Stop payday lenders from overcharging

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At a time of great struggle for families in Michigan, we have an opportunity to take simple, yet powerful, popular and positive action. Currently, predatory payday lenders in our state are charging triple digit interest rates that exceed 370% APR. A proposed measure seeking a spot in November’s election would ensure they can’t ask for more than 36% annually.

Payday loans work like this: A cash-strapped person takes out a few hundred dollars’ worth of credit, which usually has to be repaid on their next payday. The payday loan industry markets these loans as a “quick fix,” but the reality is that they act as a long-term debt trap.

That’s because the terms of the payday loan are designed to create a long-term cycle that requires full payment plus fees and direct access to the borrower’s bank account to collect it. Typically, the borrower fails to meet these conditions and falls into a downward spiral of recurring debt that lasts for 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 on the same day the previous loan is repaid.

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

The damage caused by this practice is significant. Every high-yield dollar that goes to a payday lender is one less dollar that stays in our community. Payday loan users end up in arrears on utility bills and other bills. They can’t shop at local stores or buy their kids birthday presents. Often their credit gets ruined and some even lose their bank accounts due to multiple insufficient funds charges.

As 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, “Don’t exploit the poor because they are poor…” Yet that’s exactly what predatory payday lenders are doing here in Michigan. Fee rates such as 370% APR are sheer exploitation of those who can least afford to pay such inhumane fees.

For this reason, various interest groups are banding together to support a voting measure that will bring interest rates down to at most 36% Our coalition includes groups interested in helping working families maintain their ability to participate fully in Michigan’s economy, including consumer advocates, nonprofits, credit unions and our faith communities.

Rate caps were successfully passed in 18 states as well as Washington, DC, several of which passed by vote. Most recently, voters in Nebraska passed a similar measure with over 80% support, while voters in South Dakota and Colorado passed their payday loan reform initiatives with more than 70% support. Michiganders should join the growing number of states quick to put an end to this exploitation by enacting this interest rate cap on predatory payday loans.

Unfortunately, our state legislature refuses to act on this important issue, even when a strong majority of Michiganns from all parties support this sensible policy. We had no choice but to take this issue directly to Michigan voters.

You can help ensure Michigan citizens have the opportunity to raise their collective voice to make a significant difference in how these loans are affecting people in our community by signing a petition this spring.

Dallas Lenear is the General Manager of Project GREEN in Grand Rapids.

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