Transactions With Affiliates

12 Months Ended

Dec. 31, 2016

Note 9 – Transactions with Affiliates

As described below, Credco executes material transactions with its affiliates. The agreements between Credco and its affiliates provide that the parties intend that the transactions thereunder be conducted on an arm’s length basis. However, there can be no assurance that the terms of these arrangements are the same as would be negotiated between independent parties.

In 2016, 2015 and 2014, Credco purchased Card Member receivables and loans without recourse from TRS and certain of its subsidiaries totaling approximately $225 billion, $227 billion and $221 billion, respectively. In 2016, 2015 and 2014, Credco sold Card Member receivables and participating interests to affiliates totaling $5.7 billion, $2.6 billion and $2.8 billion, respectively. The discount revenue on purchased Card Member receivables and loans totaled $471 million, $479 million and $502 million for the years ended December 31, 2016, 2015 and 2014, respectively. The receivables agreements require TRS and its subsidiaries to perform servicing, clerical and other services necessary to bill and collect all Card Member receivables and loans owned by Credco. Since settlements under the agreements occur monthly, an amount due from, or payable to, such affiliates may arise at the end of each month.

As of December 31, 2016 and 2015, CRC owned approximately $4.0 billion and $4.1 billion, respectively, of participation interests purchased from RFC VIII.

Transactions with affiliates as of or for the years ended December 31, were as follows:

(Millions, except percentages)		2016			2015			2014
Loans to affiliates and other	$	10,659		$	14,262		$	15,303
Average interest rate on loans to affiliates and other		1.78	%		1.81	%		2.69	%
Due from affiliates	$	997		$	615		$	2,206
Short-term debt to affiliates		4,559			5,439			4,334
Average interest rate on short-term debt to affiliates		0.49	%		0.19	%		0.15	%
Maximum month-end level of borrowings during the year	$	5,091		$	5,439		$	5,029
Due to affiliates		1,517			1,727			888
Maximum month-end level of loans to affiliates during the year		13,083			17,711			18,695
Interest income from affiliates and other		207			246			384
Interest expense to affiliates		24			10			6
Other, net expense	$	1		$	1		$	(3)

Credco’s loans to affiliates represent floating-rate interest-bearing intercompany borrowings by American Express Company, other wholly owned subsidiaries of TRS and the American Express joint ventures. Revenue earned from loans to affiliates and other is recorded as interest income from affiliates and other in the Consolidated Statements of Income. As of December 31, 2016 and 2015, no amount of loss reserves has been recorded and no loans are 30 days or more past due.

The components of loans to affiliates and other as of December 31 were as follows:

(Millions)		2016		2015
American Express Company	$	4,044	$	6,923
American Express Services Europe Limited		2,484		2,981
Amex Bank of Canada		1,593		1,770
American Express Australia Limited		1,290		1,193
American Express Co. (Mexico) S.A. de C.V.		765		778
American Express Bank (Mexico) S.A.		291		337
American Express International, Inc.		107		110
American Express International (NZ) Inc.		85		95
Amex (Saudi Arabia) Limited		―		75
Total ^(a)	$	10,659	$	14,262

As of December 31, 2016 and 2015, approximately $3.3 billion and $3.6 billion, respectively, were collateralized by the underlying Card Member receivables and loans transferred with recourse.

Due from/to affiliates relate primarily to timing differences from the purchase of Card Member receivables, net of remittances from TRS, as well as from operating activities.

Components of short-term debt to affiliates as of December 31 were as follows:

(Millions)		2016		2015
AE Exposure Management Ltd.	$	3,361	$	3,047
American Express Europe LLC		515		1,163
American Express Swiss Holdings		376		389
American Express Holdings (Netherlands) C.V.		192		190
American Express Funding Management (Europe) Limited		73		51
Accertify Inc.		42		―
American Express Travel Related Services Company, Inc.		―		599
Total	$	4,559	$	5,439

Short-term debt to affiliates consists primarily of master note agreements for which there is no stated term. Credco does not expect any changes to its short-term funding strategies with affiliates.

Service Fees to Affiliates

Credco’s affiliates do not explicitly charge Credco a servicing fee for the servicing of receivables purchased. Instead Credco receives a lower discount rate on the receivables purchased than would be the case if servicing fees were charged. If a servicing fee had been charged by these affiliates from which Credco purchases receivables, fees to affiliates for servicing receivables would have been approximately $253 million, $242 million and $212 million for the years ended December 31, 2016, 2015 and 2014, respectively. Correspondingly, discount revenue would have increased by approximately the same amounts in these periods.