LANSING, Mich. (AP) — A Michigan group began collecting signatures on Wednesday for a ballot proposal aimed at limiting the interest and fees charged by payday lenders they say are trapping low-income borrowers in debt cycles.
Michiganders for Fair Lending needs approximately 340,000 valid voter signatures by June. If enough are mustered, the measure would go to the Legislature, where efforts to curb payday lending 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 cap rate on this predatory lending, we can keep our most vulnerable neighbors out of a cycle of bottomless debt.”
Voters in at least three states — Nebraska, Colorado and South Dakota — have capped annual interest rates on payday loans at 36% in recent years. Fifteen other states also have laws limiting short-term loan rates to 36% or less.