Texas courts and prosecutors. Tue, Jul 16, at Jen Reel When Roger Tillman lost his job, he knew money would be tight. But he never thought he could end up in jail for being broke. But in , amid the economic collapse, the security company scaled back overtime shifts, straining his finances. Such terms are common in Texas, where payday and car title lenders are allowed to charge customers unlimited fees. Instead, the lender offered to roll it over for another two weeks and tack on another round of fees.
Tillman took on more payday loans to pay off the original loan and soon found himself in deepening debt. And then, in October , he was laid off. Tillman said he lost his job on a Wednesday and by Friday he was calling The Money Store to ask for an extended payment plan.
No one called back. With his bank account empty and hoping to avoid overdraft fees, Tillman halted the automatic withdrawals he had set up for monthly payments on his payday loans.
Eventually, he reached a manager at The Money Store. I was floored, because I was expecting to work out a payment plan. In November , The Money Center, which is the operating name for a company called Marpast of Texas, filed a criminal complaint against Tillman with the Bexar County district attorney in San Antonio.
Tillman was shocked and scared. I tried to get on a payment plan. If my intention was to duck and dodge, why would I even call them? He could be arrested for not paying his payday loan debt. An Observer investigation has found at least 1, instances in which payday loan companies in Texas have filed criminal complaints against customers in San Antonio, Houston and Amarillo. In at least a few cases, people have ended up in jail because they owed money to a payday loan company.
Even when customers avoided jail, the Observer has found, payday loan companies have used Texas courts and prosecutors as de facto collection agencies. This is despite state laws that forbid payday loan companies from even threatening to pursue criminal charges against their customers, except in unusual circumstances.
The law specifically prohibits theft charges when a post-dated check is involved. Most payday loans require borrowers to provide a post-dated check or debit authorization to get the money.
The practice threatens to jail people for debt. The costs of incarceration, though minimized by squalid prison conditions, often grossly exceeded the debts, suggesting that punishment was the overriding motive. In the first two decades of the 19th century, humanitarians confronted authorities in several states with a litany of abuses, and the public came to see the practice of jailing debtors as repugnant.
New York was the first state to abolish incarceration for debt. Other states followed, and Congress passed a federal statute banning the practice in Debt-collectors and other financial firms, the newspaper reported, are suing borrowers over unpaid credit cards, consumer loans, auto loans and other debts. Many people report never receiving a notice of the lawsuit and end up with an arrest warrant obtained through the courts.
The Observer has found a justice of the peace in Harris County who has handled almost hot-check cases, a Class C misdemeanor, for Cash Biz, an Ohio-based payday lender with 24 locations in Texas.
In Amarillo, the wife of a military veteran with 23 years of service complained to the Office of Consumer Credit Commissioner that the Potter County Attorney was pursuing theft charges against her husband even though the couple was in bankruptcy.
But she expressed discomfort with the situation, noting that the vast majority of borrowers had either lost their jobs or had their hours reduced at work. At some point last year, she started getting calls from people—some in tears—making payments to Cash Biz through the court.
To her, it sounded like the debt was being collected from two directions—a debt-collection company and through the court. She told Cash Biz to stop filing hot-check complaints as long as the company was using debt collectors. The court, Cinque said, gives borrowers as much time as possible to pay and tries to avoid issuing warrants. Most payday loan companies in Texas have their customers fill out a post-dated check or authorize an electronic debit from a checking account for a future date.
When the loan is due, the company either cashes the check or debits the account. Cash Biz, on the other hand, gets checks from their customers dated for the day of the transaction. If it bounces, then the company claims it has the basis for a hot-check charge.
Reached by phone, Cash Biz President David Flanagan said he would have someone else in the company call me back. The promise is that you will eventually pay the money back with interest. In the payday loan model, the check is security for the loan, not payment. His complaint to the credit commission triggered an investigation.
It was an attempt to collect on a debt by coercion. The Office of Credit Consumer Commissioner has occasionally told payday lenders to stop seeking criminal charges against customers, but the agency has no jurisdiction over judges or prosecutors.
After Tillman wrote to the consumer credit commissioner in August to complain about his situation, the agency investigated. This should keep Tillman and other borrowers out of jail.
While the commission ordered Marpast to stop, its policing in general is spotty. The consumer credit commission has 30 field examiners to cover 15, businesses, including 3, payday and title lenders. Only two customers, including Tillman, have ever complained to the commission. Published Tue, Jul 16, at