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Payday and Car Title Lenders in Texas Won More Than $45 Million in Pandemic Aid

Despite trapping people in a cycle of debt, predatory lenders in the Lone Star State raked in millions meant to help people get their financial footing.

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A version of this story ran in the March / April 2021 issue.

Last spring, Federal Cash Advance of Oklahoma, LLC raked in nearly $1 million in a single transaction. That money came from the federal Paycheck Protection Program (PPP), which grants forgivable loans to small businesses to alleviate the financial turmoil wrought by the COVID-19 pandemic. The company, which does business as CashMax, runs dozens of green and yellow storefronts across Texas. It promises a “quick,” “friendly,” and “hassle free” way to get cash, through payday and auto title loans, along with cash advances. 

But the loans sometimes come with a catch. An anonymous borrower submitted a complaint about CashMax to the federal Consumer Financial Protection Bureau in October. They said a woman who worked for CashMax and another online payday loan company “has been harassing me at my work on my cell.” According to the complaint, the CashMax representative said the borrower owed the two companies $1,500; she threatened to sue the complainant. The representative even allegedly asked to speak to the borrower’s employer to track them down and serve them at work. Under federal law, debt collectors can generally only call up someone’s boss to ask about their contact information, not to snitch about an employee’s debt.

A CashMax representative said they “deny everything” in the complaint, but declined to elaborate. “In the spirit of compromise, we resolved all the issues of the complainant with a confidentiality agreement,” he said.

As loan borrowers in Texas registered complaints with the Consumer Financial Protection Bureau, those same lenders were cashing in on federal COVID-19 relief money. CashMax is one of 15 payday and car title lenders operating in Texas that together racked up more than $45 million in federal pandemic aid, according to an analysis by Ann Baddour, director of the Fair Financial Services Project at Texas Appleseed. Her report on the subject was released Tuesday. 

When people get into a financial bind, they may turn to payday and car title lenders for fast cash. Such lenders offer short-term, small loans with high annual interest rates that can be upward of 500 percent in Texas—among the highest in the country. The rates are especially high here because the state doesn’t cap the fees such lenders can tack on. Widely decried for predatory practices, including aggressive and deceptive sales tactics that force consumers to pay more than advertised, these lenders generally target low-income and Black and Brown buyers.

Though advertised as relief for emergency expenses, payday loans are not usually one-time expenses. Borrowers often use them to pay basic living expenses like groceries and rent. In Texas, borrowers pay an average of $70 in fees to borrow $300—if they pay it back in two weeks. Car title loans also guarantee quick cash, from a few hundred to a few thousand bucks, with similarly high interest rates. But, such loans require borrowers to hand over their vehicle’s title. If the borrower doesn’t repay their loan, they lose their car. Plus, lenders get an added cash boost from the loan rollover. The vast majority of borrowers can’t pay back their loans and fees in the allotted two weeks, so they have to pay an extra fee—between $60 and $1,200—to renew their loans. 

“These loan products have been well documented to create a cycle of debt…and impact all the communities disproportionately harmed by the COVID crisis,” says Baddour. “Yet here we are allowing [these companies] to access tax-payer subsidized loans—essentially free money.” 

Payday and car title lenders in Texas racked up average PPP loans of $1.36 million, while the state’s small businesses received less than half that amount on average, according to Baddour’s analysis, which focused on loans exceeding $150,000. This $45 million amount awarded to these lenders is likely an underestimate; Baddour compiled the 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’s ruling.

The U.S. Small Business Administration (SBA) initially rejected a major payday lender from the PPP program because they said giving them relief was not in the “public interest.” But the SBA eventually reversed course after two major payday lenders lobbied lawmakers and a bipartisan group of lawmakers pleaded with the Treasury Department to offer them a cut. Nationwide, debt collectors and payday lenders won more than $500 million in PPP loans.

Another lender with Texas ties received a big payout, even though the company has numerous complaints against it. These harms are documented in hundreds of complaints filed with the Consumer Financial Protection Bureau. New York-based MoneyLion Inc., which is licensed in Texas, received $3.2 million in PPP loans and has had more than 600 complaints since 2018. One Texan complained of constant withdrawals from her bank account, even as she was unemployed. Another said they tried to pay off their loan in full, but the payment was never processed and the company wouldn’t respond to her calls. “Moneylion is practicing predatory lending practices and Abusive practices by reporting Current loan as DEFAULTED or past due on customers credit,” another wrote. “It is egregious and terrible in the middle of a global pandemic.”

The federal government awarded $700,000 in PPP loans to Power Finance Texas, which is owned by former state Representative Gary Elkins, a Houston Republican who fought against regulation of payday lenders in the Texas House. In 2014, Dallas and San Antonio filed criminal misdemeanor charges against Elkins’ payday businesses, including three Power Finance locations, for failing to register with the cities or let inspectors into his store.

More than 45 Texas cities have passed local ordinances to rein in payday and auto title lender abuses. But, in the last two legislative sessions, Republican and Democratic lawmakers have proposed bills to roll back these regulations. Payday lenders have given Texas politicians millions in campaign contributions in recent years. This year, Baddour says, is bound to be similar. But this time, they’ll take to the state Capitol with a wad of taxpayer money in their pockets.