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Texas Is Throwing People In Jail For Failing To Pay BackPredatory Loans 12/29/2014 12:46 pm ET | Updated Dec 29, 2014
Ben Walsh
Business Reporter, The Huffington Post
4.2k
At least six people have been jailed in Texas over the past two years for
owing money on payday loans, according to a damning new analysis of public
court records.
The economic advocacy group Texas Appleseed found that more than 1,500
debtors have been hit with criminal charges in the state — even though Texas
enacted a law in 2012 explicitly prohibiting lenders from using criminal
charges to collect debts.
According to Appleseed’s review, 1,576 criminal complaints were issued
against debtors in eight Texas counties between 2012 and 2014. These
complaints were often filed by courts with minimal review and based solely on
the payday lender’s word and frequently flimsy evidence. As a result,
borrowers have been forced to repay at least $166,000, the group found.
Appleseed included this analysis in a Dec. 17 letter sent to the Consumer
Financial Protection Bureau, the Texas attorney general’s office and several
other government entities.
It wasn’t supposed to be this way. Using criminal courts as debt collection
agencies is against federal law, the Texas constitution and the state’s penal
code. To clarify the state law, in 2012 the Texas legislature passed legislation
that explicitly describes the circumstances under which lenders are prohibited
from pursuing criminal charges against borrowers.
It’s quite simple: In Texas, failure to repay a loan is a civil, not a criminal,
matter. Payday lenders cannot pursue criminal charges against borrowers
unless fraud or another crime is clearly established.
In 2013, a devastating Texas Observer investigation documented widespread
use of criminal charges against borrowers before the clarification to state law
was passed. Texas Is Throwing People In Jail For Failing To Pay Back Pr…
6/15/2016 Texas Is Throwing People In Jail For Failing To Pay Back Predatory Loans
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Nevertheless, Texas Appleseed’s new analysis shows that payday lenders
continue to routinely press dubious criminal charges against borrowers.
Ms. Jones, a 71-year-old who asked that her first name not be published in
order to protect her privacy, was one of those 1,576 cases. (The Huffington
Post reviewed and confirmed the court records associated with her case.) On
March 3, 2012, Jones borrowed $250 from an Austin franchise of Cash Plus,
a payday lender, after losing her job as a receptionist.
Four months later, she owed almost $1,000 and faced the possibility of jail
time if she didn’t pay up.
The issue for Ms. Jones — and most other payday borrowers who face
criminal charges — came down to a check. It’s standard practice at payday
lenders for borrowers to leave either a check or a bank account number to
obtain a loan. These checks and debit authorizations are the backbone of the
payday lending system. They’re also the backbone of most criminal charges
against payday borrowers.
Ms. Jones initially obtained her loan by writing Cash Plus a check for $271.91
— the full amount of the loan plus interest and fees — with the understanding
that the check was not to be cashed unless she failed to make her payments.
The next month, when the loan came due, Jones didn’t have the money to
pay in full. She made a partial payment, rolling over the loan for another
month and asking if she could create a payment plan to pay back the
remainder. But Jones told HuffPost that CashPlus rejected her request and
instead deposited her initial check.
Jones’ check to Cash Plus was returned with a notice that her bank account
had been closed. She was then criminally charged with bad check writing.
Thanks to county fines, Jones now owed $918.91 — just four months after
she had borrowed $250.
In Texas, bad check writing and “theft by check” are Class B misdemeanors,
punishable by up to 180 days in jail as well as potential fines and additional
consequences. In the typical “hot check” case, a person writes a check that
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they know will bounce in order to buy something.
But Texas law is clear that checks written to secure a payday loan, like
Jones’, are not “hot checks.” If the lender cashes the check when the loan is
due and it bounces, the assumption isn’t that the borrower stole money by
writing a hot check –- it’s just that they can’t repay their loan.
That doesn’t mean that loan transactions are exempt from Texas criminal law.
However, the intent of the 2012 clarification to state law is that a bounced
check written to a payday lender alone cannot justify criminal charges.
Yet in Texas, criminal charges are frequently substantiated by little more than
the lender’s word and evidence that is often inadequate. For instance, the
criminal complaint against Jones simply includes a photocopy of her bounced
check.
Making matters worse, Texas Justice of the Peace courts, which handle
claims under $10,000, appear to be rubber-stamping bad check affidavits as
they receive them and indiscriminately filing criminal charges. Once the
charges are filed, the borrower must enter a plea or face an arrest warrant. If
the borrower pleads guilty, they must pay a fine on top of the amount owed to
the lender.
Jones moved after she borrowing from Cash Plus, so she did not get notice of
the charges by mail. Instead, a county constable showed up at her new
address. Jones said she was terrified and embarrassed by the charges. She
had to enter a plea in the case or else face an arrest warrant and possible jail
time. In addition to the fines, Jones was unable to renew her driver’s license
until the case was resolved.
Craig Wells, the president and CEO of Cash Plus, which is based in California
but has about 100 franchises in 13 states, told HuffPost that “this was the first
I’ve heard of this case.” He said that the company instructs its franchises to
adhere to all state laws and regulations. On the company’s website, Wells
says his goal is for Cash Plus to be “as-close-to-perfect-a-business-as-one-
can-get,” adding that the company’s “top-notch customer experience keeps
them coming back over and over again. ”
Emilio Herrera, the Cash Plus franchisee who submitted the affidavit against
Jones, told HuffPost that he does not remember her case. But he added that
he tries to work out payment plans with all his customers, and that it is
common for his customers to pay back loans in very small increments.
In response to a request for comment from HuffPost about Appleseed’s letter,
Consumer Financial Protection Bureau spokesman Sam Gilford said,
“Consumers should not be subjected to illegal threats when they are
struggling to pay their bills, and lenders should not expect to break the law
without consequences.”
One reason that lenders’ predatory behavior continues is simple Texas Is Throwing People In Jail For Failing To Pay Back Pr…
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administrative overload. Travis County Justice of the Peace Susan Steeg,
who approved the charges against Jones, told HuffPost that due to the
volume of bad check affidavits her court receives, her office has been
instructed by the county attorney to file charges as affidavits are submitted.
The charges are then passed along to the county attorney’s office. It is up to
the county attorney to review the cases and decide whether to prosecute or
dismiss them.
But Travis County Attorney David Escamilla told HuffPost that his office had
never instructed the Justice of the Peace courts to approve all bad check
complaints, and said he did not know why or where Steeg would have gotten
that understanding. “We don’t do it,” Escamilla said, referring to the usage of
the criminal hot checks process to enforce the terms of lending agreements.
When cases are wrongfully filed by payday lenders, how quickly they are
dismissed depends on prosecutors’ workload and judgment. Often, it is not
clear that theft by check cases are payday loans, since the name of the
payday lender is not immediately distinguishable from that of an ordinary
merchant.
District attorneys may also receive these complaints and have the ability to
file criminal charges. According to Ann Baddour, a policy analyst at
Appleseed, the DAs seem to operate with more discretion than the county
attorneys, but the outcomes were arguably as perverse. Baddour said one DA
told her that of the hot check complaints he had received, none had led to
criminal charges or prosecutions. Instead, he said, his office sent letters
threatening criminal charges unless the initial loan amounts plus fees were
repaid.
The DA, who seemed to think he was showing evidence of his proper
conduct, was instead admitting that his office functioned as a debt collector.
With the help of free legal aid, Jones’ case was eventually dismissed, and she
said the court waived her outstanding payment to Cash Plus. But not all
debtors are as fortunate.
Despite being against state law, the data show that criminal complaints are an
effective way for payday lenders to get borrowers to pay. Of the 1,576
criminal complaints Appleseed analyzed, 385 resulted in the borrower making
a repayment on their loan. In Collin County alone, 204 of the 700 criminal
complaints based on payday lenders’ affidavits ended in payments totaling
$131,836.
This success in using criminal charges to coerce money from borrowers
means that payday lenders have a financial incentive to file criminal charges
against debtors with alarming regularity — even if those charges are
eventually rightfully dismissed.
Because Appleseed’s study only covered eight of Texas’ 254 counties, there
are likely more cases statewide. And Texas is not alone. In 2011, The Wall Texas Is Throwing People In Jail For Failing To Pay Back Pr…
6/15/2016 Texas Is Throwing People In Jail For Failing To Pay Back Predatory Loans
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Presented by LendingTree
Street Journal found that more than a third of states allow borrowers to be
jailed, even though federal law mandates that loan repayment be treated as a
civil issue rather than a criminal one.
“There’s a lot more to learn about the practice itself, how widely it’s used, and
its effect on consumers,” Mary Spector, a law professor at Southern
Methodist University who specializes in debt collection issues, told HuffPost.
“I think they’ve uncovered the tip of the iceberg.”
More:
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CONVERSATIONS
609 Comments Sort by
Cheryl Elizabeth Irvin · Ownership at The Irvin Law Firm
Class action needed
Like · Reply · 12 · Dec 29, 2014 10:17am
Richard PortierClass actions have been effectively eliminated by SCOTUS.
Like · Reply · 11 · Dec 29, 2014 10:33am
Ron Arruda · New Bedford, Massachusetts
Richard Portier The communist Court of the republican party...
Like · Reply · 1 · Dec 29, 2014 11:25am
Richard PortierRon Arruda Not communist . . . Corporatist.
Like · Reply · 3 · Dec 29, 2014 12:12pm
Show 2 more replies in this thread
Chuck BruffeyThe payday loan industry is ridiculously powerful and owns politicians on both sides of the aisle.These people are merely legalized loan sharks and need to be banned once and for all.
Like · Reply · 503 · Dec 29, 2014 10:19am
Brian Phillips · The Ohio State University
They should all be shut down. That goes for these pre-settlement loan rackets, as well. Theyare predatory....period.
Like · Reply · 265 · Dec 29, 2014 11:27am
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IMPACT BUSINESS TECH SCIENCE
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Like · Reply · 265 · Dec 29, 2014 11:27am
Motie Wright · Works at Retired
Wasn't this Gov Dude just indicted for things ... felonious.
Like · Reply · 149 · Dec 29, 2014 11:32am
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Bozana DesantosWelcome to Victorian England.
Like · Reply · 174 · Dec 29, 2014 11:32am
Show 10 more replies in this thread
Show 10 more replies in this thread
Jolyn SkinnerUnable to renew your divers license until the case is resolved? Boy, in this country we just doubledown on the less fortunate.
Like · Reply · 310 · Dec 29, 2014 10:24am
Karey SmithThat would prevent you from voting as well.
Like · Reply · 177 · Dec 29, 2014 10:40am
Richard Frank · Columbia College
Karey Smith That is precisely what I was thinking too.
Like · Reply · 59 · Dec 29, 2014 11:23am
Angelo Giannakopoulos · Northern Illinois University
Welcome to the kingdom of Texas where the nobles have everything and the workingpeasants nothing! What a shithole of a state. Give it back to Mexico.
Like · Reply · 28 · Dec 29, 2014 11:28am
Show 10 more replies in this thread
Marco BastianThe recreation of 'debtor prisons' has the backing of local, state and federal politicians, the ones youvoted into office. It is a new industry for money making.
Like · Reply · 101 · Dec 29, 2014 10:25am
Ronda Frazier · Denver, Colorado
Yes, if sanity prevails and we start releasing non-violent drug offenders, the for-profit prisonsystem (and its paid legislators) will have to find new residents to keep those facilities atcapacity. What a disgrace.
Like · Reply · 55 · Dec 29, 2014 1:00pm
Vivian Williams · Works at Retired
And renewing slavery.
Like · Reply · 31 · Dec 29, 2014 1:44pm
Alyce GarrityExcept this is against both Federal and Texas State law.
Like · Reply · 2 · Dec 29, 2014 2:14pm
Show 10 more replies in this thread
Ernie Beckley · Air Force Institute of Technology (AFIT)
It's Texas combined with greedy companies. Not exactly surprising.
Like · Reply · 34 · Dec 29, 2014 10:26am Texas Is Throwing People In Jail For Failing To Pay Back Pr…
6/15/2016 Texas Is Throwing People In Jail For Failing To Pay Back Predatory Loans
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Victor Jay · Teacher at Orange County Public Schools
While I do not think one should borrow money that they cannot pay back, I also do not think that ourcity, county and state prosecutor's offices should be used as debt collection agents.
Like · Reply · 26 · Dec 29, 2014 10:28am
Steve Burman · MyVEGAS
Horace Wolf Some are in excess of 400% APR.
Like · Reply · 2 · Dec 29, 2014 7:22pm
Cecilia Cipriani · Works at Law firm
Steve Burman these are legalized lawn sharks.
Like · Reply · 1 · Dec 30, 2014 6:31am
Michael SwartztrauberCorporations should have less power. WAY LESS POWER, not more.
Like · Reply · 107 · Dec 29, 2014 10:28am
Jane Spurrier BrockKei Shabazz - the REPUBLICON Supremes only...and they are corrupt to the bone.
Like · Reply · 64 · Dec 29, 2014 11:52am
John Woodland · Board chair at Mineral Community Hospital
Kei Shabazz We are still waiting to see corporations sent to jail.
Like · Reply · 66 · Dec 29, 2014 12:15pm
Shaun Loftus · Florence, Italy
John Woodland I'd like to see one come home in a body bag.
Like · Reply · 9 · Dec 29, 2014 12:23pm
Show 10 more replies in this thread
Karl McMillanThis is the direction Republicans want to take our country. If they have their way, we'll be seeingpeople thrown into the workhouse, just like in Victorian England.
Like · Reply · 234 · Dec 29, 2014 10:30am
Ron Arruda · New Bedford, Massachusetts
The republican communist party of Hate for the Middle Class, Poor, Disabled, andVeterans...
Like · Reply · 164 · Dec 29, 2014 11:15am
John WaldenSo debtor prison is back.
Like · Reply · 14 · Dec 29, 2014 11:18am
George PoleSoon in Texas there will be a debtors prison where you have to work off your debt topeople who buy the debt at a reduced cost and get free labor until the debt is paid. This is the way the Tea People see life in America, the way it used to be, when the richwhite people ruled and there where no regulations to stop them.
Like · Reply · 28 · Dec 29, 2014 11:22am
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Justin Bowen · Commerce Township, Michigan
Boo hoo hoo. Governments all across the country have been throwing men (and almost ONLY men)in jail for failing to pay child support for decades now. I don't see any reason to start getting upsetnow.
Like · Reply · 1 · Dec 29, 2014 10:32am
Karey Smith Texas Is Throwing People In Jail For Failing To Pay Back Pr…
6/15/2016 Texas Is Throwing People In Jail For Failing To Pay Back Predatory Loans
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So you're one of the folks that can't hold two thoughts in your head at one time? The reasonfar more men are found in contempt of a court order (child support) than women is becausefar more women are actually doing the child raising. This article and issue, however, is notabout the court enforcing it's own orders but instead the court being asked to play the role ofdebt collector for private companies that are in fact violating state and federal law. If men areupset about child support, either a) sue for primary custody or b) stop getting womenpregnant and expecting them to raise the child without a dime from you.
Like · Reply · 14 · Dec 29, 2014 10:47am
Justin Bowen · Commerce Township, Michigan
Karey Smith Try again cupcake. Even of the percentage of women who don't have custody,a statistically insignificant percentage of women who don't pay child support - which is ahigher percentage of the total number of women who don't have custody than that of men -are ever sent to jail, much less prison. Even IF there were more women without custody thanmen there would STILL be a dramatically smaller number - and percentage - of women in jailor prison for not paying child support because the system is rigged against men.
Also, this IS about the courts being asked to play the role of debt ... See More
Like · Reply · Dec 29, 2014 11:24am
Norm Cooper · Security at Baylor College of Medicine
Responsibility for your progeny is really tough isn't it Justin.
Like · Reply · 1 · Dec 29, 2014 12:00pm
Show 8 more replies in this thread
Hank Stargell · Quakertown, Pennsylvania
Meanwhile corporations claim bankruptcy all the time skipping out on their obligations withoutpenalty.
Like · Reply · 230 · Dec 29, 2014 10:33am
Bob Bilderback · SIUE
Especially when it comes to environmental cleanup.
Like · Reply · 94 · Dec 29, 2014 11:02am
Jane Spurrier BrockPatrick Doe - not entirely true (and I'm hardly a Bush fan). Do a little research.
Like · Reply · 4 · Dec 29, 2014 11:53am
John Woodland · Board chair at Mineral Community Hospital
Jane Spurrier Brock They gutted bankruptcy for individuals (some of this predates Bush)while strengthing corporate positions. Under old bankruptcy law homeowners who foundthemselves under water in 2008 could have "crammed down" their debt and held onto theirhomes at the expense of the banks but the cram down provision for individual homes waseliminated.
Like · Reply · 9 · Dec 29, 2014 12:14pm
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