5. LOANS RECEIVABLE

Loans receivable consists of the following:


(In millions)	As of December 31, 2012
	Dealer Loans			Purchased Loans			Total
Loans receivable	$	1,869.4		$	240.5		$	2,109.9
Allowance for credit losses		(167.4	)		(9.0	)		(176.4	)
Loans receivable, net	$	1,702.0		$	231.5		$	1,933.5

(In millions)	As of December 31, 2011
	Dealer Loans			Purchased Loans			Total
Loans receivable	$	1,506.5		$	246.4		$	1,752.9
Allowance for credit losses		(141.7	)		(12.6	)		(154.3	)
Loans receivable, net	$	1,364.8		$	233.8		$	1,598.6

A summary of changes in Loans receivable is as follows:


(In millions)	For the Year Ended December 31, 2012
	Dealer Loans			Purchased Loans			Total
Balance, beginning of period	$	1,506.5		$	246.4		$	1,752.9
New Consumer Loan assignments (1)		1,253.6			108.8			1,362.4
Principal collected on Loans receivable		(1,024.8	)		(138.0	)		(1,162.8		)
Accelerated Dealer Holdback payments		43.7			-			43.7
Dealer Holdback payments		115.7			-			115.7
Transfers (2)		(23.8	)		23.8			-
Write-offs		(3.6	)		(0.6	)		(4.2		)
Recoveries (3)		2.2			0.1			2.3
Net change in other loans		(0.1	)		-			(0.1		)
Balance, end of period	$	1,869.4		$	240.5		$	2,109.9

(In millions)	For the Year Ended December 31, 2011
	Dealer Loans			Purchased Loans			Total
Balance, beginning of period	$	1,082.0		$	262.9		$	1,344.9
New Consumer Loan assignments (1)		1,152.5			122.2			1,274.7
Principal collected on Loans receivable		(843.1	)		(153.8	)		(996.9	)
Accelerated Dealer Holdback payments		47.4			-			47.4
Dealer Holdback payments		85.2			-			85.2
Transfers (2)		(15.5	)		15.5			-
Write-offs		(3.0	)		(0.5	)		(3.5	)
Recoveries (3)		1.8			0.1			1.9
Net change in other loans		(0.8	)		-			(0.8	)
Balance, end of period	$	1,506.5		$	246.4		$	1,752.9

(In millions)	For the Year Ended December 31, 2010
	Dealer Loans			Purchased Loans			Total
Balance, beginning of period	$	869.6		$	298.0		$	1,167.6
New Consumer Loan assignments (1)		786.9			100.4			887.3
Principal collected on Loans receivable		(632.6	)		(153.3	)		(785.9	)
Accelerated Dealer Holdback payments		32.6			-			32.6
Dealer Holdback payments		44.2			-			44.2
Transfers (2)		(17.8	)		17.8			-
Write-offs		(3.0	)		(0.1	)		(3.1	)
Recoveries (3)		2.3			0.1			2.4
Net change in other loans		(0.2	)		-			(0.2	)
Balance, end of period	$	1,082.0		$	262.9		$	1,344.9

(1)	The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program. The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

(2)	Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback. We transfer the Dealer’s outstanding Dealer Loan balance to Purchased Loans in the period this forfeiture occurs.

(3)	Represents collections received on previously written off Loans.

Contractual net cash flows are comprised of the contractual repayments of the underlying Consumer Loans for Dealer and Purchased Loans, less the related Dealer Holdback payments for Dealer Loans. The difference between the contractual net cash flows and the expected net cash flows is referred to as the nonaccretable difference. This difference is neither accreted into income nor recorded in our balance sheets. We do not believe that the contractual net cash flows of our Loan portfolio are relevant in assessing our financial position. We are contractually owed repayments on many Consumer Loans, primarily those older than 120 months, where we are not forecasting any future net cash flows.

The excess of expected net cash flows over the carrying value of the Loans is referred to as the accretable yield and is recognized on a level-yield basis as finance charge income over the remaining lives of the Loans. A summary of changes in the accretable yield is as follows:


(In millions)	For the Year Ended December 31, 2012
	Dealer Loans			Purchased Loans			Total
Balance, beginning of period	$	508.0		$	120.1		$	628.1
New Consumer Loan assignments (1)		538.7			47.8			586.5
Finance charge income		(458.7	)		(79.5	)		(538.2	)
Forecast changes		25.6			10.0			35.6
Transfers (2)		(10.7	)		16.8			6.1
Balance, end of period	$	602.9		$	115.2		$	718.1

(In millions)	For the Year Ended December 31, 2011
	Dealer Loans			Purchased Loans			Total
Balance, beginning of period	$	351.6		$	124.5		$	476.1
New Consumer Loan assignments (1)		508.9			59.5			568.4
Finance charge income		(374.9	)		(85.7	)		(460.6	)
Forecast changes		30.0			9.6			39.6
Transfers (2)		(7.6	)		12.2			4.6
Balance, end of period	$	508.0		$	120.1		$	628.1

(In millions)	For the Year Ended December 31, 2010
	Dealer Loans			Purchased Loans			Total
Balance, beginning of period	$	281.4		$	130.0		$	411.4
New Consumer Loan assignments (1)		371.6			56.5			428.1
Finance charge income		(299.5	)		(88.5	)		(388.0	)
Forecast changes		6.3			13.4			19.7
Transfers (2)		(8.2	)		13.1			4.9
Balance, end of period	$	351.6		$	124.5		$	476.1

(1)

The Dealer Loans amount represents the net cash flows expected at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related advances paid to Dealers. The Purchased Loans amount represents the net cash flows expected at the time of assignment on Consumer Loans assigned under our Purchase Program, less the related one-time payments made to Dealers.

(2)	Under our Portfolio Program, certain events may result in Dealers forfeiting their rights to Dealer Holdback. We transfer the Dealer’s outstanding Dealer Loan balance and related expected future net cash flows to Purchased Loans in the period this forfeiture occurs.

Additional information related to new Consumer Loan assignments is as follows:


(In millions)	For the Year Ended December 31, 2012
	Dealer Loans		Purchased Loans		Total
Contractual net cash flows at the time of assignment (1)	$	1,935.1	$	217.6	$	2,152.7
Expected net cash flows at the time of assignment (2)		1,792.3		156.5		1,948.8
Fair value at the time of assignment (3)		1,253.6		108.8		1,362.4

(In millions)	For the Year Ended December 31, 2011
	Dealer Loans		Purchased Loans		Total
Contractual net cash flows at the time of assignment (1)	$	1,786.5	$	248.0	$	2,034.5
Expected net cash flows at the time of assignment (2)		1,661.4		181.7		1,843.1
Fair value at the time of assignment (3)		1,152.5		122.2		1,274.7

(In millions)	For the Year Ended December 31, 2010
	Dealer Loans		Purchased Loans		Total
Contractual net cash flows at the time of assignment (1)	$	1,238.0	$	212.5	$	1,450.5
Expected net cash flows at the time of assignment (2)		1,158.5		156.9		1,315.4
Fair value at the time of assignment (3)		786.9		100.4		887.3

(1)

The Dealer Loans amount represents the repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we would be required to make if we collected all of the contractual repayments. The Purchased Loans amount represents the repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Purchase Program.

(2)

The Dealer Loans amount represents the repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we expected to make. The Purchased Loans amount represents the repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Purchase Program.

(3)	The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program. The Purchased Loans amount represents one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

Credit Quality

We monitor and evaluate the credit quality of Consumer Loans assigned under our Portfolio and Purchase Programs on a monthly basis by comparing our current forecasted collection rates to our initial expectations. For additional information regarding credit quality, see Note 2 to the consolidated financial statements. The following table compares our forecast of Consumer Loan collection rates as of December 31, 2012, with the forecasts as of December 31, 2011, as of December 31, 2010, and at the time of assignment, segmented by year of assignment:


	Forecasted Collection Percentage as of (1)												Variance in Forecasted Collection Percentage from
Consumer Loan Assignment Year	December 31, 2012			December 31, 2011			December 31, 2010			Initial Forecast			December 31, 2011			December 31, 2010			Initial Forecast
2003		73.8	%		73.7	%		73.7	%		72.0	%		0.1	%		0.1	%		1.8	%
2004		73.0	%		73.0	%		73.0	%		73.0	%		0.0	%		0.0	%		0.0	%
2005		73.6	%		73.6	%		73.7	%		74.0	%		0.0	%		-0.1	%		-0.4	%
2006		69.9	%		70.0	%		70.2	%		71.4	%		-0.1	%		-0.3	%		-1.5	%
2007		68.0	%		68.1	%		67.9	%		70.7	%		-0.1	%		0.1	%		-2.7	%
2008		70.3	%		70.0	%		69.9	%		69.7	%		0.3	%		0.4	%		0.6	%
2009		79.5	%		79.4	%		78.5	%		71.9	%		0.1	%		1.0	%		7.6	%
2010		77.3	%		76.8	%		75.8	%		73.6	%		0.5	%		1.5	%		3.7	%
2011		74.1	%		73.2	%		-			72.5	%		0.9	%		-			1.6	%
2012		72.2	%		-			-			71.4	%		-			-			0.8	%

(1)	Represents the total forecasted collections we expect to collect on the Consumer Loans as a percentage of the repayments that we were contractually owed on the Consumer Loans at the time of assignment. Contractual repayments include both principal and interest.

Advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program are aggregated into pools for purposes of recognizing revenue and evaluating impairment. As a result of this aggregation, we are not able to segment the carrying value of the majority of our Loan portfolio by year of assignment. The following table summarizes Loan pools based on the performance of the underlying pool of Consumer Loans:


(In millions)	As of December 31, 2012
	Loan Pool Performance Meets or Exceeds Initial Estimates						Loan Pool Performance Less than Initial Estimates
	Dealer Loans		Purchased Loans		Total		Dealer Loans			Purchased Loans			Total
Loans receivable	$	564.1	$	205.8	$	769.9	$	1,305.3		$	34.7		$	1,340.0
Allowance for credit losses		-		-		-		(167.4	)		(9.0	)		(176.4	)
Loans receivable, net	$	564.1	$	205.8	$	769.9	$	1,137.9		$	25.7		$	1,163.6

(In millions)	As of December 31, 2011
	Loan Pool Performance Meets or Exceeds Initial Estimates						Loan Pool Performance Less than Initial Estimates
	Dealer Loans		Purchased Loans		Total		Dealer Loans			Purchased Loans			Total
Loans receivable	$	511.9	$	192.5	$	704.4	$	994.6		$	53.9		$	1,048.5
Allowance for credit losses		-		-		-		(141.7	)		(12.6	)		(154.3	)
Loans receivable, net	$	511.9	$	192.5	$	704.4	$	852.9		$	41.3		$	894.2

A summary of changes in the allowance for credit losses is as follows:


(In millions)	For the Year Ended December 31, 2012
	Dealer Loans			Purchased Loans			Total
Balance, beginning of period	$	141.7		$	12.6		$	154.3
Provision for credit losses		27.1			(3.1	)		24.0
Write-offs		(3.6	)		(0.6	)		(4.2	)
Recoveries (1)		2.2			0.1			2.3
Balance, end of period	$	167.4		$	9.0		$	176.4

(In millions)	For the Year Ended December 31, 2011
	Dealer Loans			Purchased Loans			Total
Balance, beginning of period	$	113.2		$	13.7		$	126.9
Provision for credit losses		29.7			(0.7	)		29.0
Write-offs		(3.0	)		(0.5	)		(3.5	)
Recoveries (1)		1.8			0.1			1.9
Balance, end of period	$	141.7		$	12.6		$	154.3

(In millions)	For the Year Ended December 31, 2010
	Dealer Loans			Purchased Loans			Total
Balance, beginning of period	$	108.8		$	8.8		$	117.6
Provision for credit losses		5.1			4.9			10.0
Write-offs		(3.0	)		(0.1	)		(3.1	)
Recoveries (1)		2.3			0.1			2.4
Balance, end of period	$	113.2		$	13.7		$	126.9

(1)	Represents collections received on previously written off Loans.

During the fourth quarter of 2012, we enhanced the computations used to account for Dealer Loans. The enhanced computations utilize a more sophisticated approach for determining the yields established at the time of assignment, future net cash flow streams and the present value of future cash flow streams. While the enhanced computations did not change these estimates significantly at the overall Dealer Loan portfolio level, we believe they improved the precision of these estimates at the individual Dealer level. Implementation of the enhanced computations increased the provision for credit losses and finance charges by $2.8 million and $0.8 million, respectively, for the year ended December 31, 2012.