Together, we can stop predatory lending.

370% is just too high!

About

Michiganders for Fair Lending is a bipartisan coalition of Michigan leaders and community members from all corners of the state. Our coalition of supporters includes faith leaders, military veterans, community groups, civil rights advocates and more, all united in their commitment to end predatory lending practices.

In Michigan, payday lenders charge triple-digit interest rates. The typical payday loan carries a 370% annual rate. This measure would ensure payday lenders cannot charge more than 36% APR. 

This popular, pro-consumer reform has been passed in many other states, where former borrowers report being much better off. A large coalition of Michigan organizations have been working for years to lower payday lending interest rates, which cause great financial harm to hardworking Michiganders.

Michiganders for Fair Lending is in the process of gathering 340,047 valid signatures to place this payday lending reform measure on the November 2022 ballot.

Why are we committed to payday lending reform?

Currently, payday lenders in Michigan charge anywhere between 175.2% APR and 402.8% APR. A typical payday loan in Michigan comes with an APR of 370%. Each year, over $103 million dollars are drained from the pockets of Michiganders who can least afford it.

These loans are marketed as “short term,” but that’s not how they work in practice. The vast majority of borrowers are caught in a long-term debt cycle.

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 is stuck in 10 loans over the course of a year.

The debt trap is the core of the payday lenders’ business model. 75% of payday lenders’ revenue comes from borrowers caught in 10 loans per year.

Payday lenders are not required to make sure a loan is affordable to a borrower. In fact, affordability isn’t relevant to them because payday lenders are always the first paid – they gain the ability to take money directly out of a borrower’s bank account on payday, before the borrower can pay for necessities like rent and groceries.

Payday lenders take a tough economic situation and turn it into a catastrophe.

Payday lenders claim that they offer access to credit when in fact, the data shows that what they actually offer is access to debt for people who can least afford it. For example, here’s a borrower story from rural Michigan.

Borrowers routinely find that they cannot cover basic living expenses. They often lose their bank accounts as a result of multiple insufficient funds and overdraft fees, and are more likely to have to file for bankruptcy than non-borrowers with similar financial circumstances. 

This reform is popular; it’s common; and it’s working:

This is an issue that has overwhelming support across the state (across parties, geographic regions, age and income levels). In a moment where there is so much division, this is one issue that Republicans, Democrats and Independents all agree on. 

18 states plus the District of Columbia 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 reform is working. The documented experience of consumers in states with a 36% rate cap on payday loans reveals former borrowers have numerous ways to deal with a cash flow shortfall (credit and non‐credit options) and suffer fewer negative financial consequences such as bankruptcy and involuntary account closure. Follow up focus groups and polls show that there is strong, continued support for rate caps after passage.

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. 

There are stories from across our state of borrowers who have gotten caught in the payday
lending trap; from single mothers to veterans, from the elderly to college-aged students. We
also know that Michigan payday lenders disproportionately target communities of color and
rural communities. For example, data shows that there are 5.6 payday stores per 100,000
people in Michigan. In Black communities, that figure is 25% higher and in Latino communities
the number of payday lending stores is 18% higher.

What will the ballot process look like?

Michiganders for Fair Lending must submit to the Secretary of State 340,047 petition signatures from registered Michigan voters before the June 1 deadline. 

Once the petition signatures are validated by the Board of State Canvassers, the Legislature will then have 40 days to approve the initiative as submitted by Michiganders for Fair Lending. If the legislature rejects our fair lending proposal, the issue will be placed on the November ballot for voters to decide.