Makes litigation loan agreements subject to state usury laws.

Rhode Island Bill: Regulating Litigation Loans

This bill would apply Rhode Island's existing usury laws — which set limits on how much interest lenders can charge — to a specific type of financial product called a "litigation loan" (also known as lawsuit funding or legal funding). A litigation loan is when a company gives money to someone who has a pending lawsuit, and in exchange, the person agrees to repay the company (usually with significant fees and interest) if and when they win or settle their case. Currently, these arrangements may not be clearly covered under the state's standard interest rate caps.

If passed, this bill would treat litigation loan companies the same way Rhode Island treats other lenders, meaning they would be subject to the state's rules about how much interest and fees they can legally charge. This is aimed at preventing companies from charging extremely high rates to people who are waiting for their lawsuits to resolve — a process that can sometimes take years. The longer a case drags on, the more the borrower can end up owing, which critics argue can leave vulnerable people with very little money even after winning their case.

This bill would primarily affect people who have active lawsuits (such as personal injury cases) and need cash in the meantime to cover living expenses or medical bills. It would also affect the companies that provide this type of funding. The bill was introduced in the Rhode Island House and has been referred to the House Judiciary Committee, where it is currently being held for further study.