The Michiganders for Fair Lending ballot campaign officially launched its petition drive effort today to place a question on the ballot that would stop 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 seeking to place a question on the November ballot that would cap payday loans at no more than 36% APR.
“Payday lenders target Michigan’s most vulnerable communities by offering quick cash that traps people into an endless cycle of debt with outrageously high interest rates,” said Michiganders for Fair Lending Spokesperson Josh Hovey. “State lawmakers have been urged for years to put a stop to predatory lending practices. The people being harmed by these loans cannot afford to wait any longer. That’s why we’re bringing the issue directly to voters this November.”
While payday loans are marketed as “short term,” the vast majority of borrowers get caught in a long-term debt cycle. Roughly 70% of payday borrowers in Michigan reborrow the same day they pay off a previous loan. Research from the Consumer Financial Protection Bureau (CFPB) shows that the average payday loan borrower ends up taking out 10 loans over the course of a year.
In addition to charging extremely high fees and interest rates, Payday lenders are not required to make sure a loan is affordable to a borrower. Payday lenders gain direct access to the borrower’s bank account and take 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 parties, geographic regions, age and income levels. Even in the divisive climate of today, this is one issue that the vast majority of people can agree on,” said Jessica AcMoody, policy director 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 Dakota, and Montana all overwhelmingly enacted payday loan rate caps by ballot measure with more than 70% approval.
The 36% APR cap used by many states is similar to the national Military Lending Act. That act sets the same interest rate cap on lenders serving active-duty service 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 need to give all Michiganders the same protection from predatory loans that our active-duty military families receive. Nobody should be allowed to charge crippling interest rates that harm the quality of life and restrict economic opportunity for Michigan families,” said AcMoody.
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 lending reform. The campaign’s diverse and growing coalition includes:
- ACLU-Michigan
- Black Impact Collaborative
- Center for Civil Justice
- Center for Responsible Lending
- Community Economic Development Association of Michigan (CEDAM)
- Habitat for Humanity
- Lake Trust Credit Union
- Michigan League for Public Policy
- NAACP of Grand Rapids
- Project GREEN
- United Way of Michigan
Michiganders for Fair Lending will begin collecting 340,047 valid petition signatures required to place the ballot proposal on the November ballot. Petitions are due by 5 p.m. on June 1.
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