Finance Receivables

Below is information about finance receivables that have been divided into two portfolios: pre-acquisition and post-acquisition. See Note 1 - "Summary of Significant Accounting Policies."

The finance receivables portfolio consists of the following (in millions):



	December 31, 2014									December 31, 2013
	North America			International			Total			North America			International			Total
Consumer
Pre-acquisition consumer finance receivables - outstanding balance	$	361		$	147		$	508		$	931		$	363		$	1,294
Pre-acquisition consumer finance receivables - carrying value	$	313		$	146		$	459		$	826		$	348		$	1,174
Post-acquisition consumer finance receivables, collectively evaluated for impairment, net of fees^(a)	11,814			12,116			23,930			9,795			11,394			21,189
Post-acquisition consumer finance receivables, individually evaluated for impairment, net of fees	1,234			—			1,234			767			—			767
Total post-acquisition consumer finance receivables^(b)	13,048			12,116			25,164			10,562			11,394			21,956
Total consumer finance receivables, gross	13,361			12,262			25,623			11,388			11,742			23,130
Less: allowance for loan losses - collective	(405		)	(78		)	(483		)	(365		)	(29		)	(394		)
Less: allowance for loan losses - specific	(172		)	—			(172		)	(103		)	—			(103		)
Total consumer finance receivables, net	12,784			12,184			24,968			10,920			11,713			22,633
Commercial
Commercial finance receivables, collectively evaluated for impairment, net of fees	3,180			4,803			7,983			1,975			4,627			6,602
Commercial finance receivables, individually evaluated for impairment, net of fees	—			89			89			—			98			98
Total commercial finance receivables, gross	3,180			4,892			8,072			1,975			4,725			6,700
Less: allowance for loan losses - collective	(21		)	(14		)	(35		)	(17		)	(27		)	(44		)
Less: allowance for loan losses - specific	—			(5		)	(5		)	—			(7		)	(7		)
Total commercial finance receivables, net	3,159			4,873			8,032			1,958			4,691			6,649
Total finance receivables, net	$	15,943		$	17,057		$	33,000		$	12,878		$	16,404		$	29,282

________________


(a)	Amounts reported for International include $1.0 billion of direct-financing leases at December 31, 2014 and 2013.


(b)	Net of unamortized premiums and discounts, and deferred fees and costs of $245 million and $156 million at December 31, 2014 and 2013.

Consumer Finance Receivables

Pre-acquisition Consumer Finance Receivables

Following is a summary of activity in our pre-acquisition consumer finance receivables portfolio (in millions):



	Year Ended December 31, 2014
	North America			International			Total
Pre-acquisition consumer finance receivables - outstanding balance, beginning of period	$	931		$	363		$	1,294
Pre-acquisition consumer finance receivables - carrying value, beginning of period	$	826		$	348		$	1,174
Principal collections and other	(505		)	(211		)	(716		)
Change in carrying value adjustment	(8		)	45			37
Foreign currency translation	—			(36		)	(36		)
Balance at end of period	$	313		$	146		$	459



	Years Ended December 31,
	2013									2012
	North America			International			Total			North America
Pre-acquisition consumer finance receivables - outstanding balance, beginning of period	$	2,162		$	—		$	2,162		$	4,366
Pre-acquisition consumer finance receivables - carrying value, beginning of period	$	1,958		$	—		$	1,958		$	4,027
International operations acquisition	—			601			601			—
Principal collections and other	(1,078		)	(270		)	(1,348		)	(1,899		)
Change in carrying value adjustment	(54		)	56			2			(170		)
Foreign currency translation	—			(39		)	(39		)	—
Balance at end of period	$	826		$	348		$	1,174		$	1,958

The following table provides information related to the credit-impaired consumer finance receivables acquired with the international operations on the applicable acquisition dates (in millions):



Contractually required payments receivable	$	799
Cash flows expected to be collected	$	728
Fair value	$	601

We review our pre-acquisition portfolio for differences between contractual cash flows and the cash flows expected to be collected to determine if the difference is attributable, at least in part, to credit quality. During the years ended December 31, 2014, 2013 and 2012, as a result of improvements in the credit performance of the pre-acquisition portfolio, expected cash flows increased by $52 million, $74 million and $170 million. We transferred the amount of excess cash flows from the non-accretable difference to accretable yield. This excess will be amortized through finance charge income over the remaining life of the portfolio. As a result of the decrease in the pre-acquisition portfolio through amortization, as well as the stabilization of the portfolio's performance, the amount of excess cash flows transferred to accretable yield and subsequently amortized through finance charge income has decreased.

A summary of the activity in the accretable yield on the pre-acquisition consumer finance receivables portfolios is as follows (in millions):



	Year Ended December 31, 2014
	North America			International			Total
Balance at beginning of period	$	181		$	74		$	255
Accretion of accretable yield	(139		)	(50		)	(189		)
Transfer from non-accretable difference	46			6			52
Foreign currency translation	—			(7		)	(7		)
Balance at end of period	$	88		$	23		$	111



	Years Ended December 31,
	2013									2012
	North America			International			Total			North America
Balance at beginning of period	$	404		$	—		$	404		$	737
International operations acquisition	—			127			127			—
Accretion of accretable yield	(278		)	(64		)	(342		)	(503		)
Transfer from non-accretable difference	55			19			74			170
Foreign currency translation	—			(8		)	(8		)	—
Balance at end of period	$	181		$	74		$	255		$	404

Post-acquisition Consumer Finance Receivables

We generally purchase consumer finance contracts from auto dealers without recourse, and accordingly, the dealer has no liability to us if the consumer defaults on the contract. Depending upon the contract structure and consumer credit attributes, we may pay dealers a participation fee or we may charge dealers a non-refundable acquisition fee when purchasing individual finance contracts. We also have subvention programs with GM and other new vehicle manufacturers, under which the manufacturers provide us cash payments in order for us to offer lower interest rates on consumer finance contracts we purchase. We record the amortization of participation fees and subvention and accretion of acquisition fees to finance charge income using the effective interest method.

Following is a summary of activity in our post-acquisition consumer finance receivables portfolio (in millions):



	Year Ended December 31, 2014
	North America			International			Total
Post-acquisition consumer finance receivables, net of fees - beginning of period	$	10,562		$	11,394		$	21,956
Loans purchased	6,808			8,277			15,085
Charge-offs	(776		)	(138		)	(914		)
Principal collections and other	(3,541		)	(6,014		)	(9,555		)
Change in carrying value adjustment	—			—			—
Foreign currency translation	(5		)	(1,403		)	(1,408		)
Balance at end of period	$	13,048		$	12,116		$	25,164



	Years Ended December 31,
	2013									2012
	North America			International			Total			North America
Post-acquisition consumer finance receivables, net of fees - beginning of period	$	8,831		$	—		$	8,831		$	5,314
International operations acquisition	—			9,709			9,709			—
Loans purchased	5,126			4,471			9,597			5,579
Charge-offs	(584		)	(54		)	(638		)	(304		)
Principal collections and other	(2,811		)	(2,886		)	(5,697		)	(1,758		)
Change in carrying value adjustment	—			14			14			—
Foreign currency translation	—			140			140			—
Balance at end of period	$	10,562		$	11,394		$	21,956		$	8,831

A summary of the activity in the allowance for consumer loan losses is as follows (in millions):



	Year Ended December 31, 2014
	North America			International			Total
Balance at beginning of period	$	468		$	29		$	497
Provision for loan losses	468			145			613
Charge-offs	(776		)	(138		)	(914		)
Recoveries	417			53			470
Foreign currency translation	—			(11		)	(11		)
Balance at end of period	$	577		$	78		$	655



	Years Ended December 31,
	2013									2012
	North America			International			Total			North America
Balance at beginning of period	$	345		$	—		$	345		$	179
Provision for loan losses	380			52			432			298
Charge-offs	(584		)	(54		)	(638		)	(304		)
Recoveries	327			29			356			172
Foreign currency translation	—			2			2			—
Balance at end of period	$	468		$	29		$	497		$	345

Consumer Credit Quality

We use proprietary scoring systems in the underwriting process that measure the credit quality of the receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO score), and contract characteristics. In addition to the use of our proprietary scoring systems, we consider other individual consumer factors, such as employment history, financial stability, and capacity to pay. At the time of loan origination, substantially all of our international consumers have the equivalent of prime credit scores. In the North America Segment, however, our consumer finance receivables are predominantly sub-prime. A summary of the credit risk profile by FICO score band, determined at origination, of the consumer finance receivables in the North America Segment is as follows (dollars in millions):



	December 31, 2014				December 31, 2013
	Amount		Percent		Amount		Percent
FICO Score less than 540	$	3,805	28.4	%	$	3,511	30.6	%
FICO Score 540 to 619	7,308		54.5		6,645		57.8
FICO Score 620 to 679	1,698		12.7		1,217		10.6
FICO Score 680 and greater	598		4.4		120		1.0
Balance at end of period^(a)	$	13,409	100.0	%	$	11,493	100.0	%

_________________


(a)	Balance at the end of the period is the sum of pre-acquisition consumer finance receivables-outstanding balance and post-acquisition consumer finance receivables, net of fees for North America Segment.

In addition, we review the credit quality of all of our consumer finance receivables based on consumer payment activity. A consumer account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Consumer finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract. The following is a summary of the contractual amounts of consumer finance receivables, which is not significantly different than recorded investment, that are (i) more than 30 days delinquent, but not yet in repossession, and (ii) in repossession, but not yet charged off (dollars in millions):



	December 31, 2014								December 31, 2013
	North America		International		Total		Percent of Contractual Amount Due		North America		International		Total		Percent of Contractual Amount Due
31 - 60 days	$	994	$	89	$	1,083	4.2	%	$	858	$	94	$	952	4.1	%
Greater than 60 days	328		104		432		1.7		296		112		408		1.7
	1,322		193		1,515		5.9		1,154		206		1,360		5.8
In repossession	36		4		40		0.2		38		3		41		0.2
Balance at end of period	$	1,358	$	197	$	1,555	6.1	%	$	1,192	$	209	$	1,401	6.0	%

The accrual of finance charge income has been suspended on $682 million and $642 million of consumer finance receivables (based on contractual amount due) at December 31, 2014 and December 31, 2013.

Impaired Consumer Finance Receivables - TDRs

Consumer finance receivables in the post-acquisition portfolio that become classified as troubled debt restructurings ("TDRs") are separately assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. The financial effects of the accounts that become classified as TDRs result in an impairment charge recorded as part of the provision for loan losses. Accounts that become classified as TDRs because of a payment deferral still accrue interest at the contractual rate and an additional fee is collected (where permitted) at each time of deferral and recorded as a reduction of accrued interest. No interest or fees are forgiven on a payment deferral to a customer and therefore, there are no additional financial effects of deferred loans becoming classified as TDRs. Accounts in Chapter 13 bankruptcy would have already been placed on non-accrual; therefore, there are no additional financial effects from these loans becoming classified as TDRs. At December 31, 2014 and 2013, the outstanding balance of consumer finance receivables in the International Segment determined to be TDRs was insignificant; therefore, the following information is presented with regard to the TDRs in the North America Segment only.

The outstanding recorded investment for consumer finance receivables that are considered to be TDRs and the related allowance is presented below (in millions):



	December 31, 2014			December 31, 2013
Outstanding recorded investment	$	1,234		$	767
Less: allowance for loan losses	(172		)	(103		)
Outstanding recorded investment, net of allowance	$	1,062		$	664
Unpaid principal balance	$	1,255		$	779

Finance charge income from loans classified as TDRs is accounted for in the same manner as other accruing loans. Cash collections on these loans are allocated according to the same payment hierarchy methodology applied to loans that are not classified as TDRs. Additional information about loans classified as TDRs is presented below (in millions):



	Years Ended December 31,
	2014		2013		2012
Average recorded investment	$	996	$	487	$	102
Interest income recognized	123		70		11

The following table provides information on consumer loans at the time they became classified as TDRs (dollars in millions):



	December 31, 2014			December 31, 2013
	Number of Accounts	Amount		Number of Accounts	Amount
Recorded investment	49,490	$	794	38,196	$	643

A redefault is when an account meets the requirements for evaluation under our charge-off policy (See Note 1 - "Summary of Significant Accounting Policies" for additional information). The unpaid principal balance, net of recoveries, of loans that redefaulted during the reporting period and were within 12 months or less of being modified as a TDR were $25 million, $22 million and $4 million for the years ended December 31, 2014, 2013 and 2012.

Commercial Finance Receivables

Following is a summary of activity in our commercial finance receivables portfolio (in millions):



	Year Ended December 31, 2014
	North America			International			Total
Commercial finance receivables, net of fees - beginning of period	$	1,975		$	4,725		$	6,700
Net funding of commercial finance receivables	1,228			661			1,889
Charge-offs	—			—			—
Foreign currency translation	(23		)	(494		)	(517		)
Balance at end of period	$	3,180		$	4,892		$	8,072



	Years Ended December 31,
	2013									2012
	North America			International			Total			North America
Commercial finance receivables, net of fees - beginning of period	$	560		$	—		$	560		$	—
International operations acquisition	—			4,834			4,834			—
Net funding (collections) of commercial finance receivables	1,424			(246		)	1,178			560
Charge-offs	(2		)	(3		)	(5		)	—
Foreign currency translation	(7		)	140			133			—
Balance at end of period	$	1,975		$	4,725		$	6,700		$	560

A summary of the activity in the allowance for commercial loan losses is as follows (in millions):



	Year Ended December 31, 2014
	North America		International			Total
Balance at beginning of period	$	17	$	34		$	51
Provision for loan losses	4		(13		)	(9		)
Recoveries	—		—			—
Charge-offs	—		—			—
Foreign currency translation	—		(2		)	(2		)
Balance at end of period	$	21	$	19		$	40



	Years Ended December 31,
	2013									2012
	North America			International			Total			North America
Balance at beginning of period	$	6		$	—		$	6		$	—
Provision for loan losses	13			30			43			6
Recoveries	—			6			6			—
Charge-offs	(2		)	(3		)	(5		)	—
Foreign currency translation	—			1			1			—
Balance at end of period	$	17		$	34		$	51		$	6

Commercial Credit Quality

We extend wholesale credit to dealers primarily in the form of approved lines of credit to purchase new vehicles as well as used vehicles. Each commercial lending request is evaluated, taking into consideration the borrower's financial condition and the underlying collateral for the loan.

We use proprietary models to assign each dealer a risk rating. These models use historical performance data to identify key factors about a dealer that we consider significant in predicting a dealer's ability to meet its financial obligations. We also consider numerous other financial and qualitative factors, including capitalization and leverage, liquidity and cash flow, profitability and credit history.

We regularly review our models to confirm the continued business significance and statistical predictability of the factors and update the models to incorporate new factors or other information that improves statistical predictability. In addition, we verify the existence of the assets collateralizing the receivables by physical audits of vehicle inventories, which are performed with increased frequency for higher risk (i.e., Groups III, IV, V and VI) dealers. We typically perform a credit review of each dealer at least annually and adjust the dealer's risk rating, if necessary.

Performance of our commercial finance receivables is evaluated based on our internal dealer risk rating analysis, as payment for wholesale receivables is generally not required until the dealer has sold or leased the vehicle inventory. Wholesale and dealer loan receivables with the same dealer customer share the same risk rating.

A summary of the credit risk profile by dealer grouping of the commercial finance receivables is as follows (in millions):



			December 31, 2014		December 31, 2013
Group I	-	Dealers with superior financial metrics	$	1,062	$	598
Group II	-	Dealers with strong financial metrics	2,090		1,588
Group III	-	Dealers with fair financial metrics	2,856		2,174
Group IV	-	Dealers with weak financial metrics	1,250		1,622
Group V	-	Dealers warranting special mention due to potential weaknesses	559		488
Group VI	-	Dealers with loans classified as substandard, doubtful or impaired	255		230
Balance at end of period			$	8,072	$	6,700

The credit lines for Group VI dealers are typically suspended, and no further funding is extended to these dealers.

At December 31, 2014 and 2013, substantially all of our commercial finance receivables were current with respect to payment status.

Impaired Commercial Finance Receivables

We consider a loan impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. The amount of impairment is based on expected proceeds, including the estimated amount of future cash flows and/or the fair value of underlying collateral, compared to the recorded investment of the loan. A specific allowance for losses is established in the amount of any measured impairment.

Commercial finance receivables classified as TDRs are assessed for impairment and included in our allowance for credit losses based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. For receivables where foreclosure is probable, the fair value of the collateral is used to estimate the specific impairment. At December 31, 2014 and 2013, there were no outstanding commercial finance receivables classified as TDRs.