Finance Receivables

12 Months Ended

Dec. 31, 2011

Finance Receivables [Abstract]

Finance Receivables

5.     Finance Receivables

Finance receivables consist of the following (in thousands):

	Successor
	December 31, 2011			December 31, 2010			October 1, 2010
Pre-acquisition finance receivables – outstanding balance	$	4,366,075		$	7,724,188		$	8,698,018
Less: carrying value adjustment		(338,714	)		(424,225	)		(467,275	)
Pre-acquisition finance receivables – carrying value		4,027,361			7,299,963			8,230,743
Post-acquisition finance receivables, net of fees		5,313,899			923,713
		9,341,260			8,223,676			8,230,743
Less: allowance for loan losses on post-acquisition finance receivables		(178,768	)		(26,352	)
Total finance receivables, net	$	9,162,492		$	8,197,324		$	8,230,743

A summary of our finance receivables is as follows (in thousands)^(a):

	Successor						Predecessor
	Year Ended December 31, 2011			Period From October 1, 2010 Through December 31, 2010			Period From July 1, 2010 Through September 30, 2010			Years Ended June 30,
										2010			2009
Pre-acquisition finance receivables, carrying value, beginning of period	$	7,299,963		$	8,230,743		$	8,733,518		$	10,927,969		$	14,981,412
Post-acquisition finance receivables, beginning of period		923,713
		8,223,676
Loans purchased		5,084,800			934,812			959,004			2,137,620			1,285,091
Charge-offs		(66,080	)					(217,520	)		(1,249,298	)		(1,659,099	)
Principal collections and other		(3,418,088	)		(763,883	)		(799,427	)		(3,082,773	)		(3,679,435	)
Change in carrying value adjustment on the pre-acquisition finance receivables		(483,048	)		(177,996	)
Balance at end of period	$	9,341,260		$	8,223,676		$	8,675,575		$	8,733,518		$	10,927,969

(a) Table has been revised from the prior year to correspond to current year presentation.

The following table provides information related to the finance receivables acquired on October 1, 2010 (in thousands):

Contractually required payments receivable:	$	10,672,143
Cash flows expected to be collected:	$	9,666,755
Fair value:	$	8,230,743

Finance receivables are collateralized by vehicle titles and we have the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract.

The accrual of finance charge income has been suspended on $439.4 million and $491.4 million of finance receivables (based on contractual amount due) as of December 31, 2011 and 2010, respectively.

Finance contracts are purchased by us from auto dealers without recourse, and accordingly, the dealer has no liability to us if the consumer defaults on the contract. Depending upon the contract structure and consumer credit attributes, we may pay dealers a participation fee or we may charge dealers a non-refundable acquisition fee when purchasing individual finance contracts. We also have manufacturing incentive programs with GM and other new vehicle manufacturers, typically known as subvention programs, under which the manufacturers provide us cash payments in order for us to offer lower interest rates on finance contracts we purchase. We record the amortization of participation fees and subvention and accretion of acquisition fees to finance charge income using the effective interest method.

We review our pre-acquisition portfolio for differences between contractual cash flows and the cash flows expected to be collected from our initial investment in the pre-acquisition portfolio to determine if the difference is attributable, at least in part, to credit quality. During fiscal 2011, as a result of improvements in the credit performance of the pre-acquisition portfolio, which resulted in an increase of expected cash flows of $260.9 million, we transferred this excess from the non-accretable discount to accretable yield. This excess will be amortized through finance charge income over the remaining life of the portfolio.

A summary of the accretable yield is as follows (in thousands):

	Successor
	Year Ended December 31, 2011			Period From October 1, 2010 Through December 31, 2010
Balance at beginning of period	$	1,201,178		$	1,436,012
Accretion of accretable yield		(724,650	)		(234,834	)
Transfer from non-accretable discount		260,936
Balance at end of period	$	737,464		$	1,201,178

A summary of the allowance for loan losses is as follows (in thousands):

	Successor					Predecessor
	Year Ended December 31, 2011			Period From October 1, 2010 Through December 31, 2010		Period From July 1, 2010 Through September 30, 2010			Years Ended June 30,
									2010			2009
Balance at beginning of period	$	26,352				$	573,310		$	890,640		$	951,113
Provision for loan losses		178,372		$	26,352		74,618			388,058			972,381
Charge-offs		(66,080	)				(217,520	)		(1,249,298	)		(1,659,099	)
Recoveries		40,124					98,081			543,910			626,245
Balance at end of period	$	178,768		$	26,352	$	528,489		$	573,310		$	890,640

Credit Risk

A summary of the credit risk profile by FICO score band of the finance receivables, determined at origination, is as follows (in thousands):

	Successor
	December 31, 2011		December 31, 2010
FICO Score less than 540	$	2,133,361	$	1,328,011
FICO Score 540 to 599		4,166,988		3,395,736
FICO Score 600 to 659		2,623,882		2,757,771
FICO Score greater than 660		755,743		1,166,383
Balance at end of period(a)	$	9,679,974	$	8,647,901

(a) Finance receivables consist of pre-acquisition finance receivables – outstanding balance and post-acquisition finance receivables, net of fees.

Delinquency

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. The following is a summary of the contractual amounts of finance receivables, which is not materially different than recorded investment, that are (a) more than 30 days delinquent, but not yet in repossession, and (b) in repossession, but not yet charged off (dollars in thousands):

	Successor
	December 31, 2011					December 31, 2010
	Amount		Percent of Contractual Amount Due			Amount		Percent of Contractual Amount Due
Delinquent contracts:
31 to 60 days	$	517,083		5.3	%	$	535,263		6.2	%
Greater-than-60 days		181,691		1.9	%		211,588		2.4	%
		698,774		7.2	%		746,851		8.6	%
In repossession		26,824		0.3	%		28,076		0.3	%
	$	725,598		7.5	%	$	774,927		8.9	%