Michigan Usury Laws
Michigan has established a fairly restrictive statutory scheme when it comes to usury regulations in that state. Indeed, Michigan currently has one of most restrictive statutes pertaining to usury limits that can be found anywhere in the United States today.
The general usury limit in Michigan has been set at 7%. In other words, if the interest rate on a personal loan in Michigan exceeds the 7% rate, that loan is considered to be in violation of the law. It is considered to be an illegal contract and hence is unenforceable.
One does need to bear in mind that despite the restrictive nature of the usury law in Michigan, the law actually pertains to and governs over only a certain type of loan and lending practice in the state. Generally, the 7% usury cap in Michigan pertains to loans between individuals. The lending practices of state chartered banks, savings and loans, and credit unions are governed by another set of statutes and regulations in Michigan. Under the law, these state chartered institutions have a greater degree of flexibility when it comes to their own lending practices and the interest rates that they can charges to their borrowers.
The rationale behind these two separate interest rate schedules -- usury limitations for individual lenders and greater flexibility for bona fide lending institutions -- centers on the reality that there exists greater governmental authority and oversight in regard to bona fide lending institutions. In reality, if an individual were so inclined, he or she could start lending money on a whim and with not prior certification or approval from any governmental authority. Therefore, the usury laws in Michigan are deemed vital and necessary to control the lending practices of individuals who elect to extend financing to other individuals.
The usury limitations do not extend to instances in which an individual makes a loan to a corporation. Similarly, if an individual establishes a corporation for the sole intended purpose of lending money to an individual or individuals, that corporation essential will be considered a sham and the usury laws will be applicable.
Those statutes that govern usury and usurious lending practices in Michigan can be found codified at Michigan Compiled Laws Sections 438 and 439.
The information presented in this article is subject to change. While we make every effort to keep the information in this article current, it can change from time to time. Additionally, if you have any questions pertaining to interest rates and usury laws, you should consult with a qualified and experience attorney who is versed in the various lending restrictions in Michigan.