SB 441 – Interest on Money Judgments

Sen. Ford has introduced SB 441 which would alter the law with respect to interest on money judgments. Under current law, unless you have a contract that provides for a lower interest rate, if you get a money judgment against someone, that judgment accrues interest at the rate of 8% per year until paid. Under the proposed legislation, that interest rate would become the lesser of 8% or “the applicable adjusted rate of interest calculated under IC 6-8.1-10-1(c) as of the date of payment of the interest on the judgment.”  That adjusted rate of interest is “the percentage rounded to the nearest whole number that equals two (2) percentage points above the average investment yield on state general fund money for the state’s previous fiscal year, excluding pension fund investments, as determined by the treasurer of state on or before October 1 of each year and reported to the commissioner [of the Department of Revenue].” This adjusted rate calculation would apply to judgments entered after July 1, 2019, and to unpaid portions of money judgments entered before July 1, 2019.

I will tell you that, as a collection attorney, I sometimes have trouble explaining the basic concept of interest to debtors. (My standard example is along the lines of “well, if I owed you $100, would you rather I pay  you today or pay you in a year?” They, of course recognize that it’s better to have money today than in a year. Then I explain that the 8% is a way of compensating creditors for the delay.) I do not look forward to explaining the mysteries of the “average investment yield on state general fund money.” Nor do I look forward to adjusting the interest rates from year to year on all of the open collection files.

I wouldn’t object strenuously to the General Assembly lowering the interest rate down from 8%. I’m pretty sure it’s been at 8% for the 20 years I’ve been practicing law and the general trend over that period of time has been lower interest rates. But making it variable seems like a big hassle.