Michigan interest rates are provided in Chapter 438 entitled Money and Interest. MCL 438.31 provides that parties may stipulate to pay interest up to 7 percent per year but this limit does not apply to certain entities (see statute for specifics), and does not apply to any time price differential which may be charged upon sales of goods or services on credit.
The time price differential is a charge. It applies when the buyer is given a choice between paying cash or paying an additional charge for buying the goods or services on credit. Manufacturers Nat’l Bank v Burlison, 69 Mich App 570, 573, 245 NW2d 350 (1976); Matthews v Aluminum Acceptance Corp, 1 Mich App 570, 578, 137 NW2d 280 (1965). In such cases, the seller can charge interest up to 25 percent per year (the criminal usury cap) unless the sale involves the Retail Installment Sales Act, MCL 445.851 et seq.; the Motor Vehicle Sales Finance Act, MCL 492.101 et seq.; or the Home Improvement Finance Act, MCL 445.1101 et seq. Debtors subject to collectors should research whether their debt involves these acts in order to raise them as a defense if necessary.
Debtors should refer to statutory law MCL 438.32 and caselaw, Washburn v Makedonsky, 271 Mich App 95, 718 NW2d 842 (2006), which states that under MCL 438.32, a creditor is prevented from recovering interest, fees, charges, attorney fees, and costs from a guarantor if the note charges a usurious interest rate. Furthermore,Farley v Fischer, 137 Mich App 668, 358 NW2d 34 (1984) provides that if the stipulated rate violates usury laws, interest is not recoverable on the debt.
Michigan’s criminal usury – >25% interest – statute is MCL 438.41. This statute provides that a person is guilty of criminal usury when, not being authorized or permitted by law to do so, he knowingly charges, takes or receives any money or other property as interest on the loan or forbearance of any money or other property, at a rate exceeding 25% at simple interest per annum or the equivalent rate for a longer or shorter period. Any person guilty of criminal usury may be imprisoned for a term not to exceed 5 years or fined not more than $10,000.00, or both.