LANSING – A coalition of consumer and civil rights groups, which hopes to tighten rules for the pre-payday loan industry in Michigan, began efforts on Wednesday to collect signatures to bring the issue to the attention of voters in November.
Michigan for fair lendingthe organization, based in Grand Rapids, is leading a voting initiative that would limit the maximum commission and interest rate that a payday loan lender can charge in Michigan at 36 percent annually. This measure will also allow the Attorney General to prosecute creditors who exceed this limit.
Payday loans are common short-term loans with high interest rates according to the Bureau of Consumer Protection the next day of payment of wages to the borrower.
Michigan Law allows the payer to charge a commission and interest of up to 15 percent of the first $ 100, 14 percent of the second $ 100, 13 percent of the third $ 100, 12 percent of the fourth $ 100, and 11 percent of the fifth and sixth $ 100.
This means that those who borrow $ 100 can be charged up to $ 15 if they repay the loan within two weeks. In this case, the annual interest rate – a measure of how much the loan will cost the borrower a year – is 391 percent, almost 10 times higher than in Michigan for the proposed limit of 36 percent.
Coalition members say the vote will limit predatory lending and help borrowers who are trapped in debt due to high interest rates and a lack of government control over lending practices.
“While the industry marks its pre-payday loans as a quick fix, these loans take away a person’s financial capabilities and put him in a worse position than when they started,” said Ted Fiennes, executive director of Habitat for Humanity in Michigan on Wednesday. press conference.
Legislation aimed at limiting interest rates on payday loans has stalled in the Michigan legislature in recent years, Jessica EkMudi, political director of the Michigan Economic Development Coalition member coalition, told a news conference on Wednesday.
Senate Finance Committee Chairman Jim Runestad, R-White Lake, whose committee would have heard such legislation if it had reached the Senate, said he believes the maximum interest rate should be lowered, but he is not sure how much.
“It seems like someone who pays almost 400 percent a year is wrong,” Runestad told Bridge Michigan on Wednesday. “I believe that taking 400 percent a year is usury. It’s like a broom. “
Opponents of such initiatives across the country have expressed concern that the measure would force legitimate creditors to abandon business and cut off lifelines for borrowers in need of short-term cash.
“I am concerned that limiting interest rates on short-term loans in general will deprive access to emergency funds for the most vulnerable Americans,” said Diego Sualaga, an analyst at the CATO Institute, a libertarian think tank. hearings in Congress in April 2019. “Setting limits on loans in small dollars today risks leaving vulnerable families at the mercy of family members or unscrupulous suppliers or otherwise forcing them to do without necessities.”
In Michigan, payday loans are more likely to be concentrated in colored communities, where residents typically take home less money than white Michigans, according to Mapping analysis of 2018 by the Center for Responsible Lendinga nonprofit organization from North Carolina advocating for short-term loan borrowers and a coalition member advocating for the Michigan election.
As of June 2017, there were 5.6 pre-pay credit stores per 100,000 people in Michigan, analysis showed. But in the census tracts, where blacks and Latinos make up more than half the population, there were 6.6 shops per 100,000 people.
Most pre-payday borrowers tend to return to borrow more. About 70 percent of Michigan borrowers take out another loan the same day they repay the last one, report of the Center for Responsible Lending for 2016.
Some borrowers are merging their bank accounts to repay loan payments, leaving no savings to cover rental or food costs, and so have to take out another loan to make ends meet, AcMoody said.
“This cycle is causing significant financial damage to families trapped in debt, including difficulties in paying for basic living expenses and medical needs,” she said.
Why lower the ceiling to 36 percent? The figure is taken from the 2006 Military Lending Act, which limited the annual interest rate on payday loans to 36 percent for servicemen and their dependentssaid Gabriela Bartlow, Fr. financial coach for veterans and families in Macomb Countyduring a press conference on Wednesday.
The military law was passed after the Department of Defense found that payday creditors “filled around military bases affect the readiness and reduce the quality of life of military families,” Bartlow said.
A total of 18 states and Washington, D.C., have adopted a 36 percent interest limit on payday loans, according to Responsible Lending Center.
Addressing concerns that the limit could force lenders to pay wages to stop, AcMoody said the coalition does not hope to close the lending industry, but rather curb predatory lending.
“Any lender who is willing to lend at 36 percent per annum can continue to lend,” she said.
The coalition includes:
- Black Impact Collaborative
- Center for Civil Justice
- Responsible Lending Center
- Michigan Community Economic Development Association (CEDAM)
- Habitat of mankind
- Credit Union Lake Trust
- Michigan League of Public Policy
- NAACP of Grand Rapids
- GREEN project
- The United Way of Michigan
According to campaign documents submitted in January, the Michiganders for Fair Lending Election Commission raised $ 25,056. Of that, $ 25,000 came from the Sixteen Thirty Fund, a liberal DC-based liberal group Dark Money, not required to disclose its donors.
Josh Howie, a spokesman for the Michigan Coalition, said Wednesday that funds from the Sixteen Thirty Foundation helped start the campaign, and the initiative committee for the vote will follow the state’s campaign finance law “to the letter.”
The election commission must collect 340,047 signatures to place a proposal for voting in November, and it will become law if a simple majority of voters approve.