GM Financial Prepares for 'CFPB Exam'
Officials say they don’t expect the CFPB’s targeting of dealer participation to impact the company’s economics. They also offer updates on the company’s roll out of a prime product and its acquisition of Ally Financial’s international business units.
FORT WORTH, Texas — During its quarterly investor call on July 25, General Motors Financial Co. (GM Financial) announced earnings of $178 million for the second quarter of 2013, compared to $137 million in the same period last year. Officials also commented on the company’s planned roll out of a prime product, its acquisition of Ally Financial’s International business units and the Consumer Financial Protection Bureau (CFPB)’s expected impact on auto finance.
Loan originations for the captive finance company were at $3.3 billion for the quarter, with North America at $2.2 billion and the company’s international business at $1.1 billion. Officials said the company closed a significant portion of its acquisition of Ally Financial’s international assets during the quarter, including Mexico, Chile, Colombia, and its European operations.
“With the international acquisition, our business has moved significantly in the direction of being a true captive finance company,” said Dan Berce, president and CEO of GM Financial.
Upon the completion of the international acquisition, GM Financial will be in 19 countries, servicing more than 9,000 dealers, with earning assets of more than $30 billion and a footprint that covers 80 percent of the sales territories for GM.
Officials also reported that accounts 31 to 60 days and more than 60 days delinquent accounted for 5.3 and 1.8 percent, respectively, of the company’s portfolio in the quarter ending June 30. Berce said the company is seeing typical seasonal trends, with March and June quarters being the strongest and September and December being weaker.
The company has also beefed up its compliance efforts in anticipation of an “inevitable CFPB exam.”
“A few areas the CFPB is focusing on are consumer complaints and third-party vendor management,” Berce said. “We have refocused on each of those areas, like every other consumer finance company.
“The auto-finance specific, probably the area that the CFPB has its sights on the most is the payment rate participation to dealers when we source business,” Berce added. “I think the CFPB, if it were up to them, they would rather see flat rates, flat payments to dealers for sourcing business rather than a rate participation. It remains to be seen how that shakes out, but I don't think it will have much of an impact on our economics, whether we pay flat or participation. The whole industry will change together, if that's the way the cards fall.”
In its last quarterly investor call, GM Financial said it expects to roll out a prime product in early 2014. Plans for the rollout are still on track for first quarter of 2014.
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