Mariner Finance LLC, a former consumer finance division of First Mariner Bancorp, the bank founded by Edwin F. Hale Sr. whose headquarters once dominated the Canton skyline, is now a leader in predatory loans that are a “way of monetizing poor people,” according to an investigation by The Washington Post.
The company gives loans in the form of checks with interest rates as high as 36 percent, and in some cases, the Post found, takes people behind on payments to court. Last year, the company filed 300 lawsuits in Baltimore alone.
“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,” the Post reports. “It has become a key marketing method.”
The lender is now under the control of the $11.2 billion private equity fund Warburg Pincus, headed by former U.S. Treasury Secretary Timothy F. Geithner. As the Post points out, Geithner, in his role leading the Treasury Department during the financial crisis in 2008, was highly critical of predatory lenders that issued subprime mortgages.
To offer a sense of scale, consider that when First Mariner sold Mariner Finance in 2010, to MF Holdco LLC, in order to raise capital for the bank, the deal was worth $10.5 million, the Baltimore Business Journal reported at the time.
Just last year, the Post found, the company was able to raise $550 million by selling bonds to investment firms, an indicator of their increased profile.
According to the investment research company Hyde Park Capital, Warburg Pincus bought Mariner Finance in 2013 for $88.4 million. Since then, they’ve expanded rapidly.
“When it was purchased, the company operated 57 branches in seven states,” the Post reports. “It has since acquired competitors and opened dozens of branches. It now operates more than 450 branches in 22 states, according to company filings.”
John C. Morton, Mariner Finance’s general counsel, defended the company’s practices in a statement to the Post.
“The installment lending industry provides an important service to tens of millions of Americans who might otherwise not have safe, responsible access to credit. 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 Finance says it earns 2.6 percent return on assets, “a performance measure commonly used for lenders that measures profits as a percentage of total assets,” the Post says. Banks, comparatively, typically earn about 1 percent return on assets.
The sale of Mariner Finance did not prove to be enough to save First Mariner Bank. Hale stepped down as CEO in 2011, and three years later, with regulators still calling on the bank to raise its capital level, the parent company filed Chapter 11 bankruptcy to “facilitate” a sale to a group of local investors.