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Loans Receivable
9 Months Ended
Sep. 30, 2014
Receivables [Abstract]  
Loans Receivable
LOANS RECEIVABLE

Loans receivable consists of the following:
(In millions)
As of September 30, 2014
 
Dealer Loans
 
Purchased Loans
 
Total
Loans receivable
$
2,315.3

 
$
300.3

 
$
2,615.6

Allowance for credit losses
(199.1
)
 
(9.1
)
 
(208.2
)
Loans receivable, net
$
2,116.2

 
$
291.2

 
$
2,407.4

 
 
 
 
 
 
(In millions)
As of December 31, 2013
 
Dealer Loans
 
Purchased Loans
 
Total
Loans receivable
$
2,155.5

 
$
252.7

 
$
2,408.2

Allowance for credit losses
(185.7
)
 
(9.7
)
 
(195.4
)
Loans receivable, net
$
1,969.8

 
$
243.0

 
$
2,212.8



A summary of changes in Loans receivable is as follows:

(In millions)
For the Three Months Ended September 30, 2014
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
2,279.0

 
$
283.8

 
$
2,562.8

New Consumer Loan assignments (1)
342.9

 
48.8

 
391.7

Principal collected on Loans receivable
(344.4
)
 
(36.9
)
 
(381.3
)
Accelerated Dealer Holdback payments
9.7

 

 
9.7

Dealer Holdback payments
33.7

 

 
33.7

Transfers (2)
(4.6
)
 
4.6

 

Write-offs
(1.1
)
 
(0.1
)
 
(1.2
)
Recoveries (3)
0.4

 
0.1

 
0.5

Net change in other loans
(0.3
)
 

 
(0.3
)
Balance, end of period
$
2,315.3

 
$
300.3

 
$
2,615.6

 
 
 
 
 
 
(In millions)
For the Three Months Ended September 30, 2013
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
2,041.4

 
$
237.1

 
$
2,278.5

New Consumer Loan assignments (1)
335.3

 
33.9

 
369.2

Principal collected on Loans receivable
(299.1
)
 
(31.4
)
 
(330.5
)
Accelerated Dealer Holdback payments
10.4

 

 
10.4

Dealer Holdback payments
27.8

 

 
27.8

Transfers (2)
(4.6
)
 
4.6

 

Write-offs
(1.6
)
 

 
(1.6
)
Recoveries (3)
0.5

 
0.1

 
0.6

Net change in other loans
(0.1
)
 

 
(0.1
)
Balance, end of period
$
2,110.0

 
$
244.3

 
$
2,354.3


(In millions)
For the Nine Months Ended September 30, 2014
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
2,155.5

 
$
252.7

 
$
2,408.2

New Consumer Loan assignments (1)
1,103.6

 
142.8

 
1,246.4

Principal collected on Loans receivable
(1,060.5
)
 
(111.2
)
 
(1,171.7
)
Accelerated Dealer Holdback payments
31.6

 

 
31.6

Dealer Holdback payments
101.5

 

 
101.5

Transfers (2)
(16.0
)
 
16.0

 

Write-offs
(2.0
)
 
(0.1
)
 
(2.1
)
Recoveries (3)
1.4

 
0.1

 
1.5

Net change in other loans
0.2

 

 
0.2

Balance, end of period
$
2,315.3

 
$
300.3

 
$
2,615.6

 
 
 
 
 
 
(In millions)
For the Nine Months Ended September 30, 2013
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
1,869.4

 
$
240.5

 
$
2,109.9

New Consumer Loan assignments (1)
1,048.0

 
90.2

 
1,138.2

Principal collected on Loans receivable
(908.4
)
 
(100.0
)
 
(1,008.4
)
Accelerated Dealer Holdback payments
30.8

 

 
30.8

Dealer Holdback payments
86.3

 

 
86.3

Transfers (2)
(13.5
)
 
13.5

 

Write-offs
(4.6
)
 
(0.1
)
 
(4.7
)
Recoveries (3)
1.7

 
0.2

 
1.9

Net change in other loans
0.3

 

 
0.3

Balance, end of period
$
2,110.0

 
$
244.3

 
$
2,354.3

 
(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 Three Months Ended September 30, 2014
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
709.6

 
$
124.5

 
$
834.1

New Consumer Loan assignments (1)
137.7

 
17.9

 
155.6

Finance charge income
(138.6
)
 
(19.4
)
 
(158.0
)
Forecast changes
7.3

 
2.5

 
9.8

Transfers (2)
(1.1
)
 
2.3

 
1.2

Balance, end of period
$
714.9

 
$
127.8

 
$
842.7

 
 
 
 
 
 
(In millions)
For the Three Months Ended September 30, 2013
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
654.8

 
$
111.3

 
$
766.1

New Consumer Loan assignments (1)
138.1

 
13.7

 
151.8

Finance charge income
(131.0
)
 
(17.7
)
 
(148.7
)
Forecast changes
7.6

 
1.4

 
9.0

Transfers (2)
(1.9
)
 
3.4

 
1.5

Balance, end of period
$
667.6

 
$
112.1

 
$
779.7

 
 
 
 
 
 
(In millions)
For the Nine Months Ended September 30, 2014
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
667.5

 
$
112.8

 
$
780.3

New Consumer Loan assignments (1)
445.2

 
54.5

 
499.7

Finance charge income
(411.7
)
 
(57.0
)
 
(468.7
)
Forecast changes
19.0

 
8.6

 
27.6

Transfers (2)
(5.1
)
 
8.9

 
3.8

Balance, end of period
$
714.9

 
$
127.8

 
$
842.7

 
 
 
 
 
 
(In millions)
For the Nine Months Ended September 30, 2013
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
602.9

 
$
115.2

 
$
718.1

New Consumer Loan assignments (1)
437.1

 
37.0

 
474.1

Finance charge income
(384.5
)
 
(54.6
)
 
(439.1
)
Forecast changes
17.7

 
5.3

 
23.0

Transfers (2)
(5.6
)
 
9.2

 
3.6

Balance, end of period
$
667.6

 
$
112.1

 
$
779.7


(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 Three Months Ended September 30, 2014
 
Dealer Loans
 
Purchased Loans
 
Total
Contractual net cash flows at the time of assignment (1)
$
523.9

 
$
93.5

 
$
617.4

Expected net cash flows at the time of assignment (2)
480.6

 
66.7

 
547.3

Fair value at the time of assignment (3)
342.9

 
48.8

 
391.7

 
 
 
 
 
 
(In millions)
For the Three Months Ended September 30, 2013
 
Dealer Loans
 
Purchased Loans
 
Total
Contractual net cash flows at the time of assignment (1)
$
515.3

 
$
66.2

 
$
581.5

Expected net cash flows at the time of assignment (2)
473.4

 
47.6

 
521.0

Fair value at the time of assignment (3)
335.3

 
33.9

 
369.2

 
 
 
 
 
 
(In millions)
For the Nine Months Ended September 30, 2014
 
Dealer Loans
 
Purchased Loans
 
Total
Contractual net cash flows at the time of assignment (1)
$
1,684.8

 
$
274.7

 
$
1,959.5

Expected net cash flows at the time of assignment (2)
1,548.8

 
197.3

 
1,746.1

Fair value at the time of assignment (3)
1,103.6

 
142.8

 
1,246.4

 
 
 
 
 
 
(In millions)
For the Nine Months Ended September 30, 2013
 
Dealer Loans
 
Purchased Loans
 
Total
Contractual net cash flows at the time of assignment (1)
$
1,604.0

 
$
176.0

 
$
1,780.0

Expected net cash flows at the time of assignment (2)
1,485.1

 
127.2

 
1,612.3

Fair value at the time of assignment (3)
1,048.0

 
90.2

 
1,138.2

 
(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 3 to the consolidated financial statements.  The following table compares our forecast of Consumer Loan collection rates as of September 30, 2014, with the forecasts as of June 30, 2014, as of December 31, 2013, 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
 
September 30,
2014
 
June 30,
2014
 
December 31,
2013
 
Initial
Forecast
 
June 30,
2014
 
December 31,
2013
 
Initial
Forecast
2005
 
73.7
%
 
73.7
%
 
73.7
%
 
74.0
%
 
0.0
 %
 
0.0
 %
 
-0.3
 %
2006
 
70.0
%
 
70.0
%
 
70.0
%
 
71.4
%
 
0.0
 %
 
0.0
 %
 
-1.4
 %
2007
 
68.0
%
 
68.0
%
 
67.9
%
 
70.7
%
 
0.0
 %
 
0.1
 %
 
-2.7
 %
2008
 
70.3
%
 
70.3
%
 
70.1
%
 
69.7
%
 
0.0
 %
 
0.2
 %
 
0.6
 %
2009
 
79.4
%
 
79.3
%
 
79.2
%
 
71.9
%
 
0.1
 %
 
0.2
 %
 
7.5
 %
2010
 
77.2
%
 
77.2
%
 
77.0
%
 
73.6
%
 
0.0
 %
 
0.2
 %
 
3.6
 %
2011
 
74.0
%
 
74.1
%
 
74.1
%
 
72.5
%
 
-0.1
 %
 
-0.1
 %
 
1.5
 %
2012
 
73.4
%
 
73.4
%
 
73.5
%
 
71.4
%
 
0.0
 %
 
-0.1
 %
 
2.0
 %
2013
 
73.5
%
 
73.3
%
 
73.3
%
 
72.0
%
 
0.2
 %
 
0.2
 %
 
1.5
 %
2014 (2)
 
72.9
%
 
72.8
%
 

 
72.3
%
 
0.1
 %
 

 
0.6
 %

(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.
(2)
The forecasted collection rate for 2014 Consumer Loans as of September 30, 2014 includes both Consumer Loans that were in our portfolio as of June 30, 2014 and Consumer Loans assigned during the most recent quarter.  The following table provides forecasted collection rates for each of these segments:
 
 
Forecasted Collection Percentage as of
 
 
2014 Consumer Loan Assignment Period
 
September 30, 2014
 
June 30, 2014
 
Variance
January 1, 2014 through June 30, 2014
 
73.3
%
 
72.8
%
 
0.5
%
July 1, 2014 through September 30, 2014
 
71.8
%
 

 



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.  We are able to segment our Loan portfolio by the performance of the Loan pools.  Performance considers both the amount and timing of expected net cash flows and is measured by comparing the balance of the Loan pool to the discounted value of the expected future net cash flows of each Loan pool using the yield established at the time of assignment.  The following table segments our Loan portfolio by the performance of the Loan pools:
(In millions)
As of September 30, 2014
 
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
$
724.9

 
$
258.5

 
$
983.4

 
$
1,590.4

 
$
41.8

 
$
1,632.2

Allowance for credit losses

 

 

 
(199.1
)
 
(9.1
)
 
(208.2
)
    Loans receivable, net
$
724.9

 
$
258.5

 
$
983.4

 
$
1,391.3

 
$
32.7

 
$
1,424.0

 
 
 
 
 
 
 
 
 
 
 
 
(In millions)
As of December 31, 2013
 
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
$
681.4

 
$
227.3

 
$
908.7

 
$
1,474.1

 
$
25.4

 
$
1,499.5

Allowance for credit losses

 

 

 
(185.7
)
 
(9.7
)
 
(195.4
)
    Loans receivable, net
$
681.4

 
$
227.3

 
$
908.7

 
$
1,288.4

 
$
15.7

 
$
1,304.1



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

(In millions)
For the Three Months Ended September 30, 2014
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
195.8

 
$
9.0

 
$
204.8

Provision for credit losses
4.0

 
0.1

 
4.1

Write-offs
(1.1
)
 
(0.1
)
 
(1.2
)
Recoveries (1)
0.4

 
0.1

 
0.5

Balance, end of period
$
199.1

 
$
9.1

 
$
208.2

 
 
 
 
 
 
(In millions)
For the Three Months Ended September 30, 2013
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
175.5

 
$
10.3

 
$
185.8

Provision for credit losses
6.4

 
(0.3
)
 
6.1

Write-offs
(1.6
)
 

 
(1.6
)
Recoveries (1)
0.5

 
0.1

 
0.6

Balance, end of period
$
180.8

 
$
10.1

 
$
190.9

 
 
 
 
 
 
(In millions)
For the Nine Months Ended September 30, 2014
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
185.7

 
$
9.7

 
$
195.4

Provision for credit losses
14.0

 
(0.6
)
 
13.4

Write-offs
(2.0
)
 
(0.1
)
 
(2.1
)
Recoveries (1)
1.4

 
0.1

 
1.5

Balance, end of period
$
199.1

 
$
9.1

 
$
208.2

 
 
 
 
 
 
(In millions)
For the Nine Months Ended September 30, 2013
 
Dealer Loans
 
Purchased Loans
 
Total
Balance, beginning of period
$
167.4

 
$
9.0

 
$
176.4

Provision for credit losses
16.3

 
1.0

 
17.3

Write-offs
(4.6
)
 
(0.1
)
 
(4.7
)
Recoveries (1)
1.7

 
0.2

 
1.9

Balance, end of period
$
180.8

 
$
10.1

 
$
190.9


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

During the second quarter of 2013, we enhanced our methodology for forecasting future collections on Loans through the utilization of more recent data, different segmentations and new forecast variables.  Implementation of the enhanced forecasting methodology increased the provision for credit losses by $3.0 million for the second quarter of 2013, of which $1.2 million related to Dealer Loans and $1.8 million related to Purchased Loans.