How does Rhode Island's definition of prepayment penalty differ from federal law?

Rhode Island's definition of prepayment penalty is unique in that it specifically delineates that penalties can only be applied to full payments of the loan. This distinction is significant because it establishes a clear framework that governs how lenders can impose penalties when a borrower decides to pay off a loan in full before its maturity date. It contrasts with some federal laws which may not have such a specific restriction, allowing for more flexible arrangements.

In this context, the option asserting penalties only for full payments aligns with Rhode Island's approach to prepayment penalties, emphasizing borrower protection by limiting the circumstances under which lenders can impose these fees. The other options do not accurately reflect Rhode Island’s legal framework regarding prepayment penalties. For example, Rhode Island does not ban all prepayment penalties outright, nor does it set a fixed penalty rate or allow partial loan payment penalties. The specificity in Rhode Island's definition serves to provide a clearer understanding of borrower rights within the state.