People often say that everything is bigger in Texas. And while this is pretty much just a figure of speech, or Texans way of humble-bragging, it may hold true when it comes to the trouble that one Texas payday lender is facing. For a while now, some consumer advocates in Texas have been petitioning to stop payday lenders from using the courts to pursue unpaid short term loans. In response to this issue, the Office of Consumer Credit Commissioner has taken action against a Texas lending company with roots in Ohio. The name of this company is Cash Biz, and they are facing a total of $26,000 in fines and restitution costs. This lender has 16 locations in Texas and has a track record for prosecuting their customers who issue checks that are later dishonored.
The laws in Texas prohibit payday lenders and title loan companies from even insinuating that borrowers could be facing criminal prosecution, except in extenuating circumstances. The Texas Constitution even states that people cannot ever be imprisoned because of a debt related issue. This has not stopped local prosecutors from pressing charges against borrowers on behalf of some payday lending companies. Payday lenders in Texas are allowed to charge fees to their customers, however they have been warned not to seek legal action against borrowers who make late payment or that default on their loans. Many Texas consumers have actually been fined, issued arrest warrants and spent time in jail because of payday lenders that have chosen to press charges against consumers.
The assistant general counsel with the Office of Consumer Credit Commissioner, one Eamon Briggs, said, “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. 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.”
Briggs went on to explain that the OCCC requests lenders during examination sessions to answer as to whether or not they use the criminal justice system to follow up on bad debt cases. It has been determined that reps for some payday lending companies have not always answered truthfully when asked these questions. The agency gets information largely from consumer complaints and information that they obtain from consumer advocacy groups.
Ann Baddour, and employee of one of these advocacy groups, seems pleased with the way things are going. Baddour said, “It’s not sufficient because it doesn’t address any of the detrimental impacts it had on these individuals. It doesn’t expunge that charge from their record” or fix damaged credit scores. “It’s basically a refund at value, there’s no additional penalty.” It also does not take into account how much Cash Biz could have gained by threatening their customers
While it is probable that some lenders will still use the courts in order to go after people who default on loans, it appears that Texas means business when it comes to taking action against lenders that prosecute or threaten prosecution to people who make late payments on their loans. It is important for borrowers to live up to their responsibilities when it comes to borrowing money. But lenders had better watch the actions that they take when people choose not to. Failing to do so could lead to some very steep financial penalties.

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