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Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank

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coldfusion
Community Leader
Mega Contributor

Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank

 

For those of you unfamiliar with Merrick Bank they're a business unit of Cardworks. 

 

https://www.reuters.com/markets/deals/consumer-lender-ally-financial-sell-credit-card-business-cardw...

 

Jan 22 (Reuters) - Consumer lender Ally Financial has agreed to sell its credit card business to credit and payments firm CardWorks, the companies said on Wednesday.

Shares of Ally jumped 8.6% in premarket trading.
The sale comes as Ally looks to simplify and streamline its structure and focus on its core businesses.
The deal includes Ally's $2.3 billion in credit card receivables with 1.3 million active cardholders as of Dec. 31.
 
"This portfolio and platform acquisition is an exciting step in the expansion of our near-prime credit card business," said CardWorks CEO Dan Pillemer.
The deal is expected to close in 2025.
(11/2024)
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Artist formerly known as the_old_curmudgeon who was formerly known as coldfusion
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14 REPLIES 14
Patient957
Frequent Contributor

Re: Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank

Interesting.  I wonder what this means for those of us who hold Ally credit cards.  I have 2 no AF Ally credit cards in the sock drawer now. 

 

What's the scouting report on Merrick Bank?  Are they any good or do they suck?

 

Message 2 of 15
NoMoreE46
Community Leader
Senior Contributor

Re: Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank

 


@Patient957 wrote:

Interesting.  I wonder what this means for those of us who hold Ally credit cards.  I have 2 no AF Ally credit cards in the sock drawer now. 

 

What's the scouting report on Merrick Bank?  Are they any good or do they suck?

 


Merrick was focused on the sub prime market.  

 

It was "founded in 1997 and specializes in assisting people looking to build or rebuild their credit. It now serves nearly 3 million cardholders and has extended nearly $6 billion in credit."  per the Cardworks website.

 

 

 

 

Message 3 of 15
coldfusion
Community Leader
Mega Contributor

Re: Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank

Exactly right,  the target demographic for their cards is the early-to-mid stage rebuilder but you can't cold app, you have to first get an invitation from them to apply for a card.  They do have a beter reputation than for example  Credit One or Continental Finance.

(11/2024)
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Patient957
Frequent Contributor

Re: Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank


@coldfusion wrote:

Exactly right,  the target demographic for their cards is the early-to-mid stage rebuilder but you can't cold app, you have to first get an invitation from them to apply for a card.  They do have a beter reputation than for example  Credit One or Continental Finance.


This is essentially my experience with Ally as well.  I had a bank account and they approached me to apply fairly early in my rebuild, when I was in the low 600s.

Message 5 of 15
IsambardPrince
Established Contributor

Re: Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank


@Patient957 wrote:

@coldfusion wrote:

Exactly right,  the target demographic for their cards is the early-to-mid stage rebuilder but you can't cold app, you have to first get an invitation from them to apply for a card.  They do have a beter reputation than for example  Credit One or Continental Finance.


This is essentially my experience with Ally as well.  I had a bank account and they approached me to apply fairly early in my rebuild, when I was in the low 600s.


Was an Ally bank customer since 2009, never approached for a credit card even when my FICO was in the 800s, or after my bankruptcy, or ever.

 

This bank has never lost money on me. Selling off their card business seems to be ridiculous. It's hard to lose money as a credit card bank and now they're even more exposed to auto loans which are going bad with huge balances, where the other loans don't have a lot of interest to make up the slack and the repo costs and depreciation and crappy auction prices make repos more punitive than damage mitigating.

Message 6 of 15
Patient957
Frequent Contributor

Re: Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank


@IsambardPrince wrote:

@Patient957 wrote:

@coldfusion wrote:

Exactly right,  the target demographic for their cards is the early-to-mid stage rebuilder but you can't cold app, you have to first get an invitation from them to apply for a card.  They do have a beter reputation than for example  Credit One or Continental Finance.


This is essentially my experience with Ally as well.  I had a bank account and they approached me to apply fairly early in my rebuild, when I was in the low 600s.


Was an Ally bank customer since 2009, never approached for a credit card even when my FICO was in the 800s, or after my bankruptcy, or ever.

 

This bank has never lost money on me. Selling off their card business seems to be ridiculous. It's hard to lose money as a credit card bank and now they're even more exposed to auto loans which are going bad with huge balances, where the other loans don't have a lot of interest to make up the slack and the repo costs and depreciation and crappy auction prices make repos more punitive than damage mitigating.


I'm thinking the reason they're selling their credit card business is to raise cash to support their struggling auto loan business.

Message 7 of 15
AndySoCal
Senior Contributor

Re: Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank

Ally Bank reported earnings yesterday. The earnings beat estimates easily. Two factors in those earnings one were costs were down also the percentages of delinquent loans was also down.  The credit card business is not a low risk line of business. A credit card is an unsecured loan.  If the card account goes bad and ends up in a BK 7 the bank loses the balance the was discharged in the BK. All lending institutions have a risk department which set the guide lines risks that that lender is willing to take.

In the auto lending line of business you have four groups basically in broad brush strokes

Group 1  Lenders that will accept prime only

Group 2 Lenders that prime and some sub prime loans

Group 3 Lender accepts sub prime loans primarily 

Group 4 Lender will accept sub prime loans that no other lender will take.

The consumer's credit dictates which group the consumer goes into into.  There is the corresponding increase in the interest rate on the loan.

What Ally will accept for auto loans I do not know.  Ally Bank has considerable experience in this  line of business. I would say in the same way  that Capital One and Synchronny Banks have in credit card line of business.

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IsambardPrince
Established Contributor

Re: Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank


@AndySoCal wrote:

Ally Bank reported earnings yesterday. The earnings beat estimates easily. Two factors in those earnings one were costs were down also the percentages of delinquent loans was also down.  The credit card business is not a low risk line of business. A credit card is an unsecured loan.  If the card account goes bad and ends up in a BK 7 the bank loses the balance the was discharged in the BK. All lending institutions have a risk department which set the guide lines risks that that lender is willing to take.

In the auto lending line of business you have four groups basically in broad brush strokes

Group 1  Lenders that will accept prime only

Group 2 Lenders that prime and some sub prime loans

Group 3 Lender accepts sub prime loans primarily 

Group 4 Lender will accept sub prime loans that no other lender will take.

The consumer's credit dictates which group the consumer goes into into.  There is the corresponding increase in the interest rate on the loan.

What Ally will accept for auto loans I do not know.  Ally Bank has considerable experience in this  line of business. I would say in the same way  that Capital One and Synchronny Banks have in credit card line of business.


Cars are not low risk either. As soon as you sign all the finance room garbage you owe about 20-30% more than it's worth not even counting all the interest they won't get if the loan goes bad, and as soon as you drive it off the lot there went another $10,000.

 

If they take it back right then and there somehow, that dealer got 40-50% more than what they're going to sell the car for.

 

The depreciation in the first 2 years is typically brutal. The reason it hasn't been like that during COVID is because the economy was so screwed up due to the virus and political incompetence that they couldn't make enough new cars for a while causing used cars to be more valuable than they usually are.

 

They could get lucky like that again if the tariffs and trade wars start a new bout of political malpractice. 25% increase in the price of a new car with the stroke of a pen pretty much wipes out all the cost savings the car companies got by making them in Mexico and Canada out of Korean parts. And it also means a bigger ask on the banks for buying any car which would force more people to get a clunker because no bank will give them a loan at all. They were marginal APPROVE at an entry model car and now they're not. The repo division of the bank will get lucky and they'll make more interest off the people who still can get a loan though.

 

In my opinion, Capital One is a filthy bank in that they do car business with customers that should be untouchable and frankly I've heard people whose credit was in the toilet bragging on Reddit that nobody even verified that they were employed.

 

Capital One has offered me loans and while the interest was high, I did not feel it was outrageous considering I had a bankruptcy 5 years ago. The only other people that want me are ones where the interest is going up so fast you can barely pay off the loan.

Message 9 of 15
AndySoCal
Senior Contributor

Re: Reuters: Ally Finacial CC bsiness sold to Cardworks/Merrick Bank

I never said auto loans are low risk or risk free. All loans and investments have risks. My simple point was Ally is very knowledgeable  in auto loan and related businesses.Ally is streamlining its lending to area they have knowledge and experience in. It is also interesting to know who the largest stockholder is Yahoo finance has the information. 

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