Magazine article American Banker

... as Outsourcer Helps a GE Unit Make Private Ones

Magazine article American Banker

... as Outsourcer Helps a GE Unit Make Private Ones

Article excerpt

General Electric Co.'s consumer finance unit is venturing into the growing private educational lending market and has hired First Marblehead Corp. to handle the back-office work.

First Marblehead, a Boston provider of outsourced student loan services, said last week that it has signed a three-year contract to market private student loans through the Internet and direct mail to current and potential GE customers; process the applications; and securitize the loans.

GE Consumer Finance of Stamford, Conn., will make the program available under the brand GE Money on July 5. Marketing efforts will begin in mid-July.

The unit issues private-label cards for retailers and offers a host of financial products and services, such as auto loans and leases, debt consolidation and home equity loans, and credit insurance.

Gene Ullrich, a spokesman for the unit, would not discuss the deal, except to say that it is entering the student lending market because its "research indicates that private student lending is a great space to enter."

Private student loans help families cover educational costs that are not covered by government-backed loans. As the cost of education continues to climb, originations of the private loans grew to $14 billion last year, from $1 billion a decade ago, and they continue to grow at 35% annually.

The market's largest participants include Citigroup Inc., JPMorgan Chase & Co., and Bank of America Corp.

"We have a record number of students in undergraduate and graduate schools, and costs are extensive," said Ivan Feinseth, an analyst at Matrix USA LLC, who follows First Marblehead. …

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