Texas Payday Loan Manager Charged with Stealing Thousands to Pay Off Cyclical Loans
Inside Subprime: July 17, 2018
By Grace Austin
A payday loan manager in Wichita Falls, Texas, has been charged with stealing tens of thousands by taking out dozens of loans to pay the other, in a cyclical process that authorities say had been going on for months. The suspect had been using customers’ information to either reactivate previous loans, open new ones or alter them to get cash. There was never a customer present, hence the term “ghost loans.”
Lawrence Leon Petersen is being charged with misapplication of fiduciary property of a financial institution. He was the loan manager at a brick-and-mortar payday loan storefront in Wichita Falls, Texas. He faces up to 10 years in prison and $10,000 in fines.
A company spokesperson said Petersen had taken out between 60 to 80 loans total.
Company records showed Petersen created or changed nearly $40,000 in loans in under four months in late 2017. And he could still be doing it if the lender didn’t receive complaints from people who said they received letters about loans they never took out. Police say one complaint came from as far as California.
Officials say Petersen used his authority as a manager to log in to the system and alter the loans.
Police say Petersen admitted to taking out the loans to cover medical bills. In an ironic twist, Petersen became victim to the same cycle that happens to many when they attempt to pay off their loans: Petersen told police he tried to cover the first loan, but began taking out more and more loans to cover the payments.
Payday loan businesses typically offer “quick fix” loans for people with bad credit, but have such high interest rates and assorted fees that the low-income people they target can’t pay them off. It often leads to a mounting cycle of debt.
Texas has virtually no restrictions on payday loans. On average, a two-week loan of $100 can lead to an interest rate up to 800 percent because Texas has set no limits for lenders. (To learn more about the dangers of payday loans in specific Texas cities, check out our Subprime Reports for Austin, Dallas, Houston, and San Antonio.)
Learn more about the dangers of payday loans in the United States in all of our Subprime Reports.