Payday loans are a plague across Texas and across the country.
Three weeks ago, in our November 1 post, we noted some of the problems that Texans have experienced with the astronomically high interest rates involved in these loans. Auto title loans, as we discussed, are also a huge problem.
In this post, let’s look at another problem presented by the payday loan industry in Texas. That problem is the use of criminal complaints by payday loans against customers in San Antonio and several other cities.
The Texas Observer recently conducted an investigation of payday lenders in the state. The investigation found numerous instances where these lenders tried to pursue debtors by pressuring prosecutors to bring criminal charges.
Most of us associate the concept of debtor’s prison with the 19th century England of Charles Dickens. But the Observer investigation found that in several cases payday loan customers have ended up in jail.
In general, payday loan companies are supposed to use the civil collection process to collect unpaid debts, just like other creditors. But as the Observer found, there can be abuses of the process.
Keep in mind, however, that in order for criminal charges to apply, there has to be a showing of intent that a borrower tried to misuse the process. Simply being unable to pay back a predatory payday loan is arguably not enough to meet this requirement.
We will discuss this issue further in our next post, however, because there are complicated questions involved. As we will discuss next week, the attempt to criminalize the nonpayment of payday loans is similar in some ways to efforts by government agencies to seek forfeiture of assets in many different types of cases.
Source: Dallas Observer, “Payday Lenders Are Using Texas Prosecutors to Collect Their Bad Debts,” Eric Nicholoson, Nov. 12, 2013