What Is the Payday Lending Cap in Michigan?
The highest amount available to qualified borrowers in Michigan is $600. Borrowers are permitted to have less than two outstanding loans only, from various lenders.
What Are the Rates, Fees and Other Charges in Michigan
Loan providers are allowed to charge service fees for each payday loan transaction. The service fee is applied at the time of the transaction.
A lender has the right to charge both the following amounts as a feature of their service fee:
An amount not exceeding the total sum of those listed below, where applicable:
- 15 percent of the initial $100 loan;
- 14 percent of the second $100 loan;
- 13 percent of the third $100 loan;
- 12 percent of the fourth $100 loan;
- 11 percent of the fifth $100 loan;
- 11 percent of the sixth $100 loan.
An amount of a database verification fee as permitted by §,34(5) of Comp. Laws 487.2121 et seq.
Even though the service fees may appear to be low, they tend to pile up for borrowers who often fall back on such loans or renew them repeatedly. A $300 payday loan in Michigan can carry an APR of 369% (According to the Center for Responsible Lending 2019).
Besides, Section 408.020. reads: “When no rate of interest is agreed upon, nine percent allowed as legal interest.”
How Is the APR Calculated For a $100 Payday Loan in Michigan?
If the term is 14 days
Interest Rate (APR): 369%*
Loan Cost: $100*369%*(14/365)=$14.2
To Return: Principal+Loan Cost=$100+$14.2=114.2
What Are the Maximum Terms?
Loan terms range from 14 to 31 days.
Since July 2020, as permitted by the Consumer Financial Protection Bureau (CFPB), lenders are no longer required to verify if a borrower can repay the loan. Before taking out payday loans, access your current financial situation to see if you have the ability to meet your financial obligations. Default payment penalties can throw you into a never-ending cycle of debts.
- All criminal actions against borrowers are prohibited.
- If a borrower fails to repay in a timely manner, an installment payback plan would be needed from the lender. $15 can be charged for this kind of service. In addition, lenders are permitted to charge an insufficient funds fee of $25 when borrowers default on their payments. The loanees remain responsible to repay the loan. The lender may pursue collection action against the borrower for not repaying the loan.
- A borrower has the right to let a lender know through a letter if the former believes that the latter was unlawfully operating. Upon receiving the letter, the lender has 3 days for a decision. When the lender admits any kind of lawbreaking activity, the borrower should be compensated five times the loan fee (minimum $15).
Further information about payday loans in Michigan is available at the Michigan Department of Insurance and Financial Services.
Borrowers can file a complaint or report illegal practices with the Online Complaint Form.