<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.   20549
                                    FORM 10-Q


(Mark One)

   [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934.

                For the quarterly period ended December 31, 1996

                                       OR

   [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934



           For the transition period from ____________ to ____________  


                         Commission file number 0-27550 

                               RAC FINANCIAL GROUP, INC.                       
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)




            NEVADA                                    75-2561052     
--------------------------------                 --------------------
(State or other jurisdiction of                    (I.R.S. Employer
 incorporation or organization)                   Identification No.)



              1250 WEST MOCKINGBIRD LANE, DALLAS, TEXAS 75247      
             ------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)


                                  (214) 630-6006                   
             ------------------------------------------------------


             ------------------------------------------------------
               Former name, former address and former fiscal year, 
                          if changed since last report)





Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.   Yes   X      No        
                                                    -------     ------- 

There were 31,894,836 shares of voting common stock and 4,440,676 shares of 
non-voting common stock, $.01 par value outstanding as of January 31, 1997.


                                        1 
<PAGE>


                            RAC FINANCIAL GROUP, INC.

                               INDEX TO FORM 10-Q



Part I.   FINANCIAL INFORMATION

     Item 1.   Financial Statements                                  PAGE 
                                                                     ---- 
          Condensed Consolidated Balance Sheets - 
          September 30, 1996 and December 31, 1996 (unaudited)......    3 


          Condensed Consolidated Statements of Income (unaudited) -
          Three Months Ended December 31, 1995 and December 31, 
          1996......................................................    4 

          Condensed Consolidated Statements of Cash Flows 
          (unaudited) - Three Months Ended December 31, 1995 and 
          December 31, 1996.........................................    5 

          Notes to Condensed Consolidated Financial Statements 
          (unaudited)...............................................    6 


     Item 2.   Management's Discussion and Analysis of Financial 
               Condition and Results of Operations..................    8 

Part II.  OTHER INFORMATION

     Item 6.   Exhibits and Reports on Form 8-K.....................   11 


SIGNATURE...........................................................   12 

















                                        2 
<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1   FINANCIAL STATEMENTS



                                      
                RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED BALANCE SHEETS


               (Dollars in thousands, except per share data)

                                   ASSETS

                                                   September 30,   December 31,
                                                       1996            1996    
                                                   -------------   ------------
                                                                    (unaudited)
Cash and cash equivalents...........................  $ 23,167      $    7,496 
Loans held for sale, net............................   430,812         694,816 
Excess servicing receivable.........................   187,230         288,717 
Subordinated certificates held for sale.............    16,528          16,879 
Receivable from trusts..............................    32,105          50,211 
Other assets........................................    20,542          25,022 
                                                      --------      ---------- 
   Total assets.....................................  $710,384      $1,083,141 
                                                      --------      ---------- 
                                                      --------      ---------- 

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Accounts payable and accrued liabilities.........  $ 19,669      $   18,884 
   Warehouse financing facilities with affiliates...   354,481         628,594 
   Term line of credit..............................    57,465          84,625 
   Notes payable....................................     1,967           2,446 
   Subordinated notes payable to affiliates.........     7,002           7,002 
   Convertible subordinated notes...................   100,000          69,920 
   Allowance for possible credit losses on 
     loans sold.....................................    54,257          92,321 
   Deferred tax liabilities, net ...................    20,974          32,443 
                                                      --------      ---------- 
   Total liabilities ...............................   615,815         936,235 
                                                      --------      ---------- 
Commitments
Stockholders' Equity:
   Common stock, $0.01 par value:
     Authorized shares - 100,000,000
     Issued and outstanding shares - 22,499,140 
     as of September 30, 1996 and 24,980,252 
     as of December 31, 1996........................       225             250 
   Non-voting common stock, $0.01 par value:
     Authorized shares - 25,000,000
     Issued and outstanding shares - 4,440,676 
     as of September 30, 1996 and as of 
     December 31, 1996..............................        44              44 
   Additional capital...............................    54,696          87,823 
   Retained earnings................................    39,604          58,789 
                                                      --------      ---------- 
       Total stockholders' equity...................    94,569         146,906 
                                                      --------      ---------- 
      Total liabilities and stockholders' equity....  $710,384      $1,083,141 
                                                      --------      ---------- 
                                                      --------      ---------- 


                           See accompanying notes.





                                      3 
<PAGE>
                                      
                RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES


                CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                  (In thousands, except per share data)

                                                      Three Months Ended  
                                                          December 31,    
                                                      ------------------- 
                                                         1995      1996   
                                                       -------   -------- 
                                                          (unaudited)
Revenues:
  Gains on sales of loans, net of costs but 
    before provision for possible credit losses.....   $20,273   $ 95,848 
  Interest..........................................     1,767     20,432 
  Servicing income..................................       694      2,908 
  Other income......................................       734      4,400 
                                                       -------   -------- 
    Total revenues..................................    23,468    123,588 
                                                       -------   -------- 
Expenses:
  Salaries and employee benefits....................     5,459     14,838 
  Interest..........................................     2,043     13,132 
  Other operating...................................     3,761     21,048 
  Provision for possible credit losses..............     4,649     44,388 
                                                       -------   -------- 
    Total expenses..................................    15,912     93,406 
                                                       -------   -------- 
Income before income taxes..........................     7,556     30,182 
Provision for income taxes..........................    (2,871)   (11,469)
                                                       -------   -------- 
    Net income......................................   $ 4,685   $ 18,713 
                                                       -------   -------- 
                                                       -------   -------- 
Weighted average common shares and common 
  equivalent shares outstanding.....................    20,297     29,033 
                                                       -------   -------- 
                                                       -------   -------- 
Primary net income per share of common stock .......   $  0.23   $   0.64 
                                                       -------   -------- 
                                                       -------   -------- 
Weighted average fully diluted common shares and 
   common equivalent shares outstanding.............    20,297     34,957 
                                                       -------   -------- 
                                                       -------   -------- 
Fully diluted net income per share of common stock..   $  0.23   $   0.57 
                                                       -------   -------- 
                                                       -------   -------- 


                         See accompanying notes.



                                     4 
<PAGE>

               RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

         UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (UNAUDITED)

                           (Dollars in thousands)


                                                         Three Months        
                                                       Ended December 31,    
                                                    ------------------------ 
                                                      1995           1996    
                                                    ---------      --------- 
OPERATING ACTIVITIES:
  Net income......................................  $   4,685      $  18,713 
  Adjustments to reconcile net income to 
   net cash used in operating activities:
    Provision for possible credit losses..........      4,649         44,388 
    Depreciation and amortization.................        125            342 
    Gain on sales of loans........................    (19,835)      (106,558)
    Conversion of subordinated debt...............          -          1,805 
    Write off in excess servicing, net............        394              - 
    Changes in operating assets and liabilities:
      Excess servicing receivable amortization....      1,566          5,161 
      Loans originated or acquired................   (195,886)      (823,647)
      Principal collected and proceeds from 
       sale of loans..............................    119,693        570,214 
      Accrued interest receivable ................       (904)        (2,482)
      Excess servicing receivable, net............       (232)            78 
      Receivable from trusts......................     (2,641)       (19,434)
      Subordinated Certificate held for sale......     (2,400)          (351)
      Other assets................................     (3,037)       (15,374)
      Accounts payable and accrued expenses.......      5,745         (1,398)
      Deferred tax liability......................      1,514         11,469 
                                                    ---------      --------- 
NET CASH USED IN OPERATING ACTIVITIES.............    (86,564)      (317,074)
                                                    ---------      --------- 

INVESTING ACTIVITIES:
  Cash from acquisition...........................        252            492 
  Purchases of equipment and leasehold 
   improvements, net..............................       (134)          (565)
                                                    ---------      --------- 
NET CASH PROVIDED BY (USED IN) INVESTING 
 ACTIVITIES.......................................        118            (73)
                                                    ---------      --------- 
FINANCING ACTIVITIES:
  Borrowings on warehouse financing facilities, 
   net............................................     81,094        274,114 
  Borrowings on term line of credit...............      6,715         27,160 
  Repayments on notes payable, net................        (32)          (516)
  Borrowings - Invester payable...................        173              - 
  Proceeds from repayments of subordinated notes 
   payable to affiliates..........................      2,500              - 
  Exercise of stock options.......................          -            718 
                                                    ---------      --------- 
NET CASH PROVIDED BY FINANCING ACTIVITIES ........     90,450        301,476 
                                                    ---------      --------- 

INCREASE (DECREASE) IN CASH ......................      4,004        (15,671)
Cash and cash equivalents at beginning of period..      2,967         23,167 
                                                    ---------      --------- 
Cash and cash equivalents at end of period........   $  6,971      $   7,496 
                                                    ---------      --------- 
                                                    ---------      --------- 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Interest paid during the period.................  $   1,771      $  11,723 
                                                    ---------      --------- 
                                                    ---------      --------- 
  Non-cash Investing and Financing Activities:
    Acquisition of assets, net....................  $     697      $       - 
                                                    ---------      --------- 
                                                    ---------      --------- 

                                      
                           See accompanying notes.

                                      5 
<PAGE>

                 RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 (UNAUDITED)

                              DECEMBER 31, 1996


1.   BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements 
have been prepared in accordance with generally accepted accounting principles 
for interim financial information and with the instructions to Form 10-Q and 
Article 10 of Regulation S-X.  Accordingly, they do not include all of the 
information and footnotes required by generally accepted accounting principles 
for complete financial statements.  In the opinion of management, all 
adjustments (consisting of normal recurring accruals) considered necessary for 
a fair presentation have been included.  Operating results for the three month 
period ended December 31, 1996 are not necessarily indicative of the results 
that may be expected for the year ended September 30, 1997.  For further 
information, refer to the consolidated financial statements and footnotes 
thereto for the year ended September 30, 1996 included in RAC Financial Group, 
Inc.'s 1996 Annual Report filed with the SEC on Form 10-K.


     On October 1, 1996, FIRSTPLUS Consumer Finance, Inc., a wholly owned 
subsidiary of the Company, acquired National Loans, Inc. ("National") through 
an exchange of stock, in a transaction accounted for as a pooling of 
interest. However, because of the relative size of the acquisition, the 
Company does not plan to restate its historical statements of income to 
account for the acquisition.  As such, beginning retained earnings will be 
restated for the effect of all years prior to the year of acquisition.  The 
Company issued 501,996 shares of its Common Stock to the former shareholders 
of National. National is an originator of small, consumer loans and had a net 
loan portfolio of $15.3 million at the date of acquisition.

     On October 22, 1996, the Company's Board of Directors approved a two-for-
one common stock split.  The split, effectuated as a stock dividend of one newly
issued share of Common Stock for each share of Common Stock outstanding, was
effective for shareholders of record at the close of business on November 15,
1996, and payable on November 29, 1996.  Par value will remain at $0.01 per
share.  Financial information contained in these financial statements has been
adjusted to reflect the impact of the common stock split.

     In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Standards No. 125 ("FASB 125"), "Accounting for Transfer
and Servicing of Financial assets and Extinguishment of Liabilities."  FASB 125
addresses the accounting for all types of securitization transactions,
securities lending and repurchase agreements, collateralized borrowing
arrangements and other transactions involving the transfer of financial assets. 
FASB 125 is generally effective for transactions that occur after December 31,
1996, and it is to be applied prospectively.  FASB 125 will require the Company
to allocate the total cost of mortgage loans sold to the mortgage loans sold
(servicing released), retained certificates and servicing rights based on their
relative fair values.  The Company will be required to assess the retained
certificates and servicing rights for impairment based upon the fair value of
those rights.  The pronouncement also will require the Company to provide
additional disclosure about the retained certificates in its securitizations and
to account for these assets at fair value in accordance with FASB 115.  The
Company will apply the new rules prospectively beginning in the first calendar
quarter of 1997 and, based on current circumstances, does not believe the
application of the new rules will have a material impact on the Company's
financial statements.

     All tabular information is presented in thousands.


                                    6 
<PAGE>

               RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


2.   LOANS HELD FOR SALE

     Loans held for sale consist of the following:

                                                 September 30,   December 31, 
                                                     1996           1996      
                                                 -------------   ------------ 
                                                                 (unaudited)
Conventional Loans.............................    $386,934       $625,009 
Title I Loans..................................      34,712         46,586 
First lien mortgages...........................       1,714            849 
Construction Loans.............................       1,827            737 
Consumer finance Loans.........................           -         23,197 
                                                   --------       -------- 
   Subtotal....................................     425,187        696,378 
Allowance for possible credit losses...........      (6,495)       (11,398)
Deferred finance charges.......................           -         (5,580)
Net purchase premiums (discounts)..............      12,120         15,416 
                                                   --------       -------- 
   Total.......................................    $430,812       $694,816 
                                                   --------       -------- 
                                                   --------       -------- 

3.   ALLOWANCE FOR POSSIBLE CREDIT LOSSES 

     The activity in the allowance for possible credit losses is summarized 
as follows:

                                                 September 30,   December 31, 
                                                     1996           1996      
                                                 -------------   ------------ 
                                                                 (unaudited)
Balance, beginning of period...................    $  4,794       $ 60,752 
Provision for possible credit losses...........      59,644         44,388 
Charge offs, net...............................      (3,901)        (1,801)
Other..........................................         215            380
                                                   --------       -------- 
Balance, end of period.........................    $ 60,752       $103,719 
                                                   --------       -------- 
                                                   --------       -------- 
Components of Allowance:
  Allowance for possible credit losses.........    $  6,495       $ 11,398 
  Allowance for possible credit losses on 
   loans sold..................................      54,257         92,321 
                                                   --------       -------- 
  Total........................................    $ 60,752       $103,719 
                                                   --------       -------- 
                                                   --------       -------- 

4.   EXCESS SERVICING RECEIVABLE

     The activity in the Excess Servicing Receivable is summarized as follows:

                                                                 Three Months
                                                  Year Ended        Ended
                                                 September 30,   December 31, 
                                                     1996           1996      
                                                 -------------   ------------ 
                                                                 (unaudited)
Balance, beginning of period...................    $ 29,744        $187,230 
Excess servicing gains.........................     170,679         106,558 
Amortization ..................................     (12,982)         (5,071)
Other..........................................        (211)              -
                                                   --------        -------- 
Balance, end of period ........................    $187,230        $288,717 
                                                   --------        -------- 
                                                   --------        -------- 

                                      7 
<PAGE>

               RAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               (UNAUDITED)

5.   OTHER ASSETS 

     Other assets consist of the following:

                                                 September 30,   December 31, 
                                                     1996           1996      
                                                 -------------   ------------ 

Goodwill, net..................................     $   424        $   411 
Furniture, equipment and leasehold 
  improvements, net............................       5,497          5,166 
Debt offering costs............................       3,112          2,335 
Prepaids and other ............................      11,509         17,110 
                                                    -------        ------- 
  Total........................................     $20,542        $25,022 
                                                    -------        ------- 
                                                    -------        ------- 

6.   GAINS ON SALES OF LOANS

     The gains on sales of loans and the related costs consist of the following:

                                                      Three Months Ended    
                                                         December 31        
                                                          Unaudited
                                                   ------------------------ 
                                                     1995           1996    
                                                   --------       --------- 
                                                         (unaudited)
Excess servicing gain..........................     $21,414       $106,558 
Gain sharing on loan sales.....................        (534)             - 
                                                    -------       -------- 
   Subtotal....................................      20,880        106,558 
Gain on whole loan and bulk sales..............       2,548          4,744 
                                                    -------       -------- 
   Total.......................................      23,429        111,302 
Residual Interest Income.......................         109          2,717 
Premiums, net..................................      (2,414)       (15,131)
Transaction costs..............................        (850)        (3,040)
                                                    -------       -------- 
Gains on sales of loans (before provision 
 for possible credit losses)...................     $20,273       $ 95,848 
                                                    -------       -------- 
                                                    -------       -------- 


                                       8

<PAGE>

Item 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

FINANCIAL CONDITION
  DECEMBER 31, 1996


     Loans held for sale increased from $430.8 million as of September 30, 
1996 to $694.8 million as of December 31, 1996, an increase of $264.0 million 
or 61.3%.  This increase was primarily due to an expanded correspondent 
network, increased direct to consumer originations and corresponding 
increases in repurchase facilities and warehouse facilities, which allowed 
for substantial growth in loan originations. 

     The Company's excess servicing asset increased from $187.2 million at
September 30, 1996 to $288.7 million at December 31, 1996, an increase of $101.5
million or 54.2%.  This increase was due to the $394.8 million increase in the
amount of loans securitized and sold from October 1, 1996 through December 31,
1996.


     The Company's warehouse and repurchase facilities are its primary source 
of funding for loan originations.  As of September 30, 1996, the Company had 
outstanding balances of $354.5 million owed to warehouse and repurchase 
lenders at an approximate 6.6% rate of interest.  As of December 31, 1996 the 
Company had outstanding balances of $628.6 million owed to warehouse and 
repurchase lenders at an approximate 6.6% rate of interest.  This represents 
a $274.1 million warehouse and repurchase line balance increase from 
September 30, 1996 to the December 31, 1996, or 77.3%. 

     Accounts payable and other accrued liabilities decreased from $19.7 million
as of  September 30, 1996 to $18.9 million as of December 31, 1996.  This
represents a $785,785 decrease over the period, or 4.0%.  This decrease was
primarily a result of the subsequent payment of the accrued bonuses in October.

                                     9 
<PAGE>

     Total shareholders' equity at December 31, 1996 was  $146.9 million, as
compared with $94.6 million at September 30, 1996, an increase of $52.3 million
or 55.3%.  During the three months ended December 31, 1996, the Company earned
net income of $18.7 million, issued 1,986,850 of common shares for the
conversion of subordinated notes and excercise of options  resulting in a $32.6
million addition to equity and issued 501,996 of common shares in conjunction
with an acquisition.

RESULTS OF OPERATIONS

     The Company's total revenues increased to $123.6 million during its first
fiscal 1997 quarter from $23.5 million for the comparable fiscal 1996 quarter,
an increase of $100.1 million or 426.6%.

     The increase in the volume of loans originated and purchased by the Company
and the increase in the size and scope of the Company's securitization program
throughout fiscal 1996 and continuing into fiscal 1997 was primarily responsible
for this increase in revenues.  The Company's securitization transactions
resulted in increased Gain on Sale of Loans.  Gain on Sale of Loans increased
because the Company was able to increase the volume of loans sold more
efficiently in the quarter ended December 31, 1996, without reduction due to 
sharing arrangements present in the quarter ended December 31, 1995.  Interest,
servicing and other income also increased substantially during the December 31,
1996 quarter when compared to the December 31, 1995 quarter, primarily as a
result of the increased quantity of loans originated, held for sale and serviced
by the Company.

     The Company's provision for possible credit losses increased by $39.7
million, from $4.6 million for the quarter ended December 31, 1995 to $44.4
million for the quarter ended December 31, 1996.  These increases in the
provision for possible credit losses were proportional to the Company's increase
in securitization activity, as adjusted for the increasing percentage of
Conventional loans securitized by the Company throughout the 1996 calendar year
and the removal of the Warehouse Lender's sharing arrangement payment (which
required the Warehouse Lender rather than the Company to reserve for certain
loans).

     Total expenses including provision for income taxes increased from $18.8
million for the three months ended December 31, 1995 to $104.9 million for the
three months ended December 31, 1996, an increase of $86.1 million or 458.3%. 
As a percentage of total revenues, total expenses including taxes increased from
80.0% in the December 1995 quarter to 84.9% in the December 1996 quarter.  

     As a result of the above, net income increased from $4.7 million for the
December 1995 quarter to net income of $18.7 million for the December 1996
quarter.  This represents an increase of $14.0 million, or a 299.5% increase. 
Such  increases were primarily the result of growth in loan production and sale
of loans through securitizations for the respective comparative periods as well
as the increase in net interest income earned on loans retained on the balance
sheet.

     The Company completed the funding of the 1996-3 securitization by
delivering $44.4 million in loans in October 1996.  The Company also delivered
$350.4 million out of $400.0 million in loans to the 1996-4 securitization in
November 1996.  

     Weighted Average Fair, Isaac and Company scores (a default prediction model
utilized by the Company) for the Conventional loans securitized in the Company's
1996-4 securitization were approximately 668 points.  Weighted Average Fair,
Isaac and Company scores for the Conventional Loans securitized in the Company's
1995-4 securitization (closed during the quarter ended December 31, 1995) were
approximately 645 points.  This improvement in loan quality and consistency
reflects the Company's effort to produce a well received and reliable
securitization product. 

     The Company's servicing (including subserviced loans) loan portfolio had 30
day and over delinquencies of 2.7% as of December 31, 1996, and 4.0% as of
December 31, 1995.  This decrease was primarily due to increased loan
origination volumes.  On a static pool basis, the Company's seasoned
securitizations (those transactions funded more than six months ago), had a
weighted average 30 day and over delinquency rate of 4.5%.

      Gross defaults (before recoveries and Title I insurance claims paid) as a
percentage of the serviced loan portfolio declined from the December 1995 
quarter to the December 1996 quarter.  Gross defaults for the three months
ended December 31, 1995 equaled $2.0 million, or 0.05% of the December 1995
quarterly loan portfolio.  Gross defaults for the three months ended 
December 31, 1996 equaled $5.6 million or 0.3% of the December 1996 loan 
servicing portfolio.  Gross 

                                     10
<PAGE>

defaults experienced in the three months ended December 31, 1996 were primarily
the result of lower quality loans defaulting.  As of December 31, 1996, 
reserves exceed cumulative defaults in the securitizations effected, as well as
for all other loans in the Company's servicing portfolio. 

     On a seasoned pool basis the weighted average prepayment rates for the
Company's seasoned securitizations (those transactions funded more than six
months ago) were within the range of 4.9% and 11.6% for the quarter ended
December 31, 1996.  Prepayment rates for newer securitizations and for non-
securitized loans on the Company's balance sheet are not yet sufficient to
provide meaningful data regarding future loan performance.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's operations require continued access to financing 
sources. The Company's primary operating cash requirements include the 
funding of (i) loan originations and purchases, (ii) reserve accounts, 
overcollateralization requirements, fees and expenses incurred in 
connection with its securitization transactions, (iii) tax payments due 
on the Company's taxable income, (iv) television, radio and direct mail 
advertising and other marketing, and (v) administrative and other operating 
expenses.

     Adequate credit facilities and other sources of funding, which permit the
Company to fund its operating cash requirements and to securitize or sell loans
in the secondary market, are essential to the continuation of the Company's
ability to originate and purchase loans.  After utilizing available working
capital, the Company borrows money to fund its loan originations and purchases,
and repays these borrowings as the loans are repaid or sold.  Upon the
securitization or sale of loans and the subsequent repayment of the borrowings,
the Company's working capital and warehouse lines of credit again become
available to fund additional loan originations and purchases.

     In October 1996, the Company increased the Bank One Facility from $60
million to $110 million and Bear Stearns Facility from $300 million to $500
million.

     In November 1996, the Company entered into the $75 million Bear Stearns
Term Line.  The Bear Stearns Term Line may be utilized by the Company with
respect to Excess Servicing Receivable generated by securitization in which Bear
Stearns is the lead Manager.  At December 31, 1996, the Company had borrowed
$23.0 million under this facility.


     In December 1996, the Company entered into the $100 million PaineWebber
Term Line and the $400 million PaineWebber Facility.  The PaineWebber Term Line
bears interest at LIBOR plus 2.1% and the PaineWebber Facility bears interest at
LIBOR plus 1.00%.

     As a  result of the Company's increasing volume of loan originations and
purchases, and its expanding securitization activities, the Company has
operated, and expects to continue to operate, on a negative operating cash flow
basis, which is expected to increase as the volume of the Company's loan
purchases and originations increase and its securitization program grows.  The
Company's operations used $317.1 million during the quarter ended December 31,
1996.  The increase in the use of cash in operations is primarily related to
the cost of an enlarged infrastructure, employee base and the costs that
accompany the Company's securitization strategy (which increases the Gain on
Sale of Loans but reduces the amount of cash received on the sale of loans as
compared to whole-loan sales).  Cash from financing and investing activities
provided cash in the amount of $301.4 million for the quarter ended December 31,
1996.  Financing and investing activities increased primarily due to additional
borrowings related to the Subordinated Notes, the Term Line and other 
borrowings, which have been used to fund loan originations, working capital and
securitization costs.

     In addition, the Company has begun to implement a strategy of maintaining a
significant quantity of loans on its balance sheet, thus increasing the length
of time that loans are held for sale and materially increasing its interest rate
risk.  Because the Company's present loan facilities bear interest at variable
rates, the Company has a need for medium to long term fixed-rate financing.  If
the Company is unable to obtain such financing, it could have a material adverse
effect on the Company's results of operations and financial condition.


                                     11
<PAGE>

PART II.  OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS

          Not Applicable

Item 2.   CHANGES IN SECURITIES

          Not Applicable

Item 3.   DEFAULTS UPON SENIOR SECURITIES

          Not Applicable

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          Not Applicable

Item 5.   OTHER INFORMATION

          Not Applicable

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (A)  Exhibits:

               11   Statement re: Computation of Per Share Earnings
               27   Financial Data Schedule 

          (B)  Reports on Form 8-K

On December 19, 1996, the Company filed a Current Report on Form 8-K with 
respect to certain risk factors.

















                                     12
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

RAC Financial Group, Inc.
(Registrant)




by:  /s/  ERIC C. GREEN  
   ------------------------------------
     Eric C. Green
     Chief Financial Officer
     (Principal Financial Officer and 
       Duly Authorized Officer)


date:  February 14, 1997                                
     ----------------------------------
















                                     13
<PAGE>

                             INDEX TO EXHIBITS


(A)  Exhibits

     11    Statement re: Computation of Per Share Earnings

     27    Financial Data Schedule

























                                     14