Michigan Considers Bill to Loosen Payday Loan Laws

Payday loans are a debt sentence to low-income families across Michigan. But while federal regulators are trying to find ways to crack down on the industry, the Michigan Legislature is considering just the opposite. Two new bills would loosen payday loan laws and make it easier for lenders to take advantage of poor Michigan families.

Payday loans are short-term, high-interest loans that low-income families use to make ends meet between paychecks. But between interest rates and fees, borrowers can often end up paying more than double what they received.

That's why the Consumer Financial Protection Bureau (CFPB) is in the process of creating regulations, which it will likely release later this year. The regulations will most likely limit interest rates and require lenders to consider a borrower's ability to pay before issuing a loan.

But while the CFPB is looking out for the financial futures of poor families, one Michigan legislator would rather look out for the bottom line. State Senator David Robertson, a Republican from Waterford and parts of Oakland and Genesee counties, has proposed two bills, SB 842 and SB 843 which together would loosen the state's payday loan laws.

The laws would allow payday lenders to work through “credit service organizations” or CSOs. These organizations serve as third parties going between the consumer and the lender. CSOs usually work directly with just one lender, which is often owned by the same people. They add a service fee to the lender's already high rate, which can push the lender's annual interest rate well above 300%. Debbi Adams, of Michigan United, told The Detroit News:

“This bill is predatory payday and car title lending on steroids. It is designed to extract even more money out of those families that can least afford it. We need to be ending these predatory debt trap practices, not inventing new ones.”

Current Michigan law caps fees and rates on payday loans, limits short-term loans to 31 days, and only lets borrowers take out one loan at a time from any one lender, up to two loans total. The law also prohibits lenders from using rollover loans – a tactic that keeps borrowers constantly paying new loan fees to extend their earlier loans.

If Robertson's bills become law, it would allow payday lenders to get around all those limitations, just by using third-party CSOs. It may also allow auto-title loans – letting lenders require a borrower's car title before turning over any money.

So far, Robertson's bills haven't found any co-sponsors. The Senate banking committee has held a hearing, but no other action has been scheduled. All that could change as lobbying groups are being hired by payday lenders doing business in Michigan to try to make their work easier. Don't let Michigan go the wrong way on payday loans. Call your state senator today and tell them to vote against SB 842 and SB 843.

Dani K. Liblang is a consumer protection attorney at The Liblang Law Firm. She represents consumers facing collections harassment. If you are facing unending collections calls, contact The Liblang Law Firm today for a free consultation.