Michigan group gathers signatures to curb payday loans

LANSING, Mich. (AP) — A Michigan group on Wednesday began collecting signatures for a ballot proposal to limit interest and fees charged by payday lenders, which they said lock low-income borrowers into debt cycles.

Michiganders for Fair Lending needs about 340,000 valid voter signatures by June. If enough are collected, the measure would go to the Legislature, where efforts to curb payday loans have stalled. If lawmakers didn’t act, the public would vote on the initiative in November.

It would limit such loans, known as deferred presentation services transactions, to an annual interest rate of 36%. Depending on the group, they typically correspond to 370%.

Payday loans are short-term, high-cost loans, generally for $500 or less, that typically mature on the borrower’s next payday.

Jessica AcMoody, policy director at the Community Economic Development Association of Michigan, said payday loan customers take out an average of 10 loans a year and reborrow 70% the day they pay off a previous loan.

“This cycle causes significant financial damage to families caught in a debt trap — including difficulties in paying for basic living expenses and medical needs (and) repeated overdraft charges, often leading to closed bank accounts and removing the borrower entirely from the mainstream banking system” , she said. “By lowering the interest rate cap on this predatory loan, we can keep our most vulnerable neighbors out of an endless cycle of debt.”

Voters in at least four states — Nebraska, Montana, Colorado and South Dakota — have capped annual interest rates on payday loans to 36% in recent years. Fourteen other states also have laws capping short-term interest rates to 36% or less.

The election committee had raised $25,000 by December 31. All of it came from the Sixteen Thirty Fund, a Washington, DC-based group supported by anonymous left-wing donors. The fund, which also contributed $55,000 in in-kind contributions, has previously allocated millions of dollars to Michigan election campaigns and could prove instrumental.

An opposition group, Safe Lending Michigan, was formed to oppose the initiative.

Spokesman Patrick Meyers called the proposal “extremely misleading” and said it would effectively ban state-regulated payday loans.

“Michigan-based lenders with Michigan businesses and Michigan employees will be put out of business,” he said. “Like any suggestion that sounds too good to be true, this one is worthy and not worthy of your signature.”


Follow David Eggert below https://twitter.com/DavidEggert00

Comments are closed.