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S 2206Banking & Investments

Commercial Law - General Regulatory Provisions - Interest and Usury

This bill prevents lenders from using loopholes or deceptive tactics to charge interest rates higher than Rhode Island law allows.

Held for study
Population
Affected
35
Email Legislator
Introduced Jan 23, 2026Committee Senate Commerce

Plain-English Summary

This legislation enacts the "Anti-Evasion of Lending Rules Act of 2026" and opts Rhode Island out of specific federal regulations regarding interest rates on loans. It prohibits lenders from using deceptive practices, such as disguising loans as sales or rebates, to bypass state interest rate caps. The bill establishes that entities holding the primary economic interest in a loan are subject to state lending laws, even if they partner with exempt banks. Violations result in loans being voided, and borrowers may sue for damages and legal fees.

For younger readers

Rhode Island has rules about how much extra money, called interest, a bank or lender can charge when someone borrows money. Some companies try to trick these rules by pretending the money isn't a loan or by using banks from other places that don't follow Rhode Island's rules. This new law stops those tricks. It says that if a company tries to hide a loan or charge too much money, the loan is cancelled. The person who borrowed the money won't have to pay it back, and the company will get in trouble.

Who & Where It Applies

Impacted groups
BorrowersFintech LendersOnline Loan ServicersOut-of-State State-Chartered BanksConsumer Protection Attorneys
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 charge exorbitant interest rates well above state caps.
  • Closes loopholes used by fintech companies to evade consumer protection laws, ensuring that online lenders are held to the same standards as local lenders.
  • Empowers borrowers with strong legal tools, including the ability to void illegal loans and receive triple damages, effectively shifting power from corporations to consumers.
  • May unintentionally reduce access to credit for high-risk borrowers if legitimate lenders withdraw from the state due to stricter regulations.
  • Does not establish a new, lower interest rate cap for the state, but rather enforces existing limits which some advocates may still consider too high.
  • Reliance on civil litigation for enforcement requires victims to have the knowledge and resources to sue, potentially leaving the most marginalized unprotected without active state prosecution.
For Conservatives
  • Asserts state sovereignty by explicitly opting out of federal preemption (DIDMCA), returning regulatory power over local commerce to the state legislature.
  • Strengthens the rule of law by cracking down on fraud and subterfuge, ensuring that contracts reflect the true nature of the transaction.
  • Promotes transparency in financial markets by requiring entities acting as lenders to identify themselves honestly rather than hiding behind third-party charters.
  • Interferes with the free market by restricting the ability of willing borrowers and lenders to contract for loans at mutually agreed-upon rates.
  • Imposes significant regulatory burdens and legal risks on financial technology companies, potentially stifling innovation and business growth in the sector.
  • Empowers the judicial system to void private contracts and award excessive punitive damages (treble damages), which harms the business climate.

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.

(c) Any person who violates this chapter is liable to the borrower for:

(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.