LANSING, Michigan (AP) – A coalition that wants voters to decide how Michigan should cap payday loan interest rates got approval of its summary wording on Tuesday for a petition to put the issue to the November ballot 2022.
Members of Michiganders for Fair Lending told the Board of State Canvassers that payday loans – short-term loans with high interest rates – often trap people in a cycle of debt because the current law of lending The state allows interest rates equivalent to an annual interest rate greater than 370%. .
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The petition calls for a ban on fees on payday loans that total over 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 the fourth $ 100 and 11% on the fifth and sixth $ 100. If a person takes a $ 100 loan and takes two weeks to pay it off, they can be billed up to $ 15 per day, an APR of 391%, more than 10 times the limit proposed by the coalition.
Payday loans are capped at $ 600 per loan, not including fees incurred.
The ballot initiative would give Michigan residents the opportunity to have a say in the level of interest rates on these short-term loans, coalition member Dallas Lenear told the board of directors Pastor by Journey Church of Grand Rapids.
Lenear and other petition supporters argued for clear language in the petition summary, consistently using the term “payday loans” instead of “current deferred service transactions.”
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The petition would require 340,047 signatures on the November ballot. It would go first to the Legislative Assembly, and then – if lawmakers did not pass it – to the voters.
Republican political commentator Fred Wszolek said payday loan limits seemed like a good idea on a surface level, 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. to lend.
“The only ones who are going to go are the regulated guys with legitimate storefronts open in Michigan malls where you can walk in and talk and hold accountable,” Wszolek said. “There is a huge unregulated industry out there. “
Payday lenders market short-term loans as a quick fix, but they can often put borrowers in a worse financial position than ever before, said Michigan Habitat for Humanity president Sandra Pearson.
“We agree that families and individuals sometimes need to access small loans, but they need an option that helps them and doesn’t try to hide what it is,” Pearson said. “There is only one commonly understood term for this type of loan, and they are called payday loans.”
The board decided on consolidated wording that included the term “payday loans” and made it clear that the petition would only impact these loans.
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