FR3033p_FR3033s_20170427_omb

Supporting Statement for the
Census of Finance Companies and Survey of Finance Companies
(FR 3033p and FR 3033s; OMB No. 7100-0277)
Summary
The Board of Governors of the Federal Reserve System (Board), under delegated
authority from the Office of Management and Budget (OMB), proposes to extend for three years,
with revision, the voluntary Census of Finance Companies and Survey of Finance Companies,
continuing the regular five-year series (the quinquennial) (FR 3033; OMB No. 7100-0277). This
information collection includes both the Census of Finance Companies (FR 3033p) and the
Survey of Finance Companies (FR 3033s). The data collected from this survey would be used to
benchmark the consumer and business finance series collected on the monthly Domestic Finance
Company Report of Consolidated Assets and Liabilities (FR 2248; OMB No. 7100-0005) and to
increase the Board’s understanding of an important part of the financial system.
The first stage of the quinquennial, the FR 3033p was implemented in June 2015 and was
sent to all companies that met the criteria developed to identify the potential universe of
domestic finance companies. An accurate census was required to form a representative sample
of finance companies, to which a more detailed survey would be sent. The census gathered
limited information including total assets, areas of specialization, and information on the
corporate structure of the companies. The Board identified approximately 40,000 firms to which
the census was sent.
From the universe of finance companies determined by the FR 3033p, a stratified random
sample of 3,000 finance companies was drawn for the FR 3033s. The survey would be sent in
March 2016 and collect detailed information, as of December 31, 2015, from both assets and
liability sides of the respondents’ balance sheets, along with income and expenses, the number of
accounts and offices, and the small-business credit they extend, if any.
The Board proposes to revise the FR 3033s by adding a section to solicit information
from the finance companies on income and expenses, number of accounts and offices, and small
business credit they extend. Based on an estimated response rate of 40 percent, 1,200 of the
3,000 finance companies would complete the FR 3033s. The reporting burden of the FR 3033s
is estimated to be 1,800 hours, which is less than the estimated burden of 2,700 hours for the
2010 Survey of Finance Companies. The total annual burden for the FR 3033 information
collection is estimated to increase from 8,000 hours to 9,800 hours.
Background and Justification
Since June 1955, the Board has surveyed the assets and liabilities of finance companies at
five-year intervals. Finance companies include companies in which 50 percent or more of assets
are held in any of the following types of loan or lease assets: liens on real estate; business loans
and leases; consumer loans and leases. For purposes of this survey, finance companies do not
include commercial banks, cooperative banks, credit unions, investment banks, savings banks,
savings and loan institutions and industrial loan corporations or their subsidiaries. However,

subsidiaries of bank holding companies (BHCs), savings and loan holding companies (SLHCs)
or foreign banking organizations (FBOs)1 whose consumer or business loans or leases made up
50 percent or more of their assets may be considered finance companies. Through 1975, the
known universe of finance companies was surveyed. To reduce reporting burden, in 1980, the
survey was split into a brief census, which has been sent to the known universe of finance
companies, and a longer survey, which has been sent to a stratified random sample of finance
companies. In 2005, the definition of a finance company was revised to include companies
whose real estate loans made up 50 percent or more of their assets; this change effectively
brought mortgage companies into the sample. In addition, the survey was revised to instruct
finance companies to include the assets and liabilities of their mortgage company subsidiaries.
The Board has used the quinquennial survey data to benchmark monthly data series on
major assets and quarterly data series on liabilities of finance companies developed from the
FR 2248, which is collected from an even smaller longitudinal subsample of surveyed
companies. These data are used in internal analysis and estimated aggregate statistics are
reported to the public in two monthly statistical releases: Finance Companies (G.20) and
Consumer Credit (G.19), as well as the quarterly Flow of Funds Account of the United States
(Z.1) release. As with many data series based on a fixed sample, errors of estimation tend to
increase over time and thus require periodic correction. These errors reflect the evolution in the
financial markets due to firm entries, exits and mergers that lead to the deterioration of the
representativeness of the monthly longitudinal sample.
In addition to benchmarking the above data releases, information from the quinquennial
survey also provides Board staff with an opportunity to learn about an important and
understudied part of the financial system. Finance companies are a major supplier of credit to
households and businesses, holding or managing about 20 percent of total consumer credit
outstanding (a market share second to that of commercial banks) and a significant share of the
short- and intermediate-term business finance market.
Finance companies played a major role in the financial crisis, dominating the subprime
mortgage market (Chomsisengphet and Pennington-Cross (2006)). Outside of the subprime
sector, finance companies are thought to account for half of all mortgage originations, with a
higher share among FHA-guaranteed mortgage originations. In 2007 and 2008, many finance
companies experienced severe liquidity pressures that resulted in a wave of failures.
Furthermore, finance companies are significant issuers of commercial paper and had been major
users of the Term Asset-Backed Securities Lending Facility (TALF). Historically, regulation of
this sector has been light, raising the possibility that finance companies might continue to be the
conduit for high risk loans to the household sector. More immediately, as the nonbank lending
arms of holding companies are finance companies, understanding the nature of these companies
is a necessary step in developing policies for consolidated regulation.

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Although the Financial Statements of U.S. Nonbank Subsidiaries of U.S. Holding Companies (FR Y-11 and
FR Y-11S; OMB No. 7100-0244 ) and the Financial Statements of U.S. Nonbank Subsidiaries Held by Foreign
Banking Organizations (FR Y-7N and FR Y-7NS; OMB No. 7100-0125) collect balance sheet and income statement
information from the subsidiaries of HCs and FBOs, these reports do not provide the level of granularity necessary
to produce detailed series on consumer, real estate, and business credit at finance companies.

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Description of Information Collection
FR 3033p
The FR 3033p is designed to identify the universe of finance companies eligible for
potential inclusion in the FR 3033s and to enable the stratification of the sample for more
statistically efficient estimation. The FR 3033p comprises 11 questions to assess the company’s
asset size, level of loan and lease activity, company structure, and licensing authority.
FR 3033s
The FR 3033s would collect balance sheet data on major categories of consumer and
business credit receivables and major liabilities. The Board also proposes to gather information
on the company’s income and expenses, number of accounts and offices, and the small business
credit they supply.
Proposed Revisions
The Board proposes to revise the FR 3033s to improve the ability of staff to analyze the
cost structure and profitability of the finance companies, and to explore the questions of
economies of scale and elasticity of costs by loan size. The Board proposes the following
revisions to the survey:
Remove section – Assets Serviced for Others, Geographic Scope of Business, and Office
Locations.
 Remove Questions 10-12, as they were special-topic questions added for the 2010 survey.
Revise Question 3.C.2 (Commercial, Industrial, and Agricultural Equipment Loans).
 Split this item into two parts: 3.C.2(a) which asks about the revolving, open-end loans,
and 3.C.2(b) which is for closed-end loans. Finance companies are relatively important
providers of revolving credit to businesses. The proposed change would be consistent
with the treatment of revolving credit to consumers and for real estate loans on this
survey form.
Add section – Income, Expenses, and Scale of Operations.
 Add a Question 10 with 12 sub-items and a Question 11 with 3 sub-items to collect the
income, expenses, number of accounts, and number of U.S. offices from finance
companies. These data relate directly to public policy issues regarding the ability of
small and specialized finance companies to compete with large and diversified companies
and the availability of credit to businesses and households. The data will help answer
questions about the cost structure and profitability of the finance companies and facilitate
studies on the economies of scale and elasticity of costs by loan size. The data are not
available from any other source, and no other entity is in a position to collect data on the
cost structure of the industry. The proposed questions follow customary reporting
practices in the industry and are similar to those used in 1989, which was the last time
such data were collected. Advances in credit reporting (credit bureaus) and information

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processing technology (credit scoring) make 1989 data obsolete. The common questions
will help facilitate comparisons of the new information with earlier data.
Add section – Small Business Credit.
 Add a Question 12 with 4 subparts to collect information on the small business credit that
finance companies supply. Small businesses comprise a large and very important
segment of the US economy. They account for about half of all private sector
employment and about two-thirds of net new private sector jobs (see
www.sba.gov/sites/default/files/advocacy/FAQ_March_2014_0.pdf). Thus, the
formation and growth of small businesses has important implications for the
macroeconomy. In order to grow and thrive, many small businesses require access to
financing. Small firms generally have more limited alternatives to bank financing than
do larger firms, and finance companies are one alternative. The Board currently does not
have information on the amount of credit that is provided to small businesses by finance
companies. The addition of these new questions will help to fill this gap in our
knowledge regarding credit flows to small businesses.
Reporting Panel
The Board proposes keeping the FR 3033s survey sample size at 3,000 finance
companies, as in 2010. As a result of the FR 3033p responses, the Board identified the universe
of finance companies for the survey.2 The survey is stratified by size of total assets and by
specialization in receivables. The survey sample includes all FR 3033p respondents that reported
at least $1 billion in total assets. For coverage of smaller respondents3, the main survey sample
includes a sufficient number of companies with assets under $1 billion to provide adequate
representation for the expected analytical purposes.
In 2010, the Board sent the survey to 2,348 finance companies and received 911
responses (39 percent). After additional data cleaning, 692 of these 911 responses were deemed
to be usable. The 2010 population size, total sample, and the number of usable responses in each
stratum are shown in Table 1.
Given that the universe of finance companies has most likely changed since December
2010, error estimates based on the 2010 data must be interpreted as a rough guideline for the
census panel structure. The Board calculated the standard errors of aggregate levels of finance
company receivables in selected balance sheet categories in Table 2. Response rates for the
upcoming FR 3033s may fall below the level of 2010, but the Board will make a concerted effort
to raise response rates, and the estimated standard errors would fall if this effort is successful.

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The Board has the following pre-determined set of characteristics to internally determine if the respondent is a
finance company. A finance company is defined as (1) a domestic entity, (2) a company with 50 percent or more of
its assets in the form of loans or leases, and (3) a nondepository institution.
3
For the purposes of this proposal, the term small or smaller respondent or company is defined as a company that
reports less than $1 billion in assets.

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Table 1
Survey Response Distribution by Asset Size of Finance Company

2010
FR 3033p
Estimated
population

2010 FR 3033s
Total sample

2010 FR 3033s
Number of usable
responses

Less than $1 million

2,339

943

170

$1 to less than $10 million

1,348

702

200

$10 to less than $100
million

1,261

472

186

$100 million to less than
$1 billion

290

153

88

$1 to less than $3 billion

63

39

15

$3 to less than $20 billion

25

21

16

$20 billion or more

20

18

17

5,346

2,348

692

Asset size

Totals

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Table 2
Standard Errors of Aggregate Levels of Finance Company
Receivables in Selected Balance Sheet Categories
($ in billions with % of outstanding in parentheses)
2010 Panel size
2,348

Financial items

Number of usable responses
692
Total

41.77 (2.22)

Total consumer

26.15 (3.20)

Motor vehicle

9.24 (2.37)

Revolving

5.43 (6.49)

Other

12.83 (3.72)

Real estate

7.19 (2.91)

Total business

17.17 (4.13)

Motor vehicle

4.65 (3.94)

Equipment

9.16 (4.38)

Other

3.86 (4.36)

Bank loans

6.56 (6.79)

To cope with the expected level of nonresponse to the survey, the Board intends to select
a subsample of non-respondents for further follow-up that would include both additional letters
and phone calls. The follow-up study would explore nonresponse bias and would include
questions related to, but not necessarily identical to, the survey questions. These follow-up
questions may be helpful in understanding the key dimensions of nonresponse.
Frequency
The Board will retain the five-year frequency of the survey. Conducting the survey less
frequently would be undesirable because it would lengthen the time between benchmarks of the
FR 2248, which in turn would decrease the accuracy of the aggregate estimates.
Time Schedule for Information Collection and Publication
The FR 3033p was mailed to the respondents in June 2015 and responses were due to the
Board within 15 business days of its receipt by respondents. In an effort to reduce burden and

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increase response rates, respondents were encouraged to complete the census online. Also, the
Board targeted the period following the March 2015 quarter-end and tax season for mailing the
census. The Board targeted the 2nd quarter of 2015 so that the FR 3033s could be deployed on
schedule to obtain year-end data. The Board processed the results and the Federal Reserve
Banks conducted follow-up telephone calls of selected companies that did not respond to the
census in early August 2015.
The FR 3033s would be mailed in late March 2016. The respondent panel of 3,000
finance companies would include 52 companies that are FR 2248 reporters and 2,948 companies
that are non-reporters. Respondents would be directed to either complete the survey online or
mail paper responses to the Board. Before commencement of the FR 3033s, post cards were
mailed to respondents to thank them for taking part in the FR 3033p and to encourage their
participation in the FR 3033s as well.
To maximize the response rate, the timing of the FR 3033s would coincide as closely as
possible to fourth-quarter SEC 10-K filings. The Board believes that by targeting the time period
just after the 10-K filings, it is more likely that respondents will have the necessary information
easily available to complete the FR 3033s. The survey would be mailed after March 21, 2016,
with instructions to respond by April 21, 2016. After April 21, 2016, follow-up mailings would
be sent to companies that do not respond and follow-up calls would be made after June 1, 2016.
Once the data from FR 3033s have been analyzed, they would be used as a benchmark to
the FR 2248 for the period December 2010 through December 2015. It is anticipated that this
phase of analysis would be completed by mid-2017, at which time benchmark estimates based on
the FR 3033s data would be publicly reported. The newly benchmarked series would be
published at a later date in the Board’s monthly Finance Companies (G.20), monthly Consumer
Credit (G.19), and quarterly Flow of Funds Accounts of the United States (Z.1) releases.
Legal Status
The Board’s Legal Division has determined that section 2A of the Federal Reserve Act
(FRA) requires that the Board and the Federal Open Market Committee maintain long run
growth of the monetary and credit aggregates commensurate with the economy’s long run
potential to increase production, so as to promote effectively the goals of maximum employment,
stable prices, and moderate long-term interest rates (12 U.S.C. § 225a). Under section 12A of
the FRA, the Federal Open Market Committee is required to implement regulations relating to
the open market operations conducted by Federal Reserve Banks with a view to accommodating
commerce and business and with regard to their bearing upon the general credit situation of the
country (12 U.S.C. § 263). Section 14 of the FRA authorizes the reserve banks, under rules and
regulations prescribed by the Board, to engage in open market operations (12 U.S.C. § 355-59).
Because the Board and the Federal Open Market Committee use the information obtained on the
FR 3033 to fulfill these obligations, these statutory provisions provide the legal authorization for
the collection of information on the FR 3033. The FR 3033 is voluntary.
The FR 3033 informs respondents that answers will be kept confidential. Though a
promise of confidentiality may not be dispositive, commercial and financial information

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contained in individual responses collected on the FR 3033 may be exempt from disclosure
under exemption 4 of the Freedom of Information Act (5 U.S.C. § 552(b)(4)), if disclosure
would likely have the effect of (1) impairing the government’s ability to obtain the necessary
information in the future, or (2) causing substantial harm to the competitive position of the
respondent. The types of information contained on the FR 3033 would appear to be the type of
commercial or financial information covered by exemption 4.
Consultation Outside the Agency
On January 12, 2016, the Board published a notice in the Federal Register (81 FR 1421)
requesting public comment for 60 days on the extension, with revision, of the FR 3033. The
comment period for this notice expired on March 14, 2016. The Board did not receive any
comments. On March 21, 2016, the Board published a final notice in the Federal Register
(81 FR 15109) for the FR 3033.
Estimate of Respondent Burden
The total reporting burden for FR 3033p is estimated to be 8,000 hours. Based on an
estimated response rate of 40 percent, approximately 1,200 of the 3,000 finance companies
would complete the FR 3033s. The total reporting burden for FR 3033s is estimated to be 1,800
hours. The total annual burden for the FR 3033 information collection is estimated to increase
from 8,000 hours to 9,800 hours. These reporting requirements represent less than 1 percent of
total Federal Reserve System paperwork burden.
Number of
respondents

Annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

16,000

1

0.5

8,000

FR 3033p

16,000

1

0.5

8,000

FR 3033s

1,200

1

1.5

1,800

Current
FR 3033p
Proposed

Total

9,800

Change

1,800

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The total annual cost to the public for this information collection is estimated to be to $414,000
and would increase to $507,150.4
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The estimated cost to the Federal Reserve System for collecting and processing the
FR 3033p is $230,000 and for the FR 3033s is $26,000.

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Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $17, 45% Financial Managers at
$63, 15% Lawyers at $64, and 10% Chief Executives at $87). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2014, published March 25, 2015, www.bls.gov/news.release/ocwage.nr0.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.

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