(The Center Square) – The group Michiganders for Fair Lending argues that payday loans are predatory.
The coalition has started a petition to limit interest on payday loans to an annual percentage rate (APR) of 36%.
“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 Michiganders spokesperson Josh Hovey. for Fair Lending, in a press release. “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. »
People who use payday loans do so voluntarily. Many cash-strapped people do not qualify for a traditional bank loan. Although payday loans have high interest rates that eat up a large percentage of a low income, it is still better than borrowing from a real loan shark or an organized crime that operates outside the law and could break the bones of delinquent borrowers instead of bank accounts.
Payday lenders offer “unsecured” debt, which means the borrower does not provide collateral such as a car or house which is confiscated if the borrower does not repay the loan. However, payday lenders charge much higher interest and other fees.
For example, The Pew Charitable Trust sheet said:
- The average payday loan borrower is in debt for five months of the year, spending an average of $520 in fees to borrow $375 repeatedly.
- The average fee at a storefront lending business is $55 per two weeks.
- Payday loans are usually due in two weeks and are tied to the borrower’s payment cycle. Payday lenders have direct access to a borrower’s checking account on payday, either electronically or with a post-dated check, which means the payday lender can draw on the borrower’s income before the other lenders or bills are paid.
- A borrower must have a checking account and income to obtain a payday loan. Average borrowers earn around $30,000 a year and 58% struggle to meet their monthly expenses.
About 70% of payday borrowers in Michigan re-borrow on 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.
Jessica AcMoody, director of policy at the Community Economic Development Association of Michigan, said it was a common goal.
“Stopping predatory lending is an issue in Michigan that resonates across parties, geographies, age and income levels,” AcMoody said in a statement. “Even in today’s divisive climate, this is an issue the vast majority of people can agree on.”
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 Dakota and Montana all capped the payday loan rate per ballot measure with more than 70% approval.
The 36% APR cap is similar to the National Military Loans Act which caps the same interest rate for active duty members and dependents.
“We need to give all Michiganders the same predatory loan protection 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.
The 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 submitted by 5 p.m. on June 1.