Prestige Predators: Private Equity Cashes In On Payday Lending

In the prestige hierarchy of American finance, the lords of private equity are enthroned at the very top. Some are genial patricians, while others savor reputations as ruthless buccaneers. They purchase entire corporations and reward themselves with enormous salaries that enjoy outrageous tax preferences. They reserve their attention for great matters ― restructuring vast pools of debt and advising administrations.

A private equity impresario combines the speculative instincts of a hedge fund partner with the management acumen of a corporate executive and the political heft of a senator. Many prefer to exert this influence from the shadows, but others move openly in and out of the political world. Warburg Pincus President Timothy Geithner is best known as President Barack Obama’s treasury secretary; Bain Capital’s Mitt Romney as the Republican Party’s 2012 nominee for president.

Moving down the great financial chain of being from private equity, we find hedge funders ― respectable billionaires ― followed by elite bank executives ― men of influence who have been known to receive unbecoming public assistance from time to time. Further down are community bank managers, credit union presidents and other practitioners of mundane, socially necessary paperwork. And at the very bottom: payday lenders.

Payday lenders are more than a scourge of low-income communities. To illustrious financiers, they are also tacky and cheap. It is not so much that high finance disapproves of exploitation. But important capitalists move among other important capitalists. It doesn’t take much ingenuity to squeeze money from a working family desperate to meet an emergency expense. 

So it is a telling sign of just how dysfunctional the American economy has become that some of the nation’s biggest private equity firms are now heavily invested in the payday loan business and its slightly more respectable cousin, subprime installment lending. A new report from Americans for Financial Reform and the Private Equity Stakeholder Project details dozens of such arrangements involving some of the biggest names on Wall Street and the scuzziest operations on Main Street.

“Private equity firms have brought new capital and in some cases a new level of sophistication to the subprime lenders they acquired ... enabling the payday and installment lenders to buy competitors, sell off securities based on the loans they make, or engage in aggressive legislative and lobbying strategies,” the report reads.

Most of this elite money moved into the subprime consumer space during the Great Recession, as layoffs mounted and wages came under intense pressure. But even several years into the economic recovery, poverty remains a lucrative investment.

JLL Partners on Park Avenue was among the first private equity titans to get in on the payday loan business, taking ACE Cash Express private in 2006, eight years before the Consumer Financial Protection Bureau fined the firm for training new employees to trap customers in a cycle of unaffordable debt. Loan Star Funds, a $70 billion private equity firm in Dallas, acquired DFC Global Corp. in June 2014, gaining control over retail brands including Money Mart and The Check Cashing Store.

San Francisco’s FFL Partners controls SpeedyCa$h, a payday lender that charges annual interest rates of up to 729 percent, according to the report, and has run into trouble with California state regulators. You won’t find the SpeedyCa$h logo on FFL’s website, however ― the private equity firm prefers to list CURO Financial Technologies ― an umbrella company for SpeedyCa$h, RapidCa$h and Opt+ prepaid debit cards. Similarly, Diamond Castle Holdings on Madison Avenue controls Community Choice Financial, which operates as CheckSmart, Cash & Go, Easy Money and other monikers.

JLL Partners, Lone Star Funds, Diamond Castle and FFL Partners declined to comment for this story.

Source : http://www.huffingtonpost.ca/entry/private-equity-payday-lending_us_5a3301fde4b01d429cc750b6

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Prestige Predators: Private Equity Cashes In On Payday Lending

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