Relates to the rate of interest to be paid on judgments and accrued claims

BILL NUMBER:S3751

Title of bill

An act to amend the banking law and the civil practice law and rules, in relation to the rate of interest to be paid upon judgments and accrued claims

Purpose

This bill would bring the legal rate of interest on judgments in line with market rates.

Summary of provisions

This bill would add a new section 7-A to the Banking Law, and amend section 5004 of the Civil Practice Law and Rules to establish the interest rate paid on judgments at the weekly average one year constant maturity treasury yield, capped at 9 percent. This is the same standard used by the federal government.

Justification

This bill would provide for the legal rate of interest on judgments to be linked to the prevailing market interest rate in lieu of the current 9% fixed rate. The 9% rate has proven over the past twenty five-years to over compensate plaintiffs to the detriment of defendants. A floating rate reflective of the market interest rate is employed. in many sister states and ensures that parties are neither over-compensated in times of low inflation nor under compensated as is the case during periods of significant inflation.

This bill would save money for New York consumers who have commercial judgments entered against them by corporations and other business entities. Consumers already shoulder an inequitable burden under present commercial lawsuit practices because, as noted by the New York State Consumer Protection Board in 1979, consumers as a general group do not bring suit or raise counterclaims or even appear to defend against invalid lawsuits due to the costs of retaining an attorney coupled with their frequent lack of knowledge regarding their rights.

The current 9% interest rate significantly adds to the consumers' cost burden when they are confronted with a judgment against them. Reducing the 9% interest rate to the prevailing market rate would reduce the financial burden on such consumers.

Passage of this bill will also help reduce the burden imposed by an overly generous tort system. Many of our sister states have enacted comprehensive tort reform thereby attracting business development and New York simply cannot afford to retain rules which result in windfall recoveries in tort cases. In fact, based on the November 2009 figures for New York civil jury verdicts as reported by New York Jury Verdict Review & Analysis, the current interest on New York verdicts after 30 days from verdict is $9.8 million.

Using the current market interest rate would result in a savings of approximately $9.5 million in New York's civil justice system. Such further results in lower costs of both doing business and living in New York. Moreover, the State alone would save $2.6 million under this bill; and New York City would save $1.5 million

Legislative history

This is a new bill.

Fiscal implications

None Noted.

Effective date

This act shall take effect immediately.