Consumer credit: interest rates; credit card interest rates; provide cap. Amends sec. 4 of 1995 PA 162 (MCL 445.1854).

2025-2026 Regular Session Introduced by Erin Byrnes and 4 co-sponsors

HB 4581 would cap interest on consumer loans by regulated lenders at 10% per year, with depository institutions exempt for credit cards.

bill electronically reproduced 06/05/2025

#consumercredit:creditcards #consumercredit:interestrates

Purpose / Intent

HB 4581 would amend section 4 of the Michigan Credit Reform Act (1995 PA 162; MCL 445.1854) to place limits on the interest or finance charges that regulated lenders may impose on consumer credit extensions, while preserving an exception for depository institutions with respect to credit card arrangements. The bill also reiterates the existing requirement that interest on consumer-purpose extensions be calculated on the unpaid principal balance.

Key provisions

Interest-rate cap (subsec. 1):

As written, the bill attempts to limit the rate of interest or finance charge a "regulated lender" may charge for an extension of credit to not be “more than 10% per annum.” (The text contains an apparent drafting conflict with the phrase “not to exceed 25%,” discussed below.)

Exception for depository institutions (subsec. 2):

A depository institution (e.g., banks, savings institutions, credit unions) may charge, collect, and receive any rate of interest or finance charge for a credit card arrangement — i.e., the cap in subsection (1) would not apply to credit cards issued by depository institutions.

Interest computation method (subsec. 3):

For consumer extensions of credit (personal, family, household), interest or finance charges calculated on the principal balance must be computed only on the unpaid balance (except for fees allowed under sections 6 or 7 of the Act). This continues an existing consumer-protection computation rule.

Who is affected

Regulated lenders generally — non-depository consumer lenders (consumer finance companies, some specialty lenders) would be subject to the proposed 10% per annum cap (subject to the bill’s final wording).

Depository institutions and their credit-card products — explicitly exempted from the cap for credit-card arrangements.

Consumers — potentially lower interest costs on certain non-depository consumer loans, but possible credit availability or pricing impacts if lenders restrict products or exit markets.

State regulatory and enforcement agencies — would implement and enforce any new statutory caps and interpretation of the depository exception.

Procedural status / timeline

Filed: March 12, 2025.

Read first time / referred: April 3, 2025 (referred to State Affairs).

Committee activity: public hearings, substitute considered, reported favorably as substituted (April 14–23, 2025); committee report to Calendars (April 29, 2025).

Reproduced / re-introduced: electronically reproduced June 5, 2025; introduced June 5, 2025 by Rep. Alabas Farhat and referred to the Committee on Regulatory Reform (June 5, 2025). As of the latest entry, the bill is in committee.

Notes and drafting issues

The bill text as provided contains inconsistent language — both “not to exceed 25%” and “more than 10% per annum” appear in the same sentence. This creates ambiguity about the intended cap and would likely require technical corrections or clarification in subsequent drafting.

The bill does not specify effective date, treatment of existing contracts, or enforcement mechanisms beyond amending the statute; those details would matter for practical implementation and may be addressed in later amendments.

Bill