Concerns Arise Over Republican Nominee’s Former Payday Loan Career
Inside Subprime: Oct 2, 2018
By Lindsay Frankel
Bob Stefanowski, Republican nominee for governor in Connecticut, has received criticism over his last employer, a payday loan company. His firm offered short-term, high-interest loans that are illegal in Connecticut and many other states. (For more information on the state-by-state subprime lending landscape, check out all of our Subprime Reports.) Before Stefanowski took over as chief executive officer in mid-2014, the company’s predatory lending practices included fraudulent car loans to U.S. military personnel.
While running the lender, Stefanowski brought in socially-minded executives like Luz Urrutia, who co-founded a bank intended to serve minorities. She is now the chief executive of a non-profit lender geared towards educating consumers about fringe financial services. Stefanowski also involved academics, industry executives, and consumer advocates dedicated to finding a way to profit from payday lending without exploiting the poor.
While payday loans are marketed as emergency access to cash, most people use them for everyday expenses, and the interest rates and fees can trap borrowers in debt. Payday loans carry an average APR of 400%.
“I’m not advocating anything like what payday lenders have done historically,” Stefanowski told the CT Mirror. But he maintains that payday lenders are capable of socially responsible business practices. And his intention in taking the job at the lender was to make sweeping changes. In 2016, he joined meetings in Washington about the payday lending industry to pose the question, “What’s the best way to get these guys out of the cycle of debt?”
Urrutia praised Stefanowski for his attempts at innovation. “It was a really incredible and powerful meeting. People were really impressed that Bob and the team brought all these groups together to follow their input,” she said. “There were all my relationships that I’ve had over the years. I would’ve never brought all of those people in if I had an inch of doubt about what Bob was trying to do. It came from a place of honesty.”
Rep. Matt Lesser, Democratic co-chair of the legislature’s Banks Committee, does not believe Stefanowski’s intentions translated into responsible loan products. He said that even newer loan products introduced by the firm would be prohibited by usury laws in Connecticut. “Frankly, it’s a deplorable way of making your fortune,” Lesser said. “The fact this guy got rich off desperately poor people is scandalous.”
Regardless of Stefanowski’s goals, his previous work with the loan provider has become an issue in his campaign, as Democratic nominee Ned Lamont has run ads that assert “Bob Stefanowski profited from predatory loans to service members.” The statement is problematic because these claims were resolved prior to Stefanowski’s involvement with the company. Stefanowski’s lending firm settled with the Consumer Financial Protection Bureau before Stefanowski took over as CEO. And Stefanowski’s compensation is uncertain, since he has neglected to release his tax returns.
While Stefanowski claims to have made valuable attempts to introduce safer payday lending products, the extent of his success remains unclear, and his involvement with the disreputable payday lending industry still raises concerns for many voters.