LANSING, Mich (AP) — A coalition that wants voters to decide how Michigan should cap interest rates on payday loans won approval Tuesday of its summary language for a petition to put the issue on the November 2022 ballot.

Members of Michiganders for Fair Lending told the Board of State Canvassers that payday loans — short-term loans with high interest rates — often trap people in a cycle of debt because current state law allows interest rates equivalent to a more than 370% annual percentage rate.

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The petition calls for a prohibition on fees on payday loans that total more than 36% APR.

State law allows payday lenders to charge up to 15% on the first $100 of a payday loan, 14% on the second $100, 13% on the third $100, 12% on the fourth $100, and 11% on the fifth and sixth $100. If a person takes out a $100 loan and takes two weeks to pay it back, they can be charged up to $15 a day, an APR of 391%, more than 10 times the coalition’s proposed cap.

Payday loans are capped at $600 per loan, not including incurred fees.

The ballot initiative would give Michigan residents an opportunity to have a say in how high interest rates on these short-term loans should be, coalition member Dallas Lenear, pastor at Journey Church of Grand Rapids, told the board.

Lenear and other supporters of the petition argued for clear language in the petition summary, using the term “payday loans” consistently, instead of “deferred present service transactions”.

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The petition would require 340,047 signatures to be placed on the November ballot. It would first go to the Legislature and then — if lawmakers did not pass it — to voters.

Republican political commenter Fred Wszolek said the limits on payday loans seem like a good idea on a surface level, but that capping the fees could force legitimate lenders out of the market leaving illegal lenders as the only option for those in need of a short-term loan.

“The only ones that will go away are the regulated guys with legit storefronts open in Michigan strip malls that you can walk in and talk to and hold accountable,” Wszolek said. “There’s a huge unregulated industry out there.”

Payday lenders market short-term loans as a quick fix, but they often can land borrowers in a worse financial status than before, Habitat for Humanity of Michigan President Sandra Pearson said.

“We agree that families and individuals need access to small loans at times, but they need an option that helps them out, and doesn’t try to hide what it is,” Pearson said. “There is only one commonly understood term for this type of loan, and they are called payday loans.”

The board decided on summary language that includes the term “payday loans” and that made it clear the petition would solely impact those loans.

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