Three Texas congressmen were among those who, last April, urged that taxpayer-funded subsidies be granted to the purveyors of payday and car-title loans, which can carry effective annual interest rates of 500 percent or more and are widely criticized for targeting the working poor, the less educated, and military service members. Part of the federal government’s coronavirus relief efforts, loans through the Paycheck Protection Program were not originally made available to such lenders. But the industry took the matter to court and wielded its political influence in the process.

The 28 signatures on a letter to then–Treasury Secretary Steven Mnuchin included those of two Texas Republicans—Roger Williams, who represents a stretch from Fort Worth to Austin, and Dallas County’s Lance Gooden—as well as South Texas’s Henry Cuellar, one of only four Democrats to sign on. All three have taken campaign donations from the payday-lending industry.

The letter voiced support for inclusion in the PPP program of “small-size nonbanks,” a phrase meant to include payday lenders, as was later explicitly confirmed by Missouri representative Blaine Luetkemeyer.

In the end, millions of dollars would filter to Texas-based payday and title-loan companies through the PPP, money that need not be paid back if certain conditions were met, primarily that a majority of it be spent on paying employees. In an examination of Small Business Administration data, Texas Monthly was able to identify at least fifteen that received PPP funds. For example:

  • Federal Cash Advance of Oklahoma (based in Dallas, despite its name) received a $944,400 federal loan.
  • Care Cash Express, serving exurban Houston communities such as Clute and Rosenberg, received $69,400.
  • Action Credit Express, doing business from Edinburg to El Paso as Action Express Loans, got $195,300.
  • Approved Money Center, which operates from Austin to McAllen, got $267,400.

None of the four companies responded to multiple requests for interviews.

Just how many ultrahigh-interest lenders received the subsidies is tough to pin down because of the web of parent or holding companies under which they are often legally registered, as well as the ways the businesses are sometimes self-categorized in SBA data.

In its report released this week, the Austin nonprofit Texas Appleseed found that a total of $20 million has gone to payday and title-loan lenders licensed—although not necessarily based—within the state though the PPP. When including loans made through the Federal Reserve’s Main Street Lending Program (which, unlike PPP loans, are not forgivable and must be paid back), Texas Appleseed identified $45 million that went to these lenders.

Federal Cash Advance—which does business as CashMax—offers loans with an annual percentage rate of between 400 percent and more than 700 percent. Because of the way these loans are structured, consumers can get caught in a torturous cycle of paying hundreds of dollars in fees each month without touching the principal of the loan, and often without understanding the one-sided terms of the deal. Paid back biweekly over five and a half months, a $1,000 loan can end up costing $4,226.02 in interest, fees, and principal, according to disclosures on CashMax’s website.

During the difficult economic times brought about by the coronavirus pandemic, such loans can add insult to injury for vulnerable populations who lack the education, assets, or income necessary to access other forms of credit as they live paycheck to paycheck. The PPP loans these lenders received, meanwhile, are forgivable as long as they’re used toward payroll.

“A loan structure that’s designed to be profitable even as a borrower fails, because of the way that they’re put together—that’s not something that builds communities, that’s not something that supports the economy,” says Ann Baddour, who directs the Fair Financial Services Project at Texas Appleseed, which says it does policy-focused work to promote economic and social justice. “At a time of crisis, I think it’s a calamity that this has happened.”

Of the campaign money received by the three Texas congressmen who voiced support for the industry last spring, none can touch Cuellar’s recent pull, according to the campaign finance tracking site Open Secrets. In addition to $43,000 from the industry for the 2018 election, the representative, whose district stretches from San Antonio south to Laredo and along the border, accepted $37,100 during the 2020 cycle, more than any other U.S. House member. Williams, in office since 2013, has received $45,850 from the industry during that time. Meanwhile, Gooden, first elected in 2018, has taken just $3,000 from payday lenders. (Williams, Cuellar, and Gooden didn’t respond to our requests for interviews.)

The industry’s influence isn’t limited to the federal level. The Texas Legislature’s approach to payday lending drew the attention of the HBO series Last Week Tonight With John Oliver in 2014, prompted by Houston state representative Gary Elkins’s testimony against proposed regulation. At the time, Elkins owned a dozen payday lending stores. Oliver’s report concluded that, “apparently even clusterf—s are bigger in Texas.” Elkins, who once told the House that his advocacy “isn’t about my business” and that he’s “not ashamed of what I do,” didn’t respond to requests for an interview.

Legally speaking, payday lenders in Texas aren’t lenders at all. Instead, they operate as so-called credit-access businesses, a classification created by the 1987 Credit Services Organization Act, a seemingly good-faith effort to protect Texas consumers. The payday lending industry figured out how to twist the new distinction to get around the state’s 10 percent usury cap.

Elkins, a Texas lawmaker from 1995 until he lost his reelection bid in 2018, was a pioneer in this respect. His Power Finance Texas company began to act as an intermediary between consumer and lender, collecting high fees for itself in the process. The model called for the payday lending storefronts to outsource the actual lending to third parties, the same model that exists today. On a thirty-day payment for a $1,000 loan, for instance, a borrower pays $351.20 in fees to CashMax and $11.10 in interest, according to the company’s website. A U.S. Fifth Circuit Court of Appeals decision in 2004 found that usury limits don’t apply to the fees so long as the fees are independent of the third-party lender’s cut, ruling in favor of Elkins’s company. A subsequent Texas attorney general’s ruling in 2006 endorsed the model as well.

Empowered by these rulings, registered payday and auto title lending storefronts soared in number from 250 in 2004 to 3,400 in 2011, according to Texas Appleseed. “There were so many of them, and they were operating in this Wild West of essentially no oversight,” Baddour says.

In response, support mounted for greater regulation, and in 2012, a state law went into effect requiring more transparent fee disclosures and creating a new licensing process. But the Legislature still didn’t restrict the fees the companies inflict on consumers or address the payment structures that allow people to make expensive payments for months without touching their loan’s principal. The industry’s high charges remain intact.

“What’s interesting about this one is there’s not a natural proponent on the ground,” says state representative Diego Bernal, the San Antonio Democrat who last fall introduced Texas House Bill 206, another attempt to regulate the industry. “Everybody—every real person, every one of our neighbors—hates the way these companies operate. The only proponents they have are the ones they give huge contributions to, who exist in the Legislature.”

In the case of Elkins, the line between industry executive and legislator disappeared altogether. His Power Finance chain offers cash at rates as high as 790 percent APR, according to licensing data from the Texas Office of Consumer Credit Commissioner. Power Finance’s parent company, CPCWA, received a $708,900 PPP loan.

As much money as has slid toward lenders such as Power Finance, even more has gone to debt-collection agencies. Some 126 Texas companies classified as debt collectors received PPP loans, totaling about $32 million in government aid, likely a low-end estimate because some firms applied through their parent companies as part of other industries.

Several of the Texas debt collectors accessing this money have attracted significant consumer complaints. To cite two examples, Credence Resource Management and ProCollect—both Dallas-based—have totaled 1,463 and 1,124 complaints over that same span and received $404,000 and $530,000 from the federal program last year.

Of the 46 Texas debt collectors receiving at least $150,000, 11 have piled up one hundred or more complaints since 2016. Most of these complaints revolve around attempts to collect debt the consumer says he or she doesn’t owe, but also common are complaints about the companies’ communication tactics and threats. “ProCollect, this is an egregious display of greed. Here I am on a fixed income, and you’re trying to collect on a nonexistent fraudulent debt from an apartment complex I have not resided in for over four years now,” reads one typical complaint.

“They have called nonstop. I ask them to not call me, especially when I’m at work,” reads one against Credence Resource Management. “I was almost fired over the calls.”

Credence Resource Management and ProCollect did not respond to requests for an interview.

The Washington Post reported last month on the coronavirus relief money flowing to payday lenders and debt collectors, finding more than 1,800 examples totaling $580 million in government aid across the country. Its report cited Sherman-based firm Capio Asset Servicing, which came under federal and state investigation last year, leading to claims against them in a September lawsuit filed by New Mexico attorney general Hector Balderas for alleged abusive collection practices and attempts to collect debts that are not actually owed. The two sides have since entered settlement talks, and Balderas has withdrawn the suit, the Post reported.

The SBA began accepting applications for a second round of PPP loans on January 13. This time around, businesses “whose stock and trade is financing or lending,” a federal official told the Post, “are generally, and I need to qualify this, may not be eligible.” Making things even hazier, the official added that “we are aware” of payday lenders, declining to discuss them more specifically.

Those words likely come as little consolation to the payday lending industry’s opponents, who in 2019 were dealt another blow in Texas when the office of Attorney General Ken Paxton—who is facing trial on charges relating to securities fraud—ruled that products that lenders sometimes refer to as “personal” or “signature” loans can be offered without a license. These are loans whose terms look “exactly like a payday loan,” says Baddour. “It just may not be secured in the same way.” While payday loans often use a consumer’s paycheck as collateral, for instance, Power Finance offers an unsecured personal loan, according to its website.

Critics of the ruling say it helps lenders stay a step ahead of the 46 Texas municipalities—including Houston, San Antonio, Dallas, Austin, and Fort Worth—that have attempted to regulate credit-access businesses, including by limiting the number of payments allowed under the loan’s structure so that borrowers aren’t trapped into treading high-fee water without paying down the principal. Dallas recently joined Austin in updating its ordinances to close the loophole that allowed “personal” or “signature” loans to get around the city’s regulations. Austin is facing a lawsuit over its ordinance, brought by TitleMax of Texas.

State representative Bernal helped pass San Antonio’s ordinance to regulate payday lenders in 2012 when he was a member of its city council. It worked, to a degree. The number of such lenders’ storefronts dropped by about 50 percent within a couple of years, he says, but some of them simply relocated to adjacent municipalities. Bernal believes statewide legislation is necessary, though he considers it unlikely to pass during the current legislative session because of the industry’s outsized influence in Austin. Still, he holds out hope that the recession sparked by the pandemic will shift the political tides. His bill would require credit-access businesses to take into account a borrower’s ability to pay back a loan and would cap the total number of payments at four, meaning at least 25 percent of each payment must go toward paying down a loan’s principal. It would be a step in the right direction, he says, making the loan terms that credit access businesses are able to offer “at least not unconscionable.”