FOR IMMEDIATE RELEASE
November 1, 2023
Contact: Jessica AcMoody, CEDAM
In line with the Military Lending Act, the legislation caps payday loans at an APR of 36%
LANSING, MI – Today, Senator Sarah Anthony (D-21) and Representative Abraham Aiyash (D-9) introduced legislation (SB 632 and HB 5290) that would cap annual interest rates on payday loans at 36%, inclusive of fees.
“Marketed as quick-cash, payday loans are designed to trap borrowers in a high-cost cycle of debt,” said Jessica AcMoody, policy director at CEDAM. “With fees that equate to interest rates as high as 390%, these loans put customers further behind on their bills, often causing overdraft and bounced check fees, closed bank accounts, and even bankruptcy. Payday lenders rely on this cycle that devastates their customers.”
Predatory payday loans have dire effects on Michigan’s economy and communities:
- Seventy percent of our state’s borrowers reborrow on the same day a previous loan is paid off.
- In Michigan, fees for the predatory loans extract more than $67 million annually from struggling low-income families to payday lenders.
- Two thirds of Michigan payday loan stores are operated by companies with out-of-state headquarters.
- Payday loan stores in Michigan are disproportionately located in low-income neighborhoods and communities of color
- The Consumer Financial Protection Bureau found the average borrower has 10 or more of these high-cost loans per year.
“Payday lending is a financial collision at the intersection of legitimate need and perverse greed,” said Dallas Lenear, executive director at Project Green. “A rate cap will make the economic streets safer for hardworking Michiganders.”
If the measure passes, Michigan would become the 21st state plus D.C. that stops the payday lending debt trap by enforcing an interest rate cap of 36% or less. Congress capped loans to active-duty military at 36% as well, after the Department of Defense reported that payday loans were affecting military readiness by causing service members’ families significant financial difficulties.