================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

                         COMMISSION FILE NUMBER: 0-51027

                        CONSUMER PORTFOLIO SERVICES, INC.
             (Exact name of registrant as specified in its charter)


          California                                           33-0459135
(State or other jurisdiction of                               (IRS Employer
 incorporation or organization)                             Identification No.)

16355 Laguna Canyon Road, Irvine, California                      92618
  (Address of principal executive offices)                     (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 753-6800

FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT: N/A

Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer or a
non-accelerated filer. See definition of "accelerated filer and large
accelerated filer" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of October 18, 2006 the registrant had 21,703,507 common shares outstanding.
================================================================================





               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
                               INDEX TO FORM 10-Q
               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

                                                                            PAGE
                          PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

           Unaudited Condensed Consolidated Balance Sheets as of
             September 30, 2006 and December 31, 2005........................  3
           Unaudited Condensed Consolidated Statements of Operations
              for the three-month and nine-month periods ended
              September 30, 2006 and 2005 ...................................  4
           Unaudited Condensed Consolidated Statements of Cash Flows for
              the nine-month periods ended September 30, 2006 and 2005.......  5
           Notes to Unaudited Condensed Consolidated Financial Statements....  6

Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................... 15
Item 3.    Quantitative and Qualitative Disclosures About Market Risk........ 26
Item 4.    Controls and Procedures........................................... 27


                      PART II. OTHER INFORMATION

Item 1.    Legal Proceedings................................................. 27
Item 1A.   Risk factors...................................................... 27
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds....... 27
Item 6.    Exhibits.......................................................... 28
Signatures................................................................... 29
Certifications............................................................... 30


                                       2



ITEM 1. FINANCIAL STATEMENTS

                    CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
                      UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share and per share data)


                                                             September 30,    December 31,
                                                                 2006            2005
                                                              -----------     -----------
                                                                        
ASSETS
Cash and cash equivalents                                     $    15,302     $    17,789
Restricted cash and equivalents                                   197,074         157,662
Finance receivables                                             1,384,101         971,304
Less: Allowance for finance credit losses                         (78,808)        (57,728)
                                                              -----------     -----------
Finance receivables, net                                        1,305,293         913,576

Residual interest in securitizations                               17,847          25,220
Furniture and equipment, net                                          846           1,079
Deferred financing costs, net                                      11,235           8,596
Tax assets, net                                                    18,390           7,532
Accrued interest receivable                                        14,376          10,930
Other assets                                                       18,157          12,760
                                                              -----------     -----------
                                                              $ 1,598,520     $ 1,155,144
                                                              ===========     ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses                         $    22,015     $    19,568
Warehouse lines of credit                                          64,816          35,350
Notes payable                                                          89             211
Residual interest financing                                        24,243          43,745
Securitization trust debt                                       1,355,722         924,026
Senior secured debt, related party                                 40,000          40,000
Subordinated renewable notes                                        9,936           4,655
Subordinated debt                                                      --          14,000
                                                              -----------     -----------
                                                                1,516,821       1,081,555
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value;
   authorized 5,000,000 shares; none issued                            --              --
Series A preferred stock, $1 par value;
   authorized 5,000,000 shares;
   3,415,000 shares issued; none outstanding                           --              --
Common stock, no par value; authorized
   30,000,000 shares; 21,750,938 and 21,687,584
   shares issued and outstanding at September 30, 2006 and
   December 31, 2005, respectively                                 66,176          66,748
Additional paid in capital, warrants                                  794             794
Retained earnings                                                  17,158           8,476
Accumulated other comprehensive loss                               (2,429)         (2,429)
                                                              -----------     -----------
                                                                   81,699          73,589
                                                              -----------     -----------
                                                              $ 1,598,520     $ 1,155,144
                                                              ===========     ===========


     See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

                                             3




                 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
             UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                       (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                       Three Months Ended      Nine Months Ended
                                          September 30,          September 30,
                                      --------------------    --------------------

                                        2006        2005        2006        2005
                                      --------    --------    --------    --------
REVENUES:
Interest income                       $ 70,623    $ 45,321    $188,189    $122,015
Servicing fees                             633       1,432       2,436       5,492
Other income                             2,457       2,621       8,344      11,477
                                      --------    --------    --------    --------
                                        73,713      49,374     198,969     138,984
                                      --------    --------    --------    --------

EXPENSES:
Employee costs                           9,273       9,506      28,349      29,657
General and administrative               6,159       4,923      16,948      16,689
Interest                                23,649      11,585      61,469      30,142
Interest, related party                  1,426       1,925       3,943       5,700
Provision for credit losses             24,045      15,818      65,322      43,354
Marketing                                3,617       3,168      10,740       8,647
Occupancy                                1,075         858       2,920       2,490
Depreciation and amortization              204         193         596         601
                                      --------    --------    --------    --------
                                        69,448      47,976     190,287     137,280
                                      --------    --------    --------    --------
Income before income tax expense         4,265       1,398       8,682       1,704
Income tax expense                          --          --          --          --
                                      --------    --------    --------    --------
Net income                            $  4,265    $  1,398    $  8,682    $  1,704
                                      ========    ========    ========    ========

Earnings per share:
  Basic                               $   0.20    $   0.06    $   0.40    $   0.08
  Diluted                                 0.18        0.06        0.36        0.07

Number of shares used in computing
earnings per share:
  Basic                                 21,840      21,658      21,804      21,603
  Diluted                               23,850      23,419      24,139      23,435


  See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

                                         4



                    CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
                 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (IN THOUSANDS)

                                                                     Nine Months Ended
                                                                        September 30,
                                                                  -----------------------
                                                                    2006           2005
                                                                  ---------     ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                      $   8,682     $   1,704
  Adjustments to reconcile net income to net cash
     provided by operating activities:
  Amortization of deferred acquisition fees                          (8,632)       (8,169)
  Amortization of discount on Class B Notes                           1,897         1,115
  Depreciation and amortization                                         596           601
  Amortization of deferred financing costs                            4,385         2,673
  Provision for credit losses                                        65,322        43,354
  Deferred compensation                                                  --           150
  Releases of cash from Trusts to Company                            11,142        19,329
  Net deposits to Trusts to increase Spread Accounts                (20,259)       (5,131)
  Interest income on residual assets                                 (3,893)       (4,340)
  Cash received from residual interest in securitizations            11,266        24,714
  Impairment charge against non-auto finance receivable assets           --         1,882
  Changes in assets and liabilities:
     Payments on restructuring accrual                                 (595)       (1,068)
     Restricted cash and equivalents                                (30,295)      (41,537)
     Accrued interest receivable                                     (3,446)           --
     Other assets                                                    (5,499)       (3,818)
     Tax assets                                                     (10,858)       (1,932)
     Accounts payable and accrued expenses                            3,043         1,333
     Tax liabilities                                                     --        (2,978)
                                                                  ---------     ---------
        Net cash provided by operating activities                    22,856        27,882

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of finance receivables held for investment             (777,622)     (503,143)
  Proceeds received on finance receivables held for investment      329,214       202,009
  Purchase of furniture and equipment                                  (261)         (129)
                                                                  ---------     ---------
        Net cash used in investing activities                      (448,669)     (301,263)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of securitization trust debt               786,052       451,425
  Proceeds from issuance of subordinated renewable notes              5,725         3,041
  Payments on subordinated renewable notes                             (443)           --
  Net proceeds from warehouse lines of credit                        29,466        35,355
  Repayment of residual interest financing debt                     (19,503)      (22,204)
  Repayment of securitization trust debt                           (356,252)     (191,237)
  Repayment of subordinated debt                                    (14,000)       (1,000)
  Repayment of notes payable                                           (123)       (1,171)
  Payment of financing costs                                         (7,024)       (3,740)
  Repurchase of common stock                                         (2,508)         (546)
  Tax benefit from exercise of stock options                            634            --
  Exercise of options and warrants                                    1,302           671
                                                                  ---------     ---------
        Net cash provided by financing activities                   423,326       270,594
                                                                  ---------     ---------
Decrease in cash                                                     (2,487)       (2,787)

Cash at beginning of period                                          17,789        14,366
                                                                  ---------     ---------
Cash at end of period                                             $  15,302     $  11,579
                                                                  =========     =========

Supplemental disclosure of cash flow information:
  Cash paid during the period for:
     Interest                                                     $  57,943     $  31,000
     Income taxes                                                 $  10,110     $   4,910


     See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

                                            5




               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Consumer Portfolio Services, Inc. ("CPS") was incorporated in California on
March 8, 1991. CPS and its subsidiaries (collectively, the "Company") specialize
primarily in purchasing and servicing retail automobile installment sale
contracts ("automobile contracts" or "finance receivables") originated by
licensed motor vehicle dealers located throughout the United States ("Dealers")
in the sale of new and used automobiles, light trucks and passenger vans.
Through its purchases, the Company provides indirect financing to Dealer
customers for borrowers with limited credit histories, low incomes or past
credit problems ("sub-prime customers"). The Company serves as an alternative
source of financing for Dealers, allowing sales to customers who otherwise might
not be able to obtain financing. The Company does not currently lend money
directly to consumers. Rather, it purchases installment automobile contracts
from Dealers based on its financing programs (the "CPS programs").

BASIS OF PRESENTATION

The Unaudited Condensed Consolidated Financial Statements of the Company have
been prepared in conformity with accounting principles generally accepted in the
United States of America, with the instructions to Form 10-Q and with Article 10
of Regulation S-X of the Securities and Exchange Commission, and include all
adjustments that are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All such
adjustments are, in the opinion of management, of a normal recurring nature. In
addition, certain items in prior period financial statements may have been
reclassified for comparability to current period presentation. Results for the
nine-month period ended September 30, 2006 are not necessarily indicative of the
operating results to be expected for the full year.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted from these
Unaudited Condensed Consolidated Financial Statements. These Unaudited Condensed
Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2005.

OTHER INCOME

Other Income consists primarily of recoveries on previously charged off CPS and
MFN contracts and fees paid to the Company by Dealers for certain direct mail
services the Company provides. The recoveries on the charged-off CPS and MFN
contracts were $3.4 million and $4.0 million for the nine months ended September
30, 2006 and 2005, respectively. The direct mail revenues were $2.9 million and
$3.5 million for the same periods in 2006 and 2005, respectively. Other Income
for the nine months ended September 30, 2005 also included proceeds from sales
of deficiency balances to independent third parties in the amount of $2.4
million.

STOCK-BASED COMPENSATION

Effective January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123(R), "Share-Based Payment, revised 2004" ("SFAS 123R"),
prospectively for all option awards granted, modified or settled after January
1, 2006, using the modified prospective method. Under this method, the Company
recognizes compensation costs in the financial statements for all share-based
payments granted subsequent to January 1, 2006 based on the grant date fair
value estimated in accordance with the provisions of SFAS 123(R). Results for
prior periods have not been restated.

For the three and nine months ended September 30, 2006, the Company recorded no
stock-based compensation costs as there were no option awards granted during the
three-month and nine-month periods ended September 30, 2006 and there was no
vesting of option awards for options granted prior to January 1, 2006 since all
options outstanding as of December 31, 2005 were fully vested at that time. As
of September 30, 2006, there are no unrecognized stock-based compensation costs
to be recognized over future periods.


                                       6


               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following represents stock option activity for the nine months ended
September 30, 2006:


                                                                                                 WEIGHTED
                                                          NUMBER OF            WEIGHTED          AVERAGE
                                                            SHARES             AVERAGE           REMAINING
                                                        (IN THOUSANDS)      EXERCISE PRICE    CONTRACTUAL TERM
                                                        --------------      --------------     --------------
                                                                                        
Options outstanding at the beginning of period ....              4,864      $         3.38          N/A
   Granted ........................................                 --                  --          N/A
   Exercised ......................................               (459)               2.78          N/A
   Forefeited .....................................                (14)               5.22          N/A
                                                        --------------      --------------     --------------
Options outstanding at the end of period ..........              4,391      $         3.43       6.80 years
                                                        ==============      ==============     ==============

Options exercisable at the end of period ..........              4,391      $         3.43       6.80 years
                                                        ==============      ==============     ==============


At September 30, 2006 the aggregate intrinsic value of options outstanding and
exercisable was $10.3 million. The total intrinsic value of options exercised
was $1.8 million and $936,000 for the nine months ended September 30, 2006 and
2005, respectively. New shares were issued for all options exercised during the
nine-month periods ended September 30, 2006 and 2005. There were 1.6 million
shares available for future stock option grants under existing plans as of
September 30, 2006, including 1.5 million shares that are available under the
Company's 2006 Long-Term Equity Incentive Plan, which was approved at the
Company's annual meeting of shareholders held on June 15, 2006.

The 2006 Long-Term Equity Incentive Plan permits the grant of the following
awards: nonqualified stock options, incentive stock options, restricted stock,
restricted stock units or stock appreciation rights. Option awards are generally
granted with an exercise price equal to the market price of the Company's stock
at the date of grant. The option awards generally vest over a five-year period
of continued employment and expire ten years after grant. In the event of a
change of control of the Company, option awards may become fully vested and
immediately exercisable.

Prior to January 1, 2006, as was permitted by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
the Company accounted for stock-based employee compensation plans in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations, under which stock options are recorded
at intrinsic value equal to the excess of the share price over the exercise
price at the date of grant. The Company provided the pro forma net income
(loss), pro forma earnings (loss) per share, and stock based compensation plan
disclosure requirements set forth in SFAS No. 123. The Company accounted for
repriced options as variable awards.

Compensation cost was recognized for certain stock options in the Unaudited
Condensed Consolidated Financial Statements in accordance with APB Opinion No.
25. Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123 the Company's net income and
net income per share would have decreased to the pro forma amounts indicated
below.


                                       7


               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                                             THREE MONTHS ENDED     NINE MONTHS ENDED
                                                                SEPTEMBER 30,         SEPTEMBER 30,
                                                               ---------------       ---------------
                                                                     2005                  2005
                                                               ---------------       ---------------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                               
Net income, as reported ..................................     $         1,398       $         1,704
Stock-based employee compensation expense,
  fair value method, net of tax ..........................                (265)                 (845)
Previously recorded stock-based employee compensation
  expense, intrinsic value method, net of tax ............                  33                    87
                                                               ---------------       ---------------

Pro forma net income .....................................     $         1,166       $           946
                                                               ===============       ===============
Net income per share
Basic, as reported........................................     $          0.06       $          0.08
Diluted, as reported .....................................     $          0.06       $          0.07

Pro forma Basic ..........................................     $          0.05       $          0.04
Pro forma Diluted ........................................     $          0.05       $          0.04


The Company uses the Black-Scholes option valuation model to estimate the fair
value of each option on the date of grant, using the assumptions noted in the
following table. The Company did not disclose assumptions for the nine months
ended September 30, 2006 because there were no options granted in the period.
The expected term of options granted is derived from historical data on employee
exercise and post-vesting termination behavior. The risk-free rate is based on
U.S. Treasury instruments in effect at the time of grant whose terms are
consistent with the expected term of the Company's stock options. Expected
volatility is based on historical volatility of the Company's stock. The
dividend yield is based on historical experience and the lack of any expected
future changes.

                                    NINE MONTHS ENDED
                                      SEPTEMBER 30,
                                    -----------------
                                          2005
                                    -----------------
Risk-free interest rate .........         4.18%
Expected term, in years .........           6.5
Expected volatility .............        52.14%
Dividend yield ..................            0%


PURCHASES OF COMPANY STOCK

During the nine-month periods ended September 30, 2006 and 2005, the Company
purchased 395,356 and 115,753 shares, respectively, of its common stock, at
average prices of $6.34 and $4.72, respectively.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" (FIN 48). FIN 48 clarifies the accounting and
reporting for income taxes recognized in accordance with SFAS 109, "Accounting
for Income Taxes". This interpretation prescribes a comprehensive model for the
financial statement recognition, measurement, presentation and disclosure of
uncertain tax positions taken or expected to be taken in income tax returns. The
Company is currently evaluating the impact of FIN 48. The Company will adopt
this Interpretation in the first quarter of 2007.

In March 2006, the FASB issued FASB Statement No. 156, "Accounting for the
Servicing of Financial Assets an Amendment to FASB Statement No. 140" (FAS 156).
With respect to the accounting for separately recognized servicing assets and
servicing liabilities, this statement: (1) requires an entity to recognize a
servicing asset or servicing liability each time it undertakes an obligation to
service a financial asset by entering into a specific types of servicing


                                       8


               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


contracts identified in the statement, (2) requires that all separately
recognized servicing assets and servicing liabilities be initially measured at
fair value, if practicable, (3) permits an entity to choose subsequent
measurement methods for each class of separately recognized servicing assets and
servicing liabilities, (4) permits a one-time reclassification of
available-for-sale securities to trading securities by entities with recognized
servicing rights at the initial adoption of this statement, and (5) requires a
separate presentation of servicing assets and servicing liabilities subsequently
measured at fair value in the statement of financial position and additional
disclosures for all separately recognized servicing assets and servicing
liabilities. FAS 156 will be effective for the Company on January 1, 2007. The
Company is currently in the process of evaluating the effects of this Standard,
but does not believe it will have a significant effect on its financial position
or results of operations.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 clarifies the principle that fair value should be
based on the assumptions market participants would use when pricing an asset or
liability and establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions. Under the standard, fair value
measurements would be separately disclosed by level within the fair value
hierarchy. SFAS 157 is effective for the Company on January 1, 2007, with early
adoption permitted. The Company is in the process of evaluating SFAS No. 157.

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB
Statements No. 87, 88, 106 and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires
an employer that sponsors one or more single-employer defined benefit plans to
(a) recognize the overfunded or underfunded status of a benefit plan in its
statement of financial position, (b) recognize as a component of other
comprehensive income, net of tax, the gains or losses and prior service costs or
credits that arise during the period but are not recognized as components of net
periodic benefit cost pursuant to SFAS No. 87, "Employers' Accounting for
Pensions", or SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions", (c) measure defined benefit plan assets and obligations as
of the date of the employer's fiscal year-end, and (d) disclose in the notes to
financial statements additional information about certain effects on net
periodic benefit cost for the next fiscal year that arise from delayed
recognition of the gains or losses, prior service costs or credits, and
transition asset or obligation. SFAS No. 158 is effective for the Company
beginning with the year ended December 31, 2006, with early adoption encouraged.
The Company is in the process of evaluating SFAS No. 158.


(2) FINANCE RECEIVABLES

The following table presents the components of Finance Receivables, net of
unearned interest and deferred acquisition fees and originations costs:


                                                                    SEPTEMBER 30,       DECEMBER 31,
                                                                        2006                2005
                                                                    -------------      -------------
                                                                             (IN THOUSANDS)
                                                                                 
Finance Receivables
  Automobile
    Simple Interest ...........................................     $   1,369,424      $     933,510
    Pre-compute, net of unearned interest .....................            35,591             54,693
                                                                    -------------      -------------

    Finance Receivables, net of unearned interest .............         1,405,015            988,203
    Less: Unearned acquisition fees and originations costs ....           (20,914)           (16,899)
                                                                    -------------      -------------
    Finance Receivables .......................................     $   1,384,101      $     971,304
                                                                    =============      =============



                                       9


               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following table presents a summary of the activity for the allowance for
credit losses for the nine-month periods ended September 30, 2006 and 2005:


                                                            SEPTEMBER 30,      SEPTEMBER 30,
                                                                2006               2005
                                                            ------------       ------------
                                                                    (IN THOUSANDS)
                                                                         
Balance at beginning of period ........................     $     57,728       $     42,615
Provision for credit losses on finance receivables ....           65,322             42,472
Charge offs ...........................................          (57,738)           (37,456)
Recoveries ............................................           13,496              8,497
                                                            ------------       ------------
Balance at end of period ..............................     $     78,808       $     56,128
                                                            ============       ============


(3) RESIDUAL INTEREST IN SECURITIZATIONS

The residual interest in securitizations represents the discounted sum of
expected future cash flows from securitization trusts held by non-consolidated
subsidiaries and certain cash flows of receivables from terminated trusts. The
following table presents the components of the residual interest in
securitizations, which are shown at their discounted amounts:

                                                                      SEPTEMBER 30,        DECEMBER 31,
                                                                          2006                2005
                                                                     ---------------     ---------------
                                                                               (IN THOUSANDS)
Cash, commercial paper, United States government securities
  and other qualifying investments (Spread Accounts) ...........     $        12,540     $        12,748
Receivables from trusts (NIRs) and other cash flows  ...........               1,657               5,798
Overcollateralization ..........................................               3,650               6,674
                                                                     ---------------     ---------------

Residual interest in securitizations ...........................     $        17,847     $        25,220
                                                                     ===============     ===============

The following table presents estimated remaining undiscounted credit losses
included in the fair value estimate of the Residuals as a percentage of the
Company's managed portfolio held by non-consolidated subsidiaries subject to
recourse provisions:

                                                                         SEPTEMBER 30,         DECEMBER 31,
                                                                             2006                  2005
                                                                       ----------------      ----------------
                                                                 (DOLLARS IN THOUSANDS)

Undiscounted estimated credit losses .............................     $            953      $          5,724
Managed portfolio held by non-consolidated subsidiaries ..........               50,618               103,130
Undiscounted estimated credit losses as percentage of managed
  portfolio held by non-consolidated subsidiaries ................                 1.9%                  5.6%

The key economic assumptions used in measuring all residual interest in
securitizations as of September 30, 2006 and December 31, 2005 are included in
the table below. The pre-tax discount rate remained constant from previous
periods at 14%, except for certain cash flows from charged off receivables
related to the Company's securitizations from 2001 to 2003, for which the
Company has used a discount rate of 25%, which is also consistent with previous
periods.

                                                       SEPTEMBER 30,      DECEMBER 31,
                                                           2006              2005
                                                      ---------------   ---------------
Prepayment speed (Cumulative).....................     22.3% - 34.7%     22.2% - 35.8%
Net credit losses (Cumulative)....................     11.4% - 14.7%     11.9% - 20.2%


                                       10


               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(4) SECURITIZATION TRUST DEBT

The Company has completed a number of securitization transactions that are
structured as secured borrowings for financial accounting purposes. The debt
issued in these transactions is shown on the Company's Unaudited Condensed
Consolidated Balance Sheets as "Securitization trust debt," and the components
of such debt are summarized in the following table:


     
                                                                                                      WEIGHTED
                       FINAL           RECEIVABLES                   OUTSTANDING     OUTSTANDING       AVERAGE
                     SCHEDULED         PLEDGED AT                    PRINCIPAL AT    PRINCIPAL AT  INTEREST RATE AT
                      PAYMENT         SEPTEMBER 30,     INITIAL      SEPTEMBER 30,   DECEMBER 31,   SEPTEMBER 30,
    SERIES            DATE (1)            2006         PRINCIPAL         2006            2005            2006
--------------    ----------------    -------------   ------------   -------------   ------------   --------------

TFC 2003-1            January 2009    $       2,684   $     52,365   $       2,348   $      6,557            2.69%
CPS 2003-C              March 2010           18,753         87,500          18,115         30,550            3.57%
CPS 2003-D            October 2010           19,060         75,000          18,168         29,688            3.91%
CPS 2004-A            October 2010           25,283         82,094          25,364         40,225            4.21%
PCR 2004-1              March 2010           13,237         76,257          10,660         22,873            4.00%
CPS 2004-B           February 2011           34,253         96,369          34,290         52,704            4.17%
CPS 2004-C              April 2011           41,260        100,000          41,225         61,779            4.11%
CPS 2004-D           December 2011           55,704        120,000          54,741         82,801            4.44%
CPS 2005-A            October 2011           75,674        137,500          72,829        110,021            5.19%
CPS 2005-B           February 2012           86,268        130,625          82,421        113,194            4.69%
CPS 2005-C              March 2012          139,203        183,300         134,732        173,509            5.11%
CPS 2005-TFC             July 2012           56,078         72,525          52,691         72,525            5.75%
CPS 2005-D               July 2012          115,802        145,000         112,695        127,600            5.63%
CPS 2006-A           November 2012          217,002        245,000         216,112              -            5.26%
CPS 2006-B            January 2013          244,959        257,500         243,159              -            6.24%
CPS 2006-C (2)           June 2013          170,809        247,500         236,172              -            5.49%

                                      -------------   ------------   -------------   ------------
                                      $   1,316,029   $  2,108,535   $   1,355,722   $    924,026
                                      =============   ============   =============   ============

__________________
(1)  THE FINAL SCHEDULED PAYMENT DATE REPRESENTS FINAL LEGAL MATURITY OF THE
     SECURITIZATION TRUST DEBT. SECURITIZATION TRUST DEBT IS EXPECTED TO BECOME
     DUE AND TO BE PAID PRIOR TO THOSE DATES, BASED ON AMORTIZATION OF THE
     FINANCE RECEIVABLES PLEDGED TO THE TRUSTS. EXPECTED PAYMENTS, WHICH WILL
     DEPEND ON THE PERFORMANCE OF SUCH RECEIVABLES, AS TO WHICH THERE CAN BE NO
     ASSURANCE, ARE $120.7 MILLION IN 2006, $408.9 MILLION IN 2007, $307.3
     MILLION IN 2008, $230.7 MILLION IN 2009, $163.9 MILLION IN 2010, $102.8
     MILLION IN 2011 AND $21.3 MILLION IN 2012.
(2)  RECEIVABLES PLEDGED AT SEPTEMBER 30, 2006 EXCLUDES APPROXIMATELY $75.3
     MILLION IN AUTOMOBILE CONTRACTS DELIVERED TO THIS TRUST IN OCTOBER 2006
     PURSUANT TO A PRE-FUNDING STRUCTURE.

All of the securitization trust debt was sold in private placement transactions
to qualified institutional buyers. The debt was issued through wholly-owned
bankruptcy remote subsidiaries of CPS, TFC or MFN, and is secured by the assets
of such subsidiaries, but not by other assets of the Company. Principal of $1.2
billion, and the related interest payments, are guaranteed by financial guaranty
insurance policies issued by third party financial institutions.

The terms of the various Securitization Agreements related to the issuance of
the securitization trust debt and the warehouse credit facilities require that
certain delinquency and credit loss criteria be met with respect to the
collateral pool, and require that the Company maintain minimum levels of
liquidity and net worth and not exceed maximum leverage levels and maximum
financial losses. In addition, certain securitization and non-securitization
related debt contain cross-default provisions, which would allow certain
creditors to declare a default if a default were declared under a different
facility. As of September 30, 2006, the Company was in compliance with all such
financial covenants.


                                       11


               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The Company is responsible for the administration and collection of the
automobile contracts. The Securitization Agreements also require certain funds
be held in restricted cash accounts to provide additional collateral for the
borrowings, to purchase retail installment contracts that the securitization
trust has committed to buy, or to be applied to make payments on the
securitization trust debt. As of September 30, 2006, restricted cash under the
various agreements totaled approximately $197.1 million. That figure includes
$75.3 million held by our CPS 2006-C securitization trust which was used to
purchase additional automobile contracts in October 2006. Interest expense on
the securitization trust debt is composed of the stated rate of interest plus
amortization of additional costs of borrowing. Additional costs of borrowing
include facility fees, insurance and amortization of deferred financing costs
and discounts on subordinated notes. Deferred financing costs and discounts on
subordinated notes related to the securitization trust debt are amortized using
a level yield method. Accordingly, the effective cost of borrowing of the
securitization trust debt is greater than the stated rate of interest.

The wholly-owned, bankruptcy remote subsidiaries of CPS and TFC were formed to
facilitate the above asset-backed financing transactions. Similar bankruptcy
remote subsidiaries issue the debt outstanding under the Company's warehouse
lines of credit. Bankruptcy remote refers to a legal structure in which it is
expected that the applicable entity would not be included in any bankruptcy
filing by its parent or affiliates. All of the assets of these subsidiaries have
been pledged as collateral for the related debt. All such transactions, treated
as secured financings for accounting and tax purposes, are treated as sales for
all other purposes, including legal and bankruptcy purposes. None of the assets
of these subsidiaries are available to pay other creditors of the Company or its
affiliates.

(5) INTEREST INCOME

The following table presents the components of interest income:


                                                        THREE MONTHS ENDED               NINE MONTHS ENDED
                                                           SEPTEMBER 30,                    SEPTEMBER 30,
                                                  -----------------------------     -----------------------------
                                                      2006             2005             2006             2005
                                                  ------------     ------------     ------------     ------------
                                                                                         
Interest on Finance Receivables..............     $     67,128     $     43,399     $    179,875     $    115,823
Residual interest income ....................            1,729            1,180            3,893            4,340
Other interest income .......................            1,766              742            4,421            1,852
                                                  ------------     ------------     ------------     ------------

Net interest income .........................     $     70,623     $     45,321     $    188,189     $    122,015
                                                  ============     ============     ============     ============


(6) EARNINGS PER SHARE

Earnings per share for the three-month and nine-month periods ended September
30, 2006 and 2005 were calculated using the weighted average number of shares
outstanding for the related period. The following table reconciles the number of
shares used in the computations of basic and diluted earnings per share for the
three-month and nine-month periods ended September 30, 2006 and 2005:

                                                                         THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                            SEPTEMBER 30,                  SEPTEMBER 30,
                                                                     --------------------------     -------------------------
                                                                        2006            2005           2006           2005
                                                                     ----------      ----------     ----------     ----------
                                                                           (IN THOUSANDS)                (IN THOUSANDS)

Weighted average number of common shares outstanding during
   the period used to compute basic earnings per share .........         21,840          21,658         21,804         21,603
Incremental common shares attributable to exercise of
   outstanding options and warrants ............................          2,010           1,761          2,335          1,832
                                                                     ----------      ----------     ----------     ----------

Weighted average number of common shares used to compute
   diluted earnings per share ..................................         23,850          23,419         24,139         23,435
                                                                     ==========      ==========     ==========     ==========


                                                           12


               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(7) INCOME TAXES

As of December 31, 2005, the Company had net deferred tax assets of $7.5
million, which included a valuation allowance of $43.7 million against gross
deferred tax assets of $53.1 million. There were also offsetting gross deferred
tax liabilities of $1.8 million. Net tax assets at September 30, 2006 were $18.4
million. The Company decreased its valuation allowance by the income tax expense
for the period to result in no net income tax provision for the three and
nine-month periods ended September 30, 2006. The Company has evaluated its
deferred tax assets and believes that it is more likely than not that certain
deferred tax assets will not be realized due to limitations imposed by the
Internal Revenue Code and expected future taxable income.

(8) LEGAL PROCEEDINGS

STANWICH LITIGATION. CPS was for some time a defendant in a class action (the
"Stanwich Case") brought in the California Superior Court, Los Angeles County.
The original plaintiffs in that case were persons entitled to receive regular
payments (the "Settlement Payments") under out-of-court settlements reached with
third party defendants. Stanwich Financial Services Corp. ("Stanwich"), an
affiliate of the former chairman of the board of directors of CPS, is the entity
that was obligated to pay the Settlement Payments. Stanwich has defaulted on its
payment obligations to the plaintiffs and in September 2001 filed for
reorganization under the Bankruptcy Code, in the federal Bankruptcy Court of
Connecticut. At December 31, 2004, CPS was a defendant only in a cross-claim
brought by one of the other defendants in the case, Bankers Trust Company, which
asserted a claim of contractual indemnity against CPS.

CPS subsequently settled the cross-claim of Bankers Trust by payment of $3.24
million, on or about February 8, 2005. Pursuant to that settlement, the court
has dismissed the cross-claim, with prejudice. The amount paid by the Company
was accrued for and included in Accounts payable and accrued expenses in the
Company's balance sheet as of December 31, 2004.

In November 2001, one of the defendants in the Stanwich Case, Jonathan Pardee,
asserted claims for indemnity against the Company in a separate action, which is
now pending in federal district court in Rhode Island. The Company has filed
counterclaims in the Rhode Island federal court against Mr. Pardee, and has
filed a separate action against Mr. Pardee's Rhode Island attorneys, in the same
court. The action of Mr. Pardee against CPS is stayed, awaiting resolution of an
adversary action brought against Mr. Pardee in the bankruptcy court, which is
hearing the bankruptcy of Stanwich.

The reader should consider that any adverse judgment against CPS in the Stanwich
Case (or the related case in Rhode Island) for indemnification, in an amount
materially in excess of any liability already recorded in respect thereof, could
have a material adverse effect on the Company's financial position.

OTHER LITIGATION. On June 2, 2004, Delmar Coleman filed a lawsuit in the circuit
court of Tuscaloosa, Alabama, alleging that plaintiff Coleman was harmed by an
alleged failure to refer, in the notice given after repossession of her vehicle,
to the right to purchase the vehicle by tender of the full amount owed under the
retail installment contract. Plaintiff seeks damages in an unspecified amount,
on behalf of a purported nationwide class. CPS removed the case to federal
bankruptcy court, and filed a motion for summary judgment as part of its
adversary proceeding against the plaintiff in the bankruptcy court. The federal
bankruptcy court granted the plaintiff's motion to send the matter back to
Alabama state court. CPS appealed the ruling, and the federal district court, in
which the appeal was heard, has since ordered the bankruptcy court to decide
whether the plaintiff has standing to pursue her claims, and, if standing is
found, to reconsider its remand decision. The matter is currently pending before
the bankruptcy court. Although CPS believes that it has one or more defenses to
each of the claims made in this lawsuit, no discovery has yet been conducted and
the case remains in its earliest stages. Accordingly, there can be no assurance
as to its outcome.

In June 2004, Plaintiff Jeremy Henry filed a lawsuit against the Company in the
California Superior Court, San Diego County, alleging improper practices related
to the notice given after repossession of a vehicle that he purchased.
Plaintiff's motion for a certification of a class has been denied, and is the
subject of an appeal now before the California Court of Appeal. Irrespective of
the outcome of that appeal, as to which there can be no assurance, the Company
has a number of defenses that may be asserted with respect to the claims of
plaintiff Henry.


                                       13


               CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


In August and September 2005, two plaintiffs represented by the same law firm
filed substantially identical lawsuits in the federal district court for the
northern district of Illinois, each of which purports to be a class action, and
each of which alleges that CPS improperly accessed consumer credit information.
CPS has reached agreements in principle to settle these cases, which await
confirmation by the court.

The Company has recorded a liability as of September 30, 2006 that it believes
represents a sufficient allowance for legal contingencies, including those
described above. Any adverse judgment against the Company, if in an amount
materially in excess of the recorded liability, could have a material adverse
effect on the financial position of the Company.

The Company is routinely involved in various legal proceedings resulting from
its consumer finance activities and practices, both continuing and discontinued.
The Company believes that there are substantive legal defenses to such claims,
and intends to defend them vigorously. There can be no assurance, however, as to
the outcome.


(9) EMPLOYEE BENEFITS

The Company sponsors the MFN Financial Corporation Benefit Plan ("the Plan").
Plan benefits were frozen September 30, 2001. The table below sets forth the
Plan's net periodic benefit cost for the three-month and nine-month periods
ended September 30, 2006 and 2005.


                                                                    THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                                       SEPTEMBER 30,                         SEPTEMBER 30,
                                                                 2006               2005               2006                2005
                                                             -------------      -------------      -------------      -------------
                                                                                                          
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost ............................................    $          --      $          --      $          --      $          --
Interest Cost ...........................................              219                210                657                630
Expected return on assets ...............................             (287)              (276)               861)              (828)
Amortization of transition (asset)/obligation............               (3)                (9)                (8)               (26)
Amortization of net (gain) / loss .......................               42                 27                124                 81
                                                             -------------      -------------      -------------      -------------
   Net periodic benefit cost ............................    $         (29)     $         (48)     $         (88)     $        (143)
                                                             =============      =============      =============      =============

The Company made contributions to the Plan in the amounts of $600,000 and
$207,000 for the nine months ended September 30, 2006 and 2005, respectively.
The Company previously disclosed in its Financial Statements for the year ended
December 31, 2005 that they did not anticipate making any contributions to the
plan during 2006. The Company presently anticipates that no additional
contributions will be made during the remainder of 2006.

(10) COMPREHENSIVE INCOME

The components of comprehensive income are as follows:

                                                           THREE MONTHS ENDED                      NINE MONTHS ENDED
                                                              SEPTEMBER 30,                           SEPTEMBER 30,
                                                        2006                2005                2006                2005
                                                   ---------------     ---------------     ---------------     ---------------
Net income ...................................     $         4,265     $         1,398     $         8,682     $         1,704
Minimum pension liability, net of tax.........                  --                  --                  --                (185)
                                                   ---------------     ---------------     ---------------     ---------------
   Comprehensive income ......................     $         4,265     $         1,398     $         8,682     $         1,519
                                                   ===============     ===============     ===============     ===============


                                       14


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

We are a specialty finance company engaged in purchasing and servicing new and
used retail automobile contracts originated primarily by franchised automobile
dealerships and to a lesser extent by select independent dealers of used
automobiles in the United States. We serve as an alternative source of financing
for dealers, facilitating sales to sub-prime customers, who have limited credit
history, low income or past credit problems and who otherwise might not be able
to obtain financing from traditional sources. We do not currently lend money
directly to consumers but, rather, purchase automobile contracts from dealers
under several different financing programs. We are headquartered in Irvine,
California and have three additional strategically located servicing branches in
Virginia, Florida and Illinois.

On March 8, 2002, we acquired MFN Financial Corporation and its subsidiaries in
a merger. On May 20, 2003, we acquired TFC Enterprises, Inc. and its
subsidiaries in a second merger. Each merger was accounted for as a purchase.
MFN Financial Corporation and its subsidiaries and TFC Enterprises, Inc. and its
subsidiaries were engaged in businesses similar to ours: buying automobile
contracts from dealers and servicing those automobile contracts. MFN Financial
Corporation and its subsidiaries ceased acquiring automobile contracts in May
2002; TFC continues to acquire automobile contracts under its "TFC programs,"
which provide financing for vehicle purchases exclusively by members of the
United States Armed Forces.

On April 2, 2004, we purchased a portfolio of automobile contracts and certain
other assets from SeaWest Financial Corporation and its subsidiaries. In
addition, we were named the successor servicer of three term securitization
transactions originally sponsored by SeaWest. We do not intend to offer
financing programs similar to those previously offered by SeaWest.

>From inception through June 2003, we generated revenue primarily from the gains
recognized on the sale or securitization of automobile contracts, servicing fees
earned on automobile contracts sold, interest earned on residual interests
retained in securitizations, and interest earned on finance receivables. Since
July 2003, we have not recognized any gains from the sale of automobile
contracts. Instead, since July 2003 our revenues have been derived from
servicing fees and interest earned on residual interests in securitizations (for
automobile contracts purchased prior to July 2003) and interest on finance
receivables (for automobile contracts purchased since July 2003).

SECURITIZATION AND WAREHOUSE CREDIT FACILITIES

GENERALLY

Throughout the periods for which information is presented in this report, we
have purchased automobile contracts with the intention of financing them on a
long-term basis through securitizations, and on an interim basis through our
warehouse credit facilities. All such financings have involved identification of
specific automobile contracts, sale of those automobile contracts (and
associated rights) to one of our special-purpose subsidiaries, and issuance of
asset-backed securities to fund the transactions. Depending on the structure,
these transactions may properly be accounted for under generally accepted
accounting principles as sales of the automobile contracts or as secured
financings.

When structured to be treated as a secured financing for accounting purposes,
the subsidiary is consolidated with us. Accordingly, the sold automobile
contracts and the related debt appear as assets and liabilities, respectively,
on our consolidated balance sheet. We then periodically (i) recognize interest
and fee income on the contracts, (ii) recognize interest expense on the
securities issued in the transaction and (iii) record as expense a provision for
credit losses on the contracts.

When structured to be treated as a sale for accounting purposes, the assets and
liabilities of the special-purpose subsidiary are not consolidated with us.
Accordingly, the transaction removes the sold automobile contracts from our
consolidated balance sheet, the related debt does not appear as our debt, and
our consolidated balance sheet shows, as an asset, a retained residual interest
in the sold automobile contracts. The residual interest represents the
discounted value of what we expect will be the excess of future collections on
the automobile contracts over principal and interest due on the asset-backed
securities. That residual interest appears on our consolidated balance sheet as
"residual interest in securitizations," and the determination of its value is
dependent on our estimates of the future performance of the sold automobile
contracts.


                                       15


CHANGE IN POLICY

Beginning in the third quarter of 2003, we began to structure our securitization
transactions so that they would be treated for financial accounting purposes as
secured financings, rather than as sales. All subsequent securitizations of
automobile contracts have been so structured. Prior to the third quarter of
2003, we had structured our securitization transactions to be treated as sales
of automobile contracts for financial accounting purposes. In our acquisitions
of MFN and TFC, we acquired automobile contracts that these companies had
previously securitized in securitization transactions that were treated as
secured financings for financial accounting purposes. As of September 30, 2006,
our consolidated balance sheet included net finance receivables of $3.0 million
and securitization trust debt of $2.3 million related to automobile contracts
acquired in the two mergers, out of totals of net finance receivables of
$1,305.3 million and securitization trust debt of $1,355.7 million.

CREDIT RISK RETAINED

Whether a sale of automobile contracts in connection with a securitization or
warehouse credit facility is treated as a secured financing or as a sale for
financial accounting purposes, the related special-purpose subsidiary may be
unable to release excess cash to us if the credit performance of the related
automobile contracts falls short of pre-determined standards. Such releases
represent a material portion of the cash that we use to fund our operations. An
unexpected deterioration in the performance of such automobile contracts could
therefore have a material adverse effect on both our liquidity and our results
of operations, regardless of whether such automobile contracts are treated for
financial accounting purposes as having been sold or as having been financed.
For estimation of the magnitude of such risk, it may be appropriate to look to
the size of our "managed portfolio," which represents both financed and sold
automobile contracts as to which such credit risk is retained. Our managed
portfolio as of September 30, 2006 was approximately $1,480.7 million (this
amount includes $5.9 million of automobile contracts securitized by SeaWest, on
which we earn only servicing fees and have no credit risk).

RESULTS OF OPERATIONS

EFFECTS OF CHANGE IN SECURITIZATION STRUCTURE

Our decision in the third quarter 2003 to structure securitization transactions
as secured financings for financial accounting purposes, rather than as sales,
has affected and will affect the way in which the transactions are reported. The
major effects are these: (i) the automobile contracts are shown as assets on our
balance sheet; (ii) the debt issued in the transactions is shown as
indebtedness; (iii) cash deposited in the spread accounts to enhance the credit
of the securitization transactions is shown as "Restricted cash and equivalents"
on our balance sheet; (iv) cash collected from automobile purchasers and other
sources related to the automobile contracts prior to making the required
payments under the securitization agreements is also shown as "Restricted cash
and equivalents" on our balance sheet; (v) the servicing fee that we receive in
connection with such contracts is recorded as a portion of the interest earned
on such contracts in our statements of operations; (vi) we have initially and
periodically recorded as expense a provision for estimated credit losses on the
contracts in our statements of operations; and (vii) portions of scheduled
payments on the contracts and on the debt issued in the transactions
representing interest are recorded as interest income and expense, respectively,
in our statements of operations.

These changes collectively represent a deferral of revenue and acceleration of
expenses, and thus a more conservative approach to accounting for our operations
compared to the previous securitization transactions, which were accounted for
as sales at the consummation of the transaction. As a result of the changes, we
initially reported lower earnings than we would have reported if we had
continued to structure our transactions to require recognition of gain on sale.
It should also be noted that growth in our portfolio of receivables resulted in
an increase in expenses in the form of provision for credit losses, and
initially had a negative effect on net earnings. Our cash availability and cash
requirements should be unaffected by the change in structure.


                                       16


Since the third quarter 2003, we have conducted 17 term securitizations. Of
these 17, 13 were quarterly securitizations of automobile contracts that we
purchased from automobile dealers under our regular programs. In addition, in
March 2004 and November 2005, we completed securitizations of our retained
interests in other securitizations that we and our affiliates previously
sponsored. We repaid the debt from the March 2004 transaction in August 2005.
Also, in June 2004, we completed a securitization of automobile contracts
purchased in the SeaWest asset acquisition and under our TFC programs. Further,
in December 2005, we completed a securitization that included automobile
contracts purchased under the TFC programs, automobile contracts purchased under
the CPS programs and automobile contracts we repurchased upon termination of
prior securitizations of our MFN and TFC subsidiaries. All such securitizations
since the third quarter of 2003 have been structured as secured financings.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
WITH THE THREE MONTHS ENDED SEPTEMBER 30, 2005

REVENUES. During the three months ended September 30, 2006, revenues were $73.7
million, an increase of $24.3 million, or 49.3%, from the prior year period
revenue of $49.4 million. The primary reason for the increase in revenues is an
increase in interest income. Interest income for the three months ended
September 30, 2006 increased $25.3 million, or 55.8%, to $70.6 million from
$45.3 million in the prior year period. The primary reason for the increase in
interest income is the increase in finance receivables held by consolidated
subsidiaries (resulting in an increase of $28.0 million in interest income), and
an increase of $549,000 in interest earned on our residual asset. These
increases were partially offset by the decline in the balance of the portfolios
of automobile contracts we acquired in the MFN, TFC and SeaWest transactions (in
the aggregate, resulting in a decrease of $3.2 million in interest income).

Servicing fees totaling $633,000 in the three months ended September 30, 2006
decreased $799,000, or 55.8%, from $1.4 million in the same period a year
earlier. The decrease in servicing fees is the result of the change in
securitization structure and the decline in our managed portfolio held by
non-consolidated subsidiaries, and also by the decline in the Seawest Third
Party Portfolio. As a result of the decision to structure future securitizations
as secured financings, our managed portfolio held by non-consolidated
subsidiaries will continue to decline in future periods, and servicing fee
revenue is anticipated to decline proportionately. As of September 30, 2006 and
2005, our managed portfolio owned by consolidated vs. non-consolidated
subsidiaries and other third parties was as follows:


                                                          SEPTEMBER 30, 2006              SEPTEMBER 30, 2005
                                                      --------------------------      --------------------------
                                                        AMOUNT            %             AMOUNT             %
                                                      ----------      ----------      ----------      ----------
                                                                           ($ IN MILLIONS)
                                                                                               
TOTAL MANAGED PORTFOLIO

Owned by Consolidated Subsidiaries ..............     $  1,424.2           96.2%      $    900.7           85.3%
Owned by Non-Consolidated Subsidiaries...........           50.6            3.4%           130.9           12.4%
SeaWest Third Party Portfolio ...................            5.9            0.4%            24.3            2.3%
                                                      ----------      ----------      ----------      ----------

Total ...........................................     $  1,480.7          100.0%      $  1,055.9          100.0%
                                                      ==========      ==========      ==========      ==========


At September 30, 2006, we were generating income and fees on a managed portfolio
with an outstanding principal balance of $1,480.7 million (this amount includes
$5.9 million of automobile contracts securitized by SeaWest, on which we earn
only servicing fees), compared to a managed portfolio with an outstanding
principal balance of $1,055.9 million as of September 30, 2005. As the
portfolios of automobile contracts acquired in the MFN, TFC and SeaWest
transactions decrease, the portfolio of automobile contracts that we purchased
directly from automobile dealers continues to expand. At September 30, 2006 and
2005, the managed portfolio composition was as follows:


                                       17



                                                  SEPT 30, 2006                    SEPT 30, 2005
                                            --------------------------      --------------------------
                                              AMOUNT             %            AMOUNT            %
                                            ----------      ----------      ----------      ----------
                                                                 ($ IN MILLIONS)
                                                                                     
ORIGINATING ENTITY
CPS ..................................      $  1,406.7           95.0%        $  934.3           88.5%
TFC ..................................            61.4            4.1%            73.3            6.9%
MFN ..................................             0.4            0.0%             4.3            0.4%
SeaWest ..............................             6.3            0.4%            19.7            1.9%
SeaWest Third Party Portfolio.........             5.9            0.4%            24.3            2.3%
                                            ----------      ----------      ----------      ----------
Total ................................      $  1,480.7          100.0%      $  1,055.9          100.0%
                                            ==========      ==========      ==========      ==========


Other income decreased $164,000, or 6.3%, to $2.5 million in the three-month
period ended September 30, 2006 from $2.6 million during the same period a year
earlier. The period over period decrease was affected by decreases in recoveries
on MFN and certain other automobile contracts (a decrease of $220,000) compared
to the same period of the prior year and decreased revenue on our direct mail
services (a decrease of $100,000) which were partially offset by increases in
convenience fees charged to obligors for certain transaction types (an increase
of $86,000), . These direct mail services are provided to our dealers and
consist of customized solicitations targeted to prospective vehicle purchasers,
in proximity to the dealer, who appear to meet our credit criteria.

EXPENSES. Our operating expenses consist primarily of provisions for credit
losses, interest expense, employee costs and general and administrative
expenses. Provisions for credit losses and interest expense are significantly
affected by the volume of automobile contracts we purchased during a period and
by the outstanding balance of finance receivables held by consolidated
subsidiaries. Employee costs and general and administrative expenses are
incurred as applications and automobile contracts are received, processed and
serviced. Factors that affect margins and net income include changes in the
automobile and automobile finance market environments, and macroeconomic factors
such as interest rates and the unemployment level.

Employee costs include base salaries, commissions and bonuses paid to employees,
and certain expenses related to the accounting treatment of outstanding warrants
and stock options, and are one of our most significant operating expenses. These
costs (other than those relating to stock options) generally fluctuate with the
level of applications and automobile contracts processed and serviced.

Other operating expenses consist primarily of facilities expenses, telephone and
other communication services, credit services, computer services (including
employee costs associated with information technology support), professional
services, marketing and advertising expenses, and depreciation and amortization.

Total operating expenses were $69.5 million for the three months ended September
30, 2006, compared to $48.0 million for the same period a year earlier, an
increase of $21.5 million, or 44.8%. The increase is primarily due to increases
in provision for credit losses and interest expense, which increased by $8.2
million and $11.6 million, or 52.0% and 85.6%, respectively. Both interest
expense and provision for credit losses are directly affected by the growth in
our portfolio of automobile contracts held by consolidated affiliates. During
the period ended September 30, 2006, we purchased 16,541 automobile contracts
aggregating $254.4 million, compared to 13,523 automobile contracts aggregating
$205.0 million in the same period of the prior year. At September 30, 2006, we
were earning interest and providing for credit losses on a portfolio with an
outstanding principal balance of $1,424.2 million compared to a portfolio with
an outstanding principal balance of $900.7 million as of September 30, 2005. The
Company has increased Contract purchases through its continued efforts of adding
additional marketing representatives, expanding into new geographic territories
and increasing penetration of existing dealers through an emphasis on service.

Employee costs for the three months ended September 30, 2006 decreased slightly
from the prior year period at $9.3 million, representing 13.4% of total
operating expenses in 2006 compared to $9.5 million and 19.8% of total operating
expenses in the prior year period. During the period ended September 30, 2006,
we deferred $691,000 of direct employee costs associated with the purchase of
automobile contracts in the period, in accordance with Statement of Financial
Accounting Standard No. 91, Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases ("SFAS 91"). Historically, we had not deferred and amortized such costs
as our analyses had indicated that the effect of such deferral and amortization


                                       18


would not have been material. However, due to continued increases in volumes of
automobile contract purchases and refinements in our methodology to measure
direct costs associated with automobile contract purchases, our estimate of
direct costs has increased, resulting in the need to defer such costs and
amortize them over the lives of the related automobile contracts as an
adjustment to the yield in accordance with SFAS 91. We began deferring these
costs in January 2006. The decrease in employee costs as a percentage of total
operating expenses reflects the higher total of operating expenses, primarily a
result of the increased provision for credit losses and interest expense.

General and administrative expenses increased by $1.2 million, or 25.1%, to $6.2
million and represented 8.9% of total operating expenses in the three-month
period ending September 30, 2006, as compared to $4.9 million in the prior year
period when general and administrative expenses represented 10.3% of total
operating expenses. The decrease as a percentage of total operating expenses
reflects the higher operating expenses primarily a result of the provision for
credit losses and interest expense.

Interest expense for the three-month period ended September 30, 2006 increased
$11.6 million, or 85.6%, to $25.1 million, compared to $13.5 million in the same
period of the previous year. The increase is primarily the result of changes in
the amount and composition of securitization trust debt carried on our
consolidated balance sheet. Such debt increased as a result of the change in
securitization structure implemented in the third quarter of 2003 (resulting in
an increase of $13.1 million in interest expense), partially offset by the
decrease in the balance of the securitization trust debt acquired in the MFN and
TFC transactions (resulting in a decrease of $202,000 in interest expense) and a
decrease in interest expense on certain long-term debt (a decrease of $1.3
million).

Marketing expenses increased by $449,000, or 14.2%, to $3.6 million, compared to
$3.2 million in the same period of the previous year and represented 5.2% of
total operating expenses. The increase is primarily due to the increase in
automobile contracts we purchased during the three months ended September 30,
2006 as compared to the prior year period.

Occupancy expenses increased by $217,000, or 25.3%, to $1.1 million compared to
$858,000 in the same period of the previous year and represented 1.6% of total
operating expenses. The increase in occupancy expense for the period includes a
charge of $125,000 relating to the closure of the Company's Atlanta, Georgia
servicing branch earlier in 2006.

Depreciation and amortization expenses increased by $11,000, or 5.7%, to
$204,000 from $193,000 in the same period of the previous year.

COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
WITH THE NINE MONTHS ENDED SEPTEMBER 30, 2005

REVENUES. During the nine months ended September 30, 2006, revenues were $199.0
million, an increase of $60.0 million, or 43.2%, from the prior year period
revenue of $139.0 million. The primary reason for the increase in revenues is an
increase in interest income. Interest income for the nine months ended September
30, 2006 increased $66.2 million, or 54.2%, to $188.2 million from $122.0
million in the prior year period. The primary reason for the increase in
interest income is the increase in finance receivables held by consolidated
subsidiaries (resulting in an increase of $76.6 million in interest income).
This increase was partially offset by the decline in the balance of the
portfolios of automobile contracts we acquired in the MFN, TFC and SeaWest
transactions (in the aggregate, resulting in a decrease of $10.0 million in
interest income) and a decrease of $447,000 in interest earned on our residual
asset.

Servicing fees totaling $2.5 million in the nine months ended September 30, 2006
decreased $3.1 million, or 55.6%, from $5.5 million in the same period a year
earlier. The decrease in servicing fees is the result of the change in
securitization structure and the consequent decline in our managed portfolio
held by non-consolidated subsidiaries and also by the decline in the SeaWest
Third Party Portfolio. As a result of the decision to structure future
securitizations as secured financings, our managed portfolio held by
non-consolidated subsidiaries will continue to decline in future periods, and
servicing fee revenue is anticipated to decline proportionately.


                                       19


Other income decreased $3.1 million, or 27.3%, to $8.3 million in the nine-month
period ended September 30, 2006 from $11.5 million during the same period a year
earlier. The prior year period included proceeds of $2.4 million for the sale of
certain receivables that consisted primarily of charged off receivables acquired
in the MFN,TFC and SeaWest transactions. The period over period decrease was
also affected by decreased revenue on our direct mail services (a decrease of
$613,000). These direct mail services are provided to our dealers and consist of
customized solicitations targeted to prospective vehicle purchasers, in
proximity to the dealer, who appear to meet our credit criteria. Decreases in
other income for the period were also affected by increases in convenience fees
charged to obligors for certain transaction types (an increase of $523,000) and
decreases in recoveries on MFN and certain other automobile contracts (a
decrease of $645,000) compared to the same period of the prior year.

EXPENSES. Total operating expenses were $190.3 million for the nine months ended
September 30, 2006, compared to $137.3 million for the same period a year
earlier, an increase of $53.0 million, or 38.6%. The increase is primarily due
to increases in provision for credit losses and interest expense, which
increased by $22.0 million and $29.6 million, or 50.7% and 75.5% respectively.
Both interest expense and provision for credit losses are directly affected by
the growth in our portfolio of automobile contracts held by consolidated
affiliates. During the period ended September 30, 2006, we purchased 50,893
automobile contracts aggregating $777.6 million, compared to 34,105 automobile
contracts aggregating $503.1 million in the same period of the prior year. At
September 30, 2006, we were earning interest and providing for credit losses on
a portfolio with an outstanding principal balance of $1,424.2 million compared
to a portfolio with an outstanding principal balance of $900.7 million as of
September 30, 2005. The Company has increased Contract purchases through its
continued efforts of adding additional marketing representatives, expanding into
new geographic territories and increasing penetration of existing dealers
through an emphasis on service.

Employee costs for the nine months ended September 30, 2006 decreased by $1.3
million, or 4.4%, to $28.3 million and represented 14.9% of total operating
expenses, compared to $29.7 million representing 21.6% of total operating
expenses in the prior year period. During the period ended September 30, 2006,
we deferred $2.3 million of direct employee costs associated with the purchase
of automobile contracts in the period, in accordance with Statement of Financial
Accounting Standard No. 91, Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases ("SFAS 91"). Historically, we had not deferred and amortized such costs
as our analyses had indicated that the effect of such deferral and amortization
would not have been material. However, due to continued increases in volumes of
automobile contract purchases and refinements in our methodology to measure
direct costs associated with automobile contract purchases, our estimate of
direct costs has increased, resulting in the need to defer such costs and
amortize them over the lives of the related automobile contracts as an
adjustment to the yield in accordance with SFAS 91. We began deferring these
costs in January 2006. The decrease in employee costs as a percentage of total
operating expenses reflects the higher total of operating expenses, primarily a
result of the increased provision for credit losses and interest expense.

General and administrative expenses increased by $259,000, or 1.6%, to $16.9
million and represented 8.9% of total operating expenses in the nine-month
period ending September 30, 2006, as compared to $16.7 million in the prior year
period when general and administrative expenses represented 12.2% of total
operating expenses. In the prior year period we recognized what we believe will
be a one-time, non-cash impairment charge of $1.9 million against certain
non-auto finance receivable assets. The decrease as a percentage of total
operating expenses reflects the higher operating expenses primarily a result of
the provision for credit losses and interest expense.

Interest expense for the nine-month period ended September 30, 2006 increased
$29.6 million, or 82.5%, to $65.4 million, compared to $35.8 million in the same
period of the previous year. The increase is primarily the result of changes in
the amount and composition of securitization trust debt carried on our
consolidated balance sheet. Such debt increased as a result of the change in
securitization structure implemented in the third quarter of 2003 (resulting in
an increase of $33.8 million in interest expense), partially offset by the
decrease in the balance of the securitization trust debt acquired in the MFN and
TFC transactions (resulting in a decrease of $759,000 in interest expense) and a
decrease in interest expense on certain long-term debt (a decrease of $3.5
million).


                                       20


Marketing expenses increased by $2.1 million, or 24.2%, to $10.7 million,
compared to $8.6 million in the same period of the previous year and represented
5.6% of total operating expenses. The increase is primarily due to the increase
in automobile contracts we purchased during the nine months ended September 30,
2006 as compared to the prior year period.

Occupancy expenses increased by $430,000, or 17.3%, to $2.9 million compared to
$2.5 million in the same period of the previous year and represented 1.5% of
total operating expenses. The increase in occupancy expense for the period
includes a charge of $125,000 relating to the closure of the Company's Atlanta,
Georgia servicing branch earlier in 2006.

Depreciation and amortization expenses decreased by $5,000, or 0.8%, to $596,000
from $601,000 in the same period of the previous year.

CREDIT EXPERIENCE

Our financial results are dependent on the performance of the automobile
contracts in which we retain an ownership interest. The table below documents
the delinquency, repossession and net credit loss experience of all automobile
contracts that we were servicing (excluding automobile contracts from the
SeaWest Third Party Portfolio) as of the respective dates shown. Credit
experience for CPS, MFN (since the date of the MFN transaction), TFC (since the
date of the TFC transaction) and SeaWest (since the date of the SeaWest
transaction) is shown on a combined basis in the table below.


                                                   DELINQUENCY EXPERIENCE (1)
                                               CPS, MFN, TFC AND SEAWEST COMBINED


                                              SEPTEMBER 30, 2006            SEPTEMBER 30, 2005             DECEMBER 31, 2005
                                           -------------------------     -------------------------     -------------------------
                                           NUMBER OF                     NUMBER OF                     NUMBER OF
                                           CONTRACTS        AMOUNT       CONTRACTS        AMOUNT       CONTRACTS        AMOUNT
                                           ----------     ----------     ----------     ----------     ----------     ----------
                                                                          (DOLLARS IN THOUSANDS)
                                                                                                    
DELINQUENCY EXPERIENCE
Gross servicing portfolio (1) ........        120,328     $1,482,375         91,328     $1,046,416         95,942     $1,117,085
Period of delinquency (2)
   31-60 days ........................          2,842         31,193          2,175         20,854          2,353         24,050
   61-90 days ........................          1,281         13,857          1,074          9,751          1,076         10,190
   91+ days ..........................          1,021          9,112            990          7,474          1,056          7,985
                                           ----------     ----------     ----------     ----------     ----------     ----------
Total delinquencies (2) ..............          5,144         54,162          4,239         38,079          4,485         42,225
Amount in repossession (3) ...........          1,770         19,499          1,270         13,298          1,337         13,538
                                           ----------     ----------     ----------     ----------     ----------     ----------
Total delinquencies and amount
  in repossession (2) ................          6,914     $   73,661          5,509     $   51,377          5,822     $   55,763
                                           ==========     ==========     ==========     ==========     ==========     ==========

Delinquencies as a percentage of
  gross servicing portfolio ..........          4.3 %          3.7 %          4.6 %          3.6 %          4.7 %          3.8 %

Total delinquencies and amount in
  repossession as a percentage of
  gross servicing portfolio ..........          5.7 %          5.0 %          6.0 %          4.9 %          6.1 %          5.0 %


______________________

(1) ALL AMOUNTS AND PERCENTAGES ARE BASED ON THE AMOUNT REMAINING TO BE REPAID
ON EACH AUTOMOBILE CONTRACT, INCLUDING, FOR PRE-COMPUTED AUTOMOBILE CONTRACTS,
ANY UNEARNED INTEREST. THE INFORMATION IN THE TABLE REPRESENTS THE GROSS
PRINCIPAL AMOUNT OF ALL AUTOMOBILE CONTRACTS PURCHASED BY US, INCLUDING
AUTOMOBILE CONTRACTS SUBSEQUENTLY SOLD BY US IN SECURITIZATION TRANSACTIONS THAT
WE CONTINUE TO SERVICE. THE TABLE DOES NOT INCLUDE AUTOMOBILE CONTRACTS FROM THE
SEAWEST THIRD PARTY PORTFOLIO.
(2) WE CONSIDER A AUTOMOBILE CONTRACT DELINQUENT WHEN AN OBLIGOR FAILS TO MAKE
AT LEAST 90% OF A CONTRACTUALLY DUE PAYMENT BY THE FOLLOWING DUE DATE, WHICH
DATE MAY HAVE BEEN EXTENDED WITHIN LIMITS SPECIFIED IN THE SERVICING AGREEMENTS.
THE PERIOD OF DELINQUENCY IS BASED ON THE NUMBER OF DAYS PAYMENTS ARE
CONTRACTUALLY PAST DUE. AUTOMOBILE CONTRACTS LESS THAN 31 DAYS DELINQUENT ARE
NOT INCLUDED.
(3) AMOUNT IN REPOSSESSION REPRESENTS FINANCED VEHICLES THAT HAVE BEEN
REPOSSESSED BUT NOT YET LIQUIDATED.


                                       21



                          NET CHARGE-OFF EXPERIENCE (1)
                       CPS, MFN, TFC AND SEAWEST COMBINED


                                                      SEPTEMBER 30    SEPTEMBER 30   DECEMBER 31
                                                          2006           2005           2005
                                                       ----------     -------------------------
                                                                (DOLLARS IN THOUSANDS)
                                                                            
Average servicing portfolio outstanding ..........     $1,312,348     $  927,707     $  966,295
Annualized net charge-offs as a percentage of
  average servicing portfolio (2) ................          4.0 %          4.9 %          5.3 %


______________________

(1) ALL AMOUNTS AND PERCENTAGES ARE BASED ON THE PRINCIPAL AMOUNT SCHEDULED TO
BE PAID ON EACH AUTOMOBILE CONTRACT, NET OF UNEARNED INCOME ON PRE-COMPUTED
AUTOMOBILE CONTRACTS. THE INFORMATION IN THE TABLE REPRESENTS ALL AUTOMOBILE
CONTRACTS SERVICED BY US (EXCLUDING AUTOMOBILE CONTRACTS FROM THE SEAWEST THIRD
PARTY PORTFOLIO).
(2) NET CHARGE-OFFS INCLUDE THE REMAINING PRINCIPAL BALANCE, AFTER THE
APPLICATION OF THE NET PROCEEDS FROM THE LIQUIDATION OF THE VEHICLE (EXCLUDING
ACCRUED AND UNPAID INTEREST) AND AMOUNTS COLLECTED SUBSEQUENT TO THE DATE OF
CHARGE-OFF, INCLUDING SOME RECOVERIES WHICH HAVE BEEN CLASSIFIED AS OTHER INCOME
IN THE ACCOMPANYING INTERIM FINANCIAL STATEMENTS. SEPTEMBER 30, 2006 AND
SEPTEMBER 30, 2005 PERCENTAGE REPRESENTS NINE MONTHS ENDED SEPTEMBER 30, 2006
AND SEPTEMBER 30, 2005 ANNUALIZED. DECEMBER 31, 2005 REPRESENTS 12 MONTHS ENDED
DECEMBER 31, 2005.


LIQUIDITY AND CAPITAL RESOURCES

Our business requires substantial cash to support our purchases of automobile
contracts and other operating activities. Our primary sources of cash have been
cash flows from operating activities, including proceeds from sales of
automobile contracts, amounts borrowed under various revolving credit facilities
(also sometimes known as warehouse credit facilities), servicing fees on
portfolios of automobile contracts previously sold in securitization
transactions or serviced for third parties, customer payments of principal and
interest on finance receivables, and releases of cash from securitized pools of
automobile contracts in which we have retained a residual ownership interest and
from the spread account associated with such pools. Our primary uses of cash
have been the purchases of automobile contracts, repayment of amounts borrowed
under lines of credit and otherwise, operating expenses such as employee,
interest, occupancy expenses and other general and administrative expenses, the
establishment of spread account and initial overcollateralization, if any, and
the increase of credit enhancement to required levels in securitization
transactions, and income taxes. There can be no assurance that internally
generated cash will be sufficient to meet our cash demands. The sufficiency of
internally generated cash will depend on the performance of securitized pools
(which determines the level of releases from those pools and their related
spread account), the rate of expansion or contraction in our managed portfolio,
and the terms upon which we are able to acquire, sell, and borrow against
automobile contracts.

Net cash provided by operating activities for the nine-month period ended
September 30, 2006 was $22.9 million compared to net cash provided by operating
activities for the nine-month period ended September 30, 2005 of $27.9 million.
Cash provided by operating activities is affected by our increased net earnings
before the significant increase in the provision for credit losses. This impact
is somewhat negated by the increase in restricted cash as a result of our
pre-funding structure used in the securitization of our finance receivables. The
pre-funding structure allows us to issue securitization trust debt approximately
one month prior to purchasing finance receivables that collateralize the debt.
In those cases, certain of the proceeds of the securitization debt are held as
restricted cash until such time as the additional collateral is delivered to the
related trust.

Net cash used in investing activities for the nine-month periods ended September
30, 2006 and 2005 was $448.7 million and $301.3 million, respectively. Cash used
in investing activities has primarily related to purchases of automobile
contracts less principal amortization on our consolidated portfolio of
automobile contracts.


                                       22


Net cash provided by financing activities for the nine months ended September
30, 2006 and 2005, was $423.3 million and $270.6 million, respectively. Cash
provided by financing activities is generally related to the issuance of new
securitization trust debt. We issued $786.1 million and $451.4 million of such
debt in the nine-month periods ended September 30, 2006 and 2005, respectively.
Cash used in financing activities also includes the repayment of securitization
trust debt of $356.3 million and $191.2 million for the nine-month periods ended
September 30, 2006 and 2005, respectively.

We purchase automobile contracts from Dealers for a cash price approximating
their principal amount, adjusted for an acquisition fee that may either increase
or decrease the automobile contract purchase price. Those automobile contracts
generate cash flow, however, over a period of years. As a result, we have been
dependent on warehouse credit facilities to purchase automobile contracts, and
on the availability of cash from outside sources in order to finance our
continuing operations, as well as to fund the portion of automobile contract
purchase prices not financed under revolving warehouse credit facilities. As of
September 30, 2006, we had $350 million in warehouse credit capacity, in the
form of separate $200 million and $150 million facilities. The first facility
provides funding for automobile contracts purchased under the TFC programs while
both warehouse facilities provide funding for automobile contracts purchased
under the CPS programs.

The $150 million warehouse facility is structured to allow us to fund a portion
of the purchase price of automobile contracts by drawing against a floating rate
variable funding note issued by our consolidated subsidiary Page Three Funding
LLC. This facility was established on November 15, 2005, and expires on November
14, 2006, although it is renewable with the mutual agreement of the parties. Up
to 80% of the principal balance of automobile contracts may be advanced to us
under this facility, subject to collateral tests and certain other conditions
and covenants. Notes under this facility accrue interest at a rate of one-month
LIBOR plus 2.00% per annum. At September 30, 2006, there were no amounts
outstanding under this facility.

The $200 million warehouse facility is similarly structured to allow us to fund
a portion of the purchase price of automobile contracts by drawing against a
floating rate variable funding note issued by our consolidated subsidiary Page
Funding LLC. This facility was entered into on June 30, 2004. On June 29, 2005
the facility was increased from $100 million to $125 million and further amended
to provide for funding for automobile contracts purchased under the TFC
programs. It was increased again to $200 million on August 31, 2005. Up to 83.0%
of the principal balance of automobile contracts may be advanced to us under
this facility, subject to collateral tests and certain other conditions and
covenants. Notes under this facility accrue interest at a rate of one-month
LIBOR plus 2.00% per annum. This facility expires on June 30, 2007, although it
is renewable with the mutual agreement of the parties. At September 30, 2006,
$64.8 million was outstanding under this facility.

For the portfolio owned by consolidated subsidiaries, cash used to establish or
increase the spread accounts for the nine-month periods ended September 30, 2006
and 2005 was $20.3 million and $5.1 million, respectively. Cash released from
Trusts and their related spread account to us for the nine-month periods ended
September 30, 2006 and 2005, was $11.1 million and $19.3 million, respectively.
Changes in the amount of credit enhancement required for term securitization
transactions and releases from Trusts and their related spread account are
affected by the relative size, seasoning and performance of the various pools of
automobile contracts securitized that make up our managed portfolio to which the
respective spread account is related.

The acquisition of automobile contracts for subsequent sale in securitization
transactions, and the need to fund the spread accounts and initial
overcollateralization, if any, and increase credit enhancement levels when those
transactions take place, results in a continuing need for capital. The amount of
capital required is most heavily dependent on the rate of our automobile
contract purchases, the advance rate on the warehouse facilities, the required
level of initial credit enhancement in securitizations, and the extent to which
the previously established Trusts and their related spread account either
release cash to us or capture cash from collections on securitized automobile
contracts. We are limited in our ability to purchase automobile contracts by our
available cash and the capacity of our warehouse facilities. As of September 30,
2006, we had unrestricted cash on hand of $15.3 million and available capacity
from our warehouse credit facilities of $285.2 million, subject to the
availability of suitable automobile contracts to serve as collateral and of
sufficient cash to fund the portion of such automobile contracts purchase price


                                       23


not advanced under the warehouse facilities. Our plans to manage our liquidity
include the completion of additional term securitizations that may result in
additional unrestricted cash through repayment of the warehouse facilities, and
matching our levels of automobile contract purchases to our availability of
cash. There can be no assurance that we will be able to complete term
securitizations on favorable economic terms or that we will be able to complete
term securitizations at all. If we are unable to complete such securitizations,
interest income and other portfolio related income would decrease.

Our primary means of ensuring that our cash demands do not exceed our cash
resources is to match our levels of automobile contract purchases to our
availability of cash. Our ability to adjust the quantity of automobile contracts
that it purchases and securitizes will be subject to general competitive
conditions and the continued availability of warehouse credit facilities. There
can be no assurance that the desired level of automobile contract acquisition
can be maintained or increased. While the specific terms and mechanics of each
Spread Account vary among transactions, our Securitization Agreements generally
provide that we will receive excess cash flows only if the amount of credit
enhancement has reached specified levels and/or the delinquency, defaults or net
losses related to the automobile contracts in the pool are below certain
predetermined levels. In the event delinquencies, defaults or net losses on the
automobile contracts exceed such levels, the terms of the securitization: (i)
may require increased credit enhancement to be accumulated for the particular
pool; (ii) may restrict the distribution to us of excess cash flows associated
with other pools; or (iii) in certain circumstances, may permit the note
insurers to require the transfer of servicing on some or all of the automobile
contracts to another servicer. There can be no assurance that collections from
the related Trusts will continue to generate sufficient cash.

The terms of the various Securitization Agreements related to the issuance of
the securitization trust debt and the warehouse credit facilities require that
certain delinquency and credit loss criteria be met with respect to the
collateral pool, and require that we maintain minimum levels of liquidity and
net worth and not exceed maximum leverage levels and maximum financial losses.
In addition, certain securitization and non-securitization related debt contain
cross-default provisions, which would allow certain creditors to declare a
default if a default were declared under a different facility. As of September
30, 2006, we were in compliance with all such financial covenants.

The Securitization Agreements of our term securitization transactions are
terminable by the note insurers in the event of certain defaults by us and under
certain other circumstances. Similar termination rights are held by the lenders
in the warehouse credit facilities. Were a note insurer (or the lenders in such
warehouse facilities) in the future to exercise its option to terminate the
Securitization Agreements, such a termination would have a material adverse
effect on our liquidity and results of operations. We continue to receive
Servicer extensions on a monthly and/or quarterly basis, pursuant to the
Securitization Agreements.

CRITICAL ACCOUNTING POLICIES

(a) ALLOWANCE FOR FINANCE CREDIT LOSSES

In order to estimate an appropriate allowance for losses incurred on finance
receivables held on our Unaudited Condensed Consolidated Balance Sheet, we use a
loss allowance methodology commonly referred to as "static pooling," which
stratifies our finance receivable portfolio into separately identified pools.
Using analytical and formula-driven techniques, we estimate an allowance for
finance credit losses, which management believes is adequate for probable credit
losses that can be reasonably estimated in our portfolio of finance receivable
automobile contracts. Provision for losses is charged to our Unaudited
Consolidated Statement of Operations. Net losses incurred on finance receivables
are charged to the allowance. Management evaluates the adequacy of the allowance
by examining current delinquencies, the characteristics of the portfolio and the
value of the underlying collateral. As conditions change, our level of
provisioning and/or allowance may change as well.


                                       24


(b) TREATMENT OF SECURITIZATIONS

Gain on sale may be recognized on the disposition of automobile contracts either
outright or in securitization transactions. In those securitization transactions
that were treated as sales for financial accounting purposes, we, or a
wholly-owned, consolidated subsidiary of us, retained a residual interest in the
automobile contracts that were sold to a wholly-owned, unconsolidated special
purpose subsidiary. Our securitization transactions included "term"
securitizations (the purchaser holds the automobile contracts for substantially
their entire term) and "warehouse" securitizations (which financed the
acquisition of the automobile contracts for future sale into term
securitizations).

As of September 30, 2006 and December 31, 2005 the line item "Residual interest
in securitizations" on our Unaudited Consolidated Balance Sheet represents the
residual interests in certain term securitizations that were accounted for as
sales. Warehouse securitizations accounted for as secured financings are
accordingly reflected in the line items "Finance receivables" and "Warehouse
lines of credit" on our Unaudited Condensed Consolidated Balance Sheet, and the
term securitizations accounted for as secured financings are reflected in the
line items "Finance receivables" and "Securitization trust debt." The "Residual
interest in securitizations" represents the discounted sum of expected future
releases from securitization trusts held by non-consolidated subsidiaries and
certain cash flows of receivables from terminated trusts. Accordingly, the
valuation of the residual is heavily dependent on estimates of future
performance.

(c) INCOME TAXES

We and our subsidiaries file consolidated federal income and combined state
franchise tax returns. We utilize the asset and liability method of accounting
for income taxes, under which deferred income taxes are recognized for the
future tax consequences attributable to the differences between the financial
statement values of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date. We have estimated a valuation allowance against
that portion of the deferred tax asset whose utilization in future periods is
not more than likely.

In determining the possible realization of deferred tax assets, future taxable
income from the following sources are considered: (a) the reversal of taxable
temporary differences; (b) future operations exclusive of reversing temporary
differences; and (c) tax planning strategies that, if necessary, would be
implemented to accelerate taxable income into periods in which net operating
losses might otherwise expire.

(d) STOCK-BASED COMPENSATION

Effective January 1, 2006, we adopted Statement of Financial Accounting
Standards No. 123(R), "Share-Based Payment, revised 2004" ("SFAS 123R"),
prospectively for all option awards granted, modified or settled on or after
January 1, 2006, using the modified prospective method. Under this method, we
recognize compensation costs in the financial statements for all share-based
payments granted subsequent to December 31, 2005 based on the grant date fair
value estimated in accordance with the provisions of SFAS 123(R). Results for
prior periods have not been restated.

In December 2005, the Compensation Committee of the Board of Directors approved
accelerated vesting of all the outstanding stock options issued by us. Options
to purchase 2,113,998 shares of our common stock, which would otherwise have
vested from time to time through 2010, became immediately exercisable as a
result of the acceleration of vesting. The decision to accelerate the vesting of
the options was made primarily to reduce non-cash compensation expenses that
would have been recorded in our income statement in future periods upon the
adoption of Financial Accounting Standards Board Statement No. 123(R) in January
2006.

For the nine months ended September 30, 2006, we recorded no stock-based
compensation costs. There were no option awards granted during the nine-month
period ended September 30, 2006, and there was no vesting of option awards for
options granted prior to January 1, 2006, because all options outstanding as of
December 31, 2005 were fully vested at that time. As of September 30, 2006,
there are no unrecognized stock-based compensation costs to be recognized over
future periods.


                                       25


Prior to January 1, 2006, as was permitted by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
we accounted for stock-based employee compensation plans in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations, whereby stock options are recorded at
intrinsic value equal to the excess of the share price over the exercise price
at the date of grant. We provided the pro forma net income (loss), pro forma
earnings (loss) per share, and stock based compensation plan disclosure
requirements set forth in SFAS No. 123.

FORWARD LOOKING STATEMENTS

This report on Form 10-Q includes certain "forward-looking statements,"
including, without limitation, the statements or implications to the effect that
prepayments as a percentage of original balances will approximate 22.3% to 34.7%
cumulatively over the lives of the related automobile contracts, and that net
credit losses as a percentage of original balances will approximate 11.4% to
14.7% cumulatively over the lives of the related automobile contracts. Other
forward-looking statements may be identified by the use of words such as
"anticipates," "expects," "plans," "estimates," or words of like meaning. As to
the specifically identified forward-looking statements, factors that could
affect charge-offs and recovery rates include changes in the general economic
climate, which could affect the willingness or ability of obligors to pay
pursuant to the terms of automobile contracts, changes in laws respecting
consumer finance, which could affect our ability to enforce rights under
automobile contracts, and changes in the market for used vehicles, which could
affect the levels of recoveries upon sale of repossessed vehicles. Factors that
could affect our revenues in the current year include the levels of cash
releases from existing pools of automobile contracts, which would affect our
ability to purchase automobile contracts, the terms on which we are able to
finance such purchases, the willingness of Dealers to sell automobile contracts
to us on the terms that we offer, and the terms on which we are able to complete
term securitizations once automobile contracts are acquired. Factors that could
affect our expenses in the current year include competitive conditions in the
market for qualified personnel, and interest rates (which affect the rates that
we pay on Notes issued in our securitizations). The statements concerning our
structuring future securitization transactions as secured financings and the
effects of such structures on financial items and on our future profitability
also are forward-looking statements. Any change to the structure of our
securitization transaction could cause such forward-looking statements not to be
accurate. Both the amount of the effect of the change in structure on our
profitability and the duration of the period in which our profitability would be
affected by the change in securitization structure are estimates. The accuracy
of such estimates will be affected by the rate at which we purchase and sell
automobile contracts, any changes in that rate, the credit performance of such
automobile contracts, the financial terms of future securitizations, any changes
in such terms over time, and other factors that generally affect our
profitability.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

We are subject to interest rate risk during the period between when automobile
contracts are purchased from Dealers and when such automobile contracts become
part of a term securitization. Specifically, the interest rates on the warehouse
facilities are adjustable while the interest rates on the automobile contracts
are fixed. Historically, our term securitization facilities have had fixed rates
of interest. To mitigate some of this risk, we have in the past, and intend to
continue to, structure certain of our securitization transactions to include
pre-funding structures, in which the amount of Notes issued exceeds the amount
of automobile contracts initially sold to the Trusts. In pre-funding, the
proceeds from the pre-funded portion are held in an escrow account until we sell
the additional automobile contracts to the Trust in amounts up to the balance of
the pre-funded escrow account. In pre-funded securitizations, we lock in the
borrowing costs with respect to the automobile contracts it subsequently


                                       26


delivers to the Trust. However, we incur an expense in pre-funded
securitizations equal to the difference between the money market yields earned
on the proceeds held in escrow prior to subsequent delivery of automobile
contracts and the interest rate paid on the Notes outstanding, as to the amount
of which there can be no assurance.

There have been no material changes in market risks since December 31, 2005.


ITEM 4. CONTROLS AND PROCEDURES

We maintain a system of internal controls and procedures designed to provide
reasonable assurance as to the reliability of our published financial statements
and other disclosures included in this report. As of the end of the period
covered by this report, we evaluated the effectiveness of the design and
operation of such disclosure controls and procedures. Based upon that
evaluation, the principal executive officer (Charles E. Bradley, Jr.) and the
principal financial officer (Jeffrey P. Fritz) concluded that the disclosure
controls and procedures are effective in recording, processing, summarizing and
reporting, on a timely basis, material information relating to us that is
required to be included in our reports filed under the Securities Exchange Act
of 1934. There have been no significant changes in our internal controls over
financial reporting during our most recently completed fiscal quarter that
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.



                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information provided under the caption "Legal Proceedings" in our Annual
Report on Form 10-K for the year ended December 31, 2005, is incorporated herein
by reference. In addition, the reader should be aware of the following:

The Annual Report on Form 10-K disclosed that a purported class action filed in
Alabama state court had been removed to federal bankruptcy court, that the
bankruptcy court had remanded the matter to state court, and that we had
appealed that ruling. The federal district court, in which the appeal was heard,
has since ordered the bankruptcy court to decide whether the plaintiff has
standing to pursue her claims, and, if standing is found, to reconsider its
remand decision. The matter is currently pending before the bankruptcy court.
Although we believe that we have one or more defenses to each of the claims made
in this lawsuit, no discovery has yet been conducted and the case remains in its
earliest stages. Accordingly, there can be no assurance as to its outcome.

We are routinely involved in various legal proceedings resulting from our
consumer finance activities and practices, both continuing and discontinued. We
believe that there are substantive legal defenses to such claims, and intend to
defend them vigorously. There can be no assurance, however, as to the outcome.

ITEM 1A. RISK FACTORS

We remind the reader that risk factors are set forth in Item 1A of our report on
Form 10-K, filed with the U.S. Securities and Exchange Commission on March 13,
2006.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended September 30, 2006, we purchased a total of
175,939 shares of our common stock, as described in the following table:


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ISSUER PURCHASES OF EQUITY SECURITIES


                                                        TOTAL NUMBER OF      APPROXIMATE DOLLAR
                       TOTAL                          SHARES PURCHASED AS   VALUE OF SHARES THAT
                     NUMBER OF           AVERAGE        PART OF PUBLICLY    MAY YET BE PURCHASED
                      SHARES           PRICE PAID      ANNOUNCED PLANS OR    UNDER THE PLANS OR
  PERIOD (1)         PURCHASED          PER SHARE          PROGRAMS(2)            PROGRAMS
                   --------------     --------------     --------------        --------------
                                                                   
July 2006                   3,000     $         6.86              3,000        $    3,498,518
August 2006                33,800               5.56             33,800             3,308,625
September 2006            139,139               5.64            139,139             2,514,051
                   --------------     --------------     --------------        --------------
                          175,939     $         5.65            175,939
                   ==============     ==============     ===============

___________________

(1) EACH MONTHLY PERIOD IS THE CALENDAR MONTH.
(2) WE ANNOUNCED IN AUGUST 2000 OUR INTENTION TO PURCHASE UP TO $5 MILLION OF
OUR OUTSTANDING SECURITIES, INCLUSIVE OF ANNUAL $1 MILLION SINKING FUND
REDEMPTIONS ON OUR RISING INTEREST REDEEMABLE SUBORDINATED SECURITIES DUE 2006.
IN OCTOBER 2002, THE JULY 2000 PROGRAM HAVING BEEN EXHAUSTED, OUR BOARD OF
DIRECTORS AUTHORIZED THE PURCHASE OF UP TO AN ADDITIONAL $5 MILLION OF SUCH
SECURITIES. AN ADDITIONAL $5 MILLION WAS LATER AUTHORIZED BY OUR BOARD OF
DIRECTORS IN OCTOBER 2004.


ITEM 6. EXHIBITS

The Exhibits listed below are filed with this report.


4.14       Instruments defining the rights of holders of long-term debt of
           certain consolidated subsidiaries of the registrant are omitted
           pursuant to the exclusion set forth in subdivisions (b)(iv)(iii)(A)
           and (b)(v) of Item 601 of Regulation S-K (17 CFR 229.601). The
           registrant agrees to provide copies of such instruments to the United
           States Securities and Exchange Commission upon request.
4.16       Form of Indenture, dated as of September 1, 2006, respecting notes
           issued by CPS Auto Receivables Trust 2006-C (incorporated by
           reference to exhibit 4 to Form 8-K filed by the registrant on
           September 29, 2006.)
31.1       Rule 13a-14(a) Certification of the Chief Executive Officer of the
           registrant.
31.2       Rule 13a-14(a) Certification of the Chief Financial Officer of the
           registrant.
32         Section 1350 Certifications.*


        * These Certifications shall not be deemed "filed" for purposes of
    Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
    subject to the liability of that section. These Certifications shall not be
    deemed to be incorporated by reference into any filing under the Securities
    Act of 1933, as amended, or the Exchange Act, except to the extent that the
    registration statement specifically states that such Certifications are
    incorporated therein.


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                                   SIGNATURES


    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

                           CONSUMER PORTFOLIO SERVICES, INC.
                           (Registrant)

Date: October 26, 2006

                           /s/   CHARLES E. BRADLEY, JR.
                           -----------------------------------------
                           Charles E. Bradley, Jr.
                           PRESIDENT AND CHIEF EXECUTIVE OFFICER
                           (Principal Executive Officer)

Date: October 26, 2006

                           /s/   JEFFREY P. FRITZ
                           -----------------------------------------
                           Jeffrey P. Fritz
                           SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
                           (Principal Financial Officer)


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