Understanding The Payday Loan Laws in Michigan
A payday loan is a high-cost, short-term transaction in which a customer borrows money in exchange for a fee. The customer pays the lender a personal check for the amount borrowed plus the service fee. Before presenting the check to the customer’s bank for payment, the lender gives the customer the loaned amount and retains the customer’s check (typically until the next payday). Payday loans, cash advances, and check advance in https://acfa-cashflow.com/`s loans are used are less hassle to apply for.
Because the customer’s check is held for some time (delayed) before it is cashed, Michigan law refers to this sort of loan as a “deferred presentment service transaction” (presented for payment).
IN MICHIGAN, HOW DO PAYDAY LOANS WORK?
The Deferred Presentment Service Transaction Act regulates Michigan payday loans, limiting the number of payday loans a consumer can have at any given time, the amount of service fees a payday lender can charge, and the repayment date to no more than 31 days following the transaction date.
To execute a payday loan request, the payday lender will need the customers:
- Social security number,
- Driver’s license or other state-issued photo identification, loan amount,
- Check number that you will use to cover the payday loan, and
- Payday loan date.
Customers sign a written agreement that must include:
- A clear description of the process a customer can use to file a complaint against the payday lender;
- The process and the deadline for canceling the loan and receiving a refund of the service fee; and
- A statement that the customer should only use this service to meet a short-term cash need.
“If you request the funds in a check or money order, you may be charged additional check cashing or other processing fees by others for cashing the check or money order,” payday lenders must warn customers on signage.
A customer can only have two payday loans at a time; they can’t both be from the same payday lender, and each loan can only be for $600 (not counting costs). The lender must verify customers’ eligibility for payday loans.
HOW MUCH WILL A PAYDAY LOAN COST ME?
The loan amount determines the legal limits on service fees for payday loans. A payday lender can charge up to 15% on the first $100, 14% on the second $100, 13% on the third $100, 13% on the fourth $100, 11% on the fifth and sixth $100, and 11% on the seventh and eighth $100.
IS IT POSSIBLE FOR ME TO EXTEND THE TIME I HAVE TO PAY BACK THE LOAN?
Customers do not have the right to have their loan repayment terms extended by the law; this is up to the payday lender, and no repayment period, no matter how long it is, can exceed 31 days from the loan date. By law, a payday lender may not impose a fee for an extension of time to repay a payday loan, and it may not increase the balance owed over the original amount.
Customers who have taken out eight or more payday loans in the previous 12 months and cannot repay their current debt may request an installment repayment plan. The customer must request the repayment plan, pay a fee (currently $17.20; this fee will be modified in 2021 based on a Detroit consumer price index calculation), and repay the debt in three equal payments.
The installments will be due on each customer’s next three regular paydays. The customer will not be eligible for any additional payday loans during the repayment period.
WHERE DO PAYDAY LENDERS GET INFORMATION ABOUT CUSTOMERS WITH OVERDUE PAYDAY LOANS?
Before providing a new loan, payday lenders must check an electronic database maintained by the state. The payday lender cannot provide another payday loan if the consumer has two outstanding loans.
If the computerized database is unavailable, a client must sign a statement stating that they have no existing payday loans with the present payday lender. Also, they do not have two outstanding payday loans with other payday lenders in the State.
WHAT IF I AM UNABLE TO PAY BACK THE LOAN ON TIME?
The consumer has until the end of the contract to return the loan amount plus any costs that may apply. The payday lender may deposit the customer’s cheque if the payday loan and associated fees are not paid on time. Suppose there are insufficient funds to cover the check. In that case, the customer is responsible for paying the check’s face amount, fees connected with non-sufficient funds check from the customer’s financial institution, and the payday lender’s returned check fee. The present cost is $28.66. However, it will be changed in 2021 based on a calculation of the Detroit consumer price index.
The payday lender may also pursue collection proceedings against the customer, but it will not pursue the loan through illegal means.
IF I THINK THE PAYDAY LENDER HAS BREACHED THE LAW, WHAT SHOULD I DO?
Any consumer who believes a payday lender has broken the law should contact the payday lender in writing, outlining the nature of the infraction and providing all supporting evidence.
The payday lender must respond and tell the customer of its choice within three days.
If the payday lender is found to have broken the law, it must return the customer’s check as well as any service fees paid. The customer is still responsible for repaying the debt. On the other hand, the payday lender will be obligated to pay the consumer an amount equivalent to five times the transaction fee, but not less than $15 or more than the face value of the customer’s check.
The payday lender can cash the customer’s check if it believes it has not broken the law. Suppose the consumer believes the payday lender has broken the law. In that case, he or she could register a complaint with the Department of Insurance and Financial Services (DIFS) Commissioner (see address below). DIFS will investigate all concerns as soon as possible.
A person damaged by a payday lender who violates the Deferred Presentment Service Transactions Act may sue for real damages and reasonable attorney expenses under Michigan law.