Oct. 28, 2009 (Business Wire) -- Dollar Financial Corp (NASDAQ:DLLR), a leading international diversified financial services company primarily serving unbanked and under-banked consumers for nearly thirty years, today announced it has entered into an agreement to acquire Dealers’ Financial Services, LLC, or “DFS”. DFS is an established business that provides services to military personnel who obtain auto loans in the United States made by a third party national bank. The bank approves the loan application, funds and services the loans, and bears the credit risks. The acquisition, which is contingent upon obtaining financing, is anticipated to be completed in early December.
DFS, which is headquartered in Lexington, Kentucky, was founded in 1996. DFS provides services to military personnel who make application for auto loans to purchase new and low mileage used vehicles that are funded and serviced under an exclusive agreement with a major third party national bank based in the United States. DFS operates through an established network of arrangements with more than 545 franchised and independent new and used car dealerships, according to underwriting protocols specified by the third party bank lender and servicer. The partner third party bank funds and maintains the loan portfolio on its balance sheet, as well as bears any risk of repayment default. DFS’s revenues come from fees related to the loan application, an interest rate spread between the rate the third party lender charges and the rate the borrower pays, and commission fees from the sale of warranty service contracts and GAP insurance coverage.
DFS maintains strong relationships with an extensive network of franchised and independent new and used car dealerships through an experienced group of local, DFS sales agents. To be part of the DFS network, dealerships must first be certified by DFS and agree to comply with a number of vehicle quality and sale stipulations. In particular, the vehicle being financed by the bank lender through the DFS program must be less than five years old, have fewer than 65,000 miles on the odometer, and pass a comprehensive quality inspection.
The unique underwriting standards of the bank lender’s program and the ability to purchase warranty and GAP insurance policies at a discount help insulate the borrower from events that typically lead to loan default. GAP insurance covers the difference between the outstanding loan amount and the book value of the automobile, in the event the vehicle is rendered inoperable due to unforeseen events such as a collision or mechanical failure. As part of the DFS program, the borrower is also required to complete an educational course administered by DFS covering such topics as credit counseling, personal budgeting, and vehicle purchase and maintenance training.
