Advocates for payday lending reform celebrated lin 2023 when the House voted overwhelmingly for a bill they believed would finally curtail so-called “payday lenders,” an issue that has been an annual crusade on Smith Hill for more than 15 years.
But the 70-2 vote was only half the battle. And the 2023 legislative session ended with the companion bill in the Senate lying dormant for yet another summer. The House did not act on the same legislation in 2024.
Now, Senate Deputy Majority Whip Ana B. Quezada, D-Providence, has again introduced legislation to regulate payday lending, which involves customers receiving a small amount of money at a very high interest rate that, in theory, is supposed to be repaid by the borrower’s next paycheck.
Quezada took no solace in the House support in 2023. She believes the bill only made it through the chamber because many representatives were aware the Senate had no interest in ensuring the bill reached Gov. Daniel J. McKee.
“I can guarantee you the House wouldn’t have done that otherwise,” she said. “It’s the game that’s played.”
Quezada understands that anyone who gets roped into a payday lender debt has done so under their own volition. But economic circumstances are often the catalyst for desperate and unwise decisions.
“At the same time, we need to educate people a little more,” she said. “Because you are only making your situation worse.”
Payday lenders are exempt from the rules governing banks and credit unions, which are subject to a 36% maximum annual percentage rate for loans of $300 or less, and 30% for loans over $300 and up to $800.
The legislation would repeal a section of the current statute, putting payday lenders under the interest rate limits governing other lenders.
When it comes to short-term lending, Rhode Island is an outsized market. It is still the only state in New England allowing up to 261% interest on short-term loans. Ocean State customers have faced fees of more than $7.6 million annually, and 93% of all payday lending in New England happens in Rhode Island.
There are now less than 10 payday lender stores operating in Rhode Island, the majority run by Advance America.
Reformists say an enduring roadblock is lobbyist William Murphy, a former House speaker who reportedly still holds outsized sway on Smith Hill. His firm, Dome Consultants LLC, which represents Advance America, spread $2,500 in campaign contributions in January across the Senate and House leadership.
Julie Townsend, vice president of government affairs for Purpose Financial, the parent company of Advance America, did not respond to requests for comment.
Rep. Karen Alzate, D-Pawtucket, who has sponsored a House bill to rein in payday lenders, said it was the first bill she filed this legislative session. She has not heard any word when the bill might be taken up by the House Committee on Corporations.
Alzate said the industry intentionally sets up debt traps for poor and minority customers, many of whom live in her district.
“These are in vulnerable communities,” she said. “This would not be tolerated if small businesses or more affluent communities in Rhode Island were targeted.”
The payday lending industry has made an estimated $90 million in fees from Rhode Island borrowers through 2023, according to calculations by the nonprofit Economic Progress Institute, based upon data provided by the R.I. Department of Business Regulation. And data from the Pew Charitable Trusts shows the average payday loan borrower in Rhode Island accepts 10 loans per year, often taking out new loans to pay back the old.
In 2024, McKee signed on to an open letter urging both chambers of the General Assembly to hold floor votes this session to stop out-of-state payday lenders from continuing to charge exorbitant fees, calling the industry indefensible and “targeting vulnerable populations.”
In addition to R.I. Secretary of State Gregg M. Amore, Attorney General Peter F. Neronha, and General Treasurer James A. Diossa, the letter was signed by leaders of eight municipalities – including the six cities where payday lenders have stores – and nearly 60 community, business, labor and religious organizations.
Alan Krinsky, EPI director of research and fiscal policy, says Senate leadership remains the obstacle to passing the legislation. “We remain the only New England state that provides a special carveout for these predatory lenders,” Krinksy said.
A 2022 poll conducted by the Center for Responsible Lending showed that Rhode Islanders supported a 36% rate cap on all loans by almost a 50-point margin.
“There has been a movement created over the last four years,” Quezada said. “People want to see change. And the message is getting to the House and Senate leadership that something needs to be done. It’s bigger than ever before.”
She is already thinking about future amendments to keep up with the industry’s move to digital.
“They are always going to find a way to get to people,” she said. “Now they come through the internet or your phone. So, we need to look at targeting them beyond those in the corner stores. But we need to do this first.”
(Correction: An earlier version of this story contained inaccurate information. The payday lending last passed the House in 2023, and Gov. Daniel J. McKee signed an open letter supporting payday lending legislation in 2024. Also, this year's legislation would repeal a section of the current statute, putting payday lenders under the interest rate limits governing other lenders.)
