Rhode Island State House OKs Knight Bill To Expand Access To Escrow Accounts

PROVIDENCE, RI — The Rhode Island House of Representatives approved legislation sponsored by state Rep. Jason Knight that would make it easier for financial institutions to offer escrow accounts to the general public.

Knight, D-Barrington and Warren, said the bill could give landlords and others another option for holding money that belongs to someone else.

The measure sets limits and protections for what the legislation describes as special deposits by individuals. According to the State House announcement, those deposits would be governed by an account agreement between the bank and the depositor or the beneficiary.

Escrow accounts are commonly used by corporations to hold money belonging to clients. Mortgage holders use them to hold funds collected from mortgagors for costs such as property tax and insurance. Lawyers also use them to collect and pay out money belonging to clients.

“Having an escrow account would help small landlords keep their tenants’ security and other deposits separate from their own funds, and would protect tenants if their landlord were to go bankrupt," Knight said in a media release.

"In that situation, their deposit wouldn’t be entangled in the bankruptcy, so they wouldn’t run into problems getting it back,” Knight said.

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