Prior to December 2nd, 2011, Wisconsin had been enforcing one of the nation’s highest interest rates on civil monetary judgments. However, on November 16, 2011, a bill entitled 2011 Wisconsin Act 69 was enacted to change the previously static 12% rate, with the impact of significantly lowering the rate of interest on outstanding judgments. 2011 Wisconsin Act 69, also referred to as Wisconsin Special Senate Bill 14, adjusted judgment interest rates to equal the Federal Reserve prime rate plus 1%. Although the prime rate does fluctuate, the calculated interest on a particular judgment will stay the same from the date the judgment is entered until the outstanding balance is paid. For judgments entered on or before June 30th of each year, the prime rate on January 1st is used to calculate the interest, whereas judgments entered after June 30th will be based upon the prime rate on July 1st of that year. Whether calculating prejudgment interest or postjudgment interest, the prime rate will be calculated based on the date the judgment was entered.

Here’s how judgment interest is now computed:

Step 1. Determine the prime rate based on the date the judgment was entered

Entered After June 30th, but before December 31st, 2012: Use the prime rate of interest on July 1st, 2012

For example, a judgment entered in the latter half of 2012 would be charged interest at 4.25% (the Federal Reserve Prime Rate on July 1st i.e. 3.25%, + 1%), compared to the former 12% annual rate.

With 36-month used car loans at a national average of 4.89% and fixed credit card interest at 14.02%, debtors are further ahead to pay other current liabilities and make judgment creditors wait.

Other states have since followed Wisconsin’s lead in changing the method in which judgment interest is calculated. For example, as of July, 2011, the Arizona legislature changed its statute to set judgment interest at 10% or the prime rate plus 1%, whichever is lower. Arizona previously had a flat 10% annual rate.

Parties can avoid the recently enacted interest rates on judgment payments by negotiating a contracted rate of interest. All businesses should seriously consider incorporating a stated rate of default interest into their agreements relating to the sale of their goods and/or services. The failure to do so will likely result in further delays in collecting delinquent accounts, even after a judgment is obtained.