By Chris Lane
By Jeff Balke
By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
A 35-year-old entrepreneur named Gary Elkins was using radio advertisements with the lure of fast cash to reel in credit-starved consumers:
"Yankee Doodle came to Houston looking for some money / Called a friend to get some cash because he had no money," was one ad song heard on the radio. "Poor Yankee Doodle -- if only he would have called 523-CASH, he could have had the cash he needed."
Another audio spot targeted that Yule shopping season. "Deck the halls with cash for Christmas, fa la la la la, la la la la. / We can get you cash this Christmas, fa la la la la, la la la la."
But it suddenly seemed that the company promising all that money would never ring in the new year.
An employee of the local Better Business Bureau had been sent into Personal Rental, an Elkins company that offered fast cash and no credit check, to scout the operation. State attorneys swooped in soon after, leveling charges that the company violated state usury laws.
Seven days before Christmas in 1991, state attorneys gained a temporary injunction to stop Personal Rental's operations.
It wasn't a big story, but state Consumer Credit Commissioner Al Endsley garnered headlines when he accused the man behind Personal Rental of loan-sharking.
In clear, unequivocal language, Endsley charged that Elkins was hiding outrageously high loan rates behind the fine print of a lease contract. He alleged that Elkins, relying on widespread ad campaigns to reel in business, duped customers into thinly disguised loans that carried interest of more than 780 percent, a flagrant violation of usury laws limiting the amount of interest charged to customers.
Elkins got the injunction lifted the next morning, but attorneys in the A.G.'s office were already starting to congratulate themselves, feeling they were well on the way to shutting down an industry they believed to be operating outside the law.
But the state's strategy backfired badly.
The test case blew up in the A.G.'s face. Elkins bankrolled a half-million-dollar legal counterattack -- suing the state and even the individual state's attorneys in the case. After a grueling, no-holds-barred tangle that stretched over two years, a jury took 40 minutes to find in favor of Elkins.
By the time it was over, burned state attorneys would swear off any attempt to crack down on sale-leaseback operations.
And a year after his day in court, Elkins, who once busily lobbied the Texas Legislature through former House Speaker Billy Clayton, would go on to win the Texas House seat in a squeaker election for one of Houston's stolidly conservative westside districts.
Today, he sits on a House committee that oversees the same state office that once pursued him in a Houston court. As a legislator and committee member, Elkins can also guard against consumer advocates trying to reform laws affecting his business and the sale-leaseback industry.
Says Elkins about the earlier state prosecution: "They picked the wrong company."
Safe from the A.G.'s office, sale-leaseback companies have sprung up all over Texas over the past few years, holding out the offer of easy money in one hand and a pen in the other. Just sign here, and the cash is available, for whatever purpose.
But despite what many people believe, these aren't loans. They're sale-leasebacks, a decades-old, commonly used device in the financial world. In paper transactions, customers sign away ownership of cars, appliances or other possessions for fast cash, and obligate themselves for extended payments to "lease" them back from the company.
Consumer-protection groups say companies have twisted such deals into a Texas-sized loophole to skirt usury laws -- not that there's anything they can do about it.
Ask any consumer activist about sale-leasebacks and the conversation almost immediately turns back to the Personal Rental case.
"We think they [sale-leasebacks] are illegal under existing laws," says Rob Schneider, staff attorney for the Consumer Union. "But because of the loss of the lawsuit in Houston, we think we need legislation."
However, even as the industry comes under repeated fire, few like to openly take on the affable, free market Republican.
"Ooooooh, that's dangerous," croons one consumer advocate. "A lot of our bills end up before his [Elkins's] committee."
It's a position he fought for, and he's not about to apologize for keeping an eagle eye on any new move regarding sale-leaseback companies. Every time reformers started talking to the press in the last few months about legislating the business, they found themselves in direct touch with Representative Elkins from the 135th District.
But with the sudden explosion of new sale-leaseback companies in the state have come new complaints about business practices of some operators, and the long stalemate over sale-leasebacks shows signs of eroding. Even though the state has stepped aside, the Houston Press has learned that Harris County Attorney Michael Fleming recently started an investigation of those local companies to see if any operate beyond the law.
And the line of the law may be about to move. A few legislators are starting to voice opposition to sale-leasebacks, including one Dallas rep who is beginning to draw up new legislation to rein in these firms. For the first time in years, area consumer advocates see signs that the long official silence over a business they despise just may be about to end.