eBay’s Bill Me Later

eBay’s 2013 10-k came out on Fridaylogoebay_x451, and much there is worthy of comment.

For the last few years, I have followed the growth of Bill Me Later within the eBay portfolio, and over that time, my skepticism has increased commensurately (though perhaps ‘exponentially’ would be more accurate).

eBay acquired Bill Me Later in those interesting times of October 2008 for roughly $1 billion USD.

Basically, Bill Me Later offers promotional credit for eBay purchases.  From the 10-k:

“We also provide credit products through our Bill Me Later service. Currently, when a consumer funds a purchase using Bill Me Later, a chartered financial institution extends credit to the consumer, funds the extension of credit at the point of sale and advances funds to the merchant… Although the chartered financial institution continues to own each of the customer accounts, we subsequently purchase and retain most of the consumer receivables related to the consumer loans made by the chartered financial institution and are also responsible for servicing functions related to the customer account…  U.S. consumers may be offered an opportunity to defer payments under some promotional arrangements offered on select merchant sites. Interest on such purchases can be deferred for up to 18 months.”

In 2008, the receivables for Bill Me Later were more or less immaterial to eBay’s balance sheet.  In 2013, eBay purchased $794 million of consumer loan receivables, up modestly from the $727 million purchased in 2012.

In aggregate we find: “as of December 31, 2013, the total outstanding balance of [Bill Me Later’s] pool of consumer loans was $2.9 billion, of which the chartered financial institution owns a participation interest of $65 million, or 2.25% of the total outstanding balance of consumer receivables at that date.”

And apparently, I am not the only observer to have an eye on Bill Me Later, for:

“On August 7, 2013 and January 13, 2014, we received Civil Investigative Demands (CIDs) from the Consumer Financial Protection Bureau (CFPB) requesting that we provide testimony, produce documents and provide information relating primarily to the acquisition, management, and operation of the Bill Me Later business, including online credit products and services, advertising, loan origination, customer acquisition, servicing, debt collection, and complaints handling practices.  We are cooperating with the CFPB in connection with the CIDs.”

Disclosure: No Position

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