State Punishes Payday Lender for Criminalizing Debt
A year and a half after the Observer documented hundreds of examples of payday loan companies using the criminal justice system to pursue unpaid loans, state regulators have taken action against one company. In December, the Office of Consumer Credit Commissioner ordered Ohio-based Cash Biz to pay a $10,000 fine and provide more than $16,000 restitution to 51 customers the company filed criminal complaints against. In a legal filing obtained by the Observer, Cash Biz, which has 16 Texas locations, agreed that it had “referred its customers for prosecution based on an erroneous belief that a person commits a crime by issuing a check that is later dishonored.”
State law prohibits payday and title loan businesses from even threatening borrowers with criminal action, except in unusual circumstances. And the Texas Constitution states plainly that “no person shall ever be imprisoned for debt.” Nonetheless, many local DAs and justices of the peace serve as de facto debt collectors for the industry, and some people with small payday debts have ended up in jail. Payday and title lenders in Texas can effectively charge unlimited fees for loans, which often carry APRs of 500 percent or more. In December, Texas Appleseed released a report documenting more than 1,500 criminal complaints filed by 13 different payday loan companies since 2012. Many resulted in fines, arrest warrants and even jail time.
Eamon Briggs, assistant general counsel with the Office of Consumer Credit Commissioner, said this was the first time the agency had penalized a company for the practice.
“This certainly appears to be a growing trend and we’re working to make sure our licensees know they can’t be making these referrals unless they have specific concrete evidence of fraud, forgery or other criminal conduct,” Briggs said. “It’s simply not permissible or within the intent of this prohibition to allow {payday and title lenders} to make referrals and simply rely on the DA to decide whether or not there are merits to the claim. We’re working to make sure everyone knows that this is not an acceptable practice.”
Read more: http://www.texasobserver.org/state-punishes-illegal-payday-loan-lender/