The check arrived out of the blue, issued in his name for $1,200, a mailing from a consumer finance company. Stephen Huggins eyed it carefully.
A loan, it said. Smaller type said the interest rate would be 33 percent.
Way too high, Huggins thought. He put it aside.
A week later, though, his 2005 Chevy pickup was in the shop, and he didn’t have enough to pay for the repairs. He needed the truck to get to work, to get the kids to school. So Huggins, a 56-year-old heavy equipment operator in Nashville, fished the check out that day in April 2017 and cashed it.
Within a year, the company, Mariner Finance, sued Huggins for $3,221.27. That included the original $1,200, plus an additional $800 a company representative later persuaded him to take, plus hundreds of dollars in processing fees, insurance and other items, plus interest.
It didn’t matter that he’d made a few payments already.
“It would have been cheaper for me to go out and borrow money from the mob,” Huggins said before his first court hearing in April.
Most galling, Huggins couldn’t afford a lawyer but was obliged by the loan contract to pay for the company’s. That had added 20 percent — $536.88 — to the size of his bill.
“They really got me,” Huggins said.
Mass-mailing checks to strangers might seem like risky business, but Mariner Finance occupies a fertile niche in the U.S. economy. The company enables some of the nation’s wealthiest investors and investment funds to make money offering high-interest loans to cash-strapped Americans.
Mariner Finance is owned and managed by a $11.2 billion private equity fund controlled by Warburg Pincus, a storied New York firm. The president of Warburg Pincus is Timothy Geithner who, as treasury secretary in the Obama administration, condemned predatory lenders. The firm’s co-chief executives, Charles Kaye and Joseph Landy, are established figures in New York’s financial world. The minimum investment in the fund is $20 million.
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“It’s basically a way of monetizing poor people,” said John Lafferty, who was a manager trainee at a Mariner Finance branch for four months in 2015 in Nashville.
His misgivings about the business echoed those of other former employees contacted by the Washington Post.
“Maybe at the beginning, people thought these loans could help people pay their electric bill,” he said. “But it has become a cash cow.”
The market for “consumer installment loans,” which Mariner and its competitors serve, has grown rapidly in recent years, particularly as new federal regulations have curtailed payday lending, according to the Center for Financial Services Innovation, a nonprofit research group. Private equity firms, with billions to invest, have taken significant stakes in the growing field.
Among its rivals, Mariner stands out for the frequent use of mass-mailed checks, which allows customers to accept a high-interest loan on an impulse - just sign the check. It has become a key marketing method.
The company’s other tactics include borrowing money for as little as 4 or 5 percent — thanks to the bond market — and lending at rates as high as 36 percent, a rate that some states consider usurious; making millions of dollars by charging borrowers for insurance policies of questionable value; operating an insurance company in the Turks and Caicos, where regulations are notably lax, to profit further from the insurance policies; and aggressive collection practices that include calling delinquent customers once a day and embarrassing them by calling their friends and relatives, customers said.
Finally, Mariner enforces its collections with a busy legal operation, funded in part by the customers themselves: The fine print in the loan contracts obliges customers to pay as much as an extra 20 percent of the amount owed to cover Mariner’s attorney fees, and this has helped fund legal proceedings that are both voluminous and swift.
The company’s pace of growth is brisk — the number of Mariner branches has risen eightfold since 2013.
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Mariner Finance officials declined to grant interviews or provide financial statements but offered written responses to questions.
Company representatives described Mariner as a business that yields reasonable profits while fulfilling an important social need. In states where usury laws cap interest rates, the company lowers its highest rate — 36 percent — to comply.
“The installment lending industry provides an important service to tens of millions of Americans who might otherwise not have safe, responsible access to credit,” John Morton, the company’s general counsel, wrote.
Regarding the money that borrowers pay for Mariner’s attorneys, the company representatives noted that those payments go only toward the attorneys it hires, not to Mariner itself.
The company declined to discuss the affiliated offshore company that handles insurance, citing competitive reasons. Mariner sells insurance policies that are supposed to cover a borrower’s loan payments in case of various mishaps — death, accident, unemployment and the like.
“It is not our duty to explain to reporters ... why companies make decisions to locate entities in different jurisdictions,” Morton wrote.