Friday, October 24, 2014
Payday lender finds himself in court | Last Word
The Houston Chronicle reported this week that Gary Elkins has been charged with violating the city’s ordinance covering payday lenders.
Houston officials aren’t taking it personally.
They’re aware that Elkins has already been charged with the same offense in Dallas and San Antonio.
It’s not what you call a major crime.
Punishment doesn’t include prison or even jail. It maxes out at $500 a day per violation.
Two things make the story newsworthy.
One is that Elkins is a self-described leader of the industry, which uses loopholes in state usery laws to charge the equivalent of very high interest for short-term loans.
On his Linked-In profile he says he “pioneered two industries that became billion-dollar industries.”
One of those industries is payday loans.
Elkins has about a dozen money stores around the state.
His two San Antonio Power Finance outlets, in Castle Hills and the Medical Center area, list fees ranging from the equivalent of 739 percent annually to 792 percent for loans ranging from seven to 30 days.
To borrow $500 for two weeks costs $150 in fees.
Customers who can’t repay the loan on time can find themselves quickly plunging into crippling debt.
The other thing that makes the story noteworthy is that Elkins is not just a scofflaw.
He’s a lawmaker, a member of the Texas House of Representatives from the Houston area.
Of course, when the Legislature took up very mild regulatory legislation on the payday loan industry in 2011, Elkins abstained, right?
He brazenly made the case on the House floor that his colleagues should ignore his conflict of interest and view him simply as an expert.
“On this particular issue I am probably as knowledgeable as anybody and I think the body needs to hear the expertise,” he said.
Elkins offered a number of amendments to weaken the two already weak bills, which basically required payday lenders to register with the state and to post their fees and effective interest rates.
The amendments were defeated and the bills passed.
Elkins did not abstain on the final votes.
Since then Dallas, San Antonio and Houston have passed ordinances with some teeth in them.
Loans amounts are capped in proportion to the applicant’s income.
When installment payments are made, at least 25 percent must go to buying down the principal.
Elkins has refused to comply in all three cities.
Both Dallas and San Antonio have filed charges against Elkins’ company and a couple of others.
They are accused of failing to register and to open their books to the city, as required.
The Dallas trial is set for November.
In San Antonio, municipal court Judge Christine Lacy has yet to rule on a motion by Elkins’ lawyer to quash the charges on his contention that the ordinance is not compatible with state law.
She is expected to rule on the motion soon, and trials have been tentatively scheduled for December.
Whoever loses, the decision can be appealed first to a county court-at-law, then on to the 4th Court of Appeals and then Texas’ highest court.
The process could take years.
Last spring, the city charged a number of other payday lenders with being out of compliance with the San Antonio ordinance.
When they agreed to comply, the fines were dropped.
But not Representative Elkins, and for him there should be no such mercy.
If the law is upheld, and I hope it is, he should be charged the full $500 a day per infraction.
Plus retroactive interest at 792 percent annually.
I know where he can borrow the money.