Another Increase in the Post Judgment Interest Rate

by Craig Stephan

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On December 14, 2016, the Federal Reserve’s Open Market Committee (FOMC) decided to raise the target federal funds rate by 0.25 percent, or 25 basis points. As a result, on December 15, 2016, the prime rate rose from 3.50 percent to 3.75 percent, as reflected in the Federal Reserve’s Statistical Release H.15.[1]

The Arizona statute that deals with post judgment interest rates is A.R.S. § 44-1201. Subsection B of this statute provides:

    “B. Unless specifically provided for in statute or a different rate is contracted for in writing, interest on any judgment shall be at the lesser of ten per cent per annum or at a rate per annum that is equal to one per cent plus the prime rate as published by the board of governors of the federal reserve system in statistical release H.15 or any publication that may supersede it on the date that the judgment is entered. The judgment shall state the applicable interest rate and it shall not change after it is entered.”

Due to the increase in the prime rate, the post judgment interest rate in Arizona is now 4.75 percent per annum, unless a written contract or statute provides otherwise. In certain circumstances, subsection B may also be used to determine a prejudgment interest rate. See A.R.S. § 44-1201(F) (“If awarded, prejudgment interest shall be at the rate described in subsection A or B of this section.”).

The FOMC has a dual statutory mandate of fostering full employment and price stability. Based upon remarks made by Fed Chairman Janet Yellen, there could be three (or more) federal funds rate hikes in 2017. These in turn would increase the prime rate and Arizona’s post judgment interest rate.

[1] See http://www.federalreserve.gov/releases/h15/update/.