2025-04-02 10:30:00 by Forbes

Las Vegas-based Credit One has become a profit machine by squeezing exorbitant fees out of its subprime customers. Here’s the exclusive story of how the father of American tennis superstar Emma Navarro and his elusive Wall Street partner became multibillionaires on the backs of people with poor credit.Hidden under a baseball cap and a pair of dark aviator sunglasses, Ben Navarro leans forward in his seat in the stands at Melbourne’s Margaret Court Arena, fixated on the blue acrylic tennis court below. It’s January 17, the first week of the Australian Open, and Navarro’s 23-year-old daughter, Emma, then the No. 8-ranked women’s tennis player in the world, is serving, up 5-4 in the third set against Tunisia’s Ons Jabeur. Emma double-faults, tying the game at 30-all, before Jabeur commits back-to-back unforced errors, clearing the way for Navarro to advance to the fourth round of the Grand Slam tournament. Ben Navarro travels the globe to watch his daughter, Emma, a tennis star. In the past year he has been to the French Open, the Australian Open and the Mérida Open in Mexico, where the two were pictured dancing together in sombreros after she won the tournament, her second career title.Jean-Francois Badias/AP On the court, Emma, still sweating from the match with a towel draped around her shoulders, doesn’t miss a beat when a reporter asks where she gets her stamina. “My dad used to drag my siblings and me—I have three siblings, and he used to drag us on a lot of really long bike rides and a lot of really long hikes. We made up a term, ‘biking and crying,’ because we’d be six hours in, we’d all have tears in our eyes. I learned a lot of toughness growing up, and that’s a lot thanks to him.” Navarro and his wife Kelly cheer on their daughter during her quarterfinal match at Wimbledon 2024. Credit One, which Ben controls, announced a sponsorship deal for Emma Navarro in January 2024.Robert Prange/Getty ImageToughness pays in Ben Navarro’s line of work. A former Citi and Goldman Sachs banker, the 62-year-old has made an estimated $4.8 billion fortune lending to, and collecting from, people with poor or no credit histories. It’s a rough business, one that can involve sticking those who are already struggling financially with onerous fees, badgering them multiple times a day for weeks on end if they fall behind on their payments and taking them to court over several hundred dollars. Navarro doesn’t boast about how he got so rich. Most see him mainly as the father of a tennis star or a generous philanthropist in his hometown of Charleston, South Carolina. “He has a tendency to stay a bit under the radar,” says Charleston real estate billionaire Bob Faith. Navarro’s investment firm, Sherman Financial Group, has no website; it was apparently taken down after Forbes began reporting this story last summer. His longtime partner Brett Hildebrand, 63, is an MIT graduate who is worth an estimated $2.8 billion and also worked at Citi and Goldman Sachs before cofounding Sherman in 1997. Hildebrand is even more reclusive than Navarro. He has no public LinkedIn profile or Wikipedia page and doesn’t appear ever to have spoken with the media. The website of his Charleston-based investment firm, IAG Capital Partners, took down his bio and headshot (the only photo of him Forbes could find) in November. They have good reasons for the low profiles. Navarro and Hildebrand, whose role in the business has never before been detailed, have become two of America’s wealthiest people at the expense of some of the country’s most financially vulnerable. The vast majority of their wealth comes from Las Vegas–based Credit One, a credit card bank that targets subprime customers. Credit One is commonly confused with the much larger Capital One, which has a nearly identical name and logo. (Capital One had the name first but Credit One introduced the logo in 2006, two years before Capital One.) Forbes estimates that Navarro owns almost half of both Credit One and Sherman. He is the bank’s controlling shareholder as well as a board member; Hildebrand trimmed his ownership in Sherman to a small minority stake a few years ago after falling out with Navarro, according to someone familiar with the matter, but held on to his estimated 40% stake in Credit One and was still a board member as of late 2024. The pair also helped build one of the nation’s largest debt collection businesses, Resurgent Capital Services, which was part of Sherman from 1998 until 2021, when it was sold. Navarro pocketed an estimated $170 million from the sale; it’s unclear what Hildebrand, who had already stepped back from Sherman, got from the transaction. Forbes estimates that Navarro and Hildebrand received $2.5 billion and $1.2 billion, respectively, in dividends from Credit One and Sherman over the years. Neither Navarro nor Hildebrand agreed to be interviewed for this story, but a Credit One spokesperson sent back statements responding to some of our questions. Forbes also spoke with over 30 people, including customers, attorneys and nine former employees of Sherman companies, in addition to reviewing hundreds of pages of public legal and financial documents. What emerges is a portrait of an opportunistic but brilliant duo who anticipated—and profited from—America’s debt binge. “It felt a little slimy the way we made our money,” says Todd Haynal, a former Credit One assistant vice president who worked there from 2014 to 2020. “You’re not only gouging [customers] with fees; you’re also not giving them tremendous ways to help themselves,” he adds. “It isn’t a great product for people who are struggling. . . . It was fee, fee, fee.” Credit One disputes this characterization. “Some people may believe that consumers with limited or imperfect credit don’t deserve access to a mainstream financial product. We don’t share this view,” says a spokesperson for the bank. “Despite the inherent risk of providing credit to consumers with limited or imperfect credit history, through our Credit Rebuilding product, Credit One has established a sustainable, economically viable business model. Many companies have tried but struggled or failed to do the same.” Americans are borrowing more than ever, with U.S. household debt (excluding mortgages) hitting a record $5 trillion last year. Many can’t afford to borrow so much. More than 100 million people, an astounding 42% of the U.S. adult population, have bad (or no) credit, according to a 2022 study published by the credit bureau Experian and consulting firm Oliver Wyman. But many still want credit cards. That’s where Credit One has stepped in, targeting customers from “all walks of life,” including the “one in three Americans considered to be below ‘prime,’ ” as described by a Credit One spokesperson, and turning this risky segment into a cash cow. The bank reports assets of $1.7 billion but has paid dividends of $2.4 billion (pretax) since 2010, nearly $1 billion of which Forbes estimates went directly into Navarro and Hildebrand’s pockets. And that’s just what’s publicly disclosed. Credit One sells around 90% of “receivables” (the debt its customers run up on their credit cards) to Sherman, according to two former executives. If you add back the $11 billion of debt it sold to Sherman, the bank’s outstanding consumer debt was closer to $13 billion. While most credit card issuers package their loans and sell them to investors, what makes Credit One unique is that a related party—Sherman—is the only known buyer. As a result, most income generated by Credit One loans is captured by Sherman—not Credit One. Forbes estimates Navarro and Hildebrand have netted over $2.7 billion in additional cash distributions through Sherman since 2007. That allows Credit One to keep higher-quality loans on its balance sheet while offloading the debt more likely to be “charged off” (i.e., not paid back) to Sherman, which does not have to publicly report its financials.“Brett’s brilliant, but awkwardly so. . .I learned a lot from Brett—that details matter, and if you can’t explain it, you don’t understand it. Whereas Ben would pretty much just be interested in the bottom line.” Big banks avoid deep subprime customers, but they have no problem lending money to Navarro’s Sherman so it can purchase Credit One’s debt, according to two former executives. “I always thought that was ironic. Because [these banks] would claim they were never going to do subprime,” says one former Credit One executive, who described how Sherman’s lenders would visit Credit One’s Las Vegas offices once or twice a year. Chase and Citi, two of the banks cited by this former executive as having provided the credit lines, declined to comment, while an insider at Wells Fargo, a bank named by another executive as doing business with Sherman, confirmed that both Credit One and Sherman are “very large” clients and have been for decades. “We think very highly of the team,” says the Wells Fargo insider. It’s a winning formula. Credit One has grown its net income an average of 30% annually for the last 15 years. Total outstanding loans on Credit One cards hit $12.9 billion in 2024, up from $6.8 billion in 2020, according to the Nilson Report, a payments industry tracker. Last year, the bank posted $470 million in pretax income on revenue of $1.7 billion, making it the firm’s best year yet. “It has a remarkable track record,” says Dwayne Safer, a former banking executive turned finance professor at Messiah University in Pennsylvania. “Overall the business has been very well run.”Ben Navarro grew up in a sporting family. He was one of eight children of legendary Williams College football coach Frank Navarro, who served as a model for Norman Rockwell’s painting The Recruit. Despite his job, Frank never went to his son’s sporting events. “He wanted the focus of the house to be on creating entrepreneurs and kids who could take advantage of what this amazing country has to offer,” Navarro told Charleston’s Post and Courier in 2018. Navarro paid his own way through college at the University of Rhode Island by waiting tables and, according to the Post and Courier, selling advertising on “VIP cards” that offered students discounts at local businesses. After graduating in 1984, he went to work at Chemical Bank (later absorbed into Chase) issuing loans to mortgage banks and savings-and-loan associations. He then spent two years at Goldman Sachs in fixed income and commodities before moving to Citicorp in 1988, where he was co-head of the mortgage sales and trading department. Hildebrand graduated in 1984 from MIT with degrees in economics and computer science and earned a master’s there in mathematics the following year. He also worked at Citi and Goldman Sachs, where he may have met Navarro. In 1997, Navarro and Hildebrand struck out on their own, operating Sherman out of a Manhattan apartment; they moved the headquarters to Charleston after the September 11, 2001, attacks. The pair complemented each other: Navarro was the gregarious, charismatic team leader and dealmaker, while Hildebrand was the left-brained math whiz. According to a former Credit One executive at the Las Vegas headquarters, Navarro would come “cruising in” and ask how employees’ families were doing, while Hildebrand would stop to ask detailed questions about financial models. “Brett’s brilliant, but awkwardly so. A little aloof. . . . I learned a lot from Brett—that details matter, and if you can’t explain it, you don’t understand it,” recalls the former executive. “Whereas Ben would pretty much just be interested in the bottom line. What does cash flow look like? How is this going to impact profitability?” Sherman set up debt collection firm Resurgent in Greenville, South Carolina, in 1998. To fund its growth, the partners sold 90% of Sherman the same year to a pair of insurance firms for $40 million, according to a 2021 Wall Street Journal article. In 2005, Sherman picked up the First National Bank of Marin, a small bank with around 1 million active accounts and less than $400 million in receivables. Twice in the previous five years, federal investigators accused the bank of misleading vulnerable customers with poor or nonexistent credit histories to apply for credit cards and then imposing huge fees. Both cases were settled with agreements to reimburse customers; the bank did not admit wrongdoing.After an expansion in 2021, Credit One’s headquarters on the Las Vegas beltway is now a sprawling $75 million, 300,000-square-foot complex. Based in Sin City since 1998, Credit One sponsors the NFL’s Raiders and the NHL’s Golden Knights.JHVEPhoto/AlamySherman rebranded the bank Credit One, kept on CEO Robert DeJong—who still runs it today—and grew by mailing millions of credit card offers each month. In January 2008, Credit One hit $1 billion in total credit card receivables. Things were going so well that by mid-2010, Navarro, Hildebrand and other Sherman affiliates finished buying back the part of Sherman they didn’t own; the total amount they spent was over $900 million. By 2016, Credit One’s loan book had more than quadrupled in size, driven by what could be called a move-fast culture. “It was a little bit like the Wild, Wild West of banking,” says Haynal, the former Credit One assistant VP. “You can’t be all black and white. You’ve got to be able to operate in the gray.” He recalls how one year, end-of-year numbers were reconciled by “a single kid working on a spreadsheet trying to go through a bunch of reports to try to figure out where the missing money was.” A Credit One spokesperson says the bank “undergoes annual safety and soundness examinations” and that it has received “unqualified audit opinions,” meaning a clean review from independent auditors, for the last 20 years. As business boomed, the bank’s employees enjoyed the spoils. Haynal remembers one company party at M Resort, a luxe four-star hotel and casino in Vegas, at which all staffers received envelopes stuffed with $500 in cash with which to gamble. Top executives did even better: A few had multiple exotic sports cars, including Bentleys, Lamborghinis and Aston Martin Vanquishes, that they would drive to the office, according to Haynal. Another former executive recalls the time when one of the bank’s top execs had a new Aston Martin delivered to the office as lower-level employees watched: “I didn’t appreciate that personally.” Credit One’s 18 million customers probably wouldn’t appreciate it either. While most credit card issuers generate more revenue from interest paid on card balances than from fees, since 2013 Credit One has reported the reverse: just $1.1 billion in interest income, dwarfed by $2.4 billion in customer fees. Since the bank sells most of its loans (and their associated interest income) to parent Sherman, it’s impossible to know the overall ratio of interest to fees, but the operation is clearly a fee machine. One of Credit One’s most commonly issued cards, “the Platinum Visa for Rebuilding Credit,” has a $75 annual fee—which increases to $99 after the first year (customers can cancel within 90 days of signing up and have these fees refunded). Then, in some cases, there are additional fees for services such as raising credit limits or applying a payment faster to free up credit. At one point, customers had to pay fees just to change their name, even if they had recently gotten married, according to Haynal. “It felt a little slimy the way we made our money. You’re not only gouging [customers] with fees; you’re also not giving them tremendous ways to help themselves.” Sometimes, the fees surpassed a customer’s credit limit: Numerous Credit One users start with an unsecured card—meaning no deposit or collateral is needed to open the account—with a credit line as low as $300. (A person familiar with the bank says its average credit line is around $1,000.) “They’re just there to take the fees, make money and make sure they keep getting the extra payments of monthly fees,” says Geet, a former customer who asked to be identified by his first name only. Geet signed up for the Credit One card as a student in 2016, confusing it for Capital One, and was approved for a $300 credit line. He barely used it and closed the account last year after paying more than $800 in fees—which felt like “a lot of money for someone with no money,” he says. On Credit One’s income statements, one levy trumps all others: Credit Protection, a monthly fee based on the outstanding balance that cardholders can pay to receive leniency on future missed payments in cases of emergency. Last year, the bank brought in $350 million, or about 20% of its total revenue, from Credit Protection fees. Craig DiPaola, a New Jersey–based transportation logistics manager, says he was drawn to Credit One’s American Express card a few years ago after he was recommended it by a credit card research tool operated by Experian. Despite having no memory of signing up for it, DiPaola says he was enrolled for Credit Protection. Each time he would call customer service to opt out of the program, he was re-enrolled, resulting in some $250 in fees over four years. DiPaola describes the experience as “horrendous” and says he reported Credit One to the Consumer Financial Protection Bureau last year. (One former Credit One exec said the bank did not auto-enroll customers in Credit Protection.) “They’re nickel-and-diming these subprime clients,” says Ali Besharat, a professor and marketing department chair at the University of Denver’s Daniels College of Business. “They’re going after a segment that is untapped because it’s a very high-risk segment of clients. They’re going to default.” Credit One reported an average charge-off rate of 8% over the past five years, but former insiders say the real rate is higher, since the worst debt is offloaded to Sherman. Haynal recalls the bank’s default, or charge-off, rate to be around 14% or higher, while another former senior manager who worked there more recently says charge-offs fluctuated between 10% and 16%. (The industry average is 4.7%.) The bank has its defenders. It’s hard to book a flight, rent a car or buy things online without a credit card. “Keep in mind, this is the riskiest consumer in America,” says one former Credit One executive. Adds another: “I think the fees Credit One charges are commensurate with the risk they take on.” Analytics firm J.D. Power ranked Credit One as the worst credit card issuer in America for eight years running. While subprime borrowers tend to be less satisfied with their credit cards in general, Credit One stands out compared to competitors for its high fees and relatively meager rewards, says John Cabell, managing director of payments intelligence at J.D. Power. A spokesperson for Credit One said the bank is “unfamiliar with J.D. Power’s methodology” and “is proud to receive strong ratings and reviews from its customers and numerous publications.” Credit One has tried to move a bit upstream, offering a Credit One Bank American Express Card to customers with “average to excellent credit.” However, the card’s benefits fall far short of American Express’ direct offerings: 1% cash back rewards and a 29% annual percentage rate, versus up to 6% cash back on certain purchases and 0% APR for the first year with American Express’ Blue Cash Preferred Card. Credit Karma, which has a partnership with Credit One and recommends at least one of its cards highly, says about half of the customers who “matched” with this or similar cards have “poor” credit, while less than a quarter have “good” or “excellent” credit. “I feel like they’re sort of trying to tell a story that’s maybe evolving a bit beyond the subprime focus,” says Bankrate’s Ted Rossman, a senior industry analyst specializing in credit cards. “They have moved upmarket in a way,” he adds. But “underneath the hood, they are still [for people with] fair credit at best and subprime at worst.” Not surprisingly, Credit One has been hit with lawsuits. California sued in 2021, alleging that the bank “engaged in collection campaigns involving unreasonable frequent and harassing phone call patterns and conduct, even after consumers’ requests to stop the calls.” The state claims that “tens of thousands of consumers received millions of improper automated debt collection phone calls and that many of them were directed to individuals having no relationship whatsoever to Credit One.” Credit One has been fighting California’s requested document production; the state has asked the judge for monetary sanctions on Credit One for obstructing proceedings, which the bank is contesting. The case is ongoing. A class action lawsuit in the Southern District of New York has been winding its way through the courts since 2015. The case, which was one of seven similar cases filed against several banks (nearly all of which settled except for Credit One), involved failure to update credit bureaus when clients with bad debts declared bankruptcy. Credit One fought so mightily to avoid giving up information about Sherman and its ownership structure that the judge, Robert Drain, issued a default judgment in 2022 ordering the bank to pay between $50 and $1,000 to each affected customer who didn’t opt out (up to $288 million in all) due to “extraordinary discovery abuse.” The ruling was in limbo for years after Drain retired a few weeks after his decision; the case was transferred twice and Credit One challenged the judgement. The current judge, John P. Mastando III, ruled last week that affected customers may still be entitled to damages though he has not yet determined how much they will get. In the meantime the court is investigating whether an attorney representing Credit One committed fraud when they refused to give up information about the bank during the discovery process. The review could lead to further sanctions against Credit One as well as the release of highly sensitive documents about the bank if the judge rules there was fraud.What are Navarro and Hildebrand doing with all their cash? Low-key Hildebrand, who lives in Charleston and previously served on the boards of two water nonprofits, has plowed his money into financial technology, biotech and artificial intelligence startups. Navarro, meanwhile, gave the public the first glimpse of his extreme wealth when he emerged with a surprise bid for the Carolina Panthers NFL franchise in 2018. (He lost out to hedge fund mogul David Tepper.) Navarro’s family office, Beemok Capital, has since spent $450 million on historic properties in Charleston and purchased two tennis tournaments for around $300 million; one of the latter, the Charleston Open, is now named the Credit One Charleston Open. Credit One announced a sponsorship deal for Emma Navarro in January 2024. Navarro’s profile is growing in South Carolina, where he’s lauded by some of the state’s most powerful figures, including former Charleston Mayor Joseph Patrick Riley Jr., who has praised Navarro’s “remarkable impact in South Carolina,” and U.S. Senator Tim Scott, who is, conveniently, the chairman of the Senate Committee on Banking, Housing and Urban Affairs. Scott has described Navarro as a “friend”; Navarro, his wife and at least eight other family members have given more than $8 million to Scott’s Senate campaigns and his short-lived 2024 presidential nomination bid. Navarro teaches a class at the College of Charleston’s School of Business on personal growth, and founded four schools in the area that serve 1,700 children. He also owns a theater, a restaurant and a luxury hotel in the city. His latest project: a roughly 70-acre stretch of Charleston’s downtown waterfront known as Union Pier that he plans to redevelop. He has reportedly put down $250 million so far. “I hope to leave Charleston better off than I found it 20 years ago,” he wrote in a March 2024 opinion piece in the Post and Courier. That’s all well and good, but perhaps he should think more deeply about the source of all those funds. There is a real need being met by providing people with low or no credit with cards. And some of Credit One’s customers are indeed building better credit. But providing that service shouldn’t require charging rapacious fees that exploit the most financially vulnerable. More From ForbesForbesFormer Secret Service Agent Turned Deputy FBI Director Is Already Very RichBy Kyle Khan-MullinsForbesThe Billionaires Benefitting From H-1B VisasBy Julie GoldenbergForbesTrumpiverse: Ranking Trump’s Inner CircleBy Joe WalshForbesThis Fintech’s Visa Card Keeps Grandpa From Blowing His Nest EggBy Lindsey ChooForbesElon Musk Is A Billionaire Federal Welfare VampireBy Alan Ohnsman