The Arizona legislature has recently modified the law governing interest rates on loans, indebtedness and judgments.  These changes are codified in the current version of A.R.S. § 44-1201,1 and include a prohibition on awards of interest and prejudgment interest on unliquidated, future, punitive or exemplary damages. The modified version of the statute is presently in effect and applicable to all loans, debts and obligations, and judgments made or entered into on or after July 20, 2011.

Perhaps the most significant modification to the statute is the change to judgment interest rates.  The old law set a ten percent, per annum rate unless another rate was agreed upon in writing. The law now provides that the interest rate applied to judgments, unless otherwise provided for by contract or statute, shall be either ten percent per annum or one percent plus the prime rate per annum, whichever is lower.  The statute also requires judgments contain the interest rate applied and directs that the rate cannot be changed subsequent to entry, even if the prime rate fluctuates.  Although nothing in the statute appears to change a party’s entitlement to prejudgment interest on liquidated claims as a matter of right,2  the current statute specifically precludes court awards of interest or prejudgment interest on unliquidated, future, punitive or exemplary damages.

Parties are also still permitted to contract at interest rates in excess of ten percent, so as long the rate does not violate another law, like a usury statute. As with the previous version of the statute, judgment interest will be awarded at the rate specified in contract, if there is a contract.