Credit and Other Investments Segment. Our Credit and Other Investments segment
includes our point-of-sale and direct-to-consumer finance operations, investments
in and servicing of our various credit card receivables portfolios and other
product development and limited investment in consumer finance technology platforms
that generally capitalize on our credit infrastructure.
As previously discussed, through our Fortiva brand (Fortiva Retail Credit, Fortiva
Personal Loan, and Fortiva Credit Card) we offer a broad array of products over
multiple channels. We leverage proprietary analytics and a robust technology
platform to offer loan products to consumers overlooked by other providers of
consumer credit. Through Fortiva Retail Credit (our "point-of-sale"
operations), we leverage our flexible technology platform to allow retail partners
and service providers to offer loan options to their customers who have typically
been declined by a primary lender. Our paperless process, instant decision-making
and analytical capabilities enable a streamlined customer experience and increased
sales for our retail partners. We leverage the same proprietary analytics and
infrastructure to offer general purpose loan products directly to consumers
through Fortiva Personal Loans and Fortiva Credit Cards (our "direct-to-consumer"
products). We reach these consumers through a diverse origination platform that
includes direct mail, Internet-based marketing and partnerships.
Our growing portfolio of finance assets are generating and we believe will continue
to generate attractive returns on assets, thereby allowing us to secure debt
financing under terms and conditions (including advance rates and pricing) that
will allow us to achieve our desired returns on equity, and we continue to pursue
growth in this area.
Substantially all of the credit card accounts underlying our credit card receivables
and portfolios have been closed to new cardholder purchases since 2009. We continue
to service our credit card portfolios as they continue to liquidate.
Our credit and other operations are heavily regulated, which may cause us to
change how we conduct our operations either in response to regulation or in
keeping with our goal of leading the industry in adherence to consumer-friendly
practices. We have made several significant changes to our practices over the
past several years, and because our account management practices are evolutionary
and dynamic, it is possible that we may make further changes to these practices,
some of which may produce positive, and others of which may produce adverse,
effects on our operating results and financial position. Customers at the lower
end of the credit score range intrinsically have higher loss rates than do customers
at the higher end of the credit score range. As a result, we price our products
to reflect this higher loss rate. As such, our products are subject to greater
regulatory scrutiny than the products of prime lenders who are able to price
their credit products at much lower levels than we can.
Auto Finance Segment. The operations of our Auto Finance segment are principally
conducted through our CAR platform, which we acquired in April 2005. CAR primarily
purchases and/or services loans secured by automobiles from or for a pre-qualified
network of independent automotive dealers and automotive finance companies in
the buy-here, pay-here used car business. In 2010, we started offering floor-plan
financing to this same group of dealers and finance companies. In 2013 we also
started offering certain installment lending products in addition to our traditional
loans secured by automobiles.
Through our CAR operations, we generate revenues on purchased loans through
interest earned on the face value of the installment agreements combined with
the accretion of discounts on loans purchased. We generally earn discount income
over the life of the applicable loan. Additionally, we generate revenues from
servicing loans on behalf of dealers for a portion of actual collections and
by providing back-up servicing for similar quality assets owned by unrelated
third parties. We offer a number of other products to our network of buy-here,
pay-here dealers (including our floor-plan financing offering), but the majority
of our activities are represented by our purchases of auto loans at discounts
and our servicing of auto loans for a fee.