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BLAC statement on legislation that would cap interest on payday loans
Members of the Black Leadership Advisory Council (BLAC) applaud Michigan State Sen. Sarah Anthony and State Rep. Abraham Aiyash for their introduction of legislation that would cap the interest rate on pay day loans at 36 percent annual percentage rate (APR).
Senate Bill 632 aligns with a recommendation in BLAC’s 2022 policy report to Gov. Whitmer, which also advocated for a 36% interest cap on pay day loans. BLAC’s recommendation outlined the ways payday lenders target Black communities for loans that can end up costing a consumer more than 300% APR. While Michigan law does not allow a two-week loan to be renewed, the state has no cooling off period between loans, which means consumers often take out another loan when they pay off a loan. According to the Consumer Financial Protection Bureau (CFPB), the average payday lender customer takes out 10 loans in a year, paying off old loans with a new loan. According to CFPB data, 70 percent of payday loans in Michigan are taken out on the day a previous loan is paid back and 86 percent of payday loans in Michigan are taken out within two weeks of a previous loan’s payoff.
This issue is especially important to African Americans because payday lending operations are concentrated in communities of color. While there are 5.6 payday stores per 100,000 people in Michigan, communities with a significant African American population have 7.6 payday lenders per 100,000 people.
BLAC members will use their platform to educate Michiganders on the need to cap interest on pay day loans at 36 percent APR and fully support SB 632 as introduced.
By executive order, Gov. Gretchen Whitmer created the Black Leadership Advisory Council in 2020. It acts in an advisory capacity to the governor and develop, review, and recommend policies and actions designed to eradicate and prevent discrimination and racial inequity in Michigan.