Tag Archive | "BMO Harris Bank"

GE Selling Hyundai Capital Shares to Hyundai, Kia

FAIRFIELD — GE has signed an agreement to sell a 23.3 percent stake of Hyundai Capital Services to Hyundai Motor Company and Kia Motors as part of a broader deal to exit its entire 43.3 percent ownership of the consumer HCS. The transaction, which is subject to regulatory approval, represents aggregate GE ending net investment of approximately $900 million, reported F&I and Showroom.

Hyundai Capital is an 11-year-old join venture between Hyundai Motor Co. and GE Capital. It provides consumer financial products, including auto financing, auto leasing services, personal loans and home mortgages.

“As we continue to sell most of the assets of GE Capital, we are working with our joint venture partners such as a Hyundai to find solutions that work best for all parties,” said Keith Sherin, GE Capital chairman and CEO. “We’re pleased that we were able to take this step toward a longer term strategy to fully exit our stakes in Hyundai Capital and Hyundai Card.”

As previously announced, GE is embarking on a strategy to focus on high-value industrial businesses and is selling most of GE Capital’s assets.

On Dec. 3, GE Capital unloaded its transportation finance business to BMO Financial Group. At closing, the business unit, which represents North American’s largest financier to the truck and trailer segment, had net earning assets of about $8.9 million.

When GE completes its sale of its HCS shares, the transaction will contribute approximately $600 million of capital to the overall target of approximately $35 billion of dividends expected to be paid to GE under this plan. The broader transaction is subject to customary regulatory approval and is expected to close in April 2016.

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BMO Completes Acquisition of GE’s Transportation Finance Business

CHICAGO — On Monday, BMO Financial Group completed its acquisition of General Electric (GE) Capital Corporation’s transportation finance business, more two months after the company hinted at a reduction of its U.S. indirect auto finance portfolio to fund the purchase.

The newly acquired business unit, which BMO officials said represents North America’s largest financier to the truck and trailer segment, will be renamed BMO Transportation Finance. It will continue to operate under the leadership of Dan Clark and his management team. On closing, the business had net earning assets of about $8.9 million, BMO said.

“The trucking industry is vital to the North American economy, and we intend to grow that business, building on the team’s 40-year track record of providing industry expertise to its customers,” said David Casper, president and CEO of BMO’s subsidiary BMO Harris Bank, which will oversee the new business unit.

BMO Harris Bank stirred suspicions when it informed dealers on Oct. 1 that it was exiting approximately 12 states in order to refocus “its indirect auto business to solely include the bank’s core market states.” The pullback was thought to be the linked to the bank’s April 2014 decision to move to a flat-fee compensation model in response to the Consumer Financial Protection Bureau’s scrutiny of dealer participation policies. Market insiders believed the bank lost dealers as a result of the move.

At the time of the announcement, a spokesman for BMO Harris Bank denied the move to flats resulted in lost business and maintained that the pullback was the result of a strategic decision. That claim was backed by a Sept. 10 conference call in which BMO Financial Group announced to media and investors its intentions to acquire GE’s business unit.

“The transaction will be funded using existing balance sheet liquidity, additional deposits and some wholesale funding,” Tom Flynn, BMO Financial Group CFO, said during the conference call. “In addition, our funding strategy includes a reduction of our U.S. personal and commercial indirect auto lending portfolio over the next few years.”

BMO Harris Bank, which terminated dealer agreements in those 12 noncore state on Oct. 31, continues to serve dealers in Illinois, Wisconsin Indiana, Minnesota, Kansas, Missouri, Arizona, and Florida.

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Bank Eliminates Dealer Markup, Cites CFPB Guidance

CHICAGO — Dealer customers of BMO Harris Bank were issued a notice Monday that the finance source has eliminated dealer discretion in the setting of interest rates on retail installment sale contracts. The change, according to the notice, is in response to the guidelines issued by the Consumer Financial Protection Bureau (CFPB).

“While no specific safe harbor has been identified by the CFPB, we have taken these proactive steps to follow current CFPB guidance while continuing to offer significant value to our dealer customers,” the notice, obtained by F&I and Showroom, read, in part.

In March 2013, the CFPB issued guidance claiming that potentially discriminatory markups in auto lending may result in tens of millions of dollars in consumer harm each year. The guidance has sparked much debate among dealer associations and lawmakers alike, who have questioned the CFPB’s methods and transparency related to determining the presence of discriminatory practices.

BMO Harris Bank took a survey of more than 3,000 of its dealer customers in February. According to the notice, it used those results to produce “a program that removes dealer discretion in pricing while continuing to compensate [dealers] … fairly and equitably.”

“…after careful consideration of the needs of our customers and the evolving regulatory environment, BMO Harris Bank is taking the lead in changing its indirect auto lending practices,” said Vice President and Head of Media Relations Jim Kappel in a statement emailed to F&I and Showroom. “We believe the new guidelines create greater pricing consistency at the dealer level and demonstrate the bank’s deep commitment to fair lending practices.

“We will continue to offer competitive rates and programs as our pricing model, which, combined with the high level of customer service we provide dealers, has helped to drive our growth in this segment.”

Under the new program, contracts must be delivered at the “buy rate” to be eligible for purchase by BMO Harris Bank. The bank will pay a flat fee of 3% of the amount financed — up to $2,000 — for contracts with maturities greater than 35 months.

The new policy went into effect on Thursday.

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