Relates to the rate of interest to be paid on judgments and accrued claims; ties the rate of interest to the maturity treasury yield as published by the federal reserve.
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
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.
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
This is a new bill.
This act shall take effect immediately.
STATE OF NEW YORK ________________________________________________________________________ 3751 2011-2012 Regular Sessions IN SENATE March 3, 2011 ___________Introduced by Sen. GRIFFO -- read twice and ordered printed, and when printed to be committed to the Committee on Banks 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 THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The banking law is amended by adding a new section 7-a to read as follows: S 7-A. RATE OF INTEREST ON MONEY JUDGMENTS. UNLESS OTHERWISE PROVIDED BY CONTRACT OR ANY OTHER PROVISION OF LAW, THE INTEREST ON MONEY JUDG- MENTS SHALL BE CALCULATED AT A RATE EQUAL TO THE WEEKLY AVERAGE ONE YEAR CONSTANT MATURITY TREASURY YIELD, AS PUBLISHED BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, FOR THE CALENDAR WEEK PRECEDING THE DATE OF THE ENTRY OF THE JUDGMENT AWARDING DAMAGES, EXCEPT WHERE OTHERWISE PROVIDED BY STATUTE. IN NO EVENT, HOWEVER, SHALL THE RATE OF INTEREST ON ANY JUDGMENT OR ACCRUED CLAIM EXCEED NINE PER CENTUM PER ANNUM. S 2. Section 5004 of the civil practice law and rules, as amended by chapter 258 of the laws of 1981, is amended to read as follows: S 5004. Rate of interest. Interest shall be
[at the rate of nine per centum per annum]CALCULATED AT A RATE EQUAL TO THE WEEKLY AVERAGE ONE YEAR CONSTANT MATURITY TREASURY YIELD, AS PUBLISHED BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, FOR THE CALENDAR WEEK PRECEDING THE DATE OF THE ENTRY OF THE JUDGMENT AWARDING DAMAGES, except where otherwise provided by statute. IN NO EVENT, HOWEVER, SHALL THE RATE OF INTEREST ON ANY JUDGMENT OR ACCRUED CLAIM EXCEED NINE PER CENTUM PER ANNUM. S 3. This act shall take effect immediately.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD09406-02-1