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April 25, 2013

GE Capital Exits Consumer Lending in Firearms; We Have Issues With the Reporting, But Free Markets Win


Companies decide to exit markets all the time, especially the so-called niche markets. They may leave because the market in question is not large enough to generate the returns they seek, is no longer part of their core business strategy or because the company does not have sufficient market share or simply decides to re-deploy resources elsewhere.

Companies leaving a particular niche market rarely make headlines. But when leaving a controversial category such as alcohol, tobacco or firearms is involved or events in the recent news can be tied to the action, reporters love to move in.

Such is the case with the Wednesday Wall Street Journal story that reported that GE Capital, the huge financial services business of General Electric, had decided it will no longer provide consumer financing for firearms purchasing. Now, keep in mind, as the story itself said, that GE Capital had stopped taking on new customers in this space in 2008 and was only servicing existing ones, that “the company’s exit has little overall impact in a U.S. gun market, where sales last year totaled $11.7 billion (and in which) … financing remains a marginal activity” and that their involvement in this market is “an ‘insignificant and immaterial’ part of GE Capital’s business.”

But we’re talking guns, here, and everybody knows that guns are very much in the news. So the reporters explained that since GE (both corporate and GE Capital) are headquartered close to Newtown that CEO Jeff Immelt had held a town hall meeting with employees affected by the tragic loss of life. That was commendable. The pain was real, the desire to help genuine. But, the business decision to eventually exit this market had been put in place three years prior.

Another characteristic of large businesses is being politically risk averse. So, when asked by national reporters, a GE spokesman was more than happy to confirm that the company had reexamined its policies and had indeed decided to completely exit the lending pool in which it had been scarcely toe-deep anyway. Why suffer any of that possible bad publicity? CEO Immelt is close to the President. The photo ops tell us so. Surely, the White House would approve.

We believe in free markets. We know that EBay’s decision not to sell firearms gave rise to the opportunity that GunBroker.com and several others have seized. Other lenders, some local or regionally based, perhaps another national specialized niche lender, will step forward to take GE Capital’s place, if there is sufficient market opportunity. The story itself talked about two such lenders. Retailers themselves have options starting with the tried and true lay-away process of old.

As for the GE employees making jet engines, locomotives, electrical components, and all manner of manufactured products, or even those involved in finance, many of them are already our customers. They are welcome in our stores and at our ranges any time. Please bring cash or credit card.

Larry Keane is senior vice president and general counsel for the National Shooting Sports Foundation. Follow him on Twitter at @lkeane.