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SB 3196

AN ACT RELATING TO COURTS AND CIVIL PROCEDURE -- PROCEDURE GENERALLY -- LITIGATION LENDING AGREEMENTS

2026 Regular Session Introduced by Matt LaMountain and 1 co-sponsor

SB 3196 brings litigation lending agreements under RI usury laws, treating repayments above advances as interest and capping costs regardless of contract terms.

04/16/2026 Committee recommended measure be held for further study
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Bill Summary · SB 3196

Summary of Bill SB 3196 (Rhode Island, 2026)

Purpose and Intent

SB 3196 introduces a new chapter to Rhode Island law to regulate “litigation lending agreements” (LLAs). The bill seeks to curb usurious lending practices tied to civil lawsuits by ensuring that litigation financing contracts comply with state usury limits. The sponsors describe LLAs as arrangements in which a financing entity provides funds to a litigant in exchange for repayment from litigation proceeds, and they note concerns about exceedingly high annual interest rates (often over 100%).

Key Provisions

  • New Chapter Created: Adds Chapter 3.1 to Title 9 (Courts and Civil Procedure – Procedure Generally), titled “Litigation Lending Agreements.”

  • Definitions:

    • A “litigation lending agreement” is any contract where money is paid to a litigant in exchange for a promise to repay those funds (with or without interest, fees, or add-ons) from the eventual proceeds of the litigation.
    • The definition explicitly excludes attorney-funded advances of litigation expenses paid by lawyers on behalf of clients (per Rule 1.8(e) of the Rhode Island Rules of Professional Conduct).

  • Treatment as Loans for Usury Purposes:

    • Any payments made by a litigant under an LLA that exceed the amount originally received are deemed interest on loans.
    • The usury provisions of Rhode Island (Chapter 26 of Title 6) apply to LLAs, regardless of:
    • How the agreement characterizes itself (loan, advance, investment, assignment of proceeds, etc.).
    • The terminology used for payments (interest, use fees, or other terms).
    • Whether the total amount repaid exceeds typical loan/interest limits.
    • Whether repayment is contingent on the outcome of the litigation.

  • Effective Date: The act takes effect upon passage.

What Is Affected

  • Stakeholders:

    • Litigants who enter into LLAs.
    • Lenders/financiers who provide litigation funding.
    • Attorneys whose practice areas may intersect with financing arrangements (as LLAs are distinguished from attorney advances).
    • Courts, which may interpret and enforce the usury restrictions applied to LLAs.

  • Broader Impact: LLAs would become subject to Rhode Island’s traditional usury laws, potentially setting upper caps on interest and related charges (as defined by Title 6, Chapter 26). This could affect the cost structure of litigation financing and lender participation in Rhode Island.

Procedural and Timeline Aspects

  • Committee Action: The bill was referred to the Senate Judiciary Committee and recommended “held for further study” (April 16, 2026), indicating it may undergo further review or amendments.
  • Introduction Date: April 3, 2026.
  • Next Steps: If advanced, the bill would need passage by the Rhode Island General Assembly and final approval before it could become law.

Summary

SB 3196 aims to bring litigation lending agreements under Rhode Island’s usury framework to protect litigants from excessively high financing costs. By treating LLAs as loans for purposes of usury law, the bill requires that any repayment above the amount advanced be evaluated according to state interest restrictions, regardless of how the agreement is labeled or structured. The act is effective upon passage, subject to legislative action and potential amendments during committee review.

Compiled from official sources — confirm details with the bill’s official record.

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