By Christopher Maag
The Consumer Financial Protection Bureau’s newest admirer may come as a surprise to some, but he’s making no secret about his affections. Billy Webster, chairman of Advance America, one of the nation’s largest payday lenders, is touring Washington, D.C. and saying nice things about the bureau and its interim chief, Elizabeth Warren.
“People . . . might think we’re opposed to CFPB, and we’re not,” Webster tells the Huffington Post.
Webster’s position on the bureau may seem unexpected because payday lenders are often criticised by consumer advocates for charging exorbitant fees. The average payday loan costs $15 to $17 per $100 borrowed, which works out to an annual interest rate (APR) of 391%, according to research by the centre for Financial Services Innovation.
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But Webster and the Consumer Financial Protection Board have one important thing in common: They both dislike overdraft fees charged by mainstream banks. Such fees perform the same function as payday loans of providing short-term credit.
The main difference: overdraft fees are actually much more expensive, Webster argues, and much less transparent to consumers than the fees associated with payday loans. As President Obama’s special advisor in charge of getting the Consumer Financial Protection Board up and running, Warren has criticised banks for failing to disclose the cost of overdraft fees and other charges.
Warren also has suggested that once the board becomes fully operational in July, she may require banks to give consumers better notification about their fees. That’s where Webster’s support comes in.
“You’ve got bank overdraft, check overdraft, ATM overdraft. Those operate no different than the product we offer, and they don’t carry the same APR disclosure that we carry,” says Jamie Fulmer, spokesman for Advance America. “Transparency, simplicity, making sure consumers have the ability to look at their short-term financial products on an apples-to-apples basis, we think all of that is good stuff.”
Other payday lenders appear to agree with Webster and Advance America. The Community Financial Services Association of America (CFSAA) says it supports Warren’s call for better transparency and disclosure.
“These are the right criteria to evaluate all products, whether from banks or payday advance stores, that comprise the short-term credit market,” Samantha Pepi, spokeswoman for the association, said in an email.
In a debate over fees, payday lenders may be able to score some rhetorical points on traditional banks. But the new consumer bureau may not take it easy on payday lenders either, consumer advocates say. Making consumers choose between payday loans and bank overdraft fees is “a false choice,” says Kathleen Day, spokeswoman for the centre for Responsible Lending. “We don’t think consumers should have to choose between two abusive products.”
Christopher Maag is a freelance journalist for publications including The New York Times, TIME magazine and Popular Mechanics. He graduated with honours from the Columbia University Graduate School of Journalism, and has worked as a staff writer for daily newspapers, monthly magazines, alt weeklies and websites. Maag writes about people with big dreams set on little stages, including a teenage girl who races jet-powered tractors, and people who make millions of dollars impersonating Barack Obama.