Consumer advocates say strong reforms are needed to better regulate Michigan’s payday loan industry, and they may well have the data to prove it.
A new report from the Center for Responsible Lending found that over the past five years, payday lenders have collected more than half a billion dollars in fees from Michigan consumers, including $ 94 million in 2016. triple digits, low customers income often have trouble repaying their loans on time.
“Average fees are currently about 340 percent of APR. And 91 percent of payday loan borrowers in Michigan are borrowing again within 60 days,” AcMoody said. “So what we really need are better restrictions on these loans.”
The report says more than two-thirds of payday loan stores in Michigan are owned by out-of-state lenders, which AcMoody says means millions of dollars leave Michigan every year. According to the Consumer Financial Protection Bureau, the average payday loan customer takes out 10 loans over a 12-month period.
AcMoody said the research also reveals that payday lenders specifically target Michigan communities with higher concentrations of people of color and those with lower incomes.
“Payday loans are an expensive solution to a short-term problem and they are really designed to take advantage of the financial vulnerability of the borrower,” she said. “So what they’re doing is moving into communities where they can reach out to the financially vulnerable. ”
Beyond educating consumers about payday loans, AcMoody argues that policymakers need to review APR caps and reconsider measures to expand payday loan offerings. “A package of invoices in the Senate would expand payday offerings and authorize loans of up to $ 2,500 over two years with fees equal to up to 180% of APR, ”AcMoody said. “So a $ 2,500 loan would end up costing the consumer over $ 8,000 by the time they pay it off.”
15 states and the District of Columbia have a cap rate of 36% or less on payday loans. AcMoody said alternative loan products are also needed to help people who need short-term financial help.
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