Michigan House Bill HB5161

Michigan 2025-2026 Regular Session

• Introduced: 10/29/25
• Refer: 10/29/25

Caption

Financial institutions: other; limitations on interest charges; modify. Amends sec. 13 of 1939 PA 21 (MCL 493.13).

Impact

The proposed changes are expected to significantly impact state laws concerning lending practices. By codifying the maximum permissible interest rate and detailing the structuring of loan agreements, HB 5161 aims to create more transparency in lending. Additionally, it introduces a provision that allows licensees to charge a loan processing fee of up to 5% of the principal, capped at $250. This fee would be indexed to inflation every two years, ensuring that it remains relevant over time. The modifications seek to balance the interests of lenders with the protection of borrowers, potentially offering greater access to credit for those in need.

Summary

House Bill 5161 seeks to amend the Regulatory Loan Act of 1939, specifically section 13, to establish new parameters for how financial institutions can lend money and set interest rates. The bill stipulates that licensees may charge a maximum interest rate of 36% per annum, in alignment with the existing Credit Reform Act. A significant aspect of this bill is the allowance for licensees to offer both closed-end loans and open-end credit, which includes direct advances and checks, while explicitly excluding those offered through credit cards or charge cards. This dual approach is designed to provide more flexibility in lending options for consumers.

Contention

However, the bill is not without controversy. Critics argue that the cap on interest rates, while seemingly beneficial, may still lead to exorbitant costs for borrowers, especially those with limited financial literacy. Furthermore, the allowance of processing fees raises concerns among consumer protection advocates who fear that such fees could accumulate to a substantial financial burden over time. The bill's provisions may also inadvertently facilitate risky lending practices, where borrowers could become over-leveraged due to easier access to loans that carry high-interest rates and additional fees.