N.Y. Enacts Law Lowering Judgment Interest on Consumer Debts

The Governor of New York last week signed a bill into law that will lower the interest rate that can be charged on unpaid money judgments to 2%. The law not only applies to new judgments, but also will be applied retroactively to any judgment that is not fully paid or satisfied when the law goes into effect. The law is scheduled to go into effect on April 30.

News of the signing was first reported by ACA International.

Currently, the interest rate on judgments in New York is 9%, a rate that has remained steady for four decades. Information about the bill, S5724A, which was sponsored by state Sen. Alessandra Biaggi, state Sen. John E. Brooks, state Sen. Robert Jackson, and state Sen. Liz Krueger, can be accessed by clicking here.

The change applies to judgments involving consumer debts, which it defines as “any obligation or alleged obligation of any natural person to pay money that arose out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family or household purposes, including but not limited to consumer credit transactions as defined in section 105 of the civil practice law and rules.”

ACA International said it is working with the New York State Collectors Association to try and amend the bill before it goes into effect.

“With little or no income, many consumers are already unable to pay their bills, including rent, medical bills, and car loans, or to continue paying consumer debt judgments,” according to a summary of the bill. “Many of the debts stemming from the COVID-19 pandemic will eventually be bought by debt collectors who will use extraordinary means to seek legal judgments. The long-lasting economic effects of these measures are deeply concerning and it is in the interest of the State to protect vulnerable New Yorkers from bank levies and wage garnishments to pay unjustly high interest amounts that originate in State law on judgments for consumer debts. New York state has an opportunity to protect New Yorkers from further financial hardship – with no financial outlay by the state – by lowering the interest rate that defendants pay on consumer judgments and accrued claims.”

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