(The Center Square) – The Michigan Bureau of State Solicitors failed to certify a ballot initiative to place on the November ballot a question about whether the annual percentage rate for payday loans and fee should be capped at 36%.
The Michiganders for Fair Lending petition campaign submitted 392,000 signatures, exceeding the required number of 340,047 valid signatures required to reach the ballot, but an Elections Office report who used random sampling estimated that only 274,668 signatures were valid.
Michiganders for Fair Lending spokesman Josh Hovey said the group was “disappointed” the campaign failed, but is committed to payday loan reform.
“Thanks to this year’s efforts, the Fair Lending Coalition is bigger and stronger than ever,” Hovey said in a statement. “Our campaign has spoken to more than half a million people in Michigan about the need to stop payday lenders from preying on vulnerable people in this state.”
Payday lenders offer “unsecured” debt, which means the borrower does not provide collateral such as a car or house which is confiscated if the borrower does not repay the loan. However, payday lenders charge much higher interest and other fees.
About 18 states plus the District of Columbia have capped payday loan rates at 36% APR or less. Voters in Nebraska, Colorado, South Dakota and Montana all capped the payday loan rate per ballot measure with more than 70% approval.
For example, The Pew Charitable Trust sheet said:
- The average payday loan borrower is in debt for five months of the year, spending an average of $520 in fees to borrow $375 repeatedly.
- The average fee at a storefront lending business is $55 per two weeks.
- Payday loans are usually due in two weeks and are tied to the borrower’s payment cycle. Payday lenders have direct access to a borrower’s checking account on payday, either electronically or with a post-dated check, which means the payday lender can draw on the borrower’s income before the other lenders or bills are paid.
- A borrower must have a checking account and income to obtain a payday loan. Average borrowers earn around $30,000 a year and 58% struggle to meet their monthly expenses.
The collection of signatures for ballot proposals and the placement of candidates on the ballot have been disrupted by widespread signature fraud. In May, the Elections Office kicked five GOP gubernatorial candidates on the ballot because they failed to submit 15,000 valid signatures.
The coalition argues that payday loans are predatory.
About 70% of payday borrowers in Michigan re-borrow on the same day, they repay a previous loan. Research from the Consumer Financial Protection Bureau (CFPB) shows that the average payday loan borrower ends up taking out 10 loans in a year.