As Rhode Island legislators prepare to once again consider a bill to reform payday loan practices in the state, advocates in favor of stricter regulations on short-term lending staged a protest outside Advance America, a payday loan provider on Bald Hill Road in Warwick, on May 9.

Organized by the Rhode Island Coalition for Predatory Lending Reform and the Rhode Island Interfaith Coalition to Reduce Poverty, the protest sought to rally support for proposed legislation that would limit the amount of interest and other fees that lenders can impose on short-term loans. Roughly 15 people were in attendance, bearing handmade signs that decried payday loans as being exploitative of vulnerable borrowers.

Payday loans, also known as cash advance loans, are short-term loans typically taken out by borrowers to cover essential costs until their next paycheck arrives. Critics of the practice claim that payday lenders target low-income borrowers by charging high interest rates, trapping them in a cycle of further borrowing to pay off debt.

Payday lending practices “drain around $3 million in fees a year from these consumers — and from the local economy — and sends most of that money out of state, mainly to one company that’s located in South Carolina,” stated a press release from the Economic Progress Institute (EPI).

Rhode Island is the only New England state that allows payday lending. In the 2023 session of the General Assembly, the House of Representatives voted by a 70-2 margin to reform payday lending. All five state General Officers signed a letter in 2024 urging reform.

In Rhode Island, state law prevents small loan providers from charging an annual percentage rate greater than 36% for loans of $300 or less. However, the Economic Progress Institute states that a loophole in state law allows lenders to register as deferred deposit providers, enabling them to enforce an annual percentage rate of up to 260%.

While efforts to address this loophole aren’t new it’s been tough getting anything to stick across both chambers.

Whether reform efforts will have to spend another year in the General Assembly remains yet to be seen. This year, Rep. Karen Alzate and Sen. Ana Quezada have introduced bills in the House and Senate, respectively, that would repeal existing provisions that allow payday lenders to register as direct deposit providers.

“We appreciate Speaker Shekarchi allowing that [House] vote and we’re hoping for another floor vote this session,” said Michael Healey, communications manager for the Economic Progress Institute, a member of the coalition. “We’re also hopeful about the Senate side with the new energy and leadership of Senate President Lawson.”

EPI anticipates a hearing on the bill to take place within the Senate Commerce committee in the coming weeks.