Stop payday lenders from overcharging

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In a time of great struggle for Michigan families, we have the opportunity to take a simple but powerful, popular and positive action. Currently, predatory payday lenders in our state charge triple-digit interest rates that exceed 370% APR. A proposed measure seeking a place on the November ballot would make sure they cannot charge more than 36% annually.

Payday lending works like this: A person short on cash takes a loan of a few hundred dollars that is typically due to be paid back on their next payday. The payday lending industry markets these loans as a “quick fix,” but the reality is that they operate as a long-term debt trap.

That’s because the terms of the payday loan are designed to create a long-term cycle, requiring full payment plus fees and requiring direct access to the borrower’s bank account to collect it. Routinely, the borrower finds themselves unable to meet those terms and becomes stuck in a downward spiral of recurring debt that lasts months and sometimes even years. The Consumer Financial Protection Bureau found that the average payday loan borrower takes out 10 loans in a year; and in Michigan, 70% of payday loans are taken out on the same day as the previous loan is repaid.

What’s marketed as a “quick fix” is actually a debt trap by design. Payday lenders depend on this trap to feed their wealth-stripping machine.

The harms caused by this practice are significant. Every high-interest dollar that goes to a payday lender is one dollar less that stays in our community. Payday loan users end up behind on utilities and other bills. They are unable to shop at local businesses or buy their children birthday presents. Oftentimes, their credit gets ruined, and some even lose their bank accounts because of multiple insufficient funds fees.

As the executive director of a local financial empowerment organization (Project GREEN) and a pastor, these painful stories are seen far too often. 

Proverbs 22:22 says, “Do not exploit the poor because they are poor …” Yet, that is precisely what predatory payday lenders do here in Michigan. Charging rates like 370% APR is pure exploitation of those who can least afford to pay such inhumane fees.

That is why diverse interest groups are joining together to support a ballot measure reducing interest rates to no more than 36%. Our coalition includes groups concerned about helping working families maintain their ability to fully participate in Michigan’s economy, including consumer advocates, nonprofit organizations, credit unions and our faith communities.

Rate caps have successfully passed in 18 states plus Washington, D.C., several of which were passed by ballot measure. Just recently, Nebraska voters passed a similar measure with over 80% support, while voters in South Dakota and Colorado passed their payday lending reform initiatives with more than 70% support. Michiganders should join the growing number of states that put a swift stop to this exploitation by passing this rate cap on predatory payday loans.

Unfortunately, our state legislature refuses to act on this important issue, even with a strong majority of Michiganders from all parties supporting this commonsense policy. We have been left with no choice other than to take this issue directly to Michigan voters.

You can help make sure that Michigan citizens have an opportunity to raise their collective voice to make a significant difference on how these loans impact people in our community by signing a petition this spring.

Dallas Lenear is the executive director of Project GREEN in Grand Rapids.

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