Interest compensation refers to a monetary amount calculated based on the average Federal Funds rate published by the Federal Reserve Bank of New York. This calculation is performed for each day that interest compensation is owed, divided by 360. If a Federal Funds rate is not available for a specific day, the rate from the most recent day with a published rate is used.
This term is commonly used in banking and finance, particularly in the context of funds availability and check collection. Interest compensation is relevant in legal practices involving financial transactions, disputes over funds, and regulatory compliance. Users may encounter this term when dealing with banking forms or templates related to funds management, which can often be completed using resources like US Legal Forms.
Here are a couple of examples of abatement:
For instance, if a bank owes interest compensation for a specific period, it would calculate the total amount based on the average Federal Funds rate for those days. If the rate was 2.5% for five days, the interest compensation would be calculated accordingly. (hypothetical example)
| Term | Definition | Differences |
|---|---|---|
| Interest Rate | The percentage charged on a loan or paid on deposits. | Interest compensation specifically refers to amounts owed for delayed funds, while interest rates apply broadly to loans and deposits. |
| Compensatory Interest | Interest paid to compensate for loss of use of funds. | Interest compensation is a specific calculation based on the Federal Funds rate, while compensatory interest may vary based on other factors. |
If you believe you are owed interest compensation, gather all relevant documentation regarding the funds and the applicable Federal Funds rates. You may consider using US Legal Forms to find templates that can help you draft a request for compensation. If the situation is complex, consulting a legal professional may be beneficial.
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It is a monetary amount calculated based on the average Federal Funds rate for the days interest is owed, divided by 360.