Fast Five: Rhode Island Appellate Practice - March 2014: Lenders Beware! Usury Savings Clause Does Not Validate Usurious Contract Under Rhode Island Law

by Adler Pollock & Sheehan P.C.

In a case of first impression that has important implications for lenders in Rhode Island, the Rhode Island Supreme Court held this term that a usury savings clause in a commercial loan document does not validate an otherwise usurious contract.  NV One, LLC v. Potomac Realty Capital, LLC, No. 2012-262-Appeal

As a result of the Court’s decision, loan documents that impose an interest rate in excess of 21 percent per annum and do not fall within a statutory exception are usurious and void as a matter of law, regardless of whether they contain a usury savings clause.  Id. at 8.  When a usurious loan document is declared void, the borrower is entitled to recover all amounts paid on the loan.  Id.[1]  A lender has no right to collect either principal or interest on a usurious loan.  See Colonial Plan Co. v. Tartaglione, 50 R.I. 342, 147 A. 880, 881 (1929). 

Pursuant to Rhode Island statutory law, the maximum allowable interest rate for most loans is 21 percent per annumNV One, LLC at 8. (citing R.I. Gen. Laws § 6-26-2(a)).[2]  Contracts that purport to impose an interest rate in excess of 21 percent per annum are usurious and void.  Id. (citing R.I. Gen. Laws § 6-26-4).  The lender’s subjective intent to comply with the usury laws is irrelevant.  Id.  However, if the lender willfully and knowingly violates § 6-26-2, it can be found guilty of criminal usury, punishable by up to five years’ imprisonment.  R.I. Gen. Laws § 6-26-3. 

Through the passage of such statutes, the Rhode Island General Assembly has manifested an intention to protect borrowers by ensuring that lenders do not charge interest in excess of the maximum rate.   Id. at 14.  As the Supreme Court recognized, “the Legislature intended an inflexible, hardline approach to usury that is tantamount to strict liability.”  Id. at 12. 

Since their enactment, Rhode Island has strictly enforced its usury laws, but until the Supreme Court’s decision in NV One, LLC, it had not addressed whether a usury savings clause could save an otherwise usurious loan.  See NV One, LLC at 12 (tracing Rhode Island’s “historically strict enforcement of the statute and its predecessors” from 1926 through 1982). 

In concluding that usury savings clauses violate public policy, the Supreme Court reasoned that “enforcement of usury savings clauses would entirely obviate any responsibility on the part of the lender to abide by the usury statute, and would, in essence, swallow the rule.”  NV One, LLC at 15.  The Court expressed concern that “the inclusion of usury savings clauses in loan contracts would lead to results that are injurious to the money-borrowing public, as well as potentially unconscionable or tending towards injustice or oppression.”  Id. at 16.  Indeed, “[i]f lenders could circumvent the maximum interest rate by including a boilerplate usury savings clause, lenders could charge excessive rates without recourse.”  Id.

In the wake of the Supreme Court’s decision, lenders should carefully scrutinize their loan documents to ensure full compliance with Rhode Island’s usury laws, bearing in mind that a usury savings clause will not save an otherwise usurious loan agreement. 

[1]  By statute, the remedy available when a regulated financial institution knowingly contracts or charges a usurious interest rate is different.  In that scenario, the regulated financial institution must forfeit the entire interest on the debt.  R.I. Gen. Laws § 6-26-4(d).  If the debtor has already paid the usurious interest rate, he or she may recover from the regulated financial institution twice the amount of the interest paid.  Id.  There is a two year statute of limitations for such actions, which runs from the date of the usurious transaction.  Id.  

[2] There are some exceptions, such as for a loan in excess of $1,000,000 to a commercial entity when the loan is not secured by a mortgage against the principal residence of any borrower and the commercial entity obtained a pro forma methods analysis performed by a licensed certified public accountant.  R.I. Gen. Laws § 6-26-2(e).

*Photo Credits: Image courtesy of Stuart Miles at


Written by:

Adler Pollock & Sheehan P.C.

Adler Pollock & Sheehan P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.