LANSING — State Rep. Bill Sowerby (D-Clinton Township) introduced legislation today aimed at protecting families from exploitative practices used in the payday lending industry by capping the annual percentage rate (APR) for all payday lending loans in the state. Michigan currently allows for an extremely high APR — as much as 340 percent for a two-week payday lending loan. House Bill 4251 would cap APR at a maximum of 36 percent, with similar ballot proposals having passed in both Montana and South Dakota in 2016.

“There are a variety of reasons people use payday lenders, but due to the often predatory nature of the associated fees, too many find themselves stuck in a vicious cycle of endless borrowing,” Sowerby said. “It’s time to help break that cycle. Research has shown that 70 percent of payday loans are taken out on the same day the previous loan is paid off. Increasing consumer protection ensures that Michiganders are not being taken advantage of and allows them to keep more of their hard earned money.”

Sowerby’s bill would also require payday lenders to determine whether a customer had a reasonable ability to repay the loan. A customer would be deemed unable to repay if the transaction caused the customer to have a debt-to-income ratio exceeding 41 percent. If signed into law, Michigan would become the 19th state to put significant restrictions on payday lenders and prohibit exorbitant payday lending fees.