"Monetizing Poor People": Obama Treasury Secretary Tim Geithner Is Now A Predatory Lender

Former Obama Treasury Secretary and Council on Foreign Relations distinguished fellow, Tim Geithner, who condemned predatory lenders - is now a predatory lender. 

I’m still embarrassed by some of the things I did there.” -Former employee

Geithner - who lobbied against capping $165 million in executive bonuses at AIG while it was taking TARP money, is now the president of New York Warburg Pincus - a private equity firm which owns predatory lender Mariner Finance, reports the Washington Post

The firm raised $550 million through bond sales last year - using the proceeds to make high-interest-rate loans to low income individuals. 

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. -WaPo

It would have been cheaper for me to go out and borrow money from the mob,” said Huggins before his first court hearing in April.

It’s basically a way of monetizing poor people,” said former Nashville Mariner Finance manager trainee John Lafferty, who worked for the company for four months in 2015. Lafferty's misgivings echoed the sentiment of other former employees contacted by The Washington Post. “Maybe at the beginning, people thought these loans could help people pay their electric bill. But it has become a cash cow.”

That said, Mariner does reduce their highest borrowing rate of 36% in states with usury laws.

"Consumer installment loans"

The types of lending Mariner engages in - "consumer installment loans" - has grown rapidly in recent years as federal regulations have significantly hobbled payday lending services, according to nonprofit group Center for Financial Services Innovation. To fill the void, private equity firms have invested billions in the space. 

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. -WaPo

Long arm of the law

Another major aspect of Mariner's business is its collections enforcement arm - 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," reports The Post

In Baltimore alone, Mariner filed nearly 300 lawsuits last year. In some cases, lawsuits have been filed within five months of the check being cashed.

Explosive growth

Mariner's expansion has been rapid - growing eightfold since 2013 according to a financial statement obtained by The Post. Compay representatives describe themselves as "a business that yields reasonable profits while fulfilling an important socia lneed." 

“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 C. Morton, the company’s general counsel, wrote. “We operate in a competitive environment on narrow margins, and are driven by that competition to offer exceptional service to our customers. . . . A responsible story on our industry would focus on this reality.”

Mariner would not discuss an affiliated offshore company that handles insurance, citing competitive reasons - however they sell insurance policies that ostensibly cover a borrower's loan payments in the event of such mishaps as accidents, death, unemployment and similar situations. 

“It is not our duty to explain to reporters . . . why companies make decisions to locate entities in different jurisdictions,” Morton wrote.

Former employees spill the beans

In order to get a better handle on just how predatory Geithner's company is, WaPo chatted with a dozen former employees. Ten of them had issues with the company's sales practices - "describing an environment where meeting monthly goals seemed at times to rely on customer ignorance or distress." 

I didn’t like the idea of dragging people down into debt — they really make it a big deal to call and collect and not take no for an answer,” said Asha Kabirou, 28, a former customer service representative in two Maryland locations in 2014. “If someone started to fall behind on their payments — which happened a lot — they would say, ‘Why don’t we offer you another $200?’ But they wouldn’t have the money the next month, either.”

“Were there a few loans that actually helped people? Yes. Were 80 percent of them predatory? Probably,” said one former branch manager who was at the company in 2016. He spoke on the condition of anonymity, saying he did not want to antagonize his former employer. “I’m still embarrassed by some of the things I did there.

“The company is here to make money — I understand that,” said Mauricio Posso, 28, who worked at a Northern Virginia location in 2016 and said he viewed it as valuable work experience. “At the same time, it’s taking advantage of customers. Most customers do not read what they get in the mail. It’s just little tiny type. They just see the $1,200 for you. . . . It can be a win-win. In some situations, it was just a win for us.” -WaPo

Mariner says that nobody's forcing people to take out loans - however in many cases lack of English skills and general knowledge about lending has led many to accept deals with the devil. 

“I wanted to go to my mother’s funeral — I needed to go to Laos,” Keo Thepmany, a 67-year-old from Laos who is a housekeeper in Northern Virginia, said through an interpreter. To cover costs, she took out a loan from Mariner Finance and then refinanced and took out an additional $1,000. The new loan was at a rate of 33 percent and cost her $390 for insurance and processing fees. -WaPo

After Thepmany fell behind on her payments, Mariner filed suit against her last year for $4,200 - which included $703 for attorney's fees. The company sought to garnish her wages. 

Barbara Williams, 72, a retired school custodian from Prince William County, in Northern Virginia, said she cashed a Mariner loan check for $2,539 because “I wanted to get my teeth fixed. And I wanted to pay my hospital bills.”.

She’d been in the hospital with three mini-strokes and pneumonia, she said. Within a few months, Mariner suggested she borrow another $500, and she did. She paid more than $350 for fees and insurance on the loan, according to the loan documents. The interest rate was 30 percent. -WaPo

“It was kind of like I was in a trance,” Williams said of decision to take out the loan. Despite paying back some of the money, and Mariner sued when she fell behind - winning a court judgment against her in April for $3,852, including $632 in fees for Mariner’s attorney.

“You think they’re helping you out — and what they’re doing is they’re sinking you further down,” said Stephen Huggins. “They’re actually digging the hole deeper and pushing you further down.”