Finance Companies at a Glance

  • Finance companies, which supply credit to businesses and consumers, are often categorized as nondepository institutions, because they make loans without taking in deposits.
  • As a source of consumer credit, finance companies originate loans and leases to finance the purchase of such products as automobiles, furniture and household appliances. They also extend personal cash loans and loans secured by real estate, such as home equity loans.
  • For businesses, finance companies supply credit for such purposes as the purchase of equipment and motor vehicles.
  • Employment at finance companies rose from 561,700 in 2010 to 562,400 in 2011 but fell from 715,900 in 2007.
  • Assets of finance companies totaled $1.5 trillion in 2011, down from $1.6 trillion in 2010 and $1.9 trillion in 2007, according to the Federal Reserve.
  • The size of the finance company industry is often measured by receivables outstanding—i.e., the balance due from debtors. Finance company business, consumer and real estate lending declined as a result of the financial crisis, with total receivables dropping by 30.7 percent from $2.1 trillion in 2007 to $1.4 trillion in 2011, according to the Federal Reserve.
  • Finance company receivables outstanding dropped by 4.1 percent in 2011 after declining by 7.9 percent in 2010 and 15.5 percent in 2009. In 2011 consumer receivables outstanding at finance companies dropped by 1.2 percent; real estate receivables outstanding dropped by 12.2 percent; and business receivables outstanding fell by 1.3 percent.
  • The median return on equity (ROE) for finance companies providing credit to businesses rose from 7.81 percent in 2010 to 9.33 percent in 2011. During the same period the ROE for finance companies providing consumer credit fell from 14.12 percent to 13.73 percent.
  • Banks were sellers in five of the 10 largest mergers involving sales of North American finance companies in 2011. The largest finance company deal of 2011 was U.K.-based HSBC’s sale of its U.S. credit card and retail services to Capital One for $33.9 billion.