Subprime lender Lendmark Financial entering California
The Transamerica Pyramid is reflected in the window of the main branch of Citibank in the Financial District of San Francisco, in this file photo. Citigroup is selling its subprime lender, OneMain Financial, to Springleaf.
Southern California is losing one name in subprime lending but picking up another.
Next year, more than two dozen California branches of subprime lender Springleaf Financial will become branches of Lendmark Financial Services. It’s part of a deal that will allow Springleaf to swallow up a larger competitor.
Springleaf, based in Evansville, Ind., said in March it would buy rival OneMain Financial from New York banking giant Citigroup. But that deal, a combination of two of the biggest firms that lend to lower-income Americans, caught the eye of regulators, who feared the transaction could mean less competition.
The federal Department of Justice said last week it would allow the deal to go through, but first Springleaf will have to sell 127 branches in 11 states, including 29 in California, to Lendmark.
Lendmark, based in suburban Atlanta, has no operations west of the Mississippi and will enter California for the first time. It plans to acquire Springleaf branches in phases, starting this spring.
Once the acquisitions are finished, Lendmark will own 15 branches in Southern California, including in Anaheim, Long Beach, Pasadena, Pomona and Torrance. It will have another 14 in Northern California and the Central Valley. Financial terms of the branch sales were not disclosed.
The Justice Department chose the branches Springleaf must sell, focusing on cities where Springleaf and OneMain are the only meaningful competitors.
Lendmark, OneMain and Springleaf all offer personal and auto loans, mostly to customers with damaged credit. The loans are billed as a way to either consolidate other debts or to pay for emergencies.
In California, most of Springleaf’s loans are for between $2,500 and $10,000, according to the state Department of Business Oversight, which licenses private lenders. Most of those loans carry interest rates of more than 25% a year, and some carry rates topping 35%.
Despite their high rates, these loans may be the only credit available to low-income borrowers or those with damanged credit.
In approving Springleaf’s acquisition of OneMain, the Justice Department said the firms offer “a critical lifeline for borrowers with limited credit options.”
Lendmark’s rates were not immediately available.
The deal was a big expansion opportunity for Lendmark, which will grow from 194 branches in 13 states, mostly in the Southeast and mid-Atlantic, to 324 branches in 20 states.
Though many subprime lenders today are operating largely online, physical branches are still important to Lendmark.
“It allows us to underwrite loans in person, with the customer across the desk,” said Ethan Andelman, the company’s chief marketing officer.
Still, moving into so many new markets could prove risky, and Lendmark will have Springleaf as a stronger competitor.
Springleaf will have 81 branches in California, up from 57 today, following its acquisition of OneMain Financial’s network.
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