REPRESENTING. OUTMAN: Payday loan reform will help Michigan residents avoid debt trap


I have heard far too many horror stories from Michigan voters and residents who have found themselves caught in a vicious circle known as the payday loan debt trap. From single mothers to veterans, seniors and college-aged students, payday lenders have taken their toll on Michigan residents.

Representative Pat Outman

Payday loans are marketed as short-term loans to help people meet their next payday, but the reality is quite the opposite. These loans carry triple-digit interest rates and are designed to create a long-term debt cycle. In fact, payday lenders have access to the borrower’s bank account so they can be paid first, before borrowers have a chance to pay other essentials like rent, utilities or the grocery store.

We also know that payday lenders disproportionately target communities of color. For example, data shows that there are 5.6 payday stores per 100,000 residents in Michigan. In Latino communities, the number of payday loan stores is 18% higher, while in Black communities, the number is 25% higher.

In our own community, like Montcalm County, there are 6.3 payday lenders per 100,000 people, a rate higher than the state average. It’s clear that payday lenders are impacting Michigan residents in every community in our state.

Worse still, payday loans are predatory. In Michigan, the average payday loan carries an annual percentage rate of 370% APR. The terms of the loan make it very difficult for a borrower to repay it, which regularly creates a cycle of long-term debt. The data tells the story: 70% of Michigan payday borrowers reborrow the same day they repay a previous loan. Research from the Consumer Financial Protection Bureau (CFPB) shows that the average payday loan borrower is locked into 10 loans over the course of a year.

It’s no surprise, then, that the debt trap is at the heart of the payday lender business model: 75% of payday lenders’ revenue comes from borrowers caught in 10 loans a year. Once payday lenders have a new customer, they trap them in their vicious cycle.

For years, efforts to pass payday loan reform to stop these unsavory companies from preying on the vulnerable failed to pass the Michigan legislature. Fortunately, a new coalition of concerned Michigan citizens has come together to do something about it.

Michiganders for Fair Lending has launched a payday loan reform campaign and is currently collecting signatures for a ballot measure that would reduce the annual interest rate on payday loans to a maximum of 36% APR. This common-sense reform would also bring Michigan in line with 18 other states and Washington, DC that already have payday loan rate caps in place.

We urge everyone to join us in helping get this common sense reform passed in November by signing a petition when you see someone on the street collecting signatures for this campaign.

To learn more about Michiganders for Fair Lending, visit

Representative Pat Outman serves in the Michigan House of Representatives and represents the 70th House District.

Opinions expressed in the Guest View do not necessarily represent the opinions of the Daily News.

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