Numbers don’t lie.

And the numbers here in Michigan clearly show that payday lenders are targeting vulnerable communities and stripping millions of dollars away from Michiganders under the masquerade of being a fast fix for financial emergencies.

Payday lending has clearly been predatory in nature, with 77% of payday lending advertisements targeting communities of color and lenders disproportionately locating stores in rural and low-income areas, as well as Black and Latino communities, where community members have already faced extraordinary barriers to building generational wealth because of past and present-day racism.

Here in Michigan, there are 5.6 payday stores per 100,000 people statewide, according to the Center for Responsible Lending, while there are 7.6 and 6.6 payday stores per 100,000 people in census tracts where the population is made up of 25% and 50% Black and Latino residents, respectively.

And, in rural census tracts and census tracts below 80% of the state’s median household income, there is a payday lending store concentration of 7.1 stores per 100,000 people and 9.1 stores per 100,000 people, respectively.

Those numbers show that people who are financially vulnerable — some of whom are residing right here in the Alpena area — are being targeted by payday lenders who offer risky loans that come with extremely high interest rates and short repayment periods.

With little regulation of payday lenders in Michigan to date, interest rates for payday loans in our state can often average an astonishing 370%, far exceeding the double-digit average annual percentage rates (APR) you typically see for other things, such as credit cards or buying a car. In fact, in the fourth quarter of 2023, credit cards carried an average APR of 21.47%, and the average APR for a car loan is currently 24.17% for a person within the lowest credit score range.

When you couple that with the short two-week repayment period for those high-interest loans, you can clearly see why so many Michiganders find themselves trapped in an endless cycle of borrowing and debt.

Families with low incomes often use payday loans when an unexpected expense arises, such as a car repair or a medical bill, but, many times, they still need their next paycheck to go toward their own basic needs, such as housing, utilities, and groceries. That makes it near impossible for families to pay back their loans in the short time period required, frequently leading to more and more loans to cover that initial emergency cost.

In fact, according to the Community Economic Development Association of Michigan, payday borrowers in Michigan take out an average of 10 loans per year, and 70% reborrow the same day they pay off their previous loan. That type of back-to-back borrowing often results in mounting financial obligations that are near impossible to overcome.

That is how payday lenders are able to divest millions of dollars from Michiganders who are already struggling, with the Center for Responsible Lending reporting that Michigan payday lenders have made more than a half-billion dollars off of Michiganders in just five years.

That is money coming straight out of the pockets of individuals and families who are already struggling on a daily basis to make ends meet.

The time is now for commonsense protections to be put into place for the people of Michigan who have been harmed by that type of predatory payday lending. That includes residents of Alpena, Alcona, Montmorency, and Presque Isle counties, where 17%, 16%, 19%, and 13% of people are living below the poverty line and 54%, 41%, 43%, and 44% of households are below the Asset Limited, Income Constrained, Employed (ALICE) threshold, respectively.

Fortunately, the Michigan Legislature has before them right now two bills that would take a big step in offering the type of consumer protections that Michiganders need.

House Bill 4343 would require increased transparency and reporting of several pieces of information regarding payday loans and Senate Bill 632 would cap annual interest rates for payday loans at 36%, bringing that rate in line with protections that were extended to our military service members more than 17 years ago through the Military Lending Act. Senate Bill 632 would also bring Michigan in line with the 20 other states that have either already passed laws to cap payday lending rates around 36% or have put measures in place that ensure lenders can’t saddle consumers with interest rates and financing terms that lead to long-term debt traps.

We here at the Michigan League for Public Policy strongly support those bills and extend our immense gratitude to the bill sponsors: state Sen. Sarah Anthony and state Rep. Jennifer Conlin.

We encourage you to join us in urging the Michigan Legislature and governor to prioritize and support their constituencies by making those bills part of the law here in Michigan as soon as possible.

Rachel Richards is fiscal policy and government relations director at the Michigan League for Public Policy.