Legislators mull changing Texas law allowing criminal charges against rent-to-own customers

^{Editor's note: This story has been updated with comment from the McLennan County Criminal Defense Lawyers Association.}

Texas lawmakers from both sides of the aisle said Friday they are mulling legislative reforms to criminal laws that allow rent-to-own companies to pursue criminal theft charges against customers who default on payments for sofas, TVs and other merchandise.

The reaction came after The Texas Tribune and NerdWallet published the results of a months-long investigation into an obscure provision of the penal code written 40 years ago by rental industry lobbyists. There are similar laws in other U.S. states, leading to the filing of charges against thousands of rent-to-own customers nationwide, the joint investigation found.

State Sen. Konni Burton, a Colleyville Republican who has championed criminal justice reforms at the Texas Capitol, said she wants to explore reforms ahead of the next regular session of the Legislature in a little over a year.

“While I believe that we, as individuals, are responsible for the contracts in which we enter, I do not believe that one industry, or set of industries, should have special laws allowing the escalation of a dispute to our criminal system,” Burton told The Texas Tribune. “We have a civil system for these kind of disputes. I look forward to exploring this issue in advance of next session.” 

Likewise, state Sen. Kirk Watson, D-Austin, said he found it “enormously unfair” that a contract dispute could end up with one of the parties getting arrested.

“I don’t know why the police are ever involved in something like this,” Watson said. “It smacks of debtors’ prisons. You find yourself involved in a misunderstanding, or even a legitimate dispute and one side can have you hauled to jail. We need to look at that. That doesn’t sound fair.”

The Tribune's investigation found a cluster of cases in McLennan County, where rent-to-own disputes made up 98 percent of the more than 400 theft of service complaints filed with two local police departments in the last three and a half years. State Sen. Brian Birdwell, a Republican who represents the Waco area, said in a statement that "the issue merits a rigorous review by the legislature, and it's something about which my staff and I will seek [additional] granularity."

Describing why the issue deserves further scrutiny, Birdwell compared the Tribune's findings to the concept of debtors' prisons, which are prohibited by the Texas Constitution.

State Rep. Kyle Kacal, R-College Station, whose district encompasses part of Waco, said in a statement: “I think we can certainly look into this matter before next session and see if there are ways to improve the statute for our constituents."

Jason Milam, president of the McLennan County Defense Lawyers Association, said the district attorney's office has exhibited an eagerness to take on rent-to-own cases. 

The district attorney's office did not respond to requests for comment from the Texas Tribune.

"Ultimately it comes down to prosecutorial discretion," Milam said. "In general they have an attitude of, if the law says it's illegal, we're just gonna file it." Milam said the most common reaction from the rent-to-own defendants he's represented is shock.

"Without exception, no one that I’ve talked had any idea at the time they rented the items that they could ever be criminally prosecuted. They're absolutely shocked.” Though Milam said he would favor sweeping reforms, at a minimum he believes the Legislature should require rent-to-own companies to warn customers in no uncertain terms that they could go to jail if they default on their contracts.

Democratic state Reps. Joseph "Joe" Moody and Chris Turner both suggested Friday they’d study the issue and consider authoring bills once the Legislature reconvenes in 2019. Moody, from El Paso, told the Tribune the statute is “constructed in a way to create a default conviction.

“If there are problems for those businesses as creditors in reclaiming their property through the civil justice system, that's where the reforms need to happen,” he said. “This criminal justice provision probably just needs to be eliminated.”

Moody said he hopes the lower chamber’s criminal jurisprudence committee, which he chairs, would study the issue and “make full recommendations back to the House about it.” 

“I anticipate the recommendation will be, ‘This [statute] is unnecessary,’” he added. 

In a tweet Friday, Moody asked a Republican colleague to "take a look at" the Tribune’s article. "I imagine a fix would have bipartisan support," Moody wrote to state Rep. Matt Krause. 

@RepMattKrause - let's take a look at this. I imagine a fix would have bipartisan support. CC: @TDCAA @tcdla @TexasCJC @TPPF https://t.co/9D3oyZZ2Hu

— Joe Moody (@moodyforelpaso) October 27, 2017

Turner, from Grand Prairie, also said he'd consider authoring or co-authoring a bill to address the issue. 

"I think all Texans regardless of ideology and political party affiliation should be deeply concerned that companies can do this," Turner added. "That Texans can be deceived ... and that law enforcement agencies paid for by taxpayers are responsible for going out and serving as debt collectors. That's just wrong." 

Police have more important work to do than collect debts for private business. This egregious law needs to be changed in next #txlege https://t.co/DdZlWOxLqA

— Chris Turner (@ChrisGTurner) October 27, 2017

Another example of how the poor are trapped by both predatory business practices and state laws that are stacked against them. #txlege https://t.co/NPvcFEGyYm

— Gene Wu (@GeneforTexas) October 27, 2017

Marc Levin, director of the Center for Effective Justice at the conservative Texas Public Policy Foundation, said he thought a bipartisan solution was possible. Like several of the lawmakers, Levin said these rent-to-own disputes could be handled with civil remedies – and without expending "costly resources of the taxpayers in terms of jails, the courts, and the time of the prosecutor."

"There's lots of breaches of contract and debts that are handled within the civil justice system that aren't really fundamentally different from what this issue is," Levin said. "It seems like this is basically taking a problem between two private entities and basically offloading it onto taxpayers."

The Texas Tribune and NerdWallet, a personal finance company that helps consumers make smart decisions about their financial lives, partnered to examine rent-to-own companies, their debt collection practices and the impact that these businesses can have on consumers’ financial lives.

Disclosure: The Texas Public Policy Foundation has been a financial supporter of The Texas Tribune. A complete list of Tribune donors and sponsors is available here.