rate [cap][swap] agreement as described in “Description of the Notes — Interest Rate [Cap][Swap] Agreement(s).”

The Bank, the depositor and their respective affiliates may maintain normal commercial banking relationships with the [cap provider][swap counterparty] and its affiliates.]

[Insert required financial information for the swap counterparty if the significance percentage of the interest rate swap agreement is more than 10% as required by Item 1115(b) of Regulation AB.]

THE BANK’S PORTFOLIO OF MOTOR VEHICLE LOANS

Origination of Motor Vehicle Loans

The Bank directly originates motor vehicle installment loans secured by new and used automobiles and light-duty trucks (the “motor vehicle loans”). Applications for motor vehicle loans are made by individuals to the Bank’s office in San Antonio, Texas and are reviewed by the Bank in accordance with the Bank’s underwriting procedures discussed below. Applications are generally accepted by telephone, internet and mobile devices. The Bank’s primary source of applicants is the membership and associate membership of USAA, which consist of present and former commissioned and noncommissioned officers, enlisted personnel, retired military and their families.

 

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The Bank may use programs developed and maintained by the Bank or third parties that allow the Bank to complete the entire contracting process electronically. The electronic contracts created by the programs will be electronically signed by the related obligors and will be stored in an electronic vault maintained by the Bank or third parties. The Bank does not expect to maintain physical copies of the electronic contracts.

The Bank services all of its motor vehicle loans. The servicing functions performed by the Bank include customer service, document file keeping, computerized account record keeping and collections. Vehicle title processing is outsourced to Dealertrack Technologies, Inc. The Bank may change its servicing and origination policies and practices over time in accordance with the Bank’s business judgment.

There have been no material changes in the Bank’s policies or procedures for its origination of retail motor vehicle loans during the three years preceding the date of this prospectus.

Underwriting of Motor Vehicle Loans

Application Process

The applicant submits an application over the telephone, via the Bank’s Web site, or mobile app. The application sets forth the applicant’s income, liabilities, credit and employment history, and other personal information along with vehicle information which is intended to secure a motor vehicle loan. The Bank reviews each application for completeness and for compliance with the Bank’s underwriting criteria, guidelines and applicable consumer regulations.

Underwriting Criteria

The Bank evaluates each applicant using uniform underwriting standards developed by the Bank. These underwriting standards are intended to assess the applicant’s ability to repay such motor vehicle loan and the adequacy of the financed vehicle as collateral, based upon a review of the information contained in the applicant’s loan application, information provided by the applicant during funding/fulfillment process and the credit bureau reports referred to below.

The Bank first performs the evaluation on an automated basis. If the automated review of the application shows that the applicant meets certain criteria in the Bank’s underwriting guidelines described below at specified levels and has at least a specified credit score in the Bank’s credit scoring process referred to below, then the application is approved. If the application is not approved in the automated review, an underwriter then performs a judgmental review using the criteria specified in the manual Underwriting criteria.

Among the criteria considered in evaluating each application are:

 

•

the applicant’s payment and credit history based on information known directly by the Bank or as provided by various credit reporting agencies with respect to present and past debt;

 

•

capacity rules that include a debt service to gross monthly income ratio test and a monthly loan payment to gross monthly income ratio test; and

 

•

a loan to value ratio test taking into account the market value of the financed vehicle.

The Bank uses an empirically based credit scoring process (the FICO^® credit scoring system described below) that uses credit scores provided by credit bureaus to objectively assess an applicant’s creditworthiness. Through credit scoring, the Bank evaluates credit profiles to quantify credit risk. The credit scoring process uses statistics to correlate common characteristics with credit risk. The Bank’s standards are periodically reviewed and updated, if necessary. The Bank’s standards are intended to provide a basis for lending decisions.

 

71

A FICO^® score is a credit score derived from a scoring system created by the Fair Isaac Company. A FICO^® score is used to evaluate creditworthiness on the basis of, among other things, information that a credit bureau keeps about the applicant for credit and the debt level of the applicant. Because the FICO^® score depends on the information gathered by a credit bureau, it is possible that the FICO^® score for a person will vary depending upon which credit bureau is used.

Exceptions to the Underwriting Criteria

The Bank can approve applications that do not meet its standard credit guidelines. Generally, those approvals require approval of a designated credit underwriter or credit manager of the Bank. Applications that do not comply with all the Bank’s guidelines must have compensating factors, such as an established deposit relationship with the Bank or a positive credit history with the Bank, which indicate a strong capacity to repay the loan.

Total Loan Amount

The total loan amount financed by the Bank under any motor vehicle loan is subject to the maximum approved loan amount determined by the credit strategy. The total loan amount financed is often less than the maximum approved loan amount. The maximum approved loan amount is dependent on several factors including, but not limited to credit worthiness, current debt obligations, length of the motor vehicle loan term, and gross income. These factors are considered to assure the financed vehicle constitutes adequate collateral to secure the motor vehicle loan. The total loan amount may also include the cost of additional options, taxes and title and license fees.

Credit Monitoring

Periodically, the Bank makes a detailed analysis of its portfolio and originations to evaluate the effectiveness of the Bank’s credit guidelines and scoring process. If Key Performance Indicators perform beyond established limits (influenced by external economic factors, credit delinquencies or credit losses change), the Bank may adjust its credit guidelines to maintain the asset quality deemed acceptable by the Bank’s management. The Bank reviews, on a regular basis, the quality of its motor vehicle loans by examining certain randomly selected motor vehicle loans to ensure compliance with established policies and procedures.

Insurance

Each motor vehicle loan requires the obligor to obtain physical damage insurance for the financed vehicle. The Bank does not monitor the obligor’s compliance with such requirement. Most obligors obtain the required physical damage insurance from USAA or an affiliate thereof.

Collection Procedures

General practices listed are subject to individual state laws and regulations. The Bank performs collection activities with respect to delinquent motor vehicle loans including the prompt investigation and evaluation of the causes of any delinquency. An obligor is considered delinquent when the obligor makes any payment that is less than 100% of a scheduled payment.

The Bank maintains an on-line collection system for use in collection efforts. The collection system provides relevant obligor information (for example, current addresses, phone numbers and loan information) and records of all contact of the Bank with obligors. The system also records an obligor’s promise to pay, affords supervisors the ability to review collection personnel activity and modify priorities with respect to obligor contacts and provides reports concerning motor vehicle loan delinquencies. The Bank initiates telephone contact with the obligor on day 1 for high risk, day 7 for medium risk and day 10 for low risk. The level of risk on the loan is determined by a combination of internal scores and FICO^® scores. Generally, after a motor vehicle loan continues to be delinquent for thirty (30) days, the Bank sends a demand letter. After 50 days of delinquency, the Bank sends a right to cure

 

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letter requesting the past due amount for any loans with balances greater than $1,500. Generally, the Bank initiates repossession procedures after a motor vehicle loan is delinquent for seventy-two (72) days. Repossession action may occur without regard to the length of existence of payment delinquency if (1) a motor vehicle loan is deemed uncollectible, (2) the financed vehicle is deemed by Bank collection personnel to be in danger of being damaged, destroyed or made unavailable for repossession, or (3) the obligor voluntarily surrenders the financed vehicle. Repossessions are conducted by third parties engaged in the business of repossessing vehicles for secured parties. After repossession, the obligor generally has an additional 10 to 21 days to redeem or reinstate the financed vehicle based on state law before the financed vehicle is resold at auction.

Losses may occur in connection with delinquent motor vehicle loans and can arise in several ways, including inability to locate the financed vehicle or the obligor, or because of a discharge of the obligor in a bankruptcy proceeding. The current policy of the Bank is to recognize losses when it determines that the motor vehicle loan is uncollectible, or no later than the end of the month that the motor vehicle loan becomes one-hundred-twenty (120) days delinquent, whichever occurs first. Further, under the Bank’s current policy, to the extent a motor vehicle loan suffers a total loss, through accident or other insured loss, and the remaining balance of the motor vehicle loan exceeds the insurance proceeds, the remaining balance is considered uncollectible at the time the Bank receives payment of the insurance proceeds with respect to the motor vehicle loan. The Bank is the beneficiary under a contractual liability insurance policy issued by an affiliate of the Bank which insures against losses of such amounts. To the extent the Bank draws on this insurance policy for the remaining balance of the motor vehicle loan, such amount will be deposited into the issuing entity’s collection account.

Upon repossession and sale of the financed vehicle, the Bank pursues any deficiency remaining to the extent deemed practical by the Bank and as permitted by law. The loss recognition and collection policies and practices of the Bank may change over time in accordance with the Bank’s business judgment.

The Bank offers certain obligors credit-related extensions. Generally, these extensions are offered only when:

 

•

the extension will result in the obligor’s payments being brought current;

 

•

the number of credit-related extensions granted on the motor vehicle loan will be limited to one per twelve-month period; and

 

•

no more than two credit-related extensions will be granted on the motor vehicle loan in any five-year period, and the total credit-related extensions granted on the motor vehicle loan generally will not exceed four months in the aggregate in such five year period. Motor vehicle loans are generally not eligible for modifications.

Any deviation from this policy requires the concurrence of the Bank’s collection manager and collection officer. See “Description of the Receivables Transfer and Servicing Agreements—Servicing Procedures” for certain additional conditions on credit-related extensions which must be satisfied with respect to receivables owned by the issuing entity.

The Bank may also offer certain obligors payment extensions on receivables that are not delinquent. To qualify for such a payment extension, an account must satisfy certain criteria which are designed to preserve the quality of the loan portfolio in the Bank’s judgment. Any extension may extend the maturity of the applicable receivable beyond its original term to maturity and increase the weighted average life of the receivables.

The Bank may, from time to time, review its portfolio of motor vehicle loans and offer certain obligors with consistent payment experience reduced contract rates on their receivables either for a specified number of payment dates or for the remaining term to maturity of such receivable. Any such reduction will not affect the original amount financed under such receivable. If so specified in this prospectus, the Bank may take such actions with respect to receivables owned by the issuing entity.

 

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THE RECEIVABLES POOL

The issuing entity will own a pool of receivables consisting of retail motor vehicle installment loans secured by security interests in the motor vehicles financed by those loans. The pool will consist of the receivables selected from the Bank’s portfolio of installment loans for new and used vehicles, in each case meeting the criteria described below, which the Bank transfers to the depositor and the depositor transfers to the issuing entity on the closing date. No selection procedures believed by the Bank to be adverse to the noteholders were utilized in selecting the receivables. The issuing entity will be entitled to receive all payments on the receivables which are made [on or] after the Cut-off Date. Approximately [●]% of the receivables in the pool described in this prospectus (by aggregate principal balance as of the Cut-off Date) are evidenced by electronic contracts.

[Approximately [●]% of the receivables in the pool described in this prospectus (by aggregate principal balance as of the Cut-off Date) were originated pursuant to the Bank’s TrueCar program. Under the Bank’s TrueCar program, the interest rate for a receivable of a qualifying obligor is reduced between 0.25% and 1.00%. For loans made pursuant to the Bank’s TrueCar program prior to [●] 20[●], such receivables were not re-amortized following the application of the discounted interest rate, which resulted in either a reduction in the total number of payments due over the life of the receivable or a reduction in the amount of the final payment due under the terms of the receivable. Beginning in [●] 20[●], receivables originated pursuant to the Bank’s TrueCar program were re-amortized following the application of the discounted interest rate. The data regarding the distribution of the receivables in the pool described in this prospectus under “—Pool Stratifications” below and the information presented with respect to the weighted average lives of the notes under “Maturity and Prepayment Considerations—Weighted Average Lives of the Notes” reflects any applicable discounted interest rate for and reduced term to maturity of each receivable originated pursuant to the Bank’s TrueCar program.]

[The characteristics set forth in this section are based on the receivables in the [statistical] pool described in this prospectus as of the [initial][statistical] Cut-off Date. [The statistical pool consists of a portion of the receivables owned by the Bank that met the criteria below as of the statistical Cut-off Date. The receivables pool will be selected from (i) the [statistical] pool [and from (ii) receivables originated after the statistical Cut-off Date] [and from (iii) receivables originated prior to the statistical Cut-off Date but which were not included in the statistical pool because of their failure to meet the eligibility criteria described in this section as of the statistical Cut-off Date] [and which, in each case, satisfy the eligibility criteria as the actual Cut-off Date]. The characteristics of the receivables sold to the issuing entity on the closing date as of the Cut-off Date may vary somewhat from the characteristics of the receivables in the statistical pool described in this prospectus as of the statistical Cut-off Date and illustrated in the tables below, but any variance between the characteristics of the receivables in the statistical pool described in this prospectus and the receivables sold to the issuing entity on the closing date will not be material.]

Simple Interest Receivables

Each of the receivables included in the receivables pool provides for the application of payments on the simple interest method. If an obligor on a simple interest receivable pays a fixed monthly installment before its scheduled due date—

 

•

the portion of the payment allocable to interest for the period since the preceding payment was made will be less than it would have been had the payment been made as scheduled; and

 

•

the portion of the payment applied to reduce the unpaid principal balance will be correspondingly greater.

Conversely, if an obligor pays a fixed monthly installment after its scheduled due date—

 

•

the portion of the payment allocable to interest for the period since the preceding payment was made will be greater than it would have been had the payment been made as scheduled; and

 

•

the portion of the payment applied to reduce the unpaid principal balance will be correspondingly less.

 

74

In either case, the obligor pays a fixed monthly installment until the final scheduled payment date, at which time the amount of the final installment is increased or decreased as necessary to repay the then outstanding principal balance. If a simple interest receivable is prepaid, the obligor is required to pay interest only to the date of prepayment.

Criteria Applicable to Selection of Receivables

The receivables sold to the issuing entity on the closing date will be selected from the Bank’s portfolio for inclusion in the pool by several criteria. These criteria include the requirement that each receivable has the following individual characteristics as of the Cut-off Date:

 

•

has a remaining term to maturity of not less than [●] month[s];

 

•

had an original term to maturity of not more than [●] months;

 

•

provided, at origination, for level periodic payments (except for the first or last payment, which may be different but no more than three times the amount of each such level periodic payment) over its original term;

 

•

is secured by a new or used automobile or light-duty truck;

 

•

has not been identified in the records of the servicer as being the subject of any pending bankruptcy or insolvency proceeding;

 

•

has no payment more than [30] days past due;

 

•

is a simple interest loan;

 

•

was originated in the United States;

 

•

contains provisions that permit the repossession and sale of the financed vehicle upon a default under the receivable by the related obligor;

 

•

the obligor on the receivable has a FICO® score of no less than [●];

 

•

the financed vehicle related to the receivable is a model year [●] or newer;

 

•

the scheduled maturity date is on or before [●];

 

•

had an outstanding principal balance of greater than or equal to $[●]; [and]

 

•

has a Contract Rate of no less than [●]%.

[Additional receivables sold by the depositor to the issuing entity during the [revolving period] [pre-funding period] must meet substantially similar criteria. However, these criteria will not ensure that each subsequent pool of additional receivables will share the exact characteristics of the initial pool of receivables. As a result, the composition of the aggregate pool of receivables will change if additional receivables are purchased by the issuing entity during the [revolving period] [pre-funding period]. See “Risk Factors—Lack of availability of additional receivables during the revolving period could shorten the average life of your notes.”] [Insert any additional requirements for receivables that may be added to the pool during the revolving period or pre-funding period in accordance with Item 1103(a)(5)(vi) of Regulation AB.]

[The characteristics of the subsequent receivables to be sold to the issuing entity on each Funding Date as of the applicable subsequent Cut-off Date may vary somewhat from the characteristics of the receivables in the [statistical] pool described in this prospectus as of the Cut-off Date and illustrated in the tables below, but any variance between the characteristics of the receivables in the [statistical] pool described in this prospectus and the subsequent receivables to be sold to the issuing entity on each Funding Date will not be material.]

 

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[Criteria Applicable to the Selection of Additional Receivables During the Revolving Period]

[The additional receivables sold to the issuing entity during the revolving period will be selected from the Bank’s portfolio based on several criteria. These criteria include the requirements that each additional receivable:

 

•

is secured by a new or used automobile or light-duty truck;

 

•

is a simple interest receivable;

 

•

was originated in the United States;

 

•

provides for level monthly payments which may vary from one another by no more than $[ ];

 

•

[was or will be originated or acquired by the Bank in the ordinary course of business;]

 

•

has an original term of [●] to [●] months, provided that following the addition of all additional receivables on each subsequent Cut-off Date, the sum of the amount financed of all additional receivables as of the applicable Cut-off Date sold to the issuing entity with an original term in excess of months may not exceed [●]% of the aggregate amount financed of all additional receivables sold to the issuing entity, between [●] and months may not exceed [●]% of the aggregate amount financed of all additional receivables sold to the issuing entity and less than or equal to [●] months must be greater than or equal to [●]% of the aggregate amount financed of all additional receivables sold to the issuing entity;

 

•

was not more than [30] days past due;

 

•

has a remaining term as of its subsequent Cut-off Date of not less than [●] months; and

 

•

at least one payment has been made.

Following the addition of the additional receivables on each subsequent Cut-off Date:

 

•

[the sum of the amount financed of all additional receivables as of the applicable Cut-off Date sold to the issuing entity secured by used vehicles may not exceed [●]% of the aggregate amount financed of all additional receivables sold to the issuing entity;]

 

•

[the Weighted Average FICO® score related to the obligor on all additional receivables as of the applicable Cut-off Date sold to the issuing entity is at least [●];]

 

•

the percentage of all additional receivables without a FICO® score or those related to business obligors as of the applicable Cut-off Date sold to the issuing entity does not exceed [●]%;

 

•

[the percentage of all additional receivables with a FICO® score less than as of the applicable Cut-off Date sold to the issuing entity does not exceed [●]%;]

 

•

[the Weighted Average Loan-to-Value Ratio of all additional receivables as of the applicable Cut-off Date sold to the issuing entity is at most [●];] and

 

•

[the weighted average rate of all additional receivables as of the applicable Cut-off Date sold to the issuing entity is at least [●]%].

The additional receivables will be selected from the Bank’s portfolio of receivables that meet the criteria described above and other administrative criteria utilized by the Bank from time to time. We believe that no selection procedures adverse to the noteholders will be utilized in selecting the additional receivables, but there will not be any independent verification of the depositor’s determination that subsequent receivables satisfy the above criteria. After the funding period ends, to the extent required by applicable rules under the Exchange Act, we will file a report on Form 10-D with the SEC that gives the required information in respect of the final pool of receivables for the issuing entity.]

 

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Exceptions to Underwriting Criteria

Receivables originated under the Bank’s underwriting guidelines are approved based on either (i) an automated process based on the Bank’s underwriting policy, (ii) a credit underwriter applying the same criteria and standards used in the automated process or (iii) the authority of a credit underwriter.

As described under “The Bank’s Portfolio of Motor Vehicle Loans–Underwriting of Motor Vehicle Loans” in this prospectus, each applicant will initially be evaluated through an automated process. The Bank’s underwriting policy takes into account multiple factors, including, but not limited to, the stability of the applicant with specific regard to the applicant’s length of employment, the applicant’s debt-to-income ratio, the applicant’s payment-to-income ratio and a loan-to-value ratio test taking into account the age, type and market value of the financed vehicle. If an applicant is not approved through the automated process, an underwriter then performs a judgmental review using the same criteria and standards used in the automated review.

[Additionally, certain credit underwriters have limited ability to approve exceptions to the standard underwriting policies. As of the cut-off date, [●] receivables, having an aggregate principal balance of $[●], (approximately [●]% of the principal balance of receivables in the pool), were approved with one or more exceptions by the decision of a credit underwriter with the appropriate authority. With respect to the receivables in the pool that were exceptions approved by credit underwriters, as of the cut-off date, (i) [●] receivables (approximately [●]% of the principal balance of receivables in the pool) had exceptions relating to credit score; (ii) [●] receivables (approximately [●]% of the principal balance of receivables in the pool) had exceptions relating to the applicant’s debt-to-income ratio; (iii) [●] receivables (approximately [●]% of the principal balance of receivables in the pool) had exceptions relating to payment-to-income ratio; and (iv) [●] receivables (approximately [●]% of the principal balance of receivables in the pool) had exceptions relating to loan-to-value ratio.]

[None of the receivables in the pool were originated with exceptions to the Bank’s written underwriting guidelines.]

[The Bank elected to include receivables with exceptions to the underwriting criteria in the receivables pool because historically the Bank has not excluded receivables with exceptions from its auto securitization program. In addition, the information relating to delinquency, repossession and credit loss experience set forth in “The Receivables Pool – The Bank’s Delinquency, Loan Loss and Recovery Information” is reflective of the Bank’s total managed portfolio of motor vehicles receivables, including receivables approved as exceptions to the underwriting criteria.]

[None of the receivables in the pool were originated with exceptions to the Bank’s written underwriting guidelines.]

Asset-Level Information

The issuing entity has provided asset-level information regarding the receivables that will be owned by the issuing entity as of the closing date and related documents (the “asset-level data”) on exhibits to a Form ABS-EE that was filed by the issuing entity by the filing date of this prospectus, which are hereby incorporated by reference. The asset-level data comprises each of the data points required with respect to automobile loans identified on Schedule AL to Regulation AB and generally includes, with respect to each receivable, the related asset number, the reporting period covered, general information about the receivable, information regarding the related Financed Vehicle, information about the related obligor, information about activity on the receivable and information about modifications of the receivable since it was originated. In addition, the issuing entity will provide updated asset-level data with respect to the receivables each month as exhibits to the monthly distribution reports filed with the SEC on Form 10-D and Form ABS-EE.

 

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Pool Stratifications

[If the aggregate principal amount issued is $[●], the][The] composition of the receivables in the pool described in this prospectus as of the [initial] Cut-off Date is as follows (all weighted averages are based on the aggregate principal balance):

 

Aggregate Principal Balance			$[●]
Number of Receivables			[●]
Principal Balance
Average			$[●]
Range			$[●] to $[●]
Original Amount Financed
Average			$[●]
Range			$[●] to $[●]
Weighted Average Contract Rate			[●]%
Range			[●]% to [●]%
Weighted Average Original Term to Maturity			[●] months
Range			[●] months to [●] months
Weighted Average Remaining Term to Maturity			[●] months
Range			[●] months to [●] months
Weighted Average FICO® score*			[●]
Range*			[●] to [●]
Percentage of Aggregate Principal Balance of Receivables with no FICO® score			[●]%
Percentages of Aggregate Principal Balance of Receivables for New/Used Vehicles			[●]% / [●]%

 

*

Weighted average FICO® score and the range of FICO® scores are calculated excluding accounts for which we do not have a FICO® score. FICO® scores are reported on a monthly basis and presented as updated before the Cut-off Date. We describe FICO® scores in the prospectus under “The Bank’s Portfolio of Motor Vehicle Loans—Underwriting of Motor Vehicle Loans.”

[If the aggregate principal amount issued is $[●], the composition of the receivables in the pool described in this prospectus as of the [initial] Cut-off Date is as follows (all weighted averages are based on the aggregate principal balance):

 

Aggregate Principal Balance			$[●]
Number of Receivables			[●]
Principal Balance
Average			$[●]
Range			$[●] to $[●]
Original Amount Financed
Average			$[●]
Range			$[●] to $[●]
Weighted Average Contract Rate			[●]%
Range			[●]% to [●]%
Weighted Average Original Term to Maturity			[●] months
Range			[●] months to [●] months

 

78

Weighted Average Remaining Term to Maturity			[●] months
Range			[●] months to [●] months
Weighted Average FICO® score*			[●]
Range*			[●] to [●]
Percentage of Aggregate Principal Balance of Receivables with no FICO® score			[●]%
Percentages of Aggregate Principal Balance of Receivables for New/Used Vehicles			[●]% / [●]%

 

*

Weighted average FICO® score and the range of FICO® scores are calculated excluding accounts for which we do not have a FICO® score. FICO® scores are reported on a monthly basis and presented as updated before the Cut-off Date. We describe FICO® scores in the prospectus under “The Bank’s Portfolio of Motor Vehicle Loans—Underwriting of Motor Vehicle Loans.”]

The distribution by FICO^® score, distribution by original term to maturity, distribution by remaining term to maturity, distribution by principal balance, distribution by contract rate and geographic distribution of the receivables in the pool described in this prospectus as of the Cut-off Date are set forth in the following tables.

 

79

Distribution by FICO^® Score

of the Receivables in the Pool as of the [Initial] [Statistical] Cut-off Date

[If the aggregate principal amount issued is $[●], the][The] distribution by FICO^® Score of the receivables in the pool as of the [initial] cut-off Date will be as follows:

 

Range of FICO® Scores		Number of Receivables		Aggregate Principal Balance		Percentage of Aggregate Principal Balance(1) (2)
Not available		[●]		[●]		[●]
Less than 600		[●]		[●]		[●]
600 – 624		[●]		[●]		[●]
625 – 649		[●]		[●]		[●]
650 – 674		[●]		[●]		[●]
675 – 699		[●]		[●]		[●]
700 – 724		[●]		[●]		[●]
Equal to or greater than 725		[●]		[●]		[●]
Total		[●]		[●]		100.00%

 

(1)	FICO® scores are reported on a monthly basis and presented as updated before the Cut-off Date.

(2)	May not add to 100.00% due to rounding.

[If the aggregate principal amount issued is $[●], the distribution by FICO^® Score of the receivables in the pool as of the [initial] cut-off Date will be as follows:]

 

Range of FICO® Scores		Number of Receivables		Aggregate Principal Balance		Percentage of Aggregate Principal Balance(1) (2)
Not available		[●]		[●]		[●]
Less than 600		[●]		[●]		[●]
600 – 624		[●]		[●]		[●]
625 – 649		[●]		[●]		[●]
650 – 674		[●]		[●]		[●]
675 – 699		[●]		[●]		[●]
700 – 724		[●]		[●]		[●]
Equal to or greater than 725		[●]		[●]		[●]
Total		[●]		[●]		100.00%

 

(1)	FICO® scores are reported on a monthly basis and presented as updated before the Cut-off Date.

(2)	May not add to 100.00% due to rounding.

 

80

Distribution by Original Term to Maturity

of the Receivables in the Pool as of the [Initial] [Statistical] Cut-off Date

[If the aggregate principal amount issued is $[●], the][The] distribution by original term to maturity of the receivables in the pool as of the [initial] cut-off Date will be as follows:

 

Range of Original Terms to Maturity (months)(1)		Number of Receivables		Aggregate Principal Balance		Percentage of Aggregate Principal Balance(2)
1 – 12		[●]		[●]		[●]
13 – 24		[●]		[●]		[●]
25 – 36		[●]		[●]		[●]
37 – 48		[●]		[●]		[●]
49 – 60		[●]		[●]		[●]
61 – 72		[●]		[●]		[●]
73 – 84		[●]		[●]		[●]
Total		[●]		[●]		100.00%

 

[(1)

The original term to maturity of the receivables may differ from the asset-level data included as an exhibit to Form ABS-EE due to differences in how the original term to maturity is calculated for the securitized pool and how original term to maturity is required to be calculated for asset-level data.]

(2)	May not add to 100.00% due to rounding.

[If the aggregate principal amount issued is $[●], the distribution by original term to maturity of the receivables in the pool as of the [initial] cut-off Date will be as follows:]

 

Range of Original Terms to Maturity (months)(1)		Number of Receivables		Aggregate Principal Balance		Percentage of Aggregate Principal Balance(2)
1 – 12		[●]		[●]		[●]
13 – 24		[●]		[●]		[●]
25 – 36		[●]		[●]		[●]
37 – 48		[●]		[●]		[●]
49 – 60		[●]		[●]		[●]
61 – 72		[●]		[●]		[●]
73 – 84		[●]		[●]		[●]
Total		[●]		[●]		100.00%

 

[(1)

The original term to maturity of the receivables may differ from the asset-level data included as an exhibit to Form ABS-EE due to differences in how the original term to maturity is calculated for the securitized pool and how original term to maturity is required to be calculated for asset-level data.]

(2)	May not add to 100.00% due to rounding.

 

81