R.I., Mass. receive ‘Fs’ on loan laws

BOSTON – Rhode Island has received two “Fs” in a new nationwide study of state laws in place to protect consumers from excessive interest charges on small-dollar loans.
The state also received passing grades in three other categories in the “The Small Dollar Loan Products Scorecard” released by Boston’s National Consumer Law Center and Washington’s Consumer Federation of America.
The scorecard gave the failing grades because the state permits a 390-percent annual percentage rate (APR) on a $250, two-week payday loan and because the state has what the scorecard deemed an insufficient criminal usury cap.
Rhode Island received passing grades for prohibiting $3,000, one-month auto-title loans and capping the APR at 30 percent for a $500, six-month loan and 24 percent on a $1,000, one-year loan.
By comparison, Massachusetts also received two “Fs” – one for an insufficient criminal usury cap and another for permitting a 37-percent APR on a $500, six-month loan.
Maine failed one category for permitting a 261 percent APR on a $250, two-week payday loan.
The report gave New Hampshire straight “Fs” for having no restraints on payday loans and other high-interest loans.
At the same time, both Connecticut and Vermont passed all the categories.
Nationwide, states scored the worst when it came to payday loans. Thirty-eight states fail to protect consumers against high-cost payday loans. Twenty-four states do not protect consumers against abusive six-month, $500 unsecured installment loans, and 21 states fail to protect consumers against expensive auto title loans.
“Americans who fall prey to abusive lending practices pay more to borrow money and often end up trapped in an endless cycle of debt,” said Jean Ann Fox, director of financial services for Consumer Federation of America. “Unfortunately, many states aren’t providing consumers with the protections they need to avoid being ripped off by modern day loan sharks.”