When Roger Tillman lost his job, he knew money would be tight. But he never thought he could end up in jail for being broke.
Tillman’s job as a late-night security guard in Houston had paid $9 an hour, and by picking up extra shifts, Tillman could just afford rent, groceries and other bills. But in 2008, amid the economic collapse, the security company scaled back overtime shifts, straining his finances. Worried that he couldn’t pay his bills, Tillman reluctantly went to The Money Center, a payday loan company with locations in San Antonio and Houston.
He took out a $500 loan. The 64-year-old Houstonian doesn’t recall the exact terms of the loan, but The Money Center’s website currently offers a $500 loan at 650 percent annual interest, or about $150 in fees and interest for a two-week loan. Such terms are common in Texas, where payday and car title lenders are allowed to charge customers unlimited fees.
Like many low-income borrowers, Tillman found he couldn’t fully pay off the loan when it came due. Instead, the lender offered to roll it over for another two weeks and tack on another round of fees. Tillman took on more payday loans to pay off the original loan and soon found himself in deepening debt. And then, in October 2009, he was laid off.
Tillman said he lost his job on a Wednesday and by Friday he was calling The Money Store to ask for an extended payment plan. No one called back. With his bank account empty and hoping to avoid overdraft fees, Tillman halted the automatic withdrawals he had set up for monthly payments on his payday loans. Eventually, he reached a manager at The Money Store.
“His statement was that ‘I hope you don’t get stopped by the police, because I’m filing a theft by check charge against you, ’” Tillman said. “I didn’t say anything. I was floored, because I was expecting to work out a payment plan.”
It was no idle threat. In November 2009, The Money Center, which is the operating name for a company called Marpast of Texas, filed a criminal complaint against Tillman with the Bexar County district attorney in San Antonio. Tillman soon received a letter from the DA, demanding that Tillman pay Marpast $1, 020 within 10 days or potentially face felony theft charges that carry two to 20 years in jail and fines up to $10, 000. In all, the district attorney demanded $1, 250, including “district attorney fees” of $140 and merchant fees of $90.
Tillman was shocked and scared. When his daughter graduated from basic training at Lackland Air Force Base in San Antonio, Tillman almost didn’t attend out of fear that there was a warrant for his arrest in San Antonio.
“I’m innocent here, ” he said, “other than losing my job and an inability to pay. I tried to get on a payment plan. If my intention was to duck and dodge, why would I even call them?”
In Tillman’s case, however, the debt collectors weren’t exactly lying: He could be arrested for not paying his payday loan debt.
An Observer investigation has found at least 1, 700 instances in which payday loan companies in Texas have filed criminal complaints against customers in San Antonio, Houston and Amarillo. In at least a few cases, people have ended up in jail because they owed money to a payday loan company. Even when customers avoided jail, the Observer has found, payday loan companies have used Texas courts and prosecutors as de facto collection agencies.
This is despite state laws that forbid payday loan companies from even threatening to pursue criminal charges against their customers, except in unusual circumstances. The law specifically prohibits theft charges when a post-dated check is involved. (Most payday loans require borrowers to provide a post-dated check or debit authorization to get the money.) The state Office of Consumer Credit Commissioner has advised the payday loan industry that “criminal charges may be pursued only in very limited situations” where it can be proven that a borrower knew a check would bounce.
The Consumer Service Alliance of Texas, a trade association representing 80 percent of Texas’ payday and title loan companies, is even more strict about the practice. “Members will not threaten, or pursue, criminal action against a customer as a result of the customer’s default on a credit service agreement, ” according to the group’s website.
“I think the idea of debtors’ prison is offensive to most people and that’s why we have prohibited this in the law, ” said Ann Baddour of Texas Appleseed, an Austin-based organization that advocates for the poor. “It’s clearly established in the law that unless there’s criminal intent on the part of the borrower, there’s not an option to pursue criminal charges.”
Until debtors’ prisons were banned 180 years ago, Americans could be jailed for years for owing just a few pennies. The costs of incarceration, though minimized by squalid prison conditions, often grossly exceeded the debts, suggesting that punishment was the overriding motive.
Money Mart is a Canadian payday loan and cheque-cashing company. It was founded in Edmonton, Alberta in 1982, and grew steadily. It was purchased from the founders in 1996 by Dollar Financial Group. Money Mart currently owns 412 stores across Canada with an additional 53 franchised stores. The head office is located in Victoria, BC.
On Dec. 23...