PROVIDENCE – Rhode Island ranks in the bottom half of states when it comes to protections against payday lenders, according to a report from Pew Charitable Trusts published Wednesday.
The average 261% interest rate charged on payday loans in Rhode Island is the 22nd-highest nationwide – according to data published Tuesday. That means a Rhode Islander could pay an extra $360 in interest and fees per month for four months on a $450 loan. Idaho had the highest interest rates at 652%, creating a $1,000-per-month cost for borrowers over the course of four months, according to the data.
By contrast, 18 states, including Massachusetts and Connecticut, either outright ban payday lenders or cap interest rates at 36% interest rates, mirroring federal policies for active military personnel under the Military Leave Act. Under that rate, the same $450 loan would come with a $40–per-month payment over four months.
Efforts to crack down on payday lenders in Rhode Island have been ongoing but have failed to make it past committee hearings in the R.I. General Assembly in years prior. This year, advocates with Rhode Island Payday Lending Reform Coalition doubled down by releasing a public poll showing voter support for payday lending reform.
Despite these findings, the R.I. Senate bill seeking to cap payday lending interest rates appears to have again stalled, with the Senate Commerce Committee recommending the bill be held for further study. The R.I. House version has not yet had a committee hearing or vote.
Pew in its report recommended that states without payday lending reforms adopt stronger protections, including caps on interest rates, longer time frames for repayment and more access to safe credit alternatives.
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.
