S 3074Non-Banking Services

Financial Institutions - Small Loan Lenders

This bill increases the maximum interest rates and allowable fees that small loan lenders may charge borrowers.

Held for study

Population
Affected

Introduced Mar 13, 2026Committee Senate Commerce

Plain-English Summary

This legislation updates the regulations governing small loan lenders in Rhode Island. It authorizes these lenders to charge a new origination fee, capped at either $100 or 5% of the loan amount, whichever is less. Furthermore, the bill increases the maximum monthly interest rates permitted for loans up to $5,000. It also introduces a new monthly service fee structure, allowing lenders to charge between $5 and $30 per month depending on the total amount borrowed.

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. Now, the bill lets these companies charge higher interest rates each month. It also lets them charge a fee just for starting the loan and a monthly fee for keeping the loan open. This means that borrowing money from these lenders will cost more than it did before.

Who & Where It Applies

Impacted groups

Small loan lendersLow-income borrowersConsumer protection advocatesFinancial regulatorsCredit insurance providers

Impacted communities

All

Constitutional & Fiscal Check

None Likely

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Ensures that regulated credit options remain available to high-risk borrowers who might otherwise be forced to utilize illegal, unregulated loan sharks if legitimate lenders leave the market.
Maintains state oversight and caps on fees, preventing lenders from charging unlimited amounts for administrative costs even as rates increase.
Keeps the lending industry within the purview of state regulators, allowing for continued monitoring of practices rather than driving the industry underground.
Significantly increases the cost of borrowing for low-income individuals, potentially trapping them in a cycle of debt due to higher interest rates and new monthly fees.
Disproportionately harms marginalized communities and the working poor, who are the primary users of small-dollar, high-interest loans for emergency expenses.
Legitimizes and expands predatory lending practices by legally authorizing sharp increases in the maximum allowable charges for essential financial services.

For Conservatives

Reduces government price controls on the lending industry, allowing businesses to adjust their pricing models to better reflect the actual risks and costs of lending.
Promotes the viability of small businesses by allowing lenders to charge fees that cover administrative overhead, such as origination and monthly service costs.
Enhances freedom of contract by allowing willing borrowers and lenders to agree to terms that include risk-adjusted rates and fees.
Continues to impose government interference in the free market by maintaining strict price caps on interest rates and fees rather than letting the market determine the cost of credit.
Adds to the regulatory burden by codifying specific fee structures and limits, rather than simplifying the code to allow general business operations.
Maintains an arbitrary distinction between loan amounts (e.g., under $300 vs over $300) for rate setting, rather than allowing a uniform market-based approach.

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.