Tag Archive | "Ally Financial Inc."

Ally’s Bill Muir to Retire by Year’s End

DETROIT — Ally Financial Inc. named Jeffrey Brown president and CEO of the company’s Dealer Financial Services business. He will replace William (Bill) Muir, who will retire by the end of the year.
Brown, who currently serves as senior executive vice president of finance and corporate planning, will oversee the company’s automotive finance, insurance and auto servicing operations. He will continue to report to Ally CEO Michael A. Carpenter.

“Ally is fortunate to have a very strong management team that has helped to guide the company through a highly complex transformation over recent years,” Carpenter said. “Bill has been instrumental in transitioning Ally’s Dealer Financial Services business from its captive roots to a market-driven competitor that remains a leader in the industry. I want to thank him for his extraordinary leadership and his commitment to the business and Ally’s dealer customers.

Brown’s current financial responsibilities will be transferred to Ally CFO Chris Halmy. With this move, Halmy will have responsibility for all of Ally’s finance, treasury and capital markets activities.

Brown was appointed senior executive vice president of Finance and Corporate Planning in June 2011, and has played a leading role in strengthening Ally’s capital and liquidity profile, executing on the company’s strategic transformation efforts and repaying the U.S. taxpayer’s investment. Brown joined Ally in March 2009 as corporate treasurer, having previously served as corporate treasurer for Bank of America.

“JB is a proven leader and has been a critical force in helping to implement Ally’s strategic transformation,” Carpenter noted. “He has worked closely with the Dealer Financial Services team and, in his new role, is committed to advancing Ally’s leading dealer-centric business model. JB has a customer-focused mindset, and I am confident he will be a very effective leader for this business in the next chapter of Ally’s evolution.”

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Ally Granted Financial Holding Company Status

Detroit — Ally Financial Inc. was granted its application for financial holding company status by the Federal Reserve. As a financial holding company, Ally is permitted to engage in a broader range of business activities and can continue to operate its insurance and re-marketing businesses as part of its leading dealer financial services operation.

“Crossing this threshold is a great achievement for Ally and a testament to the transformative efforts that the company and its depository institution, Ally Bank, have undergone since 2008,” said CEO Michael A. Carpenter. “This has been a seminal year for the company, and we anticipate further momentum over the next year as we aim to exit the TARP program.”

Ally became a bank holding company in December 2008 and applied for financial holding company status in December 2013.

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Ally Reaches $98M Settlement with DOJ, CFPB for Lending Discrimination

Detroit — The Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) announced Friday the federal government’s largest auto loan discrimination settlement in history to resolve allegations that Detroit-based Ally Financial Inc. and Ally Bank have engaged in an ongoing nationwide pattern or practice of discrimination against African-American, Hispanic and Asian/Pacific Islander borrowers in their auto lending since April 1, 2011.

The agreement is the first joint fair lending enforcement action by the department and CFPB. With this agreement, eight of the top 10 largest fair lending settlements in the department’s history have been under U.S. Attorney General Eric Holder’s leadership.

The settlement provides $80 million in compensation for victims of past discrimination by one of the nation’s largest auto lenders, and requires Ally to pay $18 million to the CFPB’s Civil Penalty Fund. Ally also must refund discriminatory overcharges to borrowers for the next three years unless it significantly reduces disparities in unjustified interest rate markups. This system will create a strong financial incentive to eliminate discriminatory overcharges.

“With this largest-ever settlement in an auto loan discrimination case, we are taking a firm stand against discrimination in a critical lending market,” said Holder. “By requiring Ally to provide refunds to those who are overcharged because of their race or national origin, this agreement will ensure relief for Americans who are victimized. It will enable the Justice Department and the CFPB to work closely with Ally and others to prevent discriminatory practices in the future. And it will reinforce our determination to respond aggressively to discrimination in America’s lending markets — wherever it is found.”

The settlement resolves claims by the department and the CFPB that Ally discriminated by charging approximately 235,000 African-American, Hispanic and Asian/Pacific Islander borrowers higher interest rates than non-Hispanic white borrowers. The agencies claim that Ally charged borrowers higher interest rates because of their race or national origin, and not because of the borrowers’ creditworthiness or other objective criteria related to borrower risk.

The average victim paid between $200 and $300 extra during the term of the loan. The Equal Credit Opportunity Act (ECOA) prohibits such discrimination in all forms of lending, including auto lending. Ally’s settlement with the DOJ, which is subject to court approval, was filed in the U.S. District Court for the Eastern District of Michigan in conjunction with the DOJ’s complaint. Ally resolved the CFPB’s claims by entering into a public administrative settlement.

“Discrimination is a serious issue across every consumer credit market,” said CFPB Director Richard Cordray. “We are returning $80 million to hard-working consumers who paid more for their cars or trucks based on their race or national origin. We look forward to working closely with the Justice Department and Ally to make sure this serious issue will be addressed appropriately in the years ahead as well.”

Rather than taking applications directly from consumers, Ally makes most of its loans through over 12,000 car dealers nationwide who help their customers pay for their new or used car by submitting their loan application to Ally. Ally’s business practice, like most other major auto lenders, allows car dealers discretion to vary a loan’s interest rate from the price Ally initially sets based on the borrower’s objective credit-related factors.

Dealers receive greater payments from Ally on loans that include a higher interest rate markup. The coordinated investigations by the department and the CFPB that preceded the settlement determined this system of subjective and unguided pricing discretion directly results in Ally’s qualified African-American, Hispanic and Asian/Pacific Islander borrowers paying more than qualified non-Hispanic white borrowers.

The agencies claim that Ally fails to adequately monitor its interest rate markups for discrimination or require dealers to document their markup decisions. Ally’s first effort to monitor for discrimination in interest rate markups began only earlier this year after it learned of the CFPB’s preliminary findings of discrimination, and resulted in only two dealers being sanctioned and subjected to nothing more than voluntary training.

“Ally does not make loans directly to consumers, but rather, it purchases installment contracts originated by auto dealers,” Ally said in a statement. “Ally’s long-time process for evaluating auto installment contracts from dealers does not include information on a consumer’s race or ethnicity. Ally assesses these contracts and sets pricing based solely on a consumer’s creditworthiness and contract characteristics.

“The CFPB and DOJ assert that pricing disparity has occurred for certain protected classes of consumers as a result of the auto dealer’s ability to mark-up Ally’s rate at which it buys a retail installment contract,” the statement continued. “The CFPB and DOJ also assert that Ally has responsibility for the conduct of its dealer customers and allege that Ally has not sufficiently monitored the pricing practices of its dealer customers.

“Ally does not engage in or condone violations of law or discriminatory practices, and based on the company’s analysis of its business, it does not believe that there is measurable discrimination by auto dealers.”

The settlement represents the first resolution of the department’s joint effort with the CFPB to address discriminatory auto lending practices. The 2010 Dodd-Frank Act gave both the DOJ and the CFPB authority to take action against large banks like Ally for violating the ECOA. Although the department has filed previously filed lawsuits alleging violations of ECOA involving car loans, today is the first ECOA lawsuit against an auto lender that operates nationwide.

“This settlement provides relief to those who were harmed by this discrimination,” said U.S. Attorney for the Eastern District of Michigan Barbara McQuade. “Lenders must consider an individual borrower’s credit worthiness, based on income, savings, credit history and other objective factors when determining the terms of a loan. This settlement will ensure that in the future, borrowers will be able to obtain loans from Ally based on their own credit history free from discrimination based on race or national origin.”

In addition to the $98 million in payments for its past conduct and requirement to refund future discriminatory charges, the settlement requires Ally to improve its monitoring and compliance systems. The settlement allows Ally to experiment with different approaches toward lessening discrimination and requires it to regularly report to the department and the CFPB on the results of its efforts as well as discuss potential ways to improve results.

The settlement provides for an independent administrator to locate victims and distribute payments of compensation at no cost to borrowers whom the department and the CFPB identify as victims of Ally’s discrimination. The department and the CFPB will make a public announcement and post information on their websites once more details about the compensation process become available. Borrowers who are eligible for compensation from the settlement will be contacted by the administrator, and do not need to contact the department or the CFPB at this time.

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GM Announces Sale of Equity Stake in Ally Financial

Detroit – General Motors Co. completed the sale of its 8.5 percent common equity ownership in Ally Financial Inc. for total proceeds of approximately $0.9 billion.

In association with this transaction, GM expects to record a gain of approximately $0.5 billion, which will be treated as a special item in the fourth quarter of 2013.

“This transaction releases capital from a non-core asset and further enhances our financial flexibility,” said Dan Ammann, GM executive vice president and chief financial officer. “Ally continues to play an important role in financing our dealers and customers in the United States.”

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Ally to Delay IPO

Detroit-based Ally Financial Inc. has decided to delay an initial public offering because of weak market conditions, two people briefed on the matter said.

The mortgage and auto lender and bank holding company was expected to launch a road show ahead of an IPO planned before the July 4th holiday, reported The Detroit News.

The IPO could come in late July or early August, or be pushed until after the Labor Day holiday, when much of Wall Street returns from vacation, said the officials on Thursday. They asked for anonymity because the information had not been made public.

The U.S. Treasury Department plans to raise $5 billion as part of a $6 billion offering when Ally goes public. The Treasury Department owns a controlling 74 percent stake in Ally as part of the $17.2 billion bailout during the financial crisis.

The delayed IPO first was reported by the Financial Times.

Ally filed the paperwork March 31 in order to launch an IPO. Ally declined to comment Thursday night.

The Treasury is expected to sell some shares. Other owners such as General Motors Co., which holds a 9.9 percent stake in Ally, and Cerberus Capital Management LP, which holds a 9 percent stake, do not plan to sell shares.

Treasury has received about $4.9 billion in returns from Ally to date, including $2.2 billion in dividends and interest.

The company reported a $1.1 billion profit in 2010.

Citi, Goldman, Sachs & Co., J.P. Morgan and Morgan Stanley are advising Ally on its initial public offering.

With more than $172 billion in assets as of Dec. 31, 2010, Ally operates as a bank holding company.

Ally also has operations in mortgage and commercial finance, and the company’s subsidiary, Ally Bank, offers retail banking products through its online arm.

Ally, which was known as GMAC Inc. until last year, was founded by GM more than 90 years ago as its in-house finance arm. It sold a 51 percent stake in the company in 2006 to Cerberus Capital Management LP in a $7.4 billion deal.

Ally said it raised its percentage of new car lending to 9.9 percent in 2010, up from 6.1 percent, to jump from third highest to the leading auto lender.

Bad market conditions could also delay other planned IPOs, including Troy-based Delphi, which filed for an IPO last month.

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Ally Financial to Offer Its Dealers 5 Percent of IPO Shares

Ally Financial Inc. said it intends to offer as much as 5 percent of the common shares from its initial public offering to its dealers, as the auto lender disclosed more details of its IPO.

The move allows auto dealers, Ally’s primary customers, access to the auto lender’s public stock offering, which is expected this summer. Ally’s core business is to provide financing to dealers, helping them put new vehicles on their lots, reported The Wall Street Journal.

Any shares left over from this 5 percent reserve will be offered to the general public, Ally said in its amended IPO prospectus filing on Friday with the U.S. Securities and Exchange Commission.

Gina Proia, an Ally spokeswoman, declined to comment on the potential size or timing of the stock offering. But people close to the deal said earlier this year that the plan is for the U.S. Treasury to sell about $5 billion of common stock in the offering. If markets cooperate, Ally’s shares should begin trading before the end of June, a person close to the deal said in May.

Ally has listed Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley as its lead underwriters, but other banks are expected to be added to the roster.

Ally said last month it intends to list shares in its public offering on the New York Stock Exchange under the symbol ALLY.

At the time of the IPO, the U.S. Treasury Department, which owns 74 percent of Ally, plans to convert $2.9 billion of its existing holding of $5.9 billion of mandatory convertible preferred securities into common stock, Ally said in May in an earlier amended IPO prospectus filing with the SEC.

The Treasury will exchange the remaining $3 billion of its mandatory convertible preferred securities into so-called tangible equity units, a security with a debt and equity component. The Treasury will offer a portion of these tangible equity units alongside the common equity offering.

In late March, Ally, majority-owned by the U.S. government, filed an initial prospectus to begin a months-long process that will culminate with the Treasury further unwinding its $17.2 billion bailout of the company. To date, the Treasury has recouped $2.7 billion of its investment by selling trust preferred securities that it held in Ally.

As with almost any IPO, only a fraction of Ally’s shares will be sold. The U.S. government likely will have to sell its holdings over the course of months or years to be fully repaid.

The Treasury bailed out Ally as part of efforts to rescue General Motors Co. and Chrysler Group LLC at the height of the financial crisis. Ally, once owned by GM and subsequently majority-owned by private investors before the federal rescue, provides financing for dealerships and customers of the auto makers.

For the first quarter, Ally reported a 9.9 percent decline in net income as profit in its North American auto-finance and mortgage operations fell.

Ally reported a $146 million profit for the quarter ended March 31, its fifth consecutive quarterly profit following steep losses in the financial crisis. The company said core pretax income, which reflects continuing operations before taxes and some expenses, was $428 million, compared with $584 million a year earlier.

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