Changes to Interest Rates on Small Claims Judgments Legislation Passes Assembly, Dies in Senate

Assembly Bill 95, authored by Rep. Jeremy Thiesfeldt (R-Fond du Lac), and Senate Bill 76, authored by Sen. Stephen Nass (R-Whitewater), sought to change the interest rate for pre- and post- judgment interest for verdicts in small claims court. AB 95, as introduced, would revise the formula created in 2011 Wisconsin Act 69 back to the pre-Act 69 rate of 12 percent per year.

WDC opposed the legislation as it would partially repeal a top priority, namely 2011 Wisconsin Act 69. The bill died in the Senate, but we anticipate proponents will push this partial repeal of Act 69 again next session.

While introduced in March 2015, the Assembly Committee on Judiciary passed AB 95 on a 5-4 vote in January 2016. The Assembly passed the legislation via a voice vote in February with an amendment changing the rate to 8 percent. Though a Senate hearing was held on the bill, no further action occurred in the Senate.

Under current Wisconsin law, plaintiffs who win favorable verdicts are usually entitled to recover interest on the monetary judgments awarded to them. There are two types of interest. There is post-judgment interest, which is meant to compensate the plaintiff for loss of the use of the money while a defendant appeals an unfavorable judgment. Post-judgment interest accrues from the time the judgment is made until the time the judgment is paid. There is also pre-judgment interest, which accrues from the time the plaintiff makes an offer of settlement until the settlement is paid, provided the judgment amount is not less than the settlement amount.

Prior to 2011, pre- and post- judgment interest rates were set at 12 percent. Because appeals or settlement agreements and payment can take time, plaintiffs could receive a significant windfall due to the high interest rate. 2011 Senate Bill 14 signed into law as 2011 Act 69 changed the interest formula from 12 percent to the prime rate set by the Federal Reserve Board plus one percent. This ensures that plaintiffs do not receive a windfall while also ensuring that defendants pay a reasonable interest rate.