Econ 411
Professor: Tom K. Lee
Name:
United States Government v.
OneMain Financial Holdings, LLC by Springleaf Holdings, Inc.
Personal installment loan is a fixed-rate, fixed-term, and closed-end loan that is
repaid over time with a set number of scheduled payments. It is fully amortized loan
products that appeal to borrowers who have limited access to credit from traditional
banking institutions, which means that principal and interest payment will be made fully
through scheduled installments by the end of the loan term (Duration is normally from 18
months to 60 months).
OneMain Financial Holdings, LCC and Springleaf Holdings, Inc., which is a
combined company that provides services of consumer lending, credit insurance, and
other credit related products, is the largest lenders that offer personal installment loans to
subprime borrowers in the United States, and the only two with a nationwide branch
network, having $13.96 billion in core consumer net finance receivables and nearly 2000
branches across 43 states. They specialize in products that provide large range (From
$3000 to $6000) install loans, target the same customer base, and operate branches in
similar location.
Springleaf and OneMain financial holdings set up branches in many states. In
markets across Arizona, California, Colorado, Idaho, North Carolina, Ohio, Pennsylvania,
Texas, Virginia, Washington, and West Virginia, Springleaf and OneMain companies are
dominating the local market, facing limited competition of other financial holders that
have the provision of personal installment loans services. They are cooperating with each
other and sometime act as their only competitor. As a result of the lack of competition
among the market, Springleaf and OneMain financial holdings enjoy the benefits of
controlling the market share. Borrowers, who are seeking for personal financing, hence,
would absolutely have fewer choices. As a consequence, borrowers may be forced to
carry a much more expensive forms of credit. This would expel other competitors from
the market of personal installment loans, creating an unfair market situation.
Due to the behaviors and tendency of Springleaf Holdings, Inc. and OneMain
Financial Holdings, LLC to create a monopoly power, the United States of America,
acting under the direction of the Attorney General of the United States, and the States of
Colorado, Idaho, Texas, Washington and West Virginia and the Commonwealths of
Pennsylvania and Virginia, acting by and through their respective Officers of the Attorney
General, filed a suit against them, claiming that Springleaf and OneMain had violated
Section 7 of the Clayton Act, 15 U.S.C § 18. The United States of America, acted as the
Plaintiff, brings this action under Section 15 of the Clayton Act, 15 U.S.C. § 25 and
Section 16 of the Clayton Act, 15 U.S.C. § 26, to restrict Springleaf and OneMain, as the
Defendant, from violating the law.
As to the claim of violation of Section 7 of the Clayton Act, 15 U.S.C § 18, which
provides that “Prohibits interlocking directorates, and mergers between competitors to the
extent that they would substantially lessen competitors to the extent that they would
monopoly, but exempts labor unions”, Springleaf and OneMain were attempting to
combine together in order to prohibit fair competition among the market of financial
holdings. The proposed acquisition of OneMain by Springleaf were alleged to creating
anticompetitive effects, which would substantially lessen general competition in the
provision of personal installment loans to subprime borrowers in local markets in
Arizona, California, Colorado, Idaho, North Carolina, Ohio, Pennsylvania, Texas,
Virginia, Washington, and West Virginia. Moreover, the increasing market shares as well
as the monopoly power caused by the acquisition of OneMain by Springleaf would
