For the first time in over 40 years, New York has amended CPLR § 5004 and lowered its interest rate on money judgments founded upon consumer debt, which is generally defined as debts incurred “primarily for personal, family or household purposes”. Effective April 30, 2022, the Fair Consumer Judgment Interest Act (”FCJIA”) reduces from 9% to 2% the interest rate applicable to (1) consumer debt judgments entered after April 30, 2022; and to (2) that portion of a consumer debt judgment entered prior to April 30, 2022 that remains unpaid after said date. The FCJIA brings the New York post-judgment interest rate more in line with the federal interest rate on judgments, which currently (i.e., end of May, 2022) sits at 2% but which, unlike New York’s rate, gets recalculated and changed on a regular basis based upon market forces.
On April 28,2022, before the FCJIA even went into effect, a New York federal judge issued a temporary injunction enjoining Sheriffs from Chautauqua, Erie and Niagara Counties from refusing to enforce executions seeking to collect interest at the rate in effect at the time the judgments were entered (i.e., before April 30, 2022). The plaintiffs in the three cases have asserted the retroactive judgment interest reduction is an unconstitutional “regulatory taking”. The temporary injunction applicable in these three counties will continue until the case is fully litigated and the Court’s final Decision is rendered, so “stay tuned”. In any event, these lawsuits pose no threat to the 2% interest rate being applied to judgments entered on or after April 28, 2022.
The 9% return on a New York judgment has always made consumer debt collection claims very attractive investment opportunities for Junk Debt Buyers, whose practice has been to purchase “charged off” debts at drastically discounted prices from the original creditors, usually credit card companies, and then sue to collect the entire amount owed. This business model will now become much less lucrative, and if the Junk Debt Buyers move on to greener pastures (or States) deemed more profitable there may be a significant reduction in consumer debt collection litigation in New York.