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From Antitrust Law Daily, November 13, 2015

U.S., states conditionally approve combination of consumer lenders

By Jeffrey May, J.D.

Citigroup, Inc.'s sale of OneMain Financial Holdings, LLC to Springleaf Holdings, Inc. has received conditional approval from the U.S. Department of Justice and seven state attorneys general. Springleaf has agreed to divest 127 of its 830 branches to resolve concerns that the proposed $4.25 billion acquisition would combine the two largest providers of personal installment loans to subprime borrowers in the United States (U.S. v. Springleaf Holdings, Inc., Case No. 1:15-cv-01992).

According to a complaint filed today in the federal district court in Washington, D.C., elimination of the competition between Springleaf and OneMain would leave subprime borrowers seeking personal installment loans with few choices in parts of 11 states. In addition to the Justice Department, the States of Colorado, Idaho, Pennsylvania, Texas, Virginia, Washington, and West Virginia joined the complaint, as parens patriae.

Personal installment loans are marketed to consumers who have limited access to credit from traditional banking institutions. The government contends that Springleaf and OneMain specialize in large installment loans typically ranging from $3,000 to $6,000.

OneMain is the largest provider of personal installment loans to subprime borrowers in the United States, with 1,139 branch locations in 43 states. OneMain has a consumer loan portfolio that totals $8.4 billion. Springleaf is the second-largest provider of personal installment loans to subprime borrowers in the United States, with approximately 830 branches in 27 states. It has a consumer loan portfolio that totals $4.0 billion. OneMain is a subsidiary of CitiFinancial Credit Company, which is a wholly owned subsidiary of Citigroup, Inc.

In making its case, the government identified the competitive impact on local markets for personal installment loans. The government's relevant product market excluded banks and credit unions that generally do not cater to subprime borrowers, as well as payday and title lenders that provide short-term cash at much higher rates and fees. The government also contends that subprime borrowers were unlikely to turn to online lenders in response to less appealing loan terms from personal installment loan providers with local branch offices, such as OneMain and Springfield.

The competitive impact would be felt in local geographic markets from Anaheim, California, to Union Gap, West Virginia, the complaint alleged. The government focused on the transaction's impact on local areas around 126 towns and municipalities in 11 states—Arizona, California, Colorado, Idaho, North Carolina, Ohio, Pennsylvania, Texas, Virginia, Washington, and West Virginia.

Proposed settlement. To resolve the concerns raised in the complaint, the Justice Department and states filed a proposed consent decree with the court. The consent decree, which is subject to court approval, would require Springleaf to divest 127 branches in 11 states to Lendmark Financial Services or an alternative buyer approved by the United States. The divestiture includes all active loans originated or serviced at the divested branches and other assets associated with the branches. The divestiture of the branches to Lendmark is intended to create a new competitor in the provision of personal installment loans to subprime borrowers in Arizona, California, Colorado, Idaho, Ohio, Texas, and Washington. In North Carolina, Pennsylvania, Virginia, and West Virginia, the divestiture will establish Lendmark as a new competitor in some local areas and enhance its competitive presence in others, according to the Justice Department.

Antitrust chief’s remarks. “Personal installment loans are often a critical lifeline for borrowers with limited credit options, allowing them to pay for unexpected expenses or to consolidate debts,” said William Baer, Assistant Attorney General in charge of the Antitrust Division, in announcing the settlement. “Today’s proposed settlement will ensure that subprime borrowers in over 100 local markets across the United States continue to enjoy the benefits of competition when they seek these important loan products.”

Attorneys: Angela Ting for U.S. Department of Justice. Clifford H. Aronson (Skadden, Arps, Slate, Meagher & Flom LLP) for Springleaf Holdings, Inc. Ronan P. Harty (Davis Polk & Wardwell LLP) for OneMain Financial Holdings, LLC, CitiFinancial Credit Co., and Citigroup, Inc.

Companies: Springleaf Holdings, Inc.; OneMain Financial Holdings, LLC; CitiFinancial Credit Co.; Citigroup, Inc.

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