Michigan group collects signatures to cap interest and fees on short-term loans
LANSING, Mich. – A Michigan group began collecting signatures on Wednesday for a ballot proposal to limit interest and fees charged by payday lenders that they say trap low-income borrowers in cycles of debt.
Michiganders for Fair Lending needs approximately 340,000 valid voter signatures by June. If enough are gathered, the measure would go to the Legislative Assembly, where efforts to curb payday loans have stalled. If lawmakers do not act, the public will vote on the initiative in November.
It would cap these loans, known as deferred presentation service transactions, at an annual interest rate of 36%. They generally amount to 370% depending on the group.
Payday loans are short-term, high-cost loans, typically $500 or less, that are usually due on the borrower’s next payday.
Jessica AcMoody, director of policy at the Community Economic Development Association of Michigan, said payday loan customers take out an average of 10 loans a year and 70% re-borrow the day they repay a previous loan.
“This cycle causes significant financial damage to families trapped in debt – including difficulty paying basic living expenses and medical needs (and) repeated overdraft charges, which often lead to account closures. banks, completely distancing the borrower from the traditional banking system,” she says. “By lowering the rate cap on this predatory lending, we can keep our most vulnerable neighbors out of a cycle of bottomless debt.”
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Voters in at least four states — Nebraska, Montana, Colorado and South Dakota — have capped annual interest rates on payday loans at 36% in recent years. Fourteen other states also have laws limiting short-term loan rates to 36% or less.
The voting committee had raised $25,000 by December 31. It all came from the Sixteen Thirty Fund, a Washington, DC-based group supported by anonymous left-leaning donors. The fund, which also contributed $55,000 of in-kind research, has already funneled millions of dollars to Michigan’s ballot campaigns and could prove instrumental.
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An opposition group, Safe Lending Michigan, was formed to counter the initiative.
Spokesman Patrick Meyers called the proposal “grossly misleading” and said it would effectively ban state-regulated payday loans.
“Michigan-based lenders with Michigan storefronts and Michigan employees will be put out of business,” he said. “Like any proposition that seems too good to be true, this one is and isn’t worth your signature.”