Judge: Bank cannot charge more than 5% interest in loan dispute

A High Court judge has ruled that First Citizens Bank is not entitled to charge more than five per cent interest after judgment in a loan dispute, even though the original loan agreement stated a higher rate.

Justice Frank Seepersad made the ruling on July 9, in a case where the bank had asked the court to apply the loan’s contractual interest rate of 10.25 per cent after the judgment was entered. The court instead decided to apply the five per cent statutory rate outlined in the Remedies of Creditors Act.

The case involved a customer who had borrowed money from First Citizens Bank but later defaulted. The bank then took legal action, and on June 4, the court entered judgment against the borrower for $157,986.47 in debt, interest, and costs. The only question left was the rate of interest to apply from the date of judgment until the full amount is paid.

Justice Seepersad explained that while the loan agreement mentioned interest continuing after judgment, the law gave the court the final say. He said courts must avoid allowing judgments to be used as profit-making tools, especially when they can be enforced for up to 12 years.

“This court will not permit its judgment to be used as a product of commercial investment,” Seepersad said. He also considered that the borrower was unwell, unemployed, and could not reasonably afford additional interest charges at the higher rate.

The judge said financial institutions must show empathy and avoid harsh enforcement practices that can place an unfair burden on vulnerable individuals. “Commercial entities must act with a sense of empathy and should shy away from adopting the stance of Shylock,” he said, referencing the Shakespearean character known for demanding a literal "pound of flesh."

The court concluded that a five per cent post-judgment interest rate was fair, in line with legal principles and prevailing financial conditions. The ruling was made under the Supreme Court of Judicature Act, the Remedies of Creditors Act, and the Civil Proceedings Rules.