Michigan Credit Union League



1729226490454Senate bills 842 and 843 would provide an “escape hatch” by which Michigan payday lenders could structure transactions in Michigan outside of the DPSTA, thereby evading effective regulation by DIFS, limitations on fees and the consumer-friendly provisions in current law. By amending the Regulatory Loan Act (RLA) and Credit Services Protection Act (CSPA) instead of the DPSTA, payday lenders seek to have all the benefits of operating as a legitimate consumer finance provider in Michigan, without effective regulation or consumer protections, as they have done so in Ohio and other states.If the Ohio experience is any indication, allowing payday lenders to use the CSO model to eliminate fee caps will expose Michigan consumers to interest rate caps in excess of 400% to 500%. Additionally, if these bills pass, important consumer protections will be lost, including: Limitations on the number of loans a consumer may have at one timeA limitation on the maximum amount of a transactionMethods for consumers to seek restitution in case of a violationThe ability for consumers to voluntarily enter into a payment planMichigan credit unions all too often see the negative results of payday lending. While credit unions offer low dollar loans, our laws and regulations require us to underwrite loans and document a person’s “ability to repay.” For some consumers, quick access to loans, regardless of the cost to borrow, puts payday lenders at a competitive advantage to traditional lenders. Some consumers also want access to cash without filling out forms or undergoing underwriting. Even under the DPSTA, payday lending transactions frequently put consumers at significant financial risk, with fees often quickly adding up for consumers without significant financial resiliency. Through debt consolidation, financial counseling and teaching budgeting skills, credit unions often can help a member before they descend into a debt spiral. Unfortunately, for others bankruptcy is their only option.While the DPSTA is far from perfect, eliminating the basic consumer protections in current law would dramatically increase the number of Michigan consumers put into financial peril. 00Senate bills 842 and 843 would provide an “escape hatch” by which Michigan payday lenders could structure transactions in Michigan outside of the DPSTA, thereby evading effective regulation by DIFS, limitations on fees and the consumer-friendly provisions in current law. By amending the Regulatory Loan Act (RLA) and Credit Services Protection Act (CSPA) instead of the DPSTA, payday lenders seek to have all the benefits of operating as a legitimate consumer finance provider in Michigan, without effective regulation or consumer protections, as they have done so in Ohio and other states.If the Ohio experience is any indication, allowing payday lenders to use the CSO model to eliminate fee caps will expose Michigan consumers to interest rate caps in excess of 400% to 500%. Additionally, if these bills pass, important consumer protections will be lost, including: Limitations on the number of loans a consumer may have at one timeA limitation on the maximum amount of a transactionMethods for consumers to seek restitution in case of a violationThe ability for consumers to voluntarily enter into a payment planMichigan credit unions all too often see the negative results of payday lending. While credit unions offer low dollar loans, our laws and regulations require us to underwrite loans and document a person’s “ability to repay.” For some consumers, quick access to loans, regardless of the cost to borrow, puts payday lenders at a competitive advantage to traditional lenders. Some consumers also want access to cash without filling out forms or undergoing underwriting. Even under the DPSTA, payday lending transactions frequently put consumers at significant financial risk, with fees often quickly adding up for consumers without significant financial resiliency. Through debt consolidation, financial counseling and teaching budgeting skills, credit unions often can help a member before they descend into a debt spiral. Unfortunately, for others bankruptcy is their only option.While the DPSTA is far from perfect, eliminating the basic consumer protections in current law would dramatically increase the number of Michigan consumers put into financial peril. 1714500-193040Deregulating payday lenders would have devastating effects for Michigan consumers 00Deregulating payday lenders would have devastating effects for Michigan consumers 17145006093460We oppose SB 843 and 84300We oppose SB 843 and 84317265656093460 Credit unions oppose these bills because they would largely deregulate the Michigan payday lending industry and subject Michigan consumers to higher fees with little or no consumer protections. By amending the CSO and RLA, the payday lending industry is seeking to get out from under the basic consumer protections found in the DPSTA, without amending that law. Based on the experience in Ohio and other states, this result would be bad for Michigan consumers.00 Credit unions oppose these bills because they would largely deregulate the Michigan payday lending industry and subject Michigan consumers to higher fees with little or no consumer protections. By amending the CSO and RLA, the payday lending industry is seeking to get out from under the basic consumer protections found in the DPSTA, without amending that law. Based on the experience in Ohio and other states, this result would be bad for Michigan consumers.-1145540272229400-10585452924908Background00Background-10502593218605In 2005 the Deferred Presentment Service Transactions Act (DPSTA) was passed, legitimizing the payday lending industry in Michigan in exchange for regulation by the Department of Insurance and Financial Institutions (DIFS) and compliance with basic consumer protections curbing practices that put borrowers at the highest risk. In addition to requiring licensing, the DPSTA gives DIFS the authority to examine payday lenders and puts reasonable limits on the number of loans consumers can take out at any one time. It also establishes a statewide database of outstanding payday loans and puts caps on fees charged by payday lenders. According to a 2014 study over 80% of payday loans are rolled over or followed by another loan within 14 days, and 15% of new loans are followed by a loan sequence at least 10 transactions long. Half of all loans are in a sequence at least 10 loans long. At least 2.5 million households, and as many as 12 million consumers use payday loans over a 12-month period. Payday lenders (storefront and online combined) collect $8.7 billion annually in interest and fees nationwide. 00In 2005 the Deferred Presentment Service Transactions Act (DPSTA) was passed, legitimizing the payday lending industry in Michigan in exchange for regulation by the Department of Insurance and Financial Institutions (DIFS) and compliance with basic consumer protections curbing practices that put borrowers at the highest risk. In addition to requiring licensing, the DPSTA gives DIFS the authority to examine payday lenders and puts reasonable limits on the number of loans consumers can take out at any one time. It also establishes a statewide database of outstanding payday loans and puts caps on fees charged by payday lenders. According to a 2014 study over 80% of payday loans are rolled over or followed by another loan within 14 days, and 15% of new loans are followed by a loan sequence at least 10 transactions long. Half of all loans are in a sequence at least 10 loans long. At least 2.5 million households, and as many as 12 million consumers use payday loans over a 12-month period. Payday lenders (storefront and online combined) collect $8.7 billion annually in interest and fees nationwide. -1140577-81915001857375-15748000 ................
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