Feb. 17, 2014 – The Wisconsin Assembly recently passed a bill to restore the amount of interest that accrues on judgments obtained in small claims courts, which have jurisdiction in eviction actions and other civil actions involving $10,000 or less.

Currently, interest on small claims judgments accrues at an annual rate of 1 percent plus the primate rate in effect on Jan. 1 of the year in which the judgment is entered, or the rate in effect on July 1 if the judgment is entered after June 30 in any given year.

The same judgment interest rate applies if a judgment is entered after a settlement offer is made, the losing party rejects the offer, and the judgment is greater than or equal to the offer of settlement. However, interest is applied from the date of the settlement offer.

2013 Assembly Bill 523 changes the interest rate on judgments in these cases to 12 percent per year. This rate would apply in eviction actions, actions to recover earnest money in real estate purchase cases, and other civil actions claiming $10,000 or less.

In 2011, the Wisconsin Legislature changed the interest rate on all civil money judgments, including small claims judgments, from 12 percent annually to an annual rate of 1 percent plus the prime rate in effect on Jan. 1 and June 30 in a given year.

AB 523, a Republican-backed bill that passed the Assembly by voice vote last week, reverses course and restores interest rates to 12 percent annually in small claims cases only. The bill now heads to the Senate for consideration.

Rep. Jeremy Thiesfeldt (R-Fond du Lac) said the intent of the 2011 law was to “limit interest assessed on high dollar verdicts.”

The unintended consequence, he said in testimony, “is that the law now affects judgment interest owed to small businesses, counties, cities, and collection agencies that rely on small claims court for relief in minor disputes and debt collection.”