CALCULATING INTEREST IN CIVIL ACTIONS

Creditors are keenly aware of the time value of money. Delay in the collecting of a debt without compensation in the nature of interest results in a continually decreasing rate of return for the person or entity to whom the money is owed. In Maine, a creditor is entitled to collect interest on a debt if the creditor can prove that there is an agreement with the debtor for the payment of interest on the principal amount due the creditor or, absent such an agreement, a statute specifically provides for the recovery of interest.

Maine statutes allow for the award of interest to a creditor who files a civil lawsuit and subsequently obtains a judgment on the claim. In fact, the Maine Supreme Judicial Court has found that the award of statutory interest to the prevailing party in civil actions is a matter of right. Ginn v. Penobscot Co., 342 A.2d 270, 278 (Me.1975). Under Maine law, different criteria apply to the award of prejudgment and post-judgment interest.

Prejudgment interest in civil actions is governed by 14 M.R.S. § 1602-B. “Section 1602-B is broad in scope, and applies to all civil actions except small claims actions and actions involving a contract or note that already contains an interest provision.” Avery v. Kennebec Millwork, Inc., 2004 ME 147, ¶ 7, 861 A.2d 634, 636 (Me. 2004). In those cases (other than small claims cases) where there is no agreement for the payment of interest, prejudgment interest is calculated at the rate of the one-year United States Treasury bill rate plus 3%. This rate is adjusted at the beginning of each year based on the weekly average treasury bill yield for the last full week of the prior calendar year. The applicable rate can be easily ascertained by contacting any of Maine’s clerks of court. In any case (including small claims cases) where there is a contract or note which provides for interest on the debt, then prejudgment interest is calculated at the rate specified in the contract or note in effect on the earlier of the date when the complaint is filed with the court or the date on which a notice of claim has been given to the defendant in accordance with the terms of the statute. Prejudgment interest is not allowed in small claims cases which are not based on a contract or note that provides for interest.

Post-judgment interest in civil actions is governed by 14 M.R.S. § 1602-C. In those cases (including small claims cases) where there is no agreement for the payment of interest, post-judgment interest is calculated at the rate of the one-year United States Treasury bill rate plus 6%. As in the case of prejudgment interest, the post-judgment rate is adjusted at the beginning of each year. In any case (including small claims cases) where there is a contract or note which provides for interest on the debt, then post-judgment interest is calculated at the rate specified in the contract or note in effect on the date of the judgment or at the rate of the one-year United States Treasury bill rate plus 6%, whichever is greater. Prejudgment interest is not included in the amount used to calculate post-judgment interest. 14 M.R.S. § 1602-B(6).

In all cases, the judgment must specifically state the applicable prejudgment and post-judgment interest rates. The interest rate statutes allow for the suspension of interest during any period of time in excess of 30 days when the case is continued at the request of the prevailing party. The interest rate statutes also allow the court to fully or partially waive prejudgment and post-judgment interest on petition of the nonprevailing party and on a showing of good cause. The interest rules discussed in this article apply to all cases where interest begins to accrue after July 1, 2003.

The creditors rights attorneys at Gosselin & Dubord, P.A. are experienced litigators who are prepared to answer any questions regarding interest rates in civil actions. If you have any questions regarding interest rates in civil actions or need representation in connection with any creditor matter in Maine, please contact Attorney David R. Dubord at (207) 783-5261, extension 212 or drd@gosselindubord.com.