Longstanding payday lending reform policy poised for passage in Rhode Island this year

Payday lending reform appears bound for passage in the Rhode Island General Assembly this year after more than a decade of failed attempts.

The Rhode Island House of Representatives unanimously approved legislation Monday that would cap the annual percentage rate for short-term, small-dollar loans at 36% — compared with the up-to-260% APR that deferred deposit providers can charge now. Meanwhile, the Senate Committee on Commerce is poised to advance a similar proposal Tuesday, setting the stage for the bill’s forthcoming debut on the Senate floor: the first time in its 15-year history.

“I cannot tell you how happy I am to see this bill finally going to the floor,” Sen. Ana Quezada, a Providence Democrat and legislation sponsor, said in an interview Monday. “I couldn’t believe it when I saw it on the [legislative] calendar.”

Quezada continued, “This is a huge step for payday lending reform after all these years.”

It’s not a done deal yet — both chambers must still approve the legislation, along with a signature from Gov. Dan McKee, who supports it. But Quezada was confident that a majority of the upper chamber supported the repeal of predatory lending practices. Before its Monday vote, the House of Representatives had already signaled strong support, passing nearly identical legislation in 2023 in a sweeping 70-2 vote.

The perennial push to bring Rhode Island’s payday loan policy in line with 22 other states, and federal government, began in 2011 under former Democratic Rep. Frank Ferri, of Warwick, and Sen. Harold Metts, of Providence. 

But it has gained increasing attention and traction on Smith Hill in more recent years. McKee and the rest of the state’s general officeholders signed a petition urging lawmakers to approve the reform in the waning days of the 2024 session. 

The major barrier for at least the last eight years has been the late former Senate President Dominick Ruggerio. Advocates pinpointed Ruggerio, who as Senate president decided what legislation advanced out of committee to the full chamber, as their biggest obstacle. Ruggerio died on April 21.

“I always felt under Senate President Ruggerio this bill would never see the light,” Quezada said.

Senate President Valarie Lawson, who succeeded Ruggerio in Senate leadership elections, supports the bill, Greg Paré, a Senate spokesperson, said in an email Monday. House Speaker K. Joseph Shekarchi also expressed support in a separate emailed statement.

The Senate leadership has changed, but criticism by institutions that offer speedy access to cash at triple-digit APR has not. 

William Murphy, the former House Speaker who now works as a lobbyist for Purpose Financial Inc., parent company of Advance America, reiterated the payday lending company’s opposition when asked for comment Monday.

“Passage of this legislation will cause Advance America’s employees to lose their jobs and health coverage that they and their families depend on,” Murphy said in an email. “The State will now have eight additional vacant storefronts. Importantly, thousands of Rhode Islanders will lose much needed immediate access to credit and the ability to make their own personal financial choice. There are no equal alternatives for people in Rhode Island.”

Alan Krinsky, research and fiscal policy director for the Economic Progress Institute, said the bill does not force any storefront or lending company to shut down.

“It simply requires them to play by the rules of any other lending institution,” Krinsky said in an interview.

Murphy has repeatedly said that Advance America only charges a 10% fee per transaction, which would still be allowed under the new legislation. Krinsky has disputed this claim.

“Their math is wrong on that,” Krinsky said, noting that a single interest rate is not the same as the annual interest rate.

Research by Pew Charitable Trusts shows that borrowers in need of quick access to cash take, on average, eight cycles to repay their original loan, compounding the interest rate with each cycle.

In 2022, the most recent data available, Rhode Island borrowers paid an estimated $2.8 million on interest and fees associated with payday loans, based on the $28.2 million of money borrowed across 80,650 loans, according to a January 2025 report by the Center for Responsible Lending.

Research by Pew and the Center for Responsible Lending also contradict opponents’ arguments that payday loans help people who lack access to traditional financial services. However, in states where payday loans aren’t available, borrowers have successfully turned to friends, negotiated with debtors or cut other costs. Annual percentage rate caps on short-term loans in other New England States have saved those residents an estimated $252.7 million a year.

Seeking compromise, lawmakers have agreed to push back the start date of the cap on payday loans. Original legislation called for the annual percentage rate cap to take effect immediately. But the amended version being voted on in the House Monday delays the start till Jan. 1, 2027. 

Rep. Karen Alzate, a Pawtucket Democrat and bill sponsor, said she pitched the later start date to give employees of payday lending operations time to find new jobs. 

Krinsky agreed that it “made sense” to give existing payday lenders time to “wind down operations,” if they choose not to continue offering loans at lower annual percentage rates.

Margaux Morisseau, co-chair of the Rhode Island Coalition for Payday Lending Reform, would have preferred an immediate start date.

“It’s not ideal because it leaves a whole ‘nother year for people to be taken advantage of,” she said.

But, she added, “In the sense of compromise, this was where we are most comfortable compromising.”

The Senate companion does not yet contain the later start date yet, though Quezada said she intends to advocate for the tweak prior to the committee’s vote Tuesday. If passed out of committee, the Senate companion could be taken up by the full chamber Wednesday, Paré said.

Updated to include the vote in the Rhode Island House of Representatives Monday.