Discontinued Operations

6 Months Ended

Jun. 30, 2011


2.	*Discontinued Operations*

Taxpayer Financial Services During the third quarter of 2010, the Internal Revenue Service (“IRS”) announced it would stop providing information regarding certain unpaid obligations of a taxpayer (the “Debt Indicator”), which has historically served as a significant part of our underwriting process in our Taxpayer Financial Services (“TFS”) business. We determined that, without use of the Debt Indicator, we could no longer offer the product that has historically accounted for the substantial majority of our TFS loan production and that we might not be able to offer the remaining products available under the program in a safe and sound manner. As a result, in December 2010, it was determined that we would not offer any tax refund anticipation loans or related products for the 2011 tax season and we exited the TFS business. As a result of this decision, our TFS business is reported in discontinued operations. During the fourth quarter of 2010 we recorded closure costs of $25 million which primarily reflect severance costs and the write off of certain pre-paid assets which are included as a component of loss from discontinued operations. At June 30, 2011 and December 31, 2010, the liability associated with these closure costs totaled less than $1 million and $5 million, respectively.

The following summarizes the operating results of our TFS business for the periods presented:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010

	(in millions)

Net interest income and other revenues⁽¹⁾	$	-		$	2		$	1		$	86
Income (loss) from discontinued operations before income tax		(2	)		(1	)		(4	)		55


⁽¹⁾		Interest expense, which is included as a component of net interest income, was allocated to discontinued operations in accordance with our existing internal transfer pricing policy. This policy uses match funding based on the expected lives of the assets and liabilities of the business at the time of origination, subject to periodic review, as demonstrated by the expected cash flows and re-pricing characteristics of the underlying assets.

The following summarizes the assets and liabilities of our TFS business at June 30, 2011 and December 31, 2010 which are reported as Assets of discontinued operations and Liabilities of discontinued operations in our consolidated balance sheet.


	June 30,		December 31,
	2011		2010

	(in millions)

Deferred income tax, net	$	-	$	3
Other assets		-		55

Assets of discontinued operations	$	-	$	58

Other liabilities	$	2	$	10

Liabilities of discontinued operations	$	2	$	10

Auto Finance In March 2010, we sold our auto finance receivable servicing operations as well as a portion of our auto finance receivable portfolio to Santander Consumer USA Inc. (“SC USA”) for $930 million in cash which resulted in a gain of $5 million ($3 million after-tax) during the first quarter of 2010. In August 2010, we sold the remainder of our auto finance receivable portfolio with an outstanding principal balance of $2.6 billion at the time of sale and other related assets to SC USA. The aggregate sales price for the auto finance receivables and other related assets was $2.5 billion which included the transfer of $431 million of indebtedness secured by auto finance receivables, resulting in net cash proceeds of $2.1 billion. We recorded a net loss as a result of this transaction of $43 million ($28 million after-tax) during the third quarter of 2010. This net loss is included as a component of loss from discontinued operations. Severance costs recorded as a result of this transaction were less than $1 million and are included as a component of loss from discontinued operations. As a result of this transaction, our Auto Finance business is reported as discontinued operations.

The following summarizes the operating results of our Auto Finance business for the periods presented:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011			2010		2011			2010

	(in millions)

Net interest income and other revenues⁽¹⁾	$	-		$	70	$	-		$	174
Income (loss) from discontinued operations before income tax		(2	)		13		(4	)		23


⁽¹⁾		Interest expense, which is included as a component of net interest income, was allocated to discontinued operations in accordance with our existing internal transfer pricing policy. This policy uses match funding based on the expected lives of the assets and liabilities of the business at the time of origination, subject to periodic review, as demonstrated by the expected cash flows and re-pricing characteristics of the underlying assets.

The following summarizes the assets and liabilities of our Auto Finance business at June 30, 2011 and December 31, 2010 which are reported as Assets of discontinued operations and Liabilities of discontinued operations in our consolidated balance sheet. Other assets of discontinued operations at December 31, 2010 reflect current income taxes receivable on our Auto Finance business for the 2010 tax year.


	June 30,		December 31,
	2011		2010

	(in millions)

Deferred income tax, net	$	2	$	4
Other assets		3		134

Assets of discontinued operations	$	5	$	138

Other liabilities	$	8	$	7

Liabilities of discontinued operations	$	8	$	7