Bill Summary – FastDemocracy

Legislative Analysis
                                                                             Phone: (517) 373-8080
PAWNBROKER FINES AND INTEREST RATES
                                                                             http://www.house.mi.gov/hfa
House Bill 5535 as reported from committee                                   Analysis available at
Sponsor: Rep. Joseph A. Aragona                                              http://www.legislature.mi.gov
House Bill 5536 as reported from committee
Sponsor: Rep. Tullio Liberati, Jr.
Committee: Regulatory Reform
Complete to 6-20-24
SUMMARY:
       House Bill 5535 would amend 1917 PA 273, which regulates pawnbrokers, to increase the
       penalties for violations of the act.
       Currently, a person who violates the act is guilty of a misdemeanor punishable by a fine of $25
       to $100 or imprisonment for 10 days to three months, or both a fine and imprisonment.
       The bill would increase the penal fine to $250 to $1,000.
       In addition, the bill would add a new civil fine of up to $5,000 for those who charge an interest
       rate on a loan in excess of the maximum prescribed by the act. An action to collect this fine
       could be brought by the prosecutor of the county where the violation occurred or by the attorney
       general.
       MCL 446.218
       House Bill 5536 would increase the maximum interest rate that a pawnbroker can charge on a
       loan from 3% to 5% and make other complementary changes.
       MCL 446.208 and 446.209
       Neither bill can take effect unless both are enacted.
BRIEF DISCUSSION:
       According to committee testimony, the current allowable interest rate of 3% per month has not
       been updated in more than a century and is currently too low for pawnshops to cover the costs
       associated with issuing the loans. Supporters of the bill testified that the proposed 5% interest
       rate would still be far below many other states that allow rates of more than 10% a month.
       Supporters also argued that the increased penalties in the bill would help to cut down on the
       amount of illegal “buyback” loans used to get around the current rate cap. They testified that
       many establishments throughout the state currently offer these loans with interest rates of 30%
       or more and that increasing the penalties associated with a violation could reduce the number
House Fiscal Agency                                                                           Page 1 of 2
       of individuals willing to offer them. In addition, they argued the proposed interest rate could
       incentivize some to enter the business of offering legitimate pawn loans.
FISCAL IMPACT:
       The bills would have an indeterminate fiscal impact on the state and on local units of
       government. Currently, a person who violates the act is guilty of a misdemeanor punishable by
       imprisonment for at least 10 days and not more than three months, or a fine of at least $25 and
       not more than $100, or both. Under the bills, the range of fine amounts would be increased to
       at least $250 and not more than $1,000. Also under the bills, a person who charges a rate of
       interest that is more than the 5% maximum would be subject to a civil fine of up to $5,000.
       The fiscal impact would depend on the number of penal fines assessed at the higher rate and
       the number of persons charging a higher rate of interest than authorized and, subsequently,
       ordered to pay a civil fine. Revenue collected from payment of penal and civil fines is used to
       support public and county law libraries. Also, under section 8827(4) of the Revised Judicature
       Act, $10 of the civil fine would be required to be deposited into the state’s Justice System
       Fund, which supports various justice-related endeavors in the judicial branch and legislative
       branches of government and the Departments of State Police, Corrections, Health and Human
       Services, and Treasury. The fiscal impact on local court systems would depend on how
       provisions of the bills affected court caseloads and related administrative costs. Because there
       is no practical way to determine the number of violations that will occur under provisions of
       the bills, an estimate of the amount of additional revenue the state would collect, revenue for
       libraries, or costs to local courts cannot be made.
POSITIONS:
       A representative of Motor City Pawn Brokers testified in support of the bill. (6-11-24)
                                                          Legislative Analyst:    Alex Stegbauer
                                                               Fiscal Analyst:    Robin Risko
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
House Fiscal Agency                                           HBs 5535 and 5536 as reported   Page 2 of 2
Statutes affected: 
House Introduced Bill: 446.218
As Passed by the House: 446.218