On Friday, September 15th, a federal court modified its injunction that had stopped a 2021 law reducing interest collected on consumer debt judgments in New York. That legislation, the New York Fair Consumer Judgment Interest Act (Act), reduced consumer debt judgment interest from 9% to 2% per annum and has been interpreted as applying to accrued but unpaid judgment interest.
In 2022, three New York based credit unions filed a lawsuit in federal court alleging the law was unconstitutional under both the federal and New York law. In April of last year, just before the Act became effective, the credit unions were successful in obtaining a preliminary injunction which stopped the interest reduction from taking effect, until now.
The New York Attorney General succeeded in modifying the preliminary injunction so that it now only protects the three named credit unions from the judgment interest reduction. The court’s order became effective September 15, 2023. A copy of the court’s opinion is available at: https://rmaintl.org/wp-content/uploads/2023/09/US_DIS_NYSD_1_22cv2753_d119321640e183_OPINION_AND_ORDER_GRANTING_MOTION_TO_MODIFY_THE_SC.pdf
Although most consumer judgment creditors are now subject to the judgment interest reduction, the constitutionality of the law still remains an outstanding issue. It is believed that any decision on that question will impact all consumer judgment creditors and debtors.
RMAI will continue to monitor this case.
RMAI strongly recommends that its members share this Member Alert with those in their organization who are responsible for their operations, compliance, and legal matters.
This Member Alert is intended for members of the Receivables Management Association International, is for informational purposes only, and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.