News Release: Catholic Conference Applauds Senate Vote to Protect Poor from Predatory Payday Lending

MCC Opposes Unjust Practices that Take Advantage of Low-Income Individuals

A payday loan application form attached to a clipboard next to a laptop and a cup of coffee

March 14, 2024

(Lansing, Mich.) — Michigan Catholic Conference (MCC) commends state senators who provided bipartisan support today to legislation that would stop payday lenders in Michigan from charging exorbitant interest and fees on short-term loans that ensnare low-income customers in a cycle of debt.

Senate Bill 632, sponsored by Sen. Sarah Anthony, would limit the annual percentage rate offered on a payday loan to 36%. The legislation will better protect customers who obtain a payday loan to cover immediate needs from getting trapped into taking out more loans to pay off existing debt.

Under current Michigan law, consumers can borrow up to $600 and typically must repay it by their next paycheck, plus a service fee that can amount to nearly 400% in interest on an annual basis. Most payday loans are used by people who are already in or near poverty, and payday lenders often target low-income neighborhoods for locating their storefronts.

The high interest on the loans and the short payback term can make it difficult for borrowers to repay them, which leads to individuals taking on more debt. Data indicate that 70% of payday loan borrowers take out another loan the same day they repay a loan, and 90% take out another payday loan within 60 days.

The Catholic Church teaches against unjust business practices that prey on the poor and vulnerable, as both Pope Francis and Pope Benedict XVI have spoken out against excessive interest rates. MCC has for several years been engaged as a leader in public policy advocacy to oppose the expansion of the payday lending industry in Michigan and to limit its predatory impact on the poor and vulnerable of the state.

“People in difficult financial circumstances looking for short-term help should be protected from predatory lending practices designed to keep them in debt,” said Tom Hickson, vice president for public policy and advocacy for MCC. “If the federal government and numerous other states have seen fit to protect borrowers with a rate cap, Michigan should do the same for our residents.”

For lawmakers and others who believe payday loans are a necessary option for people to access cash on a short-term basis, MCC has pointed out that there are numerous lower-interest alternatives to payday loans available, including from major banks, local credit unions, and charitable organizations.

In addition to Senate Bill 632, the Senate today also approved House Bill 4343, which improves transparency around payday lending by requiring the state to publish reports on industry practices. MCC supported this legislation when it was introduced in a prior session so that lawmakers and the public can better understand the industry’s impact on the poor and vulnerable.

Both bills now head to the state House for further consideration.

Michigan Catholic Conference is the official public policy voice of the Catholic Church in this state.

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