A last ditch appeal to the Senate to stop the evil of payday loans in Rhode Island

"Make no mistake. PayDay lending is pure, unadulterated, legal oppression of some of the poorest and most vulnerable people in our society."

“For too long Rhode Island has allowed payday lenders to target our Black and Latino communities with outrageous rates and terms that trap residents in a cycle of debt,” said Weayonnoh Nelson-Davies, Executive Director of the Economic Progress Institute, speaking at a press conference by the The Rhode Island Coalition for Payday Reform. “Rhode Islanders have been asking the State House for more than a decade to take action to end predatory loan practices. With the existing overwhelming support of residents, we expect the Senate to pass these long overdue reforms this year.”

A national standard for payday loans was established when Congress capped payday loan interest at 36% for members of the military and their families in 2006, and while the Rhode Island Senate has not yet even scheduled a hearing or a committee vote for the bill before the end of the current session, the Rhode Island House of Representatives seems poised to pass the bill this week.

"Make no mistake. PayDay lending is pure, unadulterated, legal oppression of some of the poorest and most vulnerable people in our society," said the Reverend Dr. Donnie Anderson, Chair of the Democratic Women’s Caucus."These white collar gangsters are not going to break anybody's bones but they have no problem taking people's stability away from them [and] putting them in emotional trauma."

While the press conference was underway the House Corporations Committee, for the first time in 13 years, passed 2023 H5160 onto the House floor for a full vote. The act, sponsored by Representative Karen Alzate (Democrat, District 60, Pawtucket) repeals "the provisions of the general laws allowing deferred deposit providers, also known as payday lenders."

"I understand why these kind of businesses are in communities like mine, and why the prey on families like mine and my community," said Representative Alzate. "For 13 years the Coalition and many other Reps who are no longer here has been fighting to reform this predatory practice that has done financial harm to thousands of low-income and vulnerable Rhode Islanders."

The bill is less likely to pass in the Senate, even though essentially the same legislation was passed in that chamber three years ago.

"Unfortunately, I don't see [the bill] going through the Senate because they didn't even put it in committee this year," said Senator Ana Quezada (Democrat, District 2, Providence). "And I feel so sad about it because I think this is the time."

The Rhode Island Coalition for Payday Reform has been organizing to close the loophole that allows payday lenders to play by special rules that allow them to issue loans with annual interest rates of 260%. Payday loans, such as those permitted in Rhode Island, are high-cost loans structured to perpetuate an ongoing cycle of debt. In 2018, payday lenders drained $7.5 million in fees from Rhode Islanders.

"We have been working hard for 13 years and it is far past time that we end the 260% APR that predatory payday lenders are charging,” said Margaux Morriseau, Deputy Director of the Rhode Island Coalition to End Homelessness. “I am relieved that Speaker Shekarchi has let this important issue come to a vote, and I urge Senate President Ruggerio to do the same. More than twenty other states and the military are already protected from these awful loan products and it is time for Rhode Island to end this usury."

"The PayDay lending industry and other predatory lenders would have you believe that they're helping people," said Alan Krinsky, Director of Research and Fiscal Policy of the Economic Progress Institute. "But the industry does not survive because people in need come to them take out one emergency loans and then pay it back right away. Their business model works only because people come back again and again to take out additional loans - not additional money - to pay back the first loan."

Ending predatory payday lending practices has broad majority support across the political spectrum in Rhode Island. A 2022 poll conducted by the Center for Responsible Lending showed that Rhode Islanders from all political parties supported a 36% rate cap on all loans by a 49-point margin.

“Payday lending traps borrowers in cycles of debt, making it difficult for them to solidify their own finances and limiting future opportunities such as starting or growing a business,” said Secretary of State Gregg M. Amore. “We should be creating more pathways to financial stability, not allowing for continued predatory lending practices that perpetuate inequity.” General Treasurer James Diossa, who could not attend the press conference, also announced his support for reform.

Better short term loan options already exist for Rhode Islanders from local credit unions, banks, and community financial groups all offering small loans, with low fees and interest rates ranging from 5% to 30%.

The Rhode Island Coalition for Payday Reform is a coalition of community groups that work to end the predatory practices of the payday loan industry that trap Rhode Islanders in a cycle of debt.