Economic meltdown takes American General Financial Services out of the retail financing game
On May 11, retailers in both the outdoor and fitness industries began receiving a faxed statement from Vern Eliason, director of retail finance for American General Financial Services (AGFS). It informed retailers that as of June 11, 2009, the company would stop accepting applications for contracts or transaction funding requests and that it would be suspending "much of its retail financing program."
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On May 11, retailers in both the outdoor and fitness industries began receiving a faxed statement from Vern Eliason, director of retail finance for American General Financial Services (AGFS). It informed retailers that as of June 11, 2009, the company would stop accepting applications for contracts or transaction funding requests and that it would be suspending “much of its retail financing program.”
SNEWS® obtained a copy of that letter, displayed below, from a retailer who called to alert us to the news.
While the letter above indicates that AGFS is not terminating any dealer agreements, it is, effectively, ceasing to do business with any retailer until further notice. Officials at AGFS did not return our request for an interview.
Two other national programs, Wells Fargo Financial Retail Services (http://financial.wellsfargo.com/retailservices/index.html) and GE Money Sport Financing Program remain solvent and ready to assist retailers as needed.
Dennis Murphy, vice president of GE Money Sport Finance, told SNEWS, “Normally, we can get any retailer up and running from application to approval within a week, but because of the increased demand, it may take as long as two weeks right now. We have a full 30-day agreement, so a retailer can easily drop us if they are not happy — that doesn’t happen often.”
With GE Money, Murphy told us, merchants are funded within 48 hours of a transaction being completed and the funds are deposited directly, less the service fee, into the retailer bank account.
“We are very committed to this market and want to grow it. Retailers will see me at the different shows when I am there to reach out to manufacturers and dealers,” said Murphy. “We have been doing this for 75 years. We don’t intend to leave the market and can assure you this is one area we want to grow.”
He added, “If a retailer wants to switch over, I will answer their questions directly. We are trying to make it very easy in light of what is going on. Right now we are getting 30 calls a day from retailers finding us through the web. We are going to do everything we can, so retailers who need to have a retail financing solution have one in place quickly.”
To contact Murphy, send him an email at firstname.lastname@example.org or by phone at 651-286-5081.
SNEWS® View: To understand the reason behind the AGFS withdrawal from the retail financing sector, one only has to look at its financials. It lost $1.3 billion in 2008. On May 5, it announced it was closing 150 offices and cutting 500 jobs. By perusing the blogs, it appears some of those jobs came from the retail financing sector of the business, called, ironically, American Dream. Some dream! Oh, and the company’s parent is none other than AIG – yes, that AIG. If one reads between the lines, it appears that AGFS staff has been told the company will not be underwriting any more retail financing loans and its entire focus will be on collecting money to pay down debt. An insider on one blog wrote, “We are doing away with all American Dream retail except for five national dealers but haven’t heard which ones.” If one reads even more between the lines, AIG has stated it will support AGFS through 2010, which indicates AGFS is up for sale, and that might explain the line in the letter to retailers stating, “…would very much appreciate the opportunity to resume an active financing relationship in the future when economic conditions become more favorable.”
Either way, this impersonal faxed letter to retailers purporting to value their business will do little more, it appears, than drive those retailers to seek other options, meaning there will be little business left for AGFS to try to resume should “economic conditions become more favorable.”