The parent company of the institution that originates loans for eBay's Bill Me Later service filed for Chapter 11 reorganization, but according to the company, CIT Bank is expected to continue normal operations.
Bill Me Later, which eBay acquired one year ago, is not a chartered financial institution nor is it licensed to make loans in any state, so it relies on CIT Bank, an industrial loan company based in Salt Lake City, Utah, to originate its loans. On November 1, 2009, CIT Group Inc. and CIT Group Funding Company of Delaware LLC filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy.
According to CIT Group's press announcement, "none of CIT's operating subsidiaries, including CIT Bank, a Utah state bank, will be included in the filings. As a result, all operating entities are expected to continue normal operations during the pendency of the cases."
Bill Me Later spokesperson Sara Parker said the company is monitoring the CIT Group situation carefully. "As indicated previously our relationship is with CIT Bank, a subsidiary of CIT Holding Group, and we have no reason to believe that there will be an impact to the Bill Me Later business." She also said that as part of BML's contingency plans, it has put in place a back up partner to CIT "in the unlikely circumstance that CIT Bank is unable to originate and fund our consumer loan receivables."
Just last month eBay announced the integration of Bill Me Later into the PayPal wallet both on eBay and across ecommerce, meaning qualified customers can now use Bill Me Later as a funding choice at tens of thousands of online merchants that accept PayPal Express Checkout.
Bill Me Later (BML)'s chargeoff rate rose to 11.53% by the end of the third quarter 2009, up almost 300 basis points from the end of 2008, according to Digital Transactions, which said BML's 90-day delinquency rate was 4.97%, up from 3.94% nine months earlier. "eBay officials acknowledged the deteriorating credit performance but noted that Bill Me Later’s risk-adjusted margin (8.98%) remains better than industry averages," the news report stated.
