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As their efforts to get the super-regulatory agency known as the Consumer Financial Protection Bureau (CFPB) off the ground are stifled by Senate Republicans, Democrats are continuing to seek new avenues to pressure the Republican Leadership to capitulate.  The latest scheme is a hearing on “Consumer Protection and the Middle Class Wealth Building in an age of Growing Household Debt” whose purpose is the highlight the “need” for more regulation on the economy governed by the CFPB. 

The hearing will feature a variety of guests who will predictably call for more regulations that the unaccountable CFPB could provide. But perhaps the most curious witness is Douglas Fecher, head of the Wright-Patterson Federal Credit Union (WPFCU).

Mr. Fecher is expected to testify in favor of more regulation of the much-maligned short term lending industry widely known as “payday” lenders. Based in Dayton, Ohio where traditional payday loans were effectively banned, the WPFCU offers loans called “Stretch Pay” loans that they market as alternatives to pay day loans. But what makes his selection, as a witness so curious is that the products that WPFCU offers are actually more expensive than the payday loans they are supposed to replace.

Where the average payday loan costs about $15 for every $100 loan, Stretch Pay customers are charged a minimum application fee of $35 in addition to being charged 18% interest on the loan.  A customer taking two loans in a year under these terms would pay an effective annual interest rate of more than 100 percent as opposed to an effective rate of 15% on a traditional pay day loan.  And the kicker is that the WPFU is classified as a non-profit. So, while their products are costing consumers more, unlike the payday lenders they are supposed to replace, they pay no taxes.  read more »