Ally Sells $2.3 Billion Credit Card Business to CardWorks

Ally Financial has sold its credit card business to consumer finance company Cardworks.

The deal, announced in a news release Wednesday (Jan. 22), will see CardWorks and its subsidiary Merrick Bank acquire Ally’s credit card portfolio of $2.3 billion in credit card receivables and 1.3 million active cardholders.

“Ally’s decision to sell its credit card business is part of our broader strategy to pursue a more focused approach, enabling us to simplify and streamline our structure, prioritize our core businesses, and drive improved returns,” Ally CEO Michael Rhodes said in the announcement.

“We are proud of the results the business generated over the last three years and pleased with the terms of the agreement and the opportunity for this business to continue growing with CardWorks. As we embark on the next chapter at Ally, we remain relentlessly focused on doing right by our customers, communities, employees and shareholders.”

CardWorks CEO Dan Pillemer added that the acquisition marked “an exciting step in the expansion of our near-prime credit card business.”

The news comes two weeks after reports that Ally was laying off a little less than 5% of its staff, ending mortgage originations and re-examining its credit card business.

The company’s shares fell by double digits last September, with management saying the pressures facing its borrowers were leading to delinquencies and driving up charge-offs across its loans.

“Our borrower is struggling with high inflation and cost of living, and now more recently, a weakening employment picture,” Chief Financial Officer Russell Hutchinson said at a financial conference at the time.

And during an earnings call the following month, Rhodes cautioned analysts that Ally’s next few quarters would be “choppy.”

The company said it had instituted tougher standards for borrowers by putting in place stricter verification requirements for proving income and employment.

Meanwhile, other lenders are reporting upticks in credit card spending. For example, J.P. Morgan Chase’s fourth-quarter earnings results, released earlier this month, showed ongoing momentum in consumer spending, with increased credit and debit card use.

“The U.S. economy has been resilient,” J.P. Morgan Chase CEO Jamie Dimon said at the time. “Unemployment remains relatively low, and consumer spending stayed healthy, including during the holiday season.”

Capital One’s earnings, released Tuesday (Jan. 21), also showed continued card spending, with purchase volumes climbing 7% to $172.9 billion.