The Michiganders for Fair Lending ballot campaign officially launched its petition-raising effort today to place a question on the ballot that would prevent payday lenders from charging predatory interest rates. In Michigan, the typical payday loan carries the equivalent of a 370% annual percentage rate (APR). Michiganders for Fair Lending is looking to ask about the November ballot that would cap payday loans at a maximum of 36% APR.
“Payday lenders are targeting Michigan’s most vulnerable communities by offering quick cash that traps people in an endless cycle of debt with outrageously high interest rates,” said Josh Hovey, Michiganders for Fair Lending spokesperson. “State lawmakers have been urged for years to end predatory lending practices. People harmed by these loans cannot afford to wait any longer. That’s why we’re putting the issue directly to voters in November. »
While payday loans are marketed as “short-term,” the vast majority of borrowers are caught in a cycle of long-term debt. About 70% of payday borrowers in Michigan re-borrow the same day they repay a previous loan. Research from the Consumer Financial Protection Bureau (CFPB) shows that the average payday loan borrower ends up taking out 10 loans in a year.
In addition to charging extremely high fees and interest rates, payday lenders are not required to ensure that a loan is affordable for a borrower. Payday lenders get direct access to the borrower’s bank account and collect their payment before the borrower can ensure they have enough funds to pay for necessities like rent and groceries.
“Stopping predatory lending is an issue in Michigan that resonates across all parties, geographies, age and income levels. Even in today’s divisive climate, this is an issue the vast majority of people can agree on,” said Jessica AcMoody, director of policy at the Community Economic Development Association of Michigan.
Michigan would join 18 states plus the District of Columbia that have capped payday loan rates at 36% APR or less. Voters in Nebraska, Colorado, South Dakotaand Montana all payday loan rate caps passed overwhelmingly by vote with over 70% approval.
The 36% APR cap used by many states is similar to national military loan law. This law sets the same interest rate ceiling for lenders serving active duty members and dependents. The national law was passed in 2006 after the military found that payday lenders crowded around military bases were impacting the quality of life of military families.
“We must give all Michiganders the same protection from predatory loans that our active duty military families receive. No one should be allowed to charge crippling interest rates that hurt quality of life and limit economic opportunity for Michigan families,” AcMoody said.
AcMoody noted that many of the groups supporting Michiganders for Fair Lending are the same organizations that have been advocating for years inside the state capitol for payday loan reform. The diverse and growing campaign coalition includes:
- Black Impact Collab
- Civil Justice Center
- responsible credit center
- Community Economic Development Association of Michigan (CEDAM)
- habitat for humanity
- Caisse Populaire du Lac Trust
- Michigan League for Public Policy
- Grand Rapids NAACP
- GREEN project
- United Way of Michigan
Michiganders for Fair Lending will begin collecting 340,047 valid petition signatures needed to place the ballot proposal on the November ballot. Petitions must be filed by 5 p.m. on June 1.