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Minutes for SB75 - Committee on Judiciary
Short Title
Changing the legal rate of interest from a fixed rate to a variable rate based on the statutory rate provided for interest on judgments.
Minutes Content for Tue, Mar 14, 2023
Chairperson Patton called the meeting to order and asked the membership if there were any changes to the minutes that were sent out last week by the committee assistant.
Representative Goddard moved to approve the meeting minutes from February 20, 21 and March 2nd, 7th, 8th, 2023. Representative Maughan seconded. Motion carried,
Chairperson Patton opened the hearing on SB75. Jason Thompson reviewed his submitted bill brief. (Attachment 1)
Proponent
Eric Stafford (Attachment 2) explained in Kansas, the interest rates used to calculate pre-judgment interest have no connection to current economic circumstances. Kansas’ statutory pre-judgment interest rate is 10%, unless the contract specifies a higher rate. This rate is simply too high. Kansas’ statutory pre-judgment interest rate does not fairly reimburse the lost time value of money when the interest rates on savings accounts and government bonds have hovered below 4% for a long time. Interest at a whopping 10% amounts to a bonus to the plaintiff and a penalty to defendants for exercising their right to defend claims. A variable rate would better reflect prevailing economic conditions than a fixed 10% rate. SB75 will reduce the excessively high fixed pre-judgment interest rate from 10% to the federal discount rate plus 2%. Mr. Stafford stood for questions.
Jennifer Artman (Attachment 3) stated SB75 would bring Kansas in line with the vast majority of other states by abandoning an inordinately high, fixed double digit interest rate in favor of one that better reflects the market. This legislation will replace the outdated, fixed 10% prejudgment interest rate with one that adjusts to reflect the federal discount rate plus 2%. The bill will ensure plaintiffs are able to recover a fair rate of interest on judgments awarded in their favor without unduly imposing a punitive rate on defendants. It strikes the right balance between a plaintiff’s right to be made whole and a defendant’s right to vigorously defend against claims. Ms. Artman stood for questions.
Callie Jill Denton (Attachment 4) explained after carefully reviewing the amendment in section 1 (b) that was made during Senate committee deliberation, we believe SB75 should be further amended. The purpose of Kansas Trial Lawyers Association's (KTLA) amendment is to provide greater clarity and instruction for the courts on how and when to apply pre-judgment interest to civil tort actions. KTLA’s amendment will assure pre-judgment interest is applied uniformly from court to court and case to case and the law is fair to both victorious plaintiffs and defendants. Ms. Denton stood for questions.
Representative Carmichael asked the proponents to explain exactly what the new rate would be. He eventually asked Legislative Research to provide the information to the committee. The following information was provided: New paragraph (b) in the bill would provide that court-awarded prejudgment interest on civil tort actions would be subject to an interest rate of 2% below the rate established by the Secretary of State (5.75% through June 30, 2023). Thus, the applicable interest rate under the bill would be: 5.75% - 2.00% = 3.75%. This information was submitted by Jordan Milholland, Managing Research Analyst.
Written Opponent
Larry Zimmerman, Kansas Credit Attorney Association (Attachment 5)
Chairperson Patton closed the hearing on SB75.
