What changed in this filing

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Item 1. Business

2021-02-09 compared with 2020-02-14 · 55 added, 53 removed, 189 unchanged (36% of the section changed)

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This report combines the Annual Reports on Form 10-K for the year ended December 31, 2020 for OneMain Holdings, Inc.

(“OMH”), a financial service holding company, and its wholly-owned direct subsidiary, Springleaf Finance Corporation (“SFC”).

The information in this combined report is equally applicable to OMH and SFC, except where otherwise indicated.

OMH and SFC are referred to in this report, collectively with their subsidiaries, whether directly or indirectly owned, as “the Company,” “we,” “us,” or “our.”

As the nation’s largest lending-exclusive consumer finance company, we:

(“OMH”), a financial service holding company, and its wholly-owned direct subsidiary, OneMain Finance Corporation (“OMFC”) (formerly known as Springleaf Finance Corporation (“SFC”)).

The information in this combined report is equally applicable to OMH and OMFC, except where otherwise indicated.

OMH and OMFC are referred to in this report, collectively with their subsidiaries, whether directly or indirectly owned, as “the Company,” “we,” “us,” or “our.”

As one of the nation’s largest non-prime consumer finance companies, we:

• provide responsible personal loan products;

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At December 31, 2020, we had $18.1 billion of personal loans due from approximately 2.3 million customer accounts.

Our network of over 1,500 branches in 44 states is staffed with expert personnel and is complemented by our online personal loan origination capabilities and centralized operations, which allow us to reach customers located outside our branch network.

Our digital platform provides our current and prospective customers with the option of applying for a personal loan via our website, www.omf.com .

We also pursue strategic acquisitions and dispositions of assets and businesses, including loan portfolios and other financial assets, as well as fee-based opportunities in servicing loans for others in connection with potential strategic portfolio acquisitions through our centralized operations.

See “Centralized Operations” below for further information on our centralized servicing centers.

Our network of approximately 1,500 branches in 44 states is staffed with expert personnel and is complemented by our online personal loan origination capabilities and centralized operations staff, which allow us to reach customers in person, digitally, and over the phone.

Our digital platform provides our current and prospective customers with the option of applying for our products via our website, www.omf.com .

Prior to June 25, 2018, Springleaf Financial Holdings, LLC (“SFH”) owned approximately 44% of OMH’s common stock.

SFH was owned primarily by a private equity fund managed by an affiliate of Fortress.

On June 25, 2018, an investor group led by funds managed by affiliates of Apollo and Värde (the “Apollo-Värde Group”) completed its purchase from SFH of 54,937,500 shares of OMH's common stock at a purchase price per share of $26.00 for an aggregate purchase price of approximately $1.4 billion in cash (the “Apollo-Värde Transaction”).

SFH was owned primarily by a private equity fund managed by an affiliate of Fortress Investment Group LLC (“Fortress”).

On June 25, 2018, an investor group led by funds managed by affiliates of Apollo and Värde (the “Apollo-Värde Group”) completed its purchase from SFH of 54,937,500 shares of OMH's common stock, par value $0.01 per share, at a purchase price per share of $26.00 for an aggregate purchase price of approximately $1.4 billion in cash (the “Apollo-Värde Transaction”).

Upon closing of the Apollo-Värde Transaction, OMH entered into an Amended and Restated Stockholders’ Agreement, the terms of which are described in the OMH Current Report on Form 8-K filed with the SEC on June 25, 2018.

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At December 31, 2020, the Apollo-Värde Group owned approximately 40.9% of OMH’s common stock and is OMH’s largest stockholder.

As part of our ongoing efforts related to the integration of Springleaf and OneMain, on September 20, 2019, SFC entered into a merger agreement with its direct parent, SFI, to merge SFI with and into SFC, with SFC as the surviving entity.

As part of our ongoing efforts related to the integration of Springleaf and OneMain, on September 20, 2019, SFC entered into a merger agreement with its direct parent, Springleaf Finance Inc.

(“SFI”), to merge SFI with and into SFC, with SFC as the surviving entity.

The merger was effective in SFC's consolidated financial statements as of July 1, 2019.

As a result of SFI's merger with and into SFC, SFC became a wholly-owned direct subsidiary of OMH.

Effective July 1, 2020, SFC was renamed to OMFC.

The name change did not affect OMFC’s legal entity structure, nor did it have an impact on OMH’s or OMFC’s financial statements.

OMFC is used in this report to include references to transactions and arrangements occurring prior to the name change.

The following chart summarizes our organization structure.

The chart is provided for illustrative purposes only and does not represent all of our subsidiaries or obligations.

The chart is provided for illustrative purposes only and does not represent all of our subsidiaries.

INDUSTRY AND MARKET OVERVIEW

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Using November 2020 data from Experian, we estimated that there are approximately 102 million U.S.

borrowers in our target market, who collectively have approximately $1.3 trillion of outstanding borrowings in the form of personal installment loans, vehicle loans and leases, and credit cards.

borrowers in our target market, who collectively have approximately $1.2 trillion of outstanding borrowings in the form of personal loans, vehicle loans and leases, and credit cards.

We believe this large market provides us with an attractive growth opportunity.

We are one of the few national participants in the consumer installment lending industry.

Our national branch network, combined with the capabilities resident in our centralized operations, provide a platform to efficiently and responsibly serve this market.

Our national branch network and digital platform, combined with our centralized operational capabilities, provide a platform to efficiently and responsibly serve this market.

We believe we are well-positioned to capitalize on the significant growth and expansion opportunity within our industry.

See also “Competition” included in this report.

At December 31, 2019, Consumer and Insurance ("C&I") is our only reportable segment.

Beginning in the fourth quarter of 2019, we included our Acquisitions and Servicing (“A&S”), which was previously presented as a distinct reporting segment, in Other.

See Note 19 of the Notes to the Consolidated Financial Statements included in this report for more information on this change in our segment alignment and for more information about our segment.

We have revised our prior period segment disclosures to conform to this new alignment.

Consumer and Insurance

At December 31, 2020, Consumer and Insurance ("C&I") was our only reportable segment.

We originate and service secured and unsecured personal loans and offer optional credit and non-credit insurance and related products through our combined branch network and our centralized operations.

Personal loan origination and servicing, along with our insurance products, forms the core of our operations.

Our branch operations included over 1,500 branch offices in 44 states as of December 31, 2019.

Personal loan origination and servicing, along with our insurance products, form the core of our operations.

Our branch operations included approximately 1,500 branch offices in 44 states as of December 31, 2020.

In addition, our centralized support operations provide underwriting and servicing support to branch operations.

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AHL is a life and health insurance company licensed in 49 states, the District of Columbia, and Canada to write credit life, credit disability, and non-credit insurance products.

Triton is a property and casualty insurance company licensed in 50 states, the District of Columbia, and Canada to write credit involuntary unemployment and collateral protection insurance.

The Company sold all of the issued and outstanding shares of its former insurance subsidiaries, Yosemite Insurance Company ("Yosemite") and Merit Life Insurance Co.

("Merit"), to third parties on September 30, 2018 and December 31, 2019, respectively.

Triton is a property and casualty insurance company licensed in 50 states, the District of Columbia, and Canada to write credit involuntary unemployment, credit disability, and collateral protection insurance.

See Note 11 of the Notes to the Consolidated Financial Statements included in this report for further information on our insurance business.

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Our personal loan portfolio is comprised of assets that have performed through various market conditions.

Our personal loans are non-revolving, with a fixed-rate, a fixed term of three to six years, and are secured by automobiles, other titled collateral, or are unsecured.

Our personal loans are non-revolving, with a fixed-rate, fixed terms generally between three to six years, and are secured by automobiles, other titled collateral, or are unsecured.

Our secured personal loans include direct auto loans, which are typically larger in size and based on the collateral of newer cars with higher values.

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We offer optional non-credit insurance policies, which are primarily traditional level-term life policies with very limited underwriting.

We offer optional membership plans for home and auto from an unaffiliated company.

We offer optional membership plans from an unaffiliated company.

We have no risk of loss on these membership plans, and these plans are not considered insurance products.

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We use proprietary modeling, along with data purchased from credit bureaus, alternative data providers, and our existing data/experience to acquire and develop new and profitable customer relationships.

Our digital platform allows current and prospective customers the ability to apply for a personal loan online, at omf.com .

Our digital platform allows current and prospective customers the ability to apply for and close a personal loan online, at www.omf.com .

We started building our digital capabilities in 2018 and by early 2020, we successfully launched our digital user experience, which includes two-way video, chat, and co-browsing with customers.

This has helped us to simplify and optimize the customer experience.

Many of our new customer applications are sourced online, delivered via targeted marketing, search engines, e-mail, and internet loan aggregators.

Most online applications are closed in a branch;

however, we do close a small portion of our loans remotely outside the branch.

By the end of 2020, we had significantly increased the portion of borrowers who are able to close remotely without coming into a branch.

Nearly all of our applications, regardless of whether they are completed in person, over the phone, or online, go through the same best-in-class underwriting processes, including a detailed discussion with a OneMain team member, ability to pay assessment and budgeting, income verification and centralized and automated credit decisioning.

Going forward, our philosophy is to continue to change the way we serve our customers to meet their preferences.

Credit quality is driven by our long-standing underwriting philosophy, which considers each prospective customer’s budget, and his or her willingness and capacity to repay the loan.

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We develop these models using numerous factors, including past customer credit repayment experience and application data, and periodically revalidate these models based on recent portfolio performance.

Our underwriting process in the branches and for loan applications received through our website that are not automatically declined includes the development of a budget (net of taxes and monthly expenses) for the applicant.

Our underwriting process includes the development of a budget (net of taxes and monthly expenses) for the applicant.

We obtain a security interest in titled property for our secured personal loans.

Our customers are primarily considered non-prime and often require significantly higher levels of servicing than prime customers.

As a result, we tend to charge these customers higher interest rates to compensate us for the related credit risks and servicing costs.

As a result, we tend to charge these customers higher interest rates than prime borrowers to compensate us for the related credit risks and servicing costs.

Account Servicing.

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• payment processing;

• originating “out of network” loans;

• originating digital loans;

• servicing of delinquent real estate loans and certain personal loans;

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• Our executive information system is available to headquarters and field operations management to review the status of activity through the close of business of the prior day.

• Our branch operations management structure, Regional Quality Coordinators and Compliance Field Examination team are designed to control a large, decentralized organization with succeeding levels of supervision staffed with more experienced personnel.

• Our branch operations compensation plan aligns with corporate strategies and is based on profitability, credit quality, and compliance.

• Our branch operations management structure, Regional Quality Coordinators and Compliance Field Examination team are designed to oversee a large, decentralized organization with succeeding levels of supervision staffed with experienced personnel.

• Our branch operations compensation plan is based on credit quality and compliance, and is regularly reviewed for consistency with overall corporate goals and customer service.

• Our compliance department assesses our compliance with federal and state laws and regulations, as well as our compliance with our internal policies and procedures;

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• the Equal Credit Opportunity Act (which, among other things, prohibits discrimination against creditworthy applicants) and Regulation B, which implements this statute;

• the Fair Credit Reporting Act (which, among other things, governs the use of credit bureau reports and reporting information to credit bureaus);

• the Fair Credit Reporting Act (which, among other things, governs the use of credit bureau reports and reporting information to credit bureaus) and Regulation V, which implements this statute;

• the Truth in Lending Act (which, among other things, governs disclosure of applicable charges and other terms of consumer credit) and Regulation Z, which implements this statute;

• the Fair Debt Collection Practices Act (which, among other things, governs practices in collecting certain debts);

• the Fair Debt Collection Practices Act (which, among other things, governs practices in collecting certain debts) and Regulation F, which implements this statute;

• the Gramm-Leach-Bliley Act (which, among other things, governs the handling of personal financial information) and Regulation P, which implements this statute;

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• the Servicemembers Civil Relief Act (which, among other things, can impose limitations on the interest rate and the servicer’s ability to collect on a loan originated with an obligor who is on active-duty status and up to nine months thereafter);

• the Real Estate Settlement Procedures Act and Regulation X (both of which regulate the making and servicing of closed end residential mortgage loans);

• the Real Estate Settlement Procedures Act (which regulates the making and servicing of closed end residential mortgage loans) and Regulation X, which implements this statute;

• the Federal Trade Commission’s Consumer Claims and Defenses Rule, also known as the “Holder in Due Course” Rule (which, among other things, allows a consumer to assert, against the assignees of certain credit contracts, certain claims that the consumer may have against the originator of the credit contracts);

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The Dodd-Frank Act and the regulations promulgated thereunder have affected and are likely in the future to affect our operations in terms of increased oversight of financial services products by the CFPB and the imposition of restrictions on the terms of certain loans.

Among regulations the CFPB has promulgated are mortgage servicing regulations that became effective January 10, 2014, and are applicable to the remaining real estate loan portfolio serviced by or for Springleaf.

Amendments to some sections of these mortgage servicing regulations became effective on October 19, 2017 and some became effective on April 19, 2018.

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We also utilize third-party debt collectors and will continue to be responsible for oversight of their procedures and controls.

The CFPB has indicated that it intends to issue new debt collection rules in 2020, with enforcement to begin in 2021, that will directly apply to third-party debt collectors, but not to creditors.

The primary rules that will likely be adopted will cover communications frequency and timing, type of information required to be provided to consumers regarding the debt, and the express permission for debt collectors to use communication strategies like text messages and e-mail.

Third-party debt collectors will need to adopt adequate compliance controls.

The CFPB has enforcement authority with respect to various federal consumer protection laws for some providers of consumer financial products and services, such as any nonbank that it has reasonable cause to determine has engaged or is engaging in conduct that poses risks to consumers with regard to consumer financial products or services.

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With the adoption of this regulation, we are considered a larger participant in the auto financing market and are subject to supervision and examination by the CFPB for our direct auto loan business, including loans that are secured by autos and refinances of loans secured by autos that were for the purchase of autos.

In its Spring 2018 rulemaking agenda, the CFPB stated that it had decided to classify as “inactive” certain rulemakings previously identified in the expectation that the final decisions on proceeding will be made by the next permanent director.

The larger-participant rule for consumer installment loans was one of the rulemaking initiatives designated as inactive.

In addition, in its Spring 2018 rulemaking agenda, the CFPB stated that it had decided to classify as “inactive” certain rulemakings previously identified in the expectation that the final decisions on proceeding will be made by the next permanent director.

A larger-participant rule for consumer installment loans was one of the rulemaking initiatives designated as inactive.

It is not known if or when the CFPB may consider reactivating the rulemaking process for the larger-participant rule for consumer installment loans.

On October 5, 2017, the CFPB issued its final rule for Payday, Vehicle Title, and Certain High-Cost Installment Loans (the “small-dollar rule”).

The final small-dollar rule does not apply to any loan made by the Company because our loans have a term of 46+ days, no balloon payment, and an APR limit of 36%.

The proposed rule, published in 2016, had covered a relatively small segment of our loans because it calculated the 36% high-cost coverage threshold as an “all-in” APR, a term that included the cost of insurance and other optional products purchased within 3 days of the loan closing date.

The final rule calculates the 36% figure under the traditional method prescribed by the Truth-In-Lending Act (TILA).

Because the final rule replaced the proposed rule’s “all-in” APR calculation with a TILA APR calculation, a change that the Company advocated in the public comment letter it submitted to the CFPB, the final rule covers no loan made by the Company, even if the loan is both sold with insurance and secured by a vehicle or recurring ACH authorization.

The investigation and enforcement provisions of Title X of the Dodd-Frank Act may adversely affect our business if the CFPB or one or more state attorneys general or state regulators believe that we have violated any federal consumer financial protection laws, including the prohibition in Title X against unfair, deceptive or abusive acts or practices.

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With respect to each financing transaction that is subject to the risk retention requirements of the Dodd-Frank Act, we either retain at least 5% of the balance of each such class of debt obligations and at least 5% of the residual interest in each related VIE or retain at least 5% of the fair value of all ABS interests (as defined in the risk retention requirements), which is satisfied by retention of the residual interest in each related VIE, which, in each case, collectively, represents at least 5% of the economic interest in the credit risk of the securitized assets in satisfaction of the risk retention requirements.

In addition, the SEC adopted significant revisions to Regulation AB, imposing new requirements for asset-level disclosures for asset-backed securities backed by real estate related assets, auto related assets, or backed by debt securities.

This could result in sweeping changes to the commercial and residential mortgage loan securitization markets, as well as to the market for the re-securitization of mortgage-backed securities.

Various state laws and regulations also govern personal loans and real estate secured loans.

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We operate primarily in the consumer installment lending industry.

We focus on servicing the non-prime customer through a national branch network, online, and over the phone.

We focus on servicing the non-prime customer through our national branch network, online, and over the phone.

We have a number of local, regional, national, and internet competitors in the consumer installment lending industry that seek to serve the same population of non-prime customers.

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We believe that we possess several competitive strengths that position us to capitalize on the significant growth opportunity, and to compete effectively with other lenders in our industry.

Our national branch network enables us to perform multiple functions and we believe it is a proven distribution channel for our personal loan and optional insurance products.

We are one of the nation’s largest non-prime consumer finance companies with $10.7 billion in originations and are uniquely positioned to serve working Americans.

We utilize a hybrid operating model, including a digital lending footprint and approximately 1,500 branches rooted in local communities.

Almost 90% of Americans live within 25 miles of one of our branches.

We use best-in-class data and analytics, artificial intelligence, and machine learning to achieve strong loss performance.

Our national branch network enables us to perform multiple functions and serves as a proven distribution channel for our personal loan and optional insurance products.

We can provide same-day fulfillment to approved customers.

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See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Seasonality” included in this report for discussion of our seasonal trends.

HUMAN CAPITAL

As of December 31, 2020, we had over 8,300 employees.

We strive to recruit and retain an outstanding, diverse team that believes in our mission, lives our values, and goes the extra mile for our customers.

We believe a diverse talent pool and inclusive work environment makes us stronger, helps us fulfill our Company’s mission, meaningfully connects us with the customers and communities we serve, and drives success.

We offer a total rewards package which includes competitive compensation, incentives, and comprehensive benefits.

We also invest in our team members by providing extensive training and development programs to further their career and help them achieve their goals.

Our Diversity Council promotes a diverse and inclusive work environment where people are hired and advanced on their merits and where team members treat one another with respect.

We administer an annual comprehensive survey to identify areas where we can improve.

We believe engaged team members are more productive, innovative, and collaborative, which, in turn, help deliver a consistently excellent customer experience.

AVAILABLE INFORMATION

OMH and SFC file annual, quarterly, current reports, proxy statements (only OMH), and other information with the SEC.

The SEC’s website, www.sec.gov , contains these reports and other information that registrants (including OMH and SFC) file electronically with the SEC.

OMH and OMFC file annual, quarterly, current reports, proxy statements (only OMH), and other information with the SEC.

The SEC’s website, www.sec.gov , contains these reports and other information that registrants (including OMH and OMFC) file electronically with the SEC.

These reports are also available free of charge through our website, www.omf.com under “Investor Relations,” as soon as reasonably practicable after we file them with, or furnish them to, the SEC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business