BILL NUMBER:S3114

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 judg-
ments 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 twen-
ty five-years to over compensate plaintiffs to the detriment of  defend-
ants.  A  floating  rate  reflective  of  the  market  interest  rate is
employed. in many sister states and ensures  that  parties  are  neither
overcompensated  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 enti-
              

ties. 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:    2011-12  -  S. 3751 - Banks Committee/A. 9765 -
Judiciary Committee.

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediate.