So what happens now?
It is a suggestion game. You suggest what should happen next, and at the end of the day I will take the suggestions, add a bit of randomness and make things happen.
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'Mean tallfolks. Chasing halflings out of town! Say halflings steal and spy. Halflings never steal! Halflings borrow! Halflings bring back... most times!'
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Oh god, we're not playing a group of Kender, are we?
Since I've never heard of Kender before, no.
Most of the humans on this part of the world live in medieval-like societies. There are prejudices, superstition, low education. Humans see most other races as inferior, and while in communities with a large percentage of halflings those tendencies aren't as strong, they grow stronger the lower that percentage is. In a balanced community, there are as many halfling criminals as there are human criminals, and most halflings are normal people living their life. Another reason for their bad reputation in smaller communities is, that the halflings, due to the reasons mentioned above, are often being ignored and isolated by the humans and thus are more likely to turn to crime to get by.
About stealing and borrowing: For halflings it is common sense to share things with their neighbors. In a halfling community, people don't have to ask if they borrow things, and usually they bring them back when they are done using them. If they get destroyed or damaged, they will let the owner know. Unfortunately, many halflings tend to forget that humans don't handle things like halflings do, and so it happens quite often that a halfling "borrows" a tool, which the human interprets as stealing. That could add to the halflings reputation as thieves, but most of the time the "stealing" happens in good faith.