In a stunning defeat for Michiganders for Fair Lending, their initiative to regulate the amount of interest payday loan companies can charge likely won't end up on the ballot this November. The reason is that the state Bureau of Elections found there were not enough valid signatures for the proposal.
The group submitted 392,009 signatures to get the initiative on the ballot this year. However, as the bureau evaluated the signatures, some issues began to creep up, MLive reports. 9,000 signatures were dismissed based on a preliminary look by the Bureau of Elections, and they also believed a deeper look should be taken at some of the others.
When the Bureau of Elections took a sample of 522 signatures, they found that 122 or 23% of them were invalid. The most common reason a signature was considered invalid was that the person was not registered to vote.
MLive reports that Safe Lending Michigan, a group that opposed the initiative, questioned another 25 signatures over technical issues, which included a person signing multiple times or missing information from the person.
That left the group with 274,668 signatures after the invalid ones were removed. While a sizable amount shows interest in the petition making it to the ballot, it fell short of the legally required 340,047.
This led the Bureau of Elections to recommend the Board of Canvassers not certify that initiative at its meeting on July 21, 2022.
Michiganders for Fair Lending did not try to rehabilitate any of the signatures with the Bureau of Elections, though they may do so at the Board of Canvassers meeting.
Josh Hovey, the spokesman for the group, released this statement: "Michiganders for Fair Lending is disappointed in the staff report finding that this year's petition drive fell short of the signature requirement..."
What The Petition Said
Payday loans don't require a credit check and are usually approved within minutes. This seems like a good thing for families battling inflation and rising costs of necessities. However, the interest rate on these loans is estimated to be 370% per year.
The cycle involves a borrower needing the money, getting it, then repaying it but needing another loan to stay afloat. A vicious cycle begins, as the borrower consistently has to pay the big interest on the loans each time.
Currently, there are some protections under Michigan law. A borrower may not have more than two payday loans with different companies at any time. Lenders must also allow their Michigan customers to split their loan repayments into three payments.
However, many people don't know the law and often attempt to pay the entire loan back all at once, ensuring the cycle of borrowing and paying continues.
WXYZ broke down the interest rate and how much people are paying. They said if a person borrows $100 for 14 days, it breaks down to more than $1 a day. For someone borrowing $500, that is $70 over two weeks or more than 390% interest.
That's where Michiganders for Fair Lending stepped in. They argued that it is fair and even necessary for a loan company to charge interest. Still, they claimed that the payday loan companies are preying on people's need for money and going overboard in what they charge.
Economic Or Predatory
Hovey told WXYZ that there are too many payday loan stores, "There are more payday loan stores than there are McDonald's." He pointed out that Michigan residents pay more than $100 million in interest payments.
According to CNN Business, short-term subprime lender Enova CEO David Fisher told shareholders that his company was leaning into the economic factors because they are good for business. He also shared that 44% of the business came from new customers in the previous quarter.
Fisher also said that the company was meaningfully marketed and advertising to markets where they could attract new customers.
Big payday loan companies like Check N Go and Advanced America didn't comment on the petition. The website for Advanced America's frequently asked questions states that they could not stay in business if the state capped the interest rate.
From the website: "If we charged lower fees, we would not generate enough income to pay for basic business expenses, such as rent, utilities and wages. If we were to charge an APR of 36 percent, as some of our critics have suggested, that would mean customers pay a fee of $1.38 per $100 borrowed. No business — not a credit union, not a bank — can lend money for 10 cents a day for a two-week loan term without being subsidized."
However, Hovey counters that capping the rates would be more than fair. He told WXYZ: "no I think any business should be able to make money with 36% interest," he continued, "That is not an unreasonable thing to be asking to not prey on people."