From the January-February 2019 issue of News & Letters
Detroit—Had the reactionary lame duck Michigan Legislature succeeded in passing a bill to expand predatory lending in 2018, a borrower of $2,500 from a “Credit Service Organization” (CSO) would have paid $8,300 when due in 24 months! Organizations fighting predatory lending supported House Bill 6215, which would cap loans at “only” 36%. They face an uphill fight with legislators claiming these loans fill a need for people with bad credit.
CSOs are located mostly in poor minority and rural areas. They incorporate with Native American tribes to evade U.S. laws and are not covered by Dodd-Frank protections like the truth-in-lending law which Trump is gutting. A payday loan of $600 for two weeks costs the borrower a fee of $76. Some auto repair shops become predatory lenders: they can charge an annual percentage rate (APR) of 189% for loans to be repaid in 90 days.
It is estimated that the average APR in Michigan for these loans is 400%. Predatory lenders extract half a billion dollars annually from Michigan. The Center for Responsible Lending is also gathering public support to work with mainstream credit providers like banks and credit unions for affordable lending opportunities.