Proponents argue that the working poor need payday loans to cover their bills, while opponents argue that they trap borrowers in a cycle of debt. Of the 1, criminal complaints Appleseed analyzed, resulted in the borrower making a repayment on their loan. For instance, the criminal complaint against Jones simply includes a photocopy of her bounced check. Submit a question online. You may be required to submit additional documents due to state law and qualification criteria. Texas Appleseed is calling on state and federal regulators, including the Consumer Financial Protection Bureau, to better enforce laws prohibiting these practices.
Monday, January 15, 2018
Below you will find references to the Texas laws that govern payday loans. If you find these statutes difficult to understand, you may want to look at the "plain English" resources on this page or speak to an attorney. TWC investigates wage claims under the Texas Payday Law, Chapter 61 of the Texas Labor Code. Texas Payday Law covers all Texas business entities, regardless of size, except for public employers such as the federal government, the state or a political subdivision of the state. Consumer Protection Division Loans There are all kinds of loans: commercial loans, home equity loans, pay day loans, signature loans, pawn .
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Payday lenders cannot pursue criminal charges against borrowers unless fraud or another crime is clearly established. In , a devastating Texas Observer investigation documented widespread use of criminal charges against borrowers before the clarification to state law was passed. Nevertheless, Texas Appleseed's new analysis shows that payday lenders continue to routinely press dubious criminal charges against borrowers.
Jones, a year-old who asked that her first name not be published in order to protect her privacy, was one of those 1, cases. The Huffington Post reviewed and confirmed the court records associated with her case.
The issue for Ms. Jones -- and most other payday borrowers who face criminal charges -- came down to a check. These checks and debit authorizations are the backbone of the payday lending system. 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.
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. In Texas, bad check writing and "theft by check" are Class B misdemeanors, punishable by up to days in jail as well as potential fines and additional consequences. In the typical "hot check" case, a person writes a check that they know will bounce in order to buy something.
However, the intent of the 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. 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. In cases where the borrower does not roll over the loan or have enough money in the bank to pay off the balance, lenders then cash that post-dated check or debit their account for the amount they are owed. When the check bounces, or the account comes back with insufficient funds, the lender files a criminal complaint invoking the bad check laws, which make it a crime to buy goods or services with a check that the consumers knows will bounce.
In many cases, the courts as well as district and county attorneys send out letters to the borrowers warning that they could face arrest if they don't immediately pay their debt. Some courts are rubber stamping these complaints even though state laws state that bouncing a check that is intended to repay a payday loan is not enough to pursue criminal charges.
Texas legal aid attorney Tracey Whitley was able to get bad check charges dropped against one of her clients last year. But she said that without legal representation, many low-income borrowers may plead guilty and pay the additional fines and fees without realizing that the charges never should have been filed in the first place.
Appleseed argues that Texas courts and prosecutors should uniformly reject these complaints unless there is additional proof of fraud. Some payday lenders are even trying to get around those laws by requiring borrowers to date their checks for the initial transaction date, Appleseed found.
Federal legislation governs the way that payday loans can be offered to members of the armed forces and often effectively prohibits lenders from doing business with military families. Payday lending operations used to be common around any military installation, and thousands of military families used payday lenders as a way to make it to the end of the month. But the Department of Defense became increasingly concerned about military members being preyed upon by unscrupulous lenders who would charge as much as percent interest, keeping some families in debt without prospect of relief.
In , the Pentagon made a report to Congress on the damaging effects of payday lending on military families, and as a result, in the Defense Act of , lawmakers included a clause that regulates payday lending to service personnel. This legislation imposed a cap of 36 percent on the APR interest rates that can be charged to military personnel and their families. This effectively ended the bulk of predatory payday lending activity to military families.