James T. Hart / 20 April 2017

Kentucky Law Modification Cuts Statutory Interest Rates by Half (Updated June 9, 2017)

On March 16, 2017, Kentucky Governor Matt Bevin signed Kentucky House Bill 223 into law - bringing about significant changes to Kentucky's statutory interest provisions1

The Kentucky legislature's website offers a summary of the bill and describes the exact changes made to the Kentucky Revised Statute: 

"Amend KRS 360.040 to make the state interest rate for most civil judgments, including judgments for prejudgment interest, 6 percent; provide that the judgment interest rate for unpaid child support is 12 percent; provide that the judgment interest rate on a contract, promissory note, or other written obligation is the rate established in that contract, promissory note, or other written obligation; amend KRS 342.040 to establish a 6 percent interest rate for worker's compensation orders and settlements; allow the administrative law judge to raise the interest rate to 12 percent; amend KRS 360.010 to conform; specify that the new interest rates only apply to judgments, orders, and settlements entered after the effective date of this Act.”2 

First, Kentucky's statutory post-judgment interest has been reduced from 12 percent per annum to six percent per annum. Kentucky has long had one of the higher statutory interest rates nationwide. The rate was set in 1982 and remained unchanged until now. Because of this, the reduction was not surprising or unexpected to the industry. All judgments awarded after the new law’s effective date will bear interest at six percent per annum. 

The new law goes into effect until 90 days after the adjournment of the legislative session pertaining to the changes. This "effective date" was set by the Kentucky Attorney General for June 29, 2017.3 Also, this bill is not retroactive, meaning any judgments accruing interest at the statutory rate prior to June 29th shall continue to bear interest at the 12 percent rate beyond the effective date. Only those judgments that are entered on or after the effective date would accrue at the new six percent rate.

However, H.B. 223 does provide an exception to the six percent rate. If the judgment concerns a "written obligation" (such as a contract, promissory note, installment loan, etc.) then the rate set forth in the contract will apply post-judgment - not the statutory six percent rate. If a creditor seeks judgment on a written obligation with an interest rate specified within the document, any judgment arising from that written obligation will bear interest at that rate. This is regardless of whether the rate specified is higher or lower than the new statutory rate.

Secondly, the legal rate of interest under KRS 360.010 remains at eight percent per annum. However, for creditors seeking recovery on open-end credit matters concerning consumer debts, the pre-judgment legal rate of interest should not have much impact, given the bar to pre-judgment interest that arose in Stratton v. Portfolio Recovery Associates, LLC, 770 F.3d 443 (6th Cir. 2014) and Unifund CCR Partners v. Harrell, 509 S.W.3d 25 (Ky. 2017).4 

Creditors and counsel alike should be aware of the changes this new law makes to Kentucky's statutory interest provisions. Questions on this law should be directed to an attorney within the Consumer and Commercial Collections unit at Weltman, Weinberg & Reis Co., L.P.A.

For more information, please contact James T. Hart, Esq. Mr. Hart is an attorney based in the Cincinnati office of Weltman, Weinberg & Reis Co., LPA. He practices in Consumer and Commercial Collections, with a focus on legal action recovery, healthcare collections, student loan recovery, subrogation, and complex commercial collections. He can be reached at 513.723.2209 and


A text of the bill can be viewed here:
3 See OAG 17-007
4 See Weltman Alert:
Kentucky Supreme Court Case Adopts 6th Circuit's Prohibition of Pre-Judgment Interest on Open-end Credit Accounts, April 5, 2017

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