A coalition that wants voters to decide how Michigan should cap interest rates on payday loans won approval on Tuesday for its sketchy wording for a petition to bring the issue to the November 2022 ballot.
Members of Michiganders for Fair Lending told the Board of State Solicitors that payday loans â short-term loans with high interest rates â often trap people in a cycle of indebtedness because current state law The state allows interest rates equivalent to over 370% annual percentage rate.
The petition calls for a ban on fees on payday loans that total more than 36% APR.
State law allows payday lenders to charge up to 15% on the first $100 of a payday loan, 14% on the second $100, 13% on the third $100, 12% on fourth $100 and 11% on fifth and sixth $100. . If someone takes out a $100 loan and takes two weeks to pay it back, they can be charged up to $15 a day, an APR of 391%, more than 10 times the cap proposed by the coalition.
Payday loans are capped at $600 per loan, excluding fees incurred.
The ballot initiative would give Michigan residents an opportunity to have a say in the level of interest rates on these short-term loans, coalition member Dallas Lenear told the board and pastor of Journey Church of Grand Rapids.
Lenear and other petition supporters advocated for plain language in the petition summary, consistently using the term âpayday loansâ instead of âdeferred current service transactions.â
The petition would require 340,047 signatures to be affixed to the November ballot. It would go first to the Legislative Assembly and then â if lawmakers didn’t pass it â to voters.
Republican political commentator Fred Wszolek said payday loan limits sound like a good idea on the surface, but fee caps could force legitimate lenders out of the market, leaving illegal lenders as the only option for those who need a short term loan. to lend.
“The only ones that will disappear are the regulated guys with legitimate storefronts open in Michigan malls that you can walk into and talk to and hold accountable,” Wszolek said. “There is a huge unregulated industry there.”
Payday lenders market short-term loans as a quick fix, but they can often put borrowers in worse financial shape than before, said Habitat for Humanity Michigan president Sandra Pearson.
âWe agree that families and individuals sometimes need access to small loans, but they need an option that helps them and doesn’t try to hide what it is,â Pearson said. “There’s only one commonly understood term for this type of loan, and they’re called payday loans.”
The council decided on summary wording that included the term âpayday loansâ and made it clear that the petition would only affect those loans.