(Lansing, Mich.) — Despite federal statistics indicating that the practice of payday lending places low-income residents in the way of financial harm, the Michigan House Committee on Regulatory Reform passed legislation this morning that expands payday lending in the state by allowing consumers to borrow additional money at unreasonable rates.
In 2005, Michigan legalized the issuance of high-interest, short term, payday loans. Since that time, data about these loans, collected by the federal Consumer Financial Protection Bureau, has shown that over 70 percent of borrowers take out another loan the same day one is paid off. Some 90 percent of borrowers take out another loan within 60 days.
House Bill 5097, sponsored by Rep. Brandt Iden (R-Oshtemo) would offer another, similarly high interest loan for up to $2,500 with no end date to the loan. Tom Hickson, Michigan Catholic Conference Vice President for Public Policy, raised concerns after the committee hearing about the legislation’s impact on low-income residents:
“It is unfortunate that legislation to expand payday lending, without proper consumer protections, passed committee today. We are concerned about the impact that this 132 percent interest rate loan will have on poor people in the State of Michigan. Data has shown that existing loans for $600 keep people in a cycle of debt. Increasing that amount to $2,500 will not help people climb out of poverty, but rather will make things worse.
“It is our hope that if this legislation moves further through the process it can be amended to include a more reasonable interest rate and an honest evaluation of someone’s ability to repay the loan. MCC stands ready to work with the legislature to achieve common sense legislation that protects those who are in a vulnerable financial position.”
Michigan Catholic Conference is the official public policy voice of the Catholic Church in this state.
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