According to Rhode Island insurance law, what is the maximum annual interest rate on premium financing agreements?

In Rhode Island, the regulation surrounding premium financing agreements specifies that the maximum annual interest rate must be determined by evaluating both a fixed rate and a variable rate tied to the domestic prime rate of interest. Specifically, the law states that the maximum interest can be either 21% or 9% plus the prime rate, depending on which of those two calculations results in the greater amount.

This means if the sum of 9% plus the prime rate exceeds 21%, that higher amount is permissible as the interest rate for the premium financing agreement. Conversely, if 9% plus the prime rate is less than 21%, the limit would remain at 21%. The rationale for this structure is to provide flexibility in the interest rate while also safeguarding consumers from excessively high interest rates by establishing a clear maximum cap (21%).

This regulatory framework assists in fostering fair lending practices and protects borrowers from potentially exploitative interest terms in insurance premium financing.