H 7868Non-Banking Services

Financial Institutions - Small Loan Lenders

This bill increases allowable interest rates and permits new origination and monthly service fees for small personal loans.

Held for study

Population
Affected

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Introduced Feb 27, 2026Committee House Corporations

Plain-English Summary

This legislation amends the regulations governing small loan lenders in Rhode Island. It increases the maximum monthly interest rates lenders can charge on loans up to $5,000. Specifically, interest rate caps are raised by 2 percentage points across various loan tiers (for example, from 3% to 5% per month for loans under $300). Additionally, the bill permits lenders to charge an origination fee of up to $100 or 5% of the loan, as well as new monthly service fees ranging from $5 to $30. This effectively increases the total cost of borrowing for consumers using these services.

For younger readers

This bill changes the rules for companies that lend small amounts of money to people. Before this bill, there were strict limits on how much extra money, called interest, these companies could charge you for borrowing from them. This bill allows these lenders to charge higher interest rates each month. It also lets them add new fees, such as a fee for starting the loan and a monthly fee just for having the loan. This means that if someone borrows money from these lenders, it will cost them more money to pay it back than it did before.

Who & Where It Applies

Impacted groups

Small loan lendersLow-income borrowersConsumer protection advocatesDebt relief counselorsDepartment of Business Regulation

Impacted communities

All

Constitutional & Fiscal Check

None Likely

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Potentially expands access to credit for high-risk borrowers who might otherwise be denied loans entirely or forced to turn to illegal, unregulated loan sharks.
Establishes specific, transparent caps on the new origination and service fees, ensuring there is a statutory limit to what lenders can charge for these specific line items.
Helps ensure the survival of regulated small loan businesses, preventing a market vacuum that could otherwise be filled by completely unregulated and more predatory online entities.
Significantly increases the cost of borrowing for low-income individuals, exacerbating financial hardship and widening the wealth gap by transferring more money from the poor to corporate lenders.
Increases the risk of vulnerable borrowers falling into debt traps, as higher monthly interest and new service fees make it more difficult to pay down the principal balance of the loan.
Legalizes what many advocates consider predatory lending practices, sanctioning high-interest rates that disproportionately affect minority and working-class communities.

For Conservatives

Reduces government price controls on the lending industry, allowing businesses to adjust their rates and fees to better reflect market risks and operating costs.
Promotes business viability for small loan lenders, ensuring they can remain profitable and continue to provide services without being stifled by outdated rate caps.
Encourages a free-market environment where loan terms are a matter of private contract between the lender and the borrower, rather than being strictly dictated by the state.
May be viewed as enabling usurious practices that exploit the desperate, conflicting with traditional moral values regarding fair dealing and protection of the community.
Could lead to increased financial instability among families, potentially increasing the burden on taxpayers if borrowers default and require government safety net assistance.
Maintains government interference in the private sector by keeping statutory caps on fees and interest, rather than allowing the market to set rates completely freely.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 14 additions · 3 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. Every small loan lender may charge an origination fee the lesser of one hundred dollars ($100) or up to five percent (5%) of the amount borrowed and 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%)~~ five percent (5%) per month plus a monthly service fee up to five dollars ($5.00);

(2) Loans exceeding three hundred dollars ($300) but not exceeding eight hundred dollars ($800), ~~two and one-half percent (2.5%)~~ four and one-half percent (4.5%) per month plus a monthly service fee up to ten dollars ($10.00); and

(3) Loans exceeding eight hundred dollars ($800), but not exceeding five thousand dollars ($5,000), ~~two percent (2%)~~ four percent (4%) per month plus a monthly service 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.