The criminalization of poverty is not limited to the broken and unconstitutional cash bail system in our state. It also includes subjecting poor, low-income and working-class Texans to criminal prosecution for failing to timely repay unconscionable payday loans.
The law that allows for criminal prosecution of unpaid consumer debt has a disparate impact on poor and low-income Texans. Rich borrowers are generally not subject to criminal prosecution for failing to repay their consumer loans. This is in contrast to poor and low-income people, who borrow from payday lenders — sometimes the only lenders available to them — and are much more likely to be subject to criminal prosecution for failure to repay hundreds of dollars.
Ironically, Texas criminal prosecution of consumer debt law also has the perverse effect of creating a criminal record for poor people who can't repay small loans, by bringing them into contact with the broken cash bail system and broader criminal justice system that is in need of significant reform to eliminate the criminalization of poverty.
We once officially had debtors' prisons in our nation but those have long since been outlawed. It's now time to also eliminate the criminal prosecution of poor, low-income and working-class Texans.
The criminal prosecution of these consumers for failure to repay payday loans is inconsistent with the broad scope of consumer protection under Texas laws such as the Deceptive Trade Practices Consumer Protection Act (DTPA) which is intended to help protect consumers against “unconscionable actions.”
For these reasons, the Legislature should eliminate all laws in Texas that subject consumers to criminal prosecution for failure to repay consumer loans, especially payday loans.
Creditors already have a right to go into civil court to try and collect any debt they are owed without subjecting consumers to criminal prosecution and being saddled and shackled with a criminal record.
In addition, the Legislature should make five changes to state law to help creditors seek repayment of loans in civil court.
- Reduce the cost of pre–garnishment bonds on debt collection to 5 percent of the value of the outstanding debt.
- Make unpaid electricity bills for critical care individuals “expenses of the last illness,” as a doctor has to sign off on a critical care designation.
- Once a civil lawsuit has been field against a consumer debtor, the creditor’s lawyer should not have to amend their lawsuit petition unless the debtor makes a payment of at least half of the outstanding debt. Any payments less than 50 percent of the outstanding debt should be a credit against any final judgement awarded a creditor.
- Banks and other financial institutions that may be holding funds of a consumer debtor that could be available to pay a creditor should be required to file an answer in court to let a creditor know, without being entitled to attorney’s fee if the creditor does not contest the answer they file in court.
- Make it easier for creditors to securitize their loans in real property or business and personal property assets.
The Legislature should change the law to eliminate criminal prosecution of consumer debtors in exchange for making civil debt collection a better option for creditors.
Consumer debt collection should only be a civil court matter; never a criminal court issue.
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