Laws on Payday Loans in Michigan that Regulate Lenders and Protect Borrowers

Payday loans are prohibited in some states but not in Michigan. Payday loans in Michigan are legal. However, there are laws that indicate limits to protect both the lenders and borrowers.

Deferred Presentment Service Transactions Act
The Deferred Presentment Service Transactions Act was enacted in November of 2005 and has been in effect since June of 2006. The law authorizes payday loans, which have been known by many other names including the following:
·    Cash advance
·    Check loan
·    Deferred presentment transactions

Payday loans are short term loans that have high rates with the payment to be taken from the borrower’s paycheck. The law allows lenders in Michigan to take the borrower’s postdated personal check. This is to ensure that the loan will be paid in the future.

A payday loan is much like any loan that you got used to. You borrow a certain amount and pay it on the specified date. In the case of payday loans, the payment is usually on the pay day. Another difference from regular loans is the high interest rates; usually three digits.

Payday Loan Is Legal with Limits
Payday loans in Michigan are legal since 2006. However, like any legal activities, payday lending also has its limits. For instance, the maximum loan amount is only $600. The maximum finance rates are as follows:
·    15% for the first $100
·    14% for the second $100
·    13% for the third $100
·    12% for the fourth $100
·    11% for the fifth and sixth $100

In addition to the finance rate, lending companies are also allowed to charge $100 for financing fee as well as verification fee.

Note that the laws in Michigan allow a maximum of 31 days for any payday loans. You can also sign up for 14-day $100 loan with APR of 390%.

Debt and Collection Limits 
If you will apply for a payday loan in Michigan, keep in mind that you are allowed only one loan with a licensee but you can have more than one payday loan with other licensee. Note that it is not advisable to have payday loans pile up because of their extremely high rate.
In addition, rollovers are not allowed in this state. You cannot renew but the lender can allow extension without additional fees.

For collection, only one NSF fee that should not exceed $25 is allowed for every payday loan in Michigan. Plus, criminal action against borrowers is not permitted.

Getting More Informational and Filing Complaints
Since payday loans were permitted in Michigan in 2006, the Michigan Office of Financial and Insurance Regulation has been monitoring banks and lenders. They provide more information such as authorized lending companies on their official website. It is also where consumers can file complaints against lenders that break the state laws on payday loans.

With a very short payment term and 3-digit APR, payday loans in Michigan are still helpful for people who need a large sum weeks before the issuance of paychecks. They are still a great solution in case of emergencies that require a lot of money. Fortunately, there are laws that regulate banks and lenders to help consumers.


Wikipedia – Cash Advance

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