Michigan House Bill HB5290

Michigan 2023-2024 Regular Session

• Introduced: 11/1/23
• Refer: 11/1/23

Caption

Financial institutions: payday lending; deferred presentment service transactions that charge service fees greater than an annual rate of 36%; prohibit. Amends sec. 33 of 2005 PA 244 (MCL 487.2153).

Impact

If enacted, HB 5290 will significantly impact the landscape of payday lending and deferred presentment services in Michigan. The bill is designed to offer greater consumer protection by limiting the fees that can be charged within these financial transactions. This is crucial for preventing situations where borrowers feel trapped in a cycle of debt due to high service fees. The explicit delineation of allowed fees also promotes transparency, ensuring that consumers are fully informed of their financial obligations before entering into an agreement.

Summary

House Bill 5290 aims to amend the Deferred Presentment Service Transactions Act to establish restrictions on service fees charged in deferred presentment service transactions. Under this bill, a licensee can engage in a single transaction for amounts not exceeding $600, while setting clear limitations on the service fees charged to customers. The service fee structure is tiered, allowing a maximum of fifteen percent for the first $100 and progressively decreasing percentages for each subsequent $100 thereafter, ultimately capping at an annual percentage rate of 36%. This is intended to prevent exorbitant charges that can lead to financial burdens for consumers.

Contention

However, the bill has sparked debate among stakeholders in the financial sector. Proponents, including consumer advocacy groups, assert that the limits on service fees will help protect vulnerable consumers from predatory lending practices. Conversely, some business owners and financial service providers argue that imposing such restrictions may undermine their ability to offer these services profitably. They express concerns that the capped fees could lead to fewer options for consumers who rely on these transactions for immediate cash flow needs, potentially forcing them to turn to more risky or unregulated alternatives.

Notable_points

Additionally, HB 5290 mandates that licensees provide clear written notice to customers regarding their rights when engaging in deferred presentment transactions. This includes the obligation to inform customers about their recourse in cases of alleged violations of the law. The bill also stipulates that any transaction not compliant with the new regulations would be deemed void. Thus, HB 5290 seeks to not only amend financial practices in Michigan but seeks to bolster the legal protections afforded to consumers in financial transactions.