Michigan Payday Loan Stores See Profits Plummet
By J.J. CameronPayday Loan Writer
With Michigan's economy sinking - thousands of unemployed factory workers and underemployed service workers are looking for jobs and many people are struggling to pay their bills - you might expect business to be booming at payday cash loan centers.
In reality, those stores are suffering right along with hundreds of other businesses in the state.
The Detroit Free Press had the story.
A new Michigan law that limits how much providers of cash loans can lend and lowers the fees they can charge borrowers is taking a toll. So is the fact that only those getting a paycheck can qualify for a loan, which leaves out the growing ranks of unemployed in Michigan.
"We haven't seen a spike in business, but the (bad) economy and the law happened simultaneously," said Phil Locke, president of the Michigan Financial Service Centers Association, which is comprised of mostly payday loan store owners. "I don't know if it was the economy or the law."
At least 25 small regular and no faxing payday loan centers in Michigan, out of about 700, have closed since the law took effect in June, Locke said, including five of his 32 lending offices.
Payday loans - also known as check advance loans, postdated check loans or deferred deposit check loans - are a fast and easy way for people to get cash to tide them over until their next payday.
Explosion of payday loans: The number of cash advance payday loan shops exploded in the 1990s. While the industry continues to grow nationwide, it's hit a skid in Michigan because of the strict new regulations and the continuing climb in the number of unemployed.
Some loan shop owners say the law is unfair and unnecessary because the industry already was regulating itself. Even their customers defend them, saying it's faster and easier to borrow money from a payday loan or personal loan center than from a bank or credit union.
Critics argue that payday lenders were not regulating themselves, but were simply taking advantage of desperate, vulnerable people.
"These places prey on the people who can least afford it," said Sen. Martha Scott, D-Highland Park, who lobbied for even lower lending fees.
During the debate on the bill, she presented an amendment to lower the maximum interest rate to 10 percent from 15 percent on bad credit payday loans, but it was defeated.
