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HB 5161

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

2025-2026 Regular Session Introduced by Curt VanderWall

HB 5161 caps licensed small-loan interest at 36% APR, limits fees and timing of charges, and bars borrowers from taking more than one unsecured loan at a time.

bill electronically reproduced 10/29/2025
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Bill Summary · HB 5161

Summary — HB 5161 (2025): Limitations on Interest Charges; Financial Institutions

Purpose

HB 5161 amends Section 13 of the Regulatory Loan Act (1939 PA 21) to revise permissible interest/fee rules for licensed small-loan lenders in Michigan. The bill clarifies allowable loan types, caps interest, and updates what fees lenders may charge and how those fees are computed and collected.

Key provisions and changes

  • Interest rate cap
    • Permits a licensee to charge interest “not to exceed … 36% per annum.” The bill references the Credit Reform Act but explicitly states a 36% annual cap.
  • Types of loans allowed
    • Confirms licensees may make closed‑end loans and open‑end credit (direct advances or checks). Excludes credit-card/charge‑card open‑end accounts from the open‑end provision.
  • Multiple unsecured loans
    • Prohibits inducing a borrower to be directly obligated under more than one unsecured loan contract at the same time.
  • Computation and timing of charges
    • Prohibits receiving charges in advance or compounding interest.
    • Requires all charges to be computed on the unpaid principal balance, made explicit in the borrower’s obligation, and calculated on the basis of days actually elapsed.
  • Loan processing fee
    • Allows a one-time processing fee for each closed‑end loan: up to 5% of principal, capped at $250 (may be included in principal).
    • The $250 cap is to be adjusted every 2 years based on the percentage change in the U.S. Consumer Price Index (CPI) for the two preceding calendar years, “rounded to the nearest hundred dollars.”
    • Prohibits inducing multiple unsecured loans to obtain additional processing fees.
  • Other permitted fees and recoveries
    • Late charges and returned-check handling fees as permitted under the Credit Reform Act.
    • Recovery of repossession/sale costs in accordance with the UCC (MCL 440.9609 and 440.9615).
    • Reasonable annual fees for open‑end credit and reasonable per‑payment fees for ACH/automated debit payments, with an exception that no per‑payment fee may be imposed if automatic payments were authorized at loan consummation.
  • Penalties
    • Violations are subject to penalties under the Regulatory Loan Act and also to remedies/penalties under the Credit Reform Act.
  • Definition
    • Defines “open‑end credit” for purposes of the section (repeated transactions; revolving availability as outstanding balances are repaid).

Who is affected / potential impact

  • Affected parties: licensed regulatory-loan licensees (small‑loan lenders in Michigan) and their borrowers.
  • Impact highlights:
    • Caps interest at 36% APR for covered loans.
    • Specifies permitted fees and fee adjustment mechanics (CPI-based every two years).
    • Restricts practices that create multiple simultaneous unsecured loans to generate fees.
    • Clarifies methods for fee computation and timing, and preserves certain consumer protections (no advance/compound interest).

Procedural history / timeline

  • Filed: March 14, 2025 (Rep. Curtis VanderWall).
  • First read: March 14, 2025; referred to committees (General Law; later Ways & Means; then Regulatory Reform).
  • Referred to Ways & Means: April 7, 2025.
  • Bill electronically reproduced: October 29, 2025.
  • Current status (as of last update): Introduced and referred to Committee on Regulatory Reform on October 29, 2025.

(Prepared from the House Introduced Bill text of HB 5161, Oct. 29, 2025.)

Compiled from official sources — confirm details with the bill’s official record.

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