Last spring, Federal Cash Advance of Oklahoma, LLC made nearly $ 1 million in one transaction. This money came from the Federal Paycheque Protection Program (PPP), which provides forgivable loans to small businesses to alleviate financial turmoil caused by the COVID-19 pandemic. The company, which operates as CashMax, operates dozens of green and yellow storefronts across Texas. It promises a “quick,” “user-friendly” and “hassle-free” way to get money, through payday loans and auto securities, as well as cash advances.
But loans sometimes come with a catch. An anonymous borrower submitted a complaint about CashMax at the Federal Bureau for Financial Consumer Protection in October. They said a woman who worked for CashMax and another online payday loan company “harassed me at work on my laptop.” According to the complaint, the representative of CashMax said the borrower owed the two companies $ 1,500; she threatened to sue the complainant. The representative allegedly even asked to speak to the borrower’s employer to find him and serve him at work. Under federal law, debt collectors can usually only call someone’s boss to ask for their contact information, not to report an employee’s debt.
A representative for CashMax said they “denied everything” in the complaint, but declined to give details. “In the spirit of compromise, we resolved all of the complainant’s issues with a confidentiality agreement,” he said.
While loan borrowers in Texas filed complaints with the Consumer Financial Protection Bureau, those same lenders were cashing in federal COVID-19 relief money. CashMax is one of 15 payday and car title lenders operating in Texas that have together amassed more than $ 45 million in federal pandemic aid, according to analysis by Ann Baddour, director of Fair Financial Services Project at Texas Appleseed. His report on the subject was released on Tuesday.
When people find themselves in a financial bind, they can turn to payday lenders and car titles for quick cash. These lenders offer small, short term loans with high annual interest rates which can be over 500 percent in Texas– among the highest in the country. The rates are especially high here because the state doesn’t cap the fees these lenders can charge. Widely criticized for their predatory practices, including aggressive and deceptive sales tactics that force consumers to pay more than advertised, these lenders typically target low-income people and Black and Brown buyers.
Although advertised as an aid for emergency expenses, payday loans are notusually one-time expenses. Borrowers often use them to pay for basic expenses like groceries and rent. In Texas, borrowers pay a mean $ 70 fee to borrow $ 300 —if they pay it off in two weeks. Auto title loans also guarantee quick cash flow, from a few hundred to a few thousand dollars, with equally high interest rates. But, these loans require borrowers to hand over title to their vehicle. If the borrower does not repay his loan, he loses his car. Plus, lenders get an extra boost from the loan rollover. The vast majority of borrowers cannot repay their loans and fees within the allotted two weeks, so they have to pay additional fees — between $ 60 and $ 1,200– to renew their loans.
“These loan products have been well documented to create a cycle of indebtedness … and have a disproportionate impact on all communities affected by the COVID crisis,” Baddour said. “Yet here we allow [these companies] to access taxpayer subsidized loans, mostly free money.
According to Baddour’s analysis, which focused on loans over $ 150,000, payday and car title lenders in Texas averaged $ 1.36 million in P3 loans, while small businesses in the state received less than half of that amount. This amount of $ 45 million granted to these lenders is probably an underestimate; Baddour compiled data from state licensing records, but she says not all payday and car title lenders need a state license, thanks to a 2019 Texas Attorney General decision.
The Small Business Administration (SBA) in the United States initially rejected a major payday lender from the PPP program because it said giving them relief was not in the “public interest. “But the SBA finally turned the tide after two major payday lenders press lawmakers and a bipartisan group of lawmakerspleaded with the Treasury Department to offer them a cut. Nationally, collectors and payday lenders have earned more than $ 500 million in PPP loans.
Another lender with ties to Texas received a large payment, although the company has numerous complaints against it. These damages are documented in hundreds of complaints filed with the Consumer Financial Protection Bureau. MoneyLion Inc., based in New York and licensed in Texas, has received $ 3.2 million in PPP loans and has received more than 600 complaints since 2018. a texan complained of constant withdrawals from her bank account even though she was unemployed.Another said he tried to repay his loan in full, but the payment was never processed and the company did not answer his calls. “Moneylion engages in predatory lending and abusive practices by reporting the current loan as DEFAULT or past due on customers’ credit,” another wrote. “It is blatant and terrible in the midst of a global pandemic. ”
The federal government has granted $ 700,000 in PPP loans to Power Finance Texas, which is owned by former State Representative Gary Elkins, a Republican from Houston who fought against the regulation of payday lenders in the Texas House . In 2014, Dallas and San Antonio filed criminal misdemeanor chargesagainst Elkins’ breakdown companies, including three Power Finance sites, for not registering with cities or letting inspectors into his store.
More than 45 cities in Texas have passed local ordinances to curb abuse by payday lenders and auto title lenders. But, in the latest of them legislative sessions, Republican and Democratic lawmakers have proposed bills to overturn those regulations. Payday lenders gave Texas politicians millions of campaign contributions in recent years. This year, says Baddour, will necessarily be similar. But this time, they’ll go to the State Capitol with a wad of taxpayer money in their pockets.
This article was originally published by the Texas Watcher, a non-profit investigative media.
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