Payday loan job shadows exec’s run for Connecticut governor
HARTFORD — In his run for Connecticut governor, Republican businessman Bob Stefanowski touts his stints with blue-chip companies like General Electric and UBS Investment Bank. But the role getting all the attention is his most recent job as CEO of a global payday lending company.
Rivals have piled on criticism of Stefanowski’s involvement with a company offering loan products that are not even legal in Connecticut. In the GOP primary, one candidate’s advertisements dubbed him “Payday Bob.”
The 56-year-old gubernatorial candidate says his experience straightening out the troubled, Pennsylvania-based DFC Global Corp. would serve him well fixing the state’s stubborn budget deficits.
“It really bothers me that I’m being attacked on a company that I cleaned up,” Stefanowski said in an interview with The Associated Press. “I brought integrity to it.”
A review of Stefanowski’s tenure leading DFC Global Corp. from 2014 to January 2017 shows he improved its financial performance and took steps to meet regulators’ demands. It also suggests he struggled to bring lasting changes to practices described by critics as preying on the poor and people in financial distress.
Payday loans — unsecured, short-term loans that typically allow lenders to collect repayment from a customer’s checking account regardless of whether or not they have the money — are void and unenforceable in Connecticut, unless they’re made by certain exempt entities such as banks, credit unions and small loan licensees. Local loan companies can charge only up to a 36 percent annual percentage rate. According to the Center for Responsible Lending, 15 states and the District of Columbia have enacted double-digit rate caps on payday loans.
When Stefanowski went to work for the company in November 2014, he left his position as chief financial officer of UBS Investment Bank in London. DFC had recently agreed to refund more than 6,000 customers in the U.K. who received loans for amounts they couldn’t afford to pay back, following a crackdown on payday lending practices by the U.K.’s Financial Conduct Authority amid calls for tougher regulation by anti-poverty advocates.
In the first month of the job, Stefanowski said he fired 20 of DFC’s 30 top employees. About 147,000 additional customers needed loans refunded in 2015 during Stefanowski’s watch. He said that happened after one of his executives discovered unfair collection practices during an internal review he ordered because the company had “done a lot of bad things” before he arrived.
DFC at the time also agreed to work with regulators “to put matters right for its customers and to ensure that these practices are a thing of the past,” according to a statement from the Financial Conduct Authority.
Luz Urrutia, who worked for Stefanowski as the company’s U.S. CEO, said she had been skeptical about working for a payday lender but Stefanowski sold her on a vision of responsible lending for underserved populations. She said she was ultimately proud of the work they did, including a loan product capped at 36 percent in California, but the company owners were not fully on board.
“One thing led to another, and it was clear that Bob was not going to fulfill his vision of turning the organization into what he thought it could,” she said. “And he left and I was right behind him, and the rest of the people that he brought in went as well.”
Stefanowski stepped down from the company in January 2017, explaining he wanted to work at a global firm and the company was selling off its European operations. He continued working as a DFC consultant for a year to help complete the sale.
In December 2017, the nonpartisan group Americans for Financial Reform noted in a study of private equity investment in payday loan companies that DFC was still offering loans at extremely high rates, including a 14-day loan in Hawaii at a rate of as much as 456 percent interest.
Stefanowski said he didn’t keep track of DFC Global after he left for good.
“When I left that company it was a fully compliant company that treated its customers well,” he said. “And I’m proud of that.”
He still defends his decision to take the job despite so many people questioning it, saying it was an opportunity to run a global corporation and help people without access to credit.
“It’s a good indication that I never thought I’d be in politics,” he said, with a laugh.
His chief rival, Democrat Ned Lamont, another wealthy businessman who founded a cable television company, has leveled steady criticism at Stefanowski about the DFC job, calling payday lenders the economy’s “bottom fishers.” Stefanowski has fired back at Lamont, accusing him of personally profiting from the payday lending industry and calling him a hypocrite. Stefanowski is referring to Oak Investment Partners, where Lamont’s wife Annie works as a managing director. Oak invested in a British payday loan company. Lamont’s campaign has called the ad false and said the investment was not under Annie Lamont’s purview.
It’s unclear how much impact Stefanowski’s payday loan history is having on his first-time run for public office. He defeated four fellow Republicans in the August primary, despite a bevy of TV ads and mailers bringing up DFC Global.
A recent Quinnipiac University Poll shows Stefanowski has some challenges when it comes to likeability among voters, especially women. Among likely voters, 39 percent have a favorable opinion of Stefanowski, while 44 percent have an unfavorable opinion. Among women, 50 percent view him unfavorably. The survey did not ask about Stefanowski’s payday loan past.
Sajdah Sharief, a retiree and registered Democrat who is leaning toward voting for Lamont, said she would be reluctant to support somebody who worked at a payday loan company.
“It’s like exploiting people who need that service with the exorbitant rates that they charge,” said Sharief, of East Hartford. “That would be disturbing to me, to vote for someone who has worked for that type of company.”