§ 6-26-2 - Maximum rate of interest.
SECTION 6-26-2
§ 6-26-2 Maximum rate of interest. –(a) Subject to the provisions of title 19, no person, partnership, association,or corporation loaning money to or negotiating the loan of money for another,except duly licensed pawnbrokers, shall, directly or indirectly, reserve,charge, or take interest on a loan, whether before or after maturity, at a ratewhich shall exceed the greater of twenty-one percent (21%) per annum or thealternate rate specified in subsection (b) of this section of the unpaidprincipal balance of the net proceeds of the loan not compounded, nor taken inadvance, nor added on to the amount of the loan.
(b) The alternate rate means the rate per annum which isequal to nine percentage points (9%) plus an index which is the domestic primerate as published in the Money Rates section of The Wall Street Journal on thelast business day of each month preceding the later of the date of the debtor'sagreement or the date on which the interest rate is redetermined in accordancewith the terms of the debtor's agreement. If the Wall Street Journal ceasespublication of the prime rate, the director of business regulation shalldesignate a substantially equivalent index. In the event an index is publishedas a range of rates, then the lowest rate shall be the index.
(c) For purposes of this section, interest shall not beconstrued to include:
(i) Charges pursuant to chapters 30 and 31 of title 27;
(ii) Premiums for insurance in an amount not exceeding thereasonable value of property offered as security for a loan against anysubstantial risk of loss, liability, damage, or destruction in conformity withthe insurance laws of this state;
(iii) Premiums for insurance providing loss of income orinvoluntary unemployment coverage if the coverage is not a factor in theapproval by the lender of the extension of credit and the debtor gives specificwritten indication that the cost of this coverage has been conspicuouslydisclosed to the debtor, that the debtor realizes that the coverage is not acondition for the extension of credit, and that the debtor voluntarily desiresthe coverage;
(iv) Commercial loan commitment or availability fees toassure the availability of a specified amount of credit for a specified periodof time or, at the borrower's option, compensating balances in lieu of the fees;
(v) Reasonable attorney's fees customarily charged for thepreparation of loan, security, or mortgage documents and for the collection ofdefaulted loans;
(vi) Fees for title examination or title insurance;
(vii) Other customary and reasonable costs incident to theclosing, supervision, and collection of loans in this state; and
(viii) Consideration received for the redemption, sale,transfer, or other disposition of equity securities by a small businessinvestment company licensed under the provisions of the "Small BusinessInvestment Act of 1958", 15 U.S.C. § 631 et seq., as amended, or an entitywhich would qualify for regulation as a business development company under theprovisions of the "Investment Company Act of 1940", 15 U.S.C. § 80a-1 etseq., as amended, whether or not the equity securities were acquired by a smallbusiness investment company or business development company in connection withor as an incident to the extension of credit.
(2) Any of the preceding charges, if paid or advanced by thelender, may be considered part of the net proceeds of the loan, and if paid bythe debtor, shall not be deducted from the net proceeds of the loan.
(d) Notwithstanding anything to the contrary in this chapteror in any other provision of Rhode Island law, the provisions of this chaptershall not be applicable with respect to credit card transactions as defined inchapter 26.1 of this title. Chapter 26.1 shall apply exclusively to all suchtransactions.
(e) Notwithstanding the provisions of subsection (a) of thissection and/or any other provision in this chapter to the contrary, there is nolimitation on the rate of interest which may be legally charged for the loanto, or use of money by, a commercial entity, where the amount of money loanedexceeds the sum of one million dollars ($1,000,000) and where repayment of theloan is not secured by a mortgage against the principal residence of anyborrower; provided, that the commercial entity has first obtained a pro formamethods analysis performed by a certified public accountant licensed in thestate of Rhode Island indicating that the loan is capable of being repaid.