Belinda Cinque, the hot-check clerk for Justice of the Peace Tom Lawrence in the Houston suburb of Humble, said she has little choice but to take payday lenders’ criminal complaints. “If all of the elements match, I’ve got to take it,” she said. But she expressed discomfort with the situation, noting that the vast majority of borrowers had either lost their jobs or had their hours reduced at work. “Correct me if I’m wrong, but they sound like sharks,” Cinque told me. A collection agency was “threatening them that they were going to be taken to jail,” Cinque said. To her, it sounded like the debt was being collected from two directions-a debt-collection company and through the court. She told Cash Biz to stop filing hot-check complaints as long as the company was using debt collectors.
Almost all of the cases in Lawrence’s Harris County court emanate from Cash Biz, which appears to have found a way around the prohibition on prosecuting “held” or post-dated checks. Most payday loan companies in Texas have their customers fill out a post-dated check or authorize an electronic debit from a checking account for a future date. That is, unless the customer doesn’t have the money and wants to “roll over” the loan. Cash Biz, on the other hand, gets checks from their customers dated for the day of the transaction. If the customer doesn’t come in and pay on the loan before the due date, the company can try payday loans CO to cash the check. If it bounces, then the company claims it has the basis for a hot-check charge. (Reached by phone, Cash Biz President David Flanagan said he would have someone else in the company call me back. No one did.)
“What we’ve seen over and over again is that [payday lenders in Texas] are pushing the limits of the law, always finding the loopholes, finding ways to navigate through the law,” she said.
Baddour, the consumer advocate, said that Cash Biz’s “innovation” points to a persistent problem with the payday loan industry in Texas
Still, it’s not clear that the Cash Biz model is kosher. Taking out a payday loan isn’t like writing a hot check for groceries. Regardless of when you date the check, you’re borrowing money because you don’t have any. The promise is that you will eventually pay the money back with interest. In the payday loan model, the check is security for the loan, not payment.
Asked about the Cash Biz prosecutions in Harris County, Rudy Aguilar, director of consumer protection for the state Office of Consumer Credit Commissioner, responded, “We don’t believe that it would be appropriate in that scenario to move forward with those charges,” he said. “Now, we can’t tell that J.P. court how to interpret this.” Aguilar said the agency was unaware that the justice of the peace court in Humble was pursuing criminal charges against Cash Biz customers.
When the loan is due, the company either cashes the check or debits the account
Defense attorney Jeff Ross, who specializes in hot-check cases in Houston, said that payday loan customers aren’t committing a crime, because the payday lender accepts the check knowing that it’s not good at the time the loan is given.
“If I want to be a hard-ass about it I’d say, ‘Listen we’re not going to pay a nickel,’” Ross said. “This doesn’t even belong in this court. It’s a hold check and therefore it’s not a criminal case.” While he doesn’t see anything patently illegal about the JP court’s practice, the intent is clear. “The payday loan people file with the JP court and use them as muscle to collect their money.”