H 7751Civil Procedure

Courts and Civil Procedure - Procedure Generally - Litigation Lending Agreements

This bill classifies lawsuit funding agreements as loans, subjecting them to state interest rate limits and usury laws.

Introduced

Population
Affected

Introduced Feb 12, 2026Committee House Judiciary

Plain-English Summary

This legislation classifies "litigation lending agreements" as loans subject to Rhode Island's usury laws. Litigation lending agreements occur when a company provides money to a person involved in a lawsuit in exchange for a portion of the future settlement or judgment. By defining these transactions as loans, the bill caps the interest rates and fees these companies can charge, ensuring they do not exceed state legal limits. This applies regardless of how the company labels the fees or if repayment is contingent on winning the case. Attorney expense advances are excluded.

For younger readers

Sometimes, when people sue someone in court, companies offer to give them money right away. In exchange, the person promises to pay back that money plus extra fees if they win the lawsuit. This bill says these deals must follow the same rules as regular bank loans. It prevents these companies from charging huge fees or super high interest rates that are normally against the law. It ensures that even if the company calls the money a "fee" instead of "interest," it still has to follow the rules for lending money.

Who & Where It Applies

Impacted groups

Civil LitigantsLitigation Finance CompaniesTrial AttorneysCourts and JudgesCivil Defendants

Impacted communities

All

Constitutional & Fiscal Check

None Likely

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Protects vulnerable plaintiffs from predatory financial practices that charge exorbitant interest rates, ensuring that victims retain the majority of their settlement funds.
Prevents the exploitation of the judicial system by financial speculators who seek to profit excessively from the misfortunes and legal battles of others.
Closes regulatory loopholes used by lending companies to bypass usury laws, ensuring that consumer protections apply to non-traditional financial products.
May reduce the availability of immediate funding for low-income plaintiffs who rely on these advances to pay for living expenses while waiting for a slow legal process.
Could force financially strapped plaintiffs to accept lower settlement offers from wealthy corporate defendants because they cannot afford to wait for a fair trial without bridge funding.
Limits the options available to individuals who may prefer to pay a premium for financial liquidity rather than facing immediate financial ruin during litigation.

For Conservatives

Discourages the proliferation of frivolous lawsuits that are fueled by third-party investors seeking high returns on speculative legal claims.
Upholds the rule of law by enforcing established state usury limits and preventing entities from circumventing financial regulations through creative contract language.
Protects the integrity of the civil justice system by reducing the influence of outside financial interests on litigation strategies and settlement decisions.
Interferes with the free market by restricting the right of private individuals and companies to negotiate their own contract terms and risk assessments.
Imposes government price controls on high-risk financial products, which effectively destroys a specific business sector and limits economic activity.
Expands government oversight into private financial arrangements that are technically asset purchases rather than traditional loans.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 29 additions

SECTION 1. Title 9 of the General Laws entitled "COURTS AND CIVIL PROCEDURE -- PROCEDURE GENERALLY" is hereby amended by adding thereto the following chapter: 9-3.1-1. Legislative findings. The general assembly finds and declares that:

(1) Litigation financing contracts are being entered into where companies advance money to a litigant in return for payment from litigation proceeds at effective annual interest rates far exceeding state usury limits; and

(2) These contracts often bear annual interest rates which exceed one hundred percent (100%); and

(3) These rates are detrimental to the general welfare of the citizens of this state and it is necessary to enact legislation to ensure that litigation-funding advances conform to state laws governing usurious loans. 9-3.1-2. Litigation lending agreement defined. A "litigation lending agreement" (LLA) is any agreement whereby monies are paid to parties to civil litigation (litigants) in consideration for a litigant's agreement to repay these monies (with or without interest, one-time charges, use fees, or any other add-on charges) from the proceeds of the litigation. Not included in the definition of an LLA are advancements of expenses of litigation made by attorneys on behalf of their clients, as permitted by rule 1.8(e) of the Rhode Island rules of professional conduct. 9-3.1-3. Litigation advances considered loans pursuant to state usury law. All payments made by a litigant under an LLA greater than the amount received by the litigant under the LLA shall be considered interest on loans subject to the provisions of chapter 26 of title 6 ("interest and usury") regardless of:

(1) Whether an LLA characterizes itself as a "loan," an "advance," an "investment," an "assignment of proceeds," or any other characterization;

(2) Whether monies to be repaid under the LLA are called "interest," "use fees," or any other term;

(3) Whether the amount received by the litigant under the LLA otherwise exceeds any monetary limit for loans and interest rates falling within the provisions of chapter 26 of title 6; and

(4) Whether the obligation on the part of the litigant to repay monies is contingent upon a particular outcome of the litigation.

SECTION 2. This act shall take effect upon passage.