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February, 1999
This article was written by the Consumers Union Southwest Regional Office.
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The Criminal Justics System as a Collection Agency
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Consumers Union StudyTo better understand the payday loan market, Consumers Union conducted a survey of twenty-seven local cash advance lenders in Austin, Dallas, Killeen, and Waco. Over a two-week period in January, CU surveyed companies advertising certain types of loans in local phone books and in the Greensheet. We surveyed companies that advertise loans of more than the $460 maximum loan amount allowed under the credit code for signature loans, and advertise that they require only a valid checking account. CU called companies as any normal consumer would and asked questions that any normal consumer would ask, including loan limits and terms, cost of loans (fees), underwriting criteria, collateral, and the consequences of default. Consumers Union also reviewed consumer complaints filed against these companies with the Office of Consumer Credit Commissioner (OCCC). Many of the complaints that were filed included copies of "lease" agreements or other loan contract information for the cash advance companies. Consumers Union reviewed these lease agreements closely and examined trends and language used. We also spoke with Justice of the Peace Offices in Dallas and Travis Counties as well as the Travis County Hot Check Division of the District Attorney's Office. |
