Santander Consumer USA to Purchase HSBC Finance's Auto Loan Business

November 11, 2009

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METTAWA, Ill. — In breaking news Tuesday, HSBC Finance Corp. announced Santander Consumer USA is purchasing its auto loan serving operations, as well as $1 billion in auto loan receivables.

Basically, the deal will be for $904 million, in addition to Santander entering a loan servicing agreement for the remainder of the HSBC's U.S. auto loan portfolio.

As of June 30, 2009, the company's auto finance business had $7.7 billion in managed receivables which is serviced for itself and for the auto loans of HSBC Bank USA N.A.

Back in August of last year HSBC announced it has decided to exit the indirect auto finance business. The company has been allowing its portfolio to run off.

At that time, Cindy Savio, a company spokesperson, told SubPrime Auto Finance News (a sister publication to Auto Remarketing), "We're going to discontinue new auto loan originations via our indirect origination channel (or through dealers).

"As we stated previously, we have been under strategic review for some time. By exiting this business, it will allow HSBC Finance Corp. to focus on its core business of credit cards and consumer lending," she continued.

Also back in August of last year, Savio said that the business will continue direct auto loans in consumer lending branches until it can find an alternative third party to take this over. The online direct network also ceased originations.

Under the sale terms, HSBC's auto loan servicing facilities in San Diego, Calif., and Lewisville, Texas, will be assigned to SC USA. Furthermore, the majority of the 700 employees from those locations will be offered the opportunity to transfer to SC USA beginning in the first quarter of 2010.

SC USA will provide servicing for the auto loans it purchases, as well as for the remaining HSBC auto loan portfolio.

"This agreement is an important step in our continuing efforts to proactively reduce the HSBC Finance portfolio, and at the same time offer opportunities for our employees with a company that has demonstrated longer-term commitment to the auto finance business," stated Niall Booker, chief executive officer of HSBC.

"We would like to thank the auto finance team for significant contributions the business has made over the years to both the industry and to HSBC, and in particular, for their dedication and professionalism in servicing our customers during these challenging times," he concluded.

Banco Santander Central Hispano SA completed its acquisition of Drive for $636 million in cash back in December of 2006.

At that time, Thomas Dundon, Drive's chief executive officer, said, "Santander's ownership and Drive's credit risk expertise will help us to continue to improve our mix of business to include higher quality originations while maintaining our ability to sustain rapid growth.

"We believe we are poised to become one of the leading companies in our industry," he concluded.

Dundon has since added the title of CEO of Santander Consumer USA