Lender Mariner Finance accused of predatory practices by five states, DC

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A loan company controlled by one of the nation’s largest private equity firms is engaged in a nationwide scheme that benefits low- and middle-income consumers, according to a five-state lawsuit.

Mariner Finance adds expensive insurance policies and other products to loans without borrowers’ knowledge and deceptively induces them to refinance their debts to generate fees for the company, according to the lawsuit filed Tuesday by attorneys general. of Pennsylvania, New Jersey, Utah, Washington, Oregon and the District of Columbia.

“A way to monetize the poor”

The lender is owned by an investment fund managed by Warburg Pincus, a Wall Street private equity firm. Warburg Pincus’ chairman is Timothy F. Geithner, who as Treasury Secretary in the Obama administration condemned predatory lenders.

“Mariner’s illegal behavior is driven by its owner’s high-growth demands,” said the lawsuit, filed in U.S. District Court for the Eastern District of Pennsylvania.

Company ‘strengthened bottom line by cheating hard workers [people]Pennsylvania Attorney General Josh Shapiro said in a statement. “Products that consumers never asked for and often didn’t know they had subscribed to have been added to a kind of loan that we already know people struggle to repay. These tactics are predatory.

Warburg Pincus executives and the lender have denied any wrongdoing.

“Mariner Finance provides a valuable service to hundreds of thousands of Americans who have limited access to consumer credit,” according to an emailed statement from Warburg Pincus. “Throughout our ownership of Mariner, Warburg Pincus has always upheld ethical business conduct, compliance with all applicable state and federal regulations, and a high standard of customer service.”

The statement noted that the company’s operations are subject to frequent scrutiny by state regulators.

State officials said they began investigating Mariner Finance after The Washington Post published an article in 2018 profiling the company and the role of private equity firms in consumer lending.

The Post article detailed the company’s practice of mass mailing over-the-air checks to consumers who, if they cashed them, were forced to return the money at interest rates of over 30%.

Mariner’s targets “are often in financial crisis, decidedly unaccustomed to receiving unsolicited checks in the mail, and are in desperate need of economic assistance,” according to the lawsuit. “Mariner uses live checks as input for the most vulnerable part of the target population.”

The story also reported that the company made millions of dollars from the sale of insurance policies of dubious value and, despite borrowing money at rates as low as 5%, the company charged interest rates as high as 36%.

The Wall Street private equity firm has been instrumental in Mariner’s growth. When Warburg Pincus acquired Mariner, the company had 57 branches in seven states. Today it has more than 480 branches in 27 states. Mariner handles $2 billion in loans each year, according to the lawsuit.

Mariner executives have said its practices are legal.

“For nearly four years, Mariner has cooperated with the investigation and provided data, documentation and testimonials that clearly demonstrate the legality of its products and the vital support they provide to consumers,” said the Founder and Director. Mariner General Josh Johnson in a statement. statement. “The states’ claims are based on minimal interviews with consumers, the details of which were never shared with Mariner, and reflect a misunderstanding of the law, or simply a decision to ignore any evidence that negates their claims.”

“A full and fair review of the evidence from the investigation should lead to this case being immediately dismissed,” Johnson said.

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