RI 2026 H7850: Commercial Law - General Regulatory Provisions - Interest and Usury

Plain-English Summary

This legislation is designed to strengthen Rhode Island's ability to enforce its own interest rate limits on loans. It explicitly opts the state out of a federal law (DIDMCA) that currently allows out-of-state banks to export higher interest rates into Rhode Island, bypassing local caps. Additionally, the bill creates the "Anti-Evasion of Lending Rules Act," which prohibits lenders from disguising loans as other transactions to hide high fees. It establishes a "true lender" test to ensure companies cannot use partnerships with exempt banks merely to evade state consumer protection laws. Loans violating these rules become void and uncollectible.

For younger readers

This bill helps protect people from borrowing money under unfair rules. Sometimes, companies try to trick people by charging extra money that isn't allowed by state laws. They might pretend a loan is something else, like a sale, or use a bank from another place to break the rules. This bill says they can't do that anymore. If a company tries to trick someone to charge too much money, the person who borrowed it won't have to pay it back, and the company will get in trouble. It makes sure lending rules are followed fairly.

Who & Where It Applies

Impacted groups

BorrowersFintech LendersOut-of-State BanksPayday LendersConsumer Advocacy Groups

Impacted communities

All

Constitutional & Fiscal Check

None Likely

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Protects low-income and vulnerable communities from predatory "rent-a-bank" schemes that trap borrowers in cycles of debt by charging exorbitant interest rates.
Empowers consumers by making illegal loans void and uncollectible, providing immediate debt relief and restitution to victims of predatory lending.
Closes corporate loopholes used by fintech lenders to evade state regulations, ensuring that financial institutions cannot place profit over the welfare of Rhode Island residents.
May inadvertently reduce access to credit for high-risk borrowers who cannot qualify for traditional bank loans, potentially driving them toward unregulated underground markets.
Relies heavily on the civil court system for enforcement, which may be difficult for low-income individuals to navigate without affordable legal representation.
Does not lower the existing state usury cap or create public banking alternatives, leaving some borrowers still facing relatively high, though legal, interest rates.

For Conservatives

Asserts state sovereignty and the Tenth Amendment by explicitly opting out of federal preemption laws, ensuring Rhode Island retains control over its own financial regulations.
Upholds the rule of law by cracking down on deceptive business practices and fraud, ensuring that contracts are transparent and honest.
Protects local community banks and credit unions from unfair competition by out-of-state entities that manipulate federal loopholes to bypass state rules.
Interferes with the free market and the freedom of contract by dictating the terms under which willing lenders and borrowers can conduct business.
Imposes severe penalties, including voiding the principal of the loan and treble damages, which could be viewed as excessive and damaging to business confidence.
Creates regulatory uncertainty for fintech companies and innovators, potentially discouraging new financial technologies from operating within the state.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 67 additions

SECTION 1. Chapter 6-26 of the General Laws entitled "Interest and Usury" is hereby amended by adding thereto the following section: 6-26-12. The Federal Depository Institutions Deregulation and Monetary Control Act of 1980. In accordance with section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (Pub. L. 96-221; 94 Stat. 161) (“DIDMCA”), it is hereby expressly provided that the State of Rhode Island rejects the application of the amendments made by sections 521 through 523 of DIDMCA with respect to loans made in the State of Rhode Island.

SECTION 2. Title 19 of the General Laws entitled "FINANCIAL INSTITUTIONS" is hereby amended by adding thereto the following chapter: 19-14.12-1. Short title. This chapter shall be known and may be cited as “The Anti-Evasion of Lending Rules Act of 2026.” 19-14.12-2. Application. This chapter shall apply to any loan made according to chapters 14.1 and 14.2 of title 19 and shall apply to any loan made in the State of Rhode Island through any medium whatsoever including, but not limited to, paper, mail, facsimile, Internet, telephone or any electronic means, regardless of whether the lender has a physical presence in the state. 19-14.12-3. Prohibition of subterfuge to evade lending rules and interest rate limits. No person shall engage in any device, subterfuge, or pretense to evade the requirements of this chapter or chapters 14.1 and 14.2 of title 19 including, without limitation to:

(1) Making a loan disguised as a personal or real property sale and leaseback transaction;

(2) Disguising loan proceeds as a cash rebate for the pretextual sale of goods or services;

(3) Disguising a loan as the sale or assignment of goods, services or things in action;

(4) Disguising loan charges, interest or the annual percentage rate, including, without limitation, in the price of goods, services or things in action;

(5) Offering, charging, contracting for, receiving, arranging or facilitating interest, fees, charges, or other payments or consideration in excess of those permitted by chapters 14.1 and 14.2 of title 19; or

(6) Otherwise obscuring the fact that the transaction is a loan or that it is subject to this chapter or chapters 14.1 and 14.2 of title 19. 19-14.12-4. Application to persons purporting not to be lenders. If a loan exceeds the rate permitted by chapters 14.1 and 14.2 of title 19, a person shall be a lender subject to the requirements of this chapter notwithstanding the fact that the person purports to act as an agent or service provider or in another capacity for another entity that is exempt from chapters 14.1 and 14.2 of title 19, if, among other things:

(1) The person holds, acquires, or maintains, directly or indirectly, the predominant economic interest, risk or reward, in the loan;

(2) The person:

(i) Markets, solicits, brokers, arranges, facilitates or services loans and directly or indirectly;

(ii) Holds or has the right to, requirement to, first right of refusal to, or expectation that it will acquire the loans, a share of receivables or another direct or indirect interest in the loans or loan program; or

(3) The totality of the circumstances indicate that the person is the lender and that the transaction is structured to evade the requirements of chapters 14.1 and 14.2 of title 19. Circumstances that weigh in favor of a person being a lender include, without limitation, when the person:

(i) Indemnifies, insures or protects an exempt entity from costs or risks related to the loan;

(ii) Predominantly designs, controls or operates the loan program;

(iii) Holds the trademark or intellectual property rights in the brand, underwriting system, or other core aspects of the loan program; or

(iv) Purports to act as an agent or service provider or in another capacity for an exempt entity while acting directly as a lender in other states. 19-14.12-5. Facilitating loans. No person shall solicit, broker, or engage in any other activity intended to facilitate or result in, or that in fact facilitates or results in, the origination of a loan that violates chapters 14.1 and 14.2 of title 19. 19-14.12-6. Violations.

(a) A loan made in violation of this chapter shall be void and uncollectible as to any principal, fee, interest, charge or payment, and the borrower shall be entitled to restitution of any amounts paid.

(b) An action for violation of this chapter may be brought in any court of competent jurisdiction.

(1) Actual and consequential damages, including treble the amount of any excess fee, interest, charge, or payment;

(2) Statutory damages of one thousand dollars ($1,000) per violation;

(3) Reasonable attorneys' fees and costs; and

(4) Any other legal or equitable relief that the court deems appropriate in addition to any other remedies provided at law.

SECTION 3. This act shall take effect on October 1, 2026.