Leading the News: GE Plans Move Into Risky Area: Personal Loans
General Electric Co., which has sold appliances and light bulbs to consumers since its earliest days, is aggressively moving into a risky consumer arena: unsecured personal loans.</br></br>Starting this month, GE plans to send about one million letters during the next year offering unsecured personal loans of as much as $25,000. Marketed as the "GE FlexPlus Account," the loans are similar to credit lines and carry interest rates ranging from 7.99% to 18.99%. Consumers can either pay them off in a specified period or draw down on them again after repaying a portion of the principal.</br></br>The new venture is part of GE's strategy to extend its U.S. consumer-finance business beyond primarily private-label credit cards -- in which GE is a third-party provider for retailers like Gap Inc., Retail Brand Alliance Inc. unit Brooks Brothers and J.C. Penney Co. -- to direct interaction with customers. The Fairfield, Conn., company, which has seen profits fall amid the current economic climate, is seeking new growth engines as some businesses, including its power-generation unit, see slower growth.</br></br>GE has offered such loans in Europe and Asia for nearly a decade. But in the U.S., GE will enter a fiercely competitive business in a market already saturated with loan and credit-card offers, including some that have 0% interest rates for the first six to 12 months. GE's lowest rate of 7.99% is reserved for its best customers.</br></br>Moreover, GE is entering the business at a tricky time. Consumer defaults have been increasing along with rising unemployment, calling into question the quality of consumer credit and how much demand there is among debt-laden consumers for even more types of credit. Personal bankruptcy filings have jumped as well.