RI Senators Introduced Effective 36% Rate Cap Bill Last Week
PROVIDENCE, R.I.— After State Senator Ana Quezada and cosponsors introduced S2166 last week, a bill that would cap payday loans at 36% annually by repealing authorization for their triple-digit annual interest rates, the Center for Responsible Lending, The Economic Progress Institute and Capital Good Fund released a poll showing broad support for such a measure.
Rhode Islanders are eager to limit the interest rate payday lenders can charge on loans that typically trap borrowers in long-term cycles of debt, according to the poll released today. Payday loans carry an average 260% annual interest rate in Rhode Island, making the state an outlier in New England, where legislators have protected consumers with strong rate caps.
By a 49-point margin, Rhode Island voters support lowering the rate from the current average of 260% to 36% annually (APR). While 59% of voters surveyed support this reform, only 10% oppose, according to the poll conducted by Lake Research Partners. Some voters are undecided (31%) after hearing an initial description, and one in five of those who oppose do so because they think the cap should be lower than 36%.
Support for the 36% cap holds across party lines: the poll found 64% support for the cap from Democrats, 62% from Independents or Unidentified Voters, and 40% support from Republicans (compared to 26% of Republicans opposed). And another finding will be of interest to state lawmakers: four in 10 voters would be more likely to vote for an elected official who supported a 36% cap.
“The payday loan companies drain millions of dollars each year from Rhode Islanders,” said Margaux Morisseau, co-chair of the Rhode Island Payday Lending Reform Coalition. “These predatory loans have been curbed in many states, including all of our neighboring states, and now it is time for Rhode Island to end this usurious practice too. A 36% APR rate cap is the best solution. Voters overwhelmingly support this reform, and you can bet this will be a big issue during this election year.”
“As a nonprofit lender offering small personal loans, we strongly support a 36% rate cap,” said Andy Posner, Capital Good Fund CEO. “There are a variety of high-quality loan products available to Rhode Islanders, including from banks, credit unions, fintechs, and nonprofits like us. By listening to the concerns of voters, legislators can protect consumers and level the playing field for equitable lenders in the state.”
“After the U.S. Defense Department determined that predatory lending ‘undermines military readiness,’ Congress acted in 2006 to protect active-duty military personnel by capping loans to such individuals at 36 percent,” said Alan Krinsky, Senior Fiscal Policy Analyst for The Economic Progress Institute. “If this standard is appropriate for protecting those serving in the military, it should be appropriate for protecting all Rhode Islanders.”
Because payday lending is marketed as short-term lending but functions as long-term debt for most borrowers, 18 states plus the District of Columbia cap annual interest around 36%, which effectively bans the type of high-interest payday loans that cause financial harm for struggling families. Borrowers often find themselves worse off after experiencing payday loan debt, unable to pay bills, accruing multiple overdraft fees, sometimes losing their bank accounts altogether and/or filing bankruptcy. Nationally, and in Rhode Island, these harms fall disproportionately on communities of color.
“The strong support for a 36% cap in Rhode Island is in line with the overwhelming support across the country in poll after poll, ballot measure after ballot measure,” said Yasmin Farahi, Center for Responsible Lending Senior Policy Counsel. “People understand the harmful nature of payday lending, which is designed to create a long-term cycle of debt that causes financial devastation for many families. A rate cap is the most effective way to dismantle this predatory machine.”
Three-quarters of those who responded to the poll support it even if it caused some payday loan stores to close, and borrowers and citizens of states that have established such a cap have found relief and alternative responsible and safe resources to meet their needs.