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November 29, 2021

Freddi Goldstein
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ICYMI: District Council 37 calls on Governor Hochul to sign the Fair Consumer Judgement Interest Act

In an op-ed printed in the New York Daily News last week, DC 37’s Municipal Employees Legal Services Director William Whalen called on the Governor to lower the interest rate on consumer debt judgments from 9% to 2%, saving New Yorkers thousands of dollars

NEW YORK—Last week, William Whalen, director of District Council 37’s Office of Municipal Employees Legal Services, penned an op-ed in The Daily News calling on Governor Hochul to sign the Fair Consumer Judgement Interest Act. The bill, which the State legislature passed this past spring, would lower the interest rate on consumer debt judgements from 9% to 2%. In its current form, the 9% interest rate is an unintended windfall for collectors and is particularly hard on low-income people. With the legislative session coming to a close at the end of the year, it is urgent Governor Hochul sign the bill immediately.

The op-ed can be found here and full text is available below.

Help N.Y.ers get out of debt: Gov. Hochul should sign the Fair Consumer Judgment Interest Act into law

When Alice was forced to move out of an apartment in terrible condition eight years ago, she could never have imagined that the back rent she owed would haunt her for almost a decade. It’s not that Alice hasn’t paid back what she originally owed. To the contrary, she has paid more than $10,000 on the original debt of $9,500. But because the New York State-mandated interest rate has been stuck at a cruel 9%, she has been told she still owes $6,500.

Alice is a clerical worker at the New York City Human Resources Administration, where she has worked for almost 40 years, and is also a member of our union, District Council 37. We represent 150,000 municipal employees and 50,000 retirees who, like Alice, make up the dedicated and hardworking people who keep New York City running. Our members are the workers who care for the sick, the children, and the elderly; they maintain bridges, parks, roads and subways; and they staff hospitals, schools, libraries and more.

Alice’s former landlord sued for the back rent and got a court judgment for the full amount of the rent, even though the apartment was in really bad shape. The financial burden is steep. Further, the court order gave the creditor the power to freeze Alice’s bank account and even garnish her wages until the judgment is fully paid. After Alice and her family left their old place, they moved into a too-small apartment that is so mold-infested, her child with asthma was forced to move out. But this was all she could afford.

Alice is among countless New Yorkers with mounting debt, stemming from unpaid medical bills, rent arrears, tuition liabilities, credit card balances and more. When creditors win lawsuits based on unpaid debts, New York State law adds 9% interest onto these court judgments. The intention is to compensate judgment creditors for the cost of any delay in repayment.

In actuality, instead of being compensatory, the current 9% rate creates a perverse incentive for creditors to wait to collect and thus maximize profits. This is why, despite having paid $10,000 towards the debt over the years, Alice still owes $6,500. Like other working low-income people with judgments against them, getting out from under this debt is nearly impossible.

It is important to question why New York State still imposes a 9% interest rate that was set in 1981, when the relevant federal rate was trending at 14.5%. Today, that rate is 0.18% — and has averaged just below 2% for the last 20 years. Yet, the 9% rate continues to burden struggling consumers.

New York State is on the verge of making the interest rate more just and fair. This spring, the Legislature passed the Fair Consumer Judgment Interest Act (FCJIA), which would lower the interest rate on consumer debt judgments from 9% to 2%, a rate far more in line with market conditions. It would do so prospectively (on future judgments) and retrospectively (on the unpaid principal on existing judgments). There is one last requirement for the bill to be enacted: Gov. Hochul’s signature.

The 9% interest rate has long been punitive. It is an unintended windfall for collectors and is particularly hard on low-income people, who take longer to repay debt, and on communities of color, who are disproportionately targeted by debt collectors. This cruel rate makes it especially difficult to pay down a debt while continuing to pay rent and other necessary living expenses.

The FCJIA is needed now more than ever. COVID-19 has wreaked havoc on New Yorkers, particularly those who have been laid off, taken a wage cut or are reeling from the loss of family members, including caregivers and providers. This legislation will provide sorely needed relief to hundreds of thousands of economically distressed New Yorkers.

This simple reform would save New Yorkers thousands of dollars and free up money that just enriches creditors. For Alice, this could mean moving to an apartment that is safe for her and her children. Other consumers could use these funds to stave off housing and food insecurity, or to obtain an education, child care or necessary medical care. In other words, the money could be reinvested in local communities, rather than used to line the pockets of judgment creditors.

Alice deserves to move on with her life, and all New Yorkers deserve a fair shot at paying off their debt. It is time for the state to help the people that keep New York running. The Fair Consumer Judgment Interest Act would do just that. I urge Gov. Hochul to act for the people of New York State and help New Yorkers in debt dig themselves out, so they can get their lives back.

Whalen is the director of District Council 37′s Municipal Employees Legal Services office. The office offers legal advice and representation and prepares legal documents for the union’s members and dependents.

District Council 37 is New York City's largest public employee union, with 150,000 members and 50,000 retirees.