Commercial Credit Company

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Commercial Credit Company

300 St. Paul Place
Baltimore, Maryland 21202-2120
U.S.A.
(410) 332-3000
Fax: (410) 332-3734

Subsidiary of Primerica Inc.
Employees: 4,600
Sales: $1.523 billion
SICs: 6351 Surety Insurance; 6141 Personal Credit Institutions; 6719 Holding Companies Nec

Primarily a consumer finance company, Commercial Credit Company also offers insurance, credit cards, and mortgage financing. The company focuses on market segments that are often underserved by banks and other financial service companies due to demographics or credit ratings. Its branches are located in malls and other areas with a heavy volume of consumer traffic.

CCC was founded in Baltimore in 1912 by Alexander E. Duncan and a group of eight businessmen. The company initially lent money to companies using their accounts receivable as security. However, in 1916 the firm branched out of commercial financing, entering the growing field of auto finance, which represented the firm’s greatest growth area until the 1930s, when the Great Depression caused auto sales to plunge. During this time, the firm bought several factoring companies, service providers that buy accounts receivable at a discount from banks and then collect the outstanding monies. CCC later consolidated these factoring companies under the name Textile Banking Co., Inc.

CCC then bought the American Credit Indemnity Co. of New York, which insured accounts receivable against customer default or bankruptcy. It continued its move into insurance by buying Calvert Fire Insurance, a casualty company that covered physical damage to autos and appliances it was financing. This helped CCC win financing business with auto dealers, since the dealers hoped to gain business repairing Calvert-insured cars.

The credit controls and decline in auto manufacturing during World War II badly pinched CCC’s business. To help generate income, CCC bought several companies that were making money from war-related demands, manufacturing products ranging from pork sausages to printing presses. Competitors like CIT Financial Corp. also diversified into manufacturing during the war. But unlike CIT, CCC held onto its manufacturing operations when the war ended and its finance business became stable again.

By the late 1950s CCC was the largest commercial finance company in the United States, with annual volume at nearly $1 billion at ten to 15 percent interest. But despite the rising volume of the consumer credit business, CCC was becoming less profitable. Competition had become cutthroat, and that, combined with the rising cost of capital, was hurting profits. Auto financing remained the core of the firm’s business, at over 50 percent of its receivables. However, the automotive industry was notoriously cyclical, and CCC was up such against giants as General Motors Acceptance Corp. To broaden its appeal, the firm began moving into the leasing of equipment and autos, as well as personal loans and farm equipment and boat financing.

With commercial finance being hurt, CCC decided to diversify again, this time staying closer to its primary businesses. In 1956 it bought Dearborn Motors Credit Corp.—a financier of Ford tractors—from a group of Ford executives. CCC renamed the corporation Commercial Credit Equipment Corp. and began financing a full range of farm equipment. In 1958 it started a national drive to get financing business from boat dealers and manufacturers, and the following year it bought the long-term auto leases of Greyhound Rent-A-Car.

In the mid-1960s CCC’s fortunes took a turn for the worse. Textile Banking lost $25 million in 1965 due to weak businesses it had bought earlier. The firm was vulnerable to fluctuations in interest rates because it acquired a large proportion of its funds through short-term borrowing. Interest rates were higher than they had been in decades, so CCC had to pay $14 million more for its money in 1966 than the year before. Nevertheless, the firm earned $25.4 million in 1965 on sales of $307.4 million. In 1966 Bertold Muecke was named CCC chairperson. Muecke revamped Textile Banking’s management and sold off its unprofitable businesses. Its ten manufacturing companies had $170.7 million in sales, but profits of only $215,000.

By 1967 CCC had about 1,000 offices throughout the United States, and almost $500 million in outstanding personal loans. It had become the third-largest personal loan firm, behind Household Finance and Beneficial Finance, with over $3 billion in total assets and more than $2 billion in life insurance in force. Although the firm had plenty of cash, its stock was doing poorly, making it a tempting takeover target. Loews Theatres Inc. quietly began buying CCC stock, announcing a takeover attempt in April 1968 when it had acquired ten percent of the company. The board of CCC rejected the offer and began looking for a desirable merger candidate. After talks with several companies, CCC agreed to merge with Minneapolis-based Control Data Corp. Loews initially vowed to fight the merger, and a public fight ensued, which Control Data eventually won. CCC received Control Data shares worth $582 million.

Control Data was much smaller than CCC, earning $8.4 million in 1966 with only $350 million in assets. However, CCC was already financing and leasing computers, and Control Data had big plans to open a worldwide network of computer data centers, as well as sell and lease its computers. Control Data lacked the capital for this plan, and the two companies hoped they could be of mutual benefit to one another. CCC was to contribute capital and assist in the leasing of computers and in timesharing operations.

CCC generally had a low profile during its years under the ownership of Control Data. The firm consolidated its leasing units in 1970 and formed a real estate finance unit the following year. In 1974 CCC formed an insurance division. It also bought 70 percent of France’s Credit Fran£ais and formed a joint venture with Japan’s Nippon Shinpan, a major consumer finance company. Beginning in the late 1970s the firm made a number of acquisitions including Gulf Insurance in 1976 and Great Western Loan & Trust in Texas in 1977. In 1981 CCC bought the Electronic Realty Association, a real estate franchising network.

Meanwhile the relationship between CCC and Control Data was eroding. Computers became rapidly less expensive and more powerful in the 1970s, and many corporations that had leased mainframes from Control Data began to buy their own computers. As this trend intensified, Control Data no longer needed CCC to help it with leasing. CCC also expanded into a wide area of financial services—too many, in the eyes of some critics. CCC opened a national bank based in Delaware, two state-chartered banks, and two savings and loans that offered mortgages, credit cards, and a variety of other services. It owned 21 percent of midsize brokerage Inter-Regional Financial Group Inc. Its business financing expanded to include vehicle and airplane leasing as well as life and casualty insurance. It lent a total of $577 million to foreign countries, about half of them in Latin America. Because of Control Data’s large losses in the computer business, CCC lost its investment-grade credit rating, forcing it to pay more for its money.

Meanwhile Control Data used CCC resources to help it open a network of over 100 business centers, which offered data processing, consulting, and commercial loans to small businesses. The centers were expensive to run, consuming more than $100 million between 1983 and 1985. CCC began closing the centers by late 1984. It also transferred its ERA real estate brokerage to Control Data and began phasing out withdrawals at some of its savings and loans. This move caused a run at several Rhode Island offices. As a result of these problems, CCC had a 6.7 percent return on equity in 1984, half the industry average. CCC had become a drag on Control Data’s earnings. In late 1984 Control Data tried to sell CCC but found no takers.

CCC was forced to sell more of its peripheral businesses and pay down its debt. Thereafter, the company began regaining its health, earning about $80 million in 1985 on revenue of about $1.1 billion. The firm had $5 billion in assets. However, CCC found a buyer in September 1986, when Sanford I. Weill became chair and chief executive and took the company public. Weill was a well-known Wall Street figure who had built securities giant Shearson Lehman Brothers and been president of American Express Co. Control Data reduced its stake in CCC to about 20 percent while Weill and other CCC executives bought ten percent. The remaining 70 percent was sold to investors in a public stock offering.

Weill brought a group of experienced finance executives with him to CCC, paying them less than they had earned elsewhere but rewarding them with CCC stock. The new management took CCC out of life insurance, vehicle leasing, and overseas lending, and tripled operating profits within a year. In September 1987 CCC bought back Control Data’s remaining stake for $22 per share.

In 1988 Weill used the rejuvenated CCC as a springboard to buy Primerica Corp. Primerica’s stockholders were given CCC shares on a one-for-one trade. Because of a difference in dividends, Primerica holders were also given $7 per share in cash. The total price was $1.54 billion. Primerica owned 54 percent of the new company but only four of 15 seats on the board of directors. Although CCC was the buying company, the Primerica name was kept as the name of the new company. CCC became a Primerica subsidiary, the leading component of Primerica’s consumer services division. CCC’s 1988 profits were $161.8 million on sales of $943.7 million.

By 1989 CCC had 490 offices in 29 states and $3.4 billion in receivables. Weill continued to make changes to strengthen its financial performance, tightening underwriting criteria and monitoring loans through more sophisticated systems. Greater emphasis was placed on collecting loans and resolving problems. In April 1989 the firm acquired Action Data Services, a data processing supplier, partly to do in-house data processing. In late 1989 CCC acquired the branch offices and loan portfolio of Barclays American Financial for $1.35 billion. Barclays, based in Charlotte, North Carolina, was a branch of Barclays Bank PLC that specialized in consumer loans and home equity lending. The acquisition, which brought 220 offices in 29 states and $1.3 billion of receivables, was seen as increasing CCC’s loan portfolio by 40 percent at a reasonable price. While Barclays offices that overlapped with CCC’s were closed, the purchase brought CCC back into the western United States, which it had left during the consolidation of 1985. The firm had about $190 million in profits for the year.

In 1991 CCC bought Landmark Financial Services Inc., the consumer finance branch of MNC Financial, for about $370 million. By the end of 1992 CCC had 695 branch offices in 39 states and was planning to open 50 more offices during the next year. Newer offices were being opened with staffs of only two or three, verses four or five for older offices, and used one-third less space. These and other cost control efforts had brought operating expenses down to 4.28 percent of average receivables. The branch office network used a goal system that encouraged mangers to treat their office like their own business, giving them control over revenues and expenses. Because they were more aware of the conditions of a local economy, they were given flexibility in determining if customers met CCC’s credit requirements. Top performing managers were given large bonuses.

In 1993 CCC introduced a new computer-based branch information system called Maestro. The system automated point-of-sale marketing and credit evaluations, allowing branches to quickly determine which products a given customer was qualified for. Prior to that time, customer data was written on forms and credit checks were done by telephone and mail.