New Law Could Drive Payday Lenders Out of Michigan

Payday loan centers that offer cash advances to residents who are in a tight spot may be packing up and heading out of Michigan, if new legislation is passed.

Payday Loans in Michigan

In 2022, the Michigan Fair Lending Campaign estimated that there are more payday loan centers in Michigan than there are McDonald's restaurants.

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About half the states in the US allow payday loan companies to charge customers exorbitant interest rates, and Michigan consumers who use these services can end up paying annual percentage rates that are in the neighborhood of 370 percent.

John Rabenold is a representative of Cincinnati-based CNG Holdings, Inc., which owns Check 'n Go. He tells Crain's Detroit Business that while APRs can vary depending on the length of customers' loans, clients are typically charged fixed service fees.

Michigan Bill Would Cap APRs for Payday Loan Customers

Senate Bill 632 would limit "deferred presentment service transactions" and cap annual percentage rates at just 36%. Supporters of the bill say it would crack down on what they call "predatory loans" which they say are targeted at poor or low income people.

The measure has been gaining momentum for years, since the Michigan Fair Lending Campaign began circulating petitions in 2022 to get legislation in front of Lansing lawmakers.

But Rabenold says passing the bill would would force cash-advance businesses such as his out of the state.

"So let me tell you that if you take this away, if you eliminate the cost of credit, the 36% cap will drive lenders out of the state," he said.

About 20 US states and Washington DC have taken similar measures to cap payday lending rates at about 36%.