2019 -- S 0195

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LC000404

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

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A N   A C T

RELATING TO COMMERCIAL LAW-GENERAL REGULATORY PROVISIONS --

INTEREST AND USURY

     

     Introduced By: Senators Raptakis, Bell, Metts, Sheehan, and Ciccone

     Date Introduced: January 31, 2019

     Referred To: Senate Commerce

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 6-26-2 of the General Laws in Chapter 6-26 entitled "Interest and

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Usury" is hereby amended to read as follows:

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     6-26-2. Maximum rate of interest.

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     (a) Subject to the provisions of title 19, no person, partnership, association, or corporation

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loaning money to or negotiating the loan of money for another, except duly licensed

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pawnbrokers, shall, directly or indirectly, reserve, charge, or take interest on a loan, whether

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before or after maturity, at a rate that shall exceed the greater of twenty-one percent (21%) twelve

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percent (12%) per annum or the alternate rate specified in subsection (b) of this section of the

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unpaid principal balance of the net proceeds of the loan not compounded, nor taken in advance,

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nor added on to the amount of the loan.

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     (b) The alternate rate means the rate per annum that is equal to nine percentage points

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(9%) plus an index that is the domestic prime rate as published in the Money Rates section of The

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Wall Street Journal on the last business day of each month preceding the later of the date of the

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debtor's agreement or the date on which the interest rate is redetermined in accordance with the

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terms of the debtor's agreement. If the Wall Street Journal ceases publication of the prime rate,

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the director of business regulation shall designate a substantially equivalent index. In the event an

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index is published as a range of rates, then the lowest rate shall be the index.

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     (c)(1) For purposes of this section, interest shall not be construed to include:

 

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     (i) Charges pursuant to chapter 30 of title 27;

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     (ii) Premiums for insurance in an amount not exceeding the reasonable value of property

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offered as security for a loan against any substantial risk of loss, liability, damage, or destruction

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in conformity with the insurance laws of this state;

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     (iii) Premiums for insurance providing loss of income or involuntary unemployment

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coverage if the coverage is not a factor in the approval by the lender of the extension of credit and

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the debtor gives specific written indication that the cost of this coverage has been conspicuously

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disclosed to the debtor; that the debtor realizes that the coverage is not a condition for the

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extension of credit; and that the debtor voluntarily desires the coverage;

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     (iv) Commercial loan commitment or availability fees to assure the availability of a

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specified amount of credit for a specified period of time or, at the borrower's option,

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compensating balances in lieu of the fees;

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     (v) Reasonable attorney's fees customarily charged for the preparation of loan, security,

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or mortgage documents and for the collection of defaulted loans;

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     (vi) Fees for title examination or title insurance;

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     (vii) Other customary and reasonable costs incident to the closing, supervision, and

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collection of loans in this state; and

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     (viii) Consideration received for the redemption, sale, transfer, or other disposition of

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equity securities by a small business investment company licensed under the provisions of the

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"Small Business Investment Act of 1958", 15 U.S.C. § 631 et seq., as amended, or an entity that

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would qualify for regulation as a business development company under the provisions of the

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"Investment Company Act of 1940", 15 U.S.C. § 80a-1 et seq., as amended, whether or not the

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equity securities were acquired by a small business investment company or business development

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company in connection with or as an incident to the extension of credit.

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     (2) Any of the preceding charges, if paid or advanced by the lender, may be considered

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part of the net proceeds of the loan, and if paid by the debtor, shall not be deducted from the net

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proceeds of the loan.

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     (d) Notwithstanding anything to the contrary in this chapter or in any other provision of

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Rhode Island law, the provisions of this chapter shall not be applicable with respect to credit card

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transactions as defined in chapter 26.1 of this title. Chapter 26.1 shall apply exclusively to all

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such transactions.

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     (e) Notwithstanding the provisions of subsection (a) of this section and/or any other

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provision in this chapter to the contrary, there is no limitation on the rate of interest that may be

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legally charged for the loan to, or use of money by, a commercial entity, where the amount of

 

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money loaned exceeds the sum of one million dollars ($1,000,000) and where repayment of the

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loan is not secured by a mortgage against the principal residence of any borrower; provided, that

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the commercial entity has first obtained a pro forma methods analysis performed by a certified

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public accountant licensed in the state of Rhode Island indicating that the loan is capable of being

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repaid.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO COMMERCIAL LAW-GENERAL REGULATORY PROVISIONS --

INTEREST AND USURY

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     This act would reduce the usury rate to twelve percent (12%).

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     This act would take effect upon passage.

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