Makes litigation loan agreements subject to state usury laws.
Summary
H5907 creates a new chapter in Rhode Island law governing “litigation lending agreements,” which are arrangements in which a company advances money to a civil litigant in exchange for repayment from any litigation proceeds. The bill states legislative findings that these arrangements often carry effective annual interest rates far above state usury limits, sometimes exceeding 100%, and declares that regulation is needed to protect the public welfare.
The bill defines a litigation lending agreement broadly to include advances repaid from lawsuit proceeds, whether the transaction is labeled a loan, advance, investment, assignment of proceeds, or something else, and whether the repayment is described as interest, fees, or other charges. It expressly excludes attorney advances for litigation expenses that are permitted under Rhode Island’s professional conduct rules. The core legal effect is to treat any amount paid by the litigant above the amount received as interest subject to Rhode Island’s usury laws, regardless of how the agreement is structured or whether repayment depends on the outcome of the case. The act would take effect immediately upon passage.
Impact
The bill would amend Title 9 of the General Laws by adding a new chapter that brings litigation funding transactions within the scope of Rhode Island’s interest and usury statutes in Title 6, chapter 26. As a result, litigation funders could no longer avoid usury limits by using alternative labels or contingent repayment structures, and litigants entering these agreements would gain the protections of state usury law. The measure would also leave intact attorney-client litigation expense advances permitted by the rules of professional conduct.
Sentiment
The bill text reflects a strongly protective stance toward consumers and litigants, framing litigation funding as a practice that can impose excessive and harmful interest rates. Because there are no committee transcripts or recorded votes provided, there is no documented legislative debate or opposition in the supplied materials. Based on the bill’s findings and caption, the apparent sentiment is favorable toward tighter regulation of litigation finance and toward aligning it with existing usury limits.
Contention
The main point of contention likely concerns whether litigation funding should be treated as a loan subject to usury caps or as a distinct financial product outside traditional lending rules. Supporters would emphasize high effective interest rates, consumer protection, and the need to stop evasion through contract labels; opponents may argue that contingent litigation funding serves plaintiffs who lack access to cash and that strict usury treatment could reduce availability of funding. The bill specifically addresses potential loopholes by defining the covered agreements broadly and excluding only attorney expense advances.