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H 7724Non-Banking Services

Financial Institutions - Small Loan Lenders

This bill sets a maximum annual interest rate of 99% for small loans and establishes specific limits on lender fees.

Introduced
Population
Affected
15
Email Legislator
Introduced Feb 12, 2026Committee House Corporations

Plain-English Summary

This legislation updates the regulations for small loan lenders in Rhode Island. It replaces the previous tiered monthly interest rate system with a new maximum annual interest rate of 99% for loans up to $5,000. This new rate cap is inclusive of origination and closing fees. The bill explicitly limits origination fees to 10% of the loan amount and closing fees to 4%. Furthermore, it establishes specific allowable fees for late payments (the greater of 5% or $18) and returned payments (up to $30), while prohibiting other unauthorized charges.

For younger readers

This bill changes the rules for companies that lend small amounts of money to people. Before, there were different rules for how much extra money (called interest) the company could charge. Now, the law says the most they can charge in interest and fees combined is 99% per year. It also sets strict limits on the fees the company can charge to set up the loan. Additionally, it creates specific rules for how much they can charge if a person pays late or if their payment doesn't go through.

Who & Where It Applies

Impacted groups
Small loan lendersLow-income borrowersConsumer protection agenciesBanking regulatorsFinancial counselors
Impacted communities
All

Constitutional & Fiscal Check

None Likely

Estimated cost
None
Estimated revenue
None

Bill Analysis

Both viewpoints
For Progressives
  • Mandates that the annual interest rate cap is inclusive of origination and closing fees, which increases transparency and prevents lenders from hiding the true cost of a loan behind "junk fees."
  • Establishes hard caps on origination (10%) and closing fees (4%), preventing lenders from charging unlimited administrative costs that disproportionately affect low-income borrowers.
  • By allowing a higher regulated interest rate, it may ensure credit access for high-risk borrowers who might otherwise be forced into the unregulated, illegal market (loan sharks) where there are no consumer protections.
  • Drastically increases the allowable interest rate from approximately 36% APR (3% per month) to 99% APR, potentially trapping low-income individuals in cycles of unmanageable debt.
  • Codifies relatively high late fees ($18 minimum) and returned payment fees, which penalizes those who are already struggling financially and living paycheck to paycheck.
  • Legitimizes triple-digit (or near triple-digit) interest lending practices that many progressives view as predatory and exploitative of the working poor.
For Conservatives
  • Expands the free market by allowing lenders to charge interest rates that more accurately reflect the risk associated with unsecured small loans, potentially encouraging more businesses to operate in the state.
  • Simplifies the regulatory landscape by removing complex tiered interest rate structures in favor of a single annual percentage cap.
  • Codifies the lender's right to collect fees for late payments and returned checks, supporting the principle of personal responsibility and contractual obligation.
  • Imposes government price controls on private business transactions by maintaining a hard cap on interest rates and fees rather than letting the market determine the value of the loan.
  • Restricts business freedom by mandating exactly how origination and closing fees must be calculated and capped.
  • Increases regulatory interference by dictating that fees must be included in the annual interest rate calculation, limiting how businesses structure their products.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 13 additions · 6 deletions

SECTION 1. Sections 19-14.2-8 and 19-14.2-12 of the General Laws in Chapter 19-14.2 entitled "Small Loan Lenders" are hereby amended to read as follows: 19-14.2-8. Maximum loan and interest rate.

(a) Every small loan lender may lend up to five thousand dollars ($5,000) in the aggregate to one borrower and may charge, contract for, and receive on the loan interest on the unpaid principal balance on a loan at a rate not exceeding the following:

(1) Loans up to and including three hundred dollars ($300), three percent (3%) per month;

(2) Loans exceeding three hundred dollars ($300) but not exceeding eight hundred dollars ($800), two and one-half percent (2.5%) per month; and

(3) Loans exceeding eight hundred dollars ($800), but not exceeding five thousand dollars ($5,000), two percent (2%) per month ninety-nine percent (99%) per annum, inclusive of any origination and closing fee.

(b) Origination fees shall not be more than ten percent (10%) of the original loan amount.

(c) Closing fees shall not be more than four percent (4%) of the original loan amount.

(d) In addition to any other fees permitted in this chapter, the following fees shall be agreed to in writing between borrower and lender and are not included in the annual interest rate:

(1) A late payment fee in the amount of five percent (5%) of the delinquent payment or eighteen dollars ($18.00), whichever is greater; and

(2) A returned payment fee up to thirty dollars ($30.00). 19-14.2-12. Small loans — No other charges — Exception. In addition to the interest and fees allowed in this chapter, no small loan licensee shall directly, or indirectly, charge, contract for, or receive any other charges except credit insurance, lawful filing fees and insurance charges, and other fees listed in § 6-26-2(c) or as authorized by regulation.

SECTION 2. This act shall take effect upon passage.