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Substantial Changes to Rate of Interest Charged On Judgment Debts

By: Patrick Mullins | Posted on: 09 Mar 2017

Substantial Changes to Rate of Interest Charged On Judgment Debts

 

When a creditor i.e. a supplier, or a bank, sues a debtor for a debt, and the creditor obtains Judgment, interest applies from the date of the Judgment, under the provisions of the Courts Act, 1981.

 

Up until very recently, the nominated rate of interest, in relation to Judgment debts, was in the amount of 8%, per annum, pursuant to the Courts Act, 1981 (Interest on Judgment Debts) Order 1989 (No.12 of 1989).

 

Having reviewed the level of consumer, and other private debt, existing in the wider Irish community, the Minister for Justice and Equality, Frances Fitzgerald, has amended the rate of interest, applying to such Judgment debts, as and from the 1st January, 2017.

 

The Minister has slashed the rate of interest, on such Judgment debts, from an amount of 8%, per annum, to 2%, per annum. The Minister has wiped 75%, off the rate of interest, applicable to Judgment debts.

 

The Minister for Justice and Equality has the power, under Section 20 of the Courts Act, 1981, to pass secondary legislation, in relation to the rates of interest, on Court Judgments.

The relevant statutory instrument is S.I .No.624 of 2016, entitled Courts Act, 1981 (Interest on Judgment Debts) Order, 2016.

 

The Regulations apply to the rate of interest, specified in Section 26 of the Debtors (Ireland) Act, 1840, which sets out the legal basis, for charging interest, on Judgment debts.

 

The passing of these Regulations, will have a substantial impact, on the amount of interest, which will accrue on a Judgment debt, until it is paid.

 

Interest continues to accrue, from the date of Judgment, until the date of payment. Depending on the amount of the Judgment, a reduction of 75%, on the rate of interest, will have a substantial impact, on the total amount of the debt, over a period of years, of repayments. There has been very little attention to these Regulations, in the media. However, these Regulations will substantially ease the burden on Judgment debtors, seeking to service Judgment debts.

 

Patrick Mullins – Commercial Partner  

 

BDM Boylan Solicitors, Clarkes Bridge House, Hanover Street, Cork

pmullins@bdmboylan.ie

021 4313333