Say you get a check in the mail and it says just sign me. You ignore it then some emergency crops up and you can’t cover it and then you remember the check. That’s one way companies owned by Private Equity Funds make money. In this case a company like Mariner Finance is owned by an $11.2 billion Private Equity Fund called Warburg Pincus, and the president of Warburg Pincus is Timothy Geithner, former Treasury Secretary under Obama, which makes the activities of Mariner Finance stand out all the more . They charge up to 36% interest to needy people who not quite understanding what they’re going into will use the check they are sent. Payday lenders also do the same thing, but regulations make it harder for them. Not so for companies like Mariner Finance. Besides sending out check, Mariner Finance will do things like borrowing money, maybe from the bond market at 4 or 5% interest, and then using that for loans as high as %36, or in states where usury laws apply, a little less. It also makes money from insurance policies of questionable value. It, for example, operates an insurance company where regulations are very lax, and then to profit even more from these policies, it has collection practices which include calling customers every day and even embarrassing them by calling their friends, associates and relatives. Before making loans, after sending a check they may follow up by a call and try to elicit personal information so that later if a delinquency occurs they can use that personal information for their benefit. The fine print of their loans also includes a clause where the borrowers, should be case go to court. would be responsible for 20% of the company’s legal cost. This of course means that they legal department can be very active.
Private equity firms have many critics, of which I am a loud one. But in this case preying on people in need, exploiting the ignorance many have about financial transactions, using questionable tactics and taking the principles of capitalism to harmful limits are practices we ought not to tolerate.