HF 2725

as introduced - 87th Legislature (2011 - 2012) Posted on 03/07/2012 02:17pm

A bill for an act
relating to commerce; regulating industrial loan and thrift companies; amending
Minnesota Statutes 2010, sections 53.01; 53.015; 53.02; 53.03; 53.04,
subdivisions 1, 3a; 53.06; 53.08; 53.09, subdivision 1.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 53.01, is amended to read:

53.01 ORGANIZATION.

It is lawful for three or more persons, who desire to form a corporation new text begin or limited
liability company new text end for the purpose of carrying on primarily the business of loaning money
to persons within the conditions set forth in this chapter, to organize, under this chapter,
an industrial loan and thrift company, by filing with the secretary of state articles of
incorporation new text begin or articles of organization new text end , and upon paying the fees prescribed by chapter
302A new text begin or 322B new text end and upon compliance with the procedure provided for the organization
and government of ordinary corporations new text begin or limited liability companies new text end under the laws
of this state, and upon compliance with the additional requirements of this chapter prior
to receiving authorization to do business. If an industrial loan and thrift company is
owned or controlled by a company, as defined in United States Code, title 12, section
1467a(a)(1)(C), the industrial loan and thrift company is not authorized, or eligible to
apply for authorization, to accept deposits under this chapter, unless the company that
owns or controls the industrial loan and thrift company would qualify to own a federal
savings association under United States Code, title 12, section 1467a(c)(9).

Sec. 2.

Minnesota Statutes 2010, section 53.015, is amended to read:

53.015 DEFINITIONS.

Subdivision 1.

Applicability.

For the purposes of this chapter, the terms defined in
this section deleted text begin shall deleted text end have the meanings given them.

Subd. 2.

Surplus.

"Surplus" means the sum total of all funds: (1) received as
consideration in excess of the par value of preferred or common stock new text begin or membership
interest new text end ; and (2) transferred from undivided profits as dedicated funds, by action of the
board of directors new text begin or board of governors new text end .

Subd. 3.

Undivided profits.

"Undivided profits" means the net remaining funds
resulting from the operation of the corporation new text begin or company new text end and shall include, but not be
limited to retained earnings, earned surplus, undivided profits and current earnings.

Subd. 4.

Capital stock.

"Capital stock" means new text begin in the case of a corporation
organized under chapter 302A new text end the par value of preferred or common stock multiplied by
the respective number of shares of each type of stock new text begin or in the case of a limited liability
company organized under chapter 322B, the par value of membership interests multiplied
by the respective number of membership interests new text end . For purposes of section 53.05,
clause (7), capital stock may include an amount of mandatory convertible debentures
approved by the commissioner. The terms and conditions for redemption of the qualifying
debentures must include the prior written approval of the commissioner as a condition
for a redemption, but in no event an amount in excess of 50 percent of total preferred
or common stock.

Sec. 3.

Minnesota Statutes 2010, section 53.02, is amended to read:

53.02 CAPITAL.

No corporation new text begin or limited liability company new text end shall be organized under this chapter
or qualified to do business thereunder with a capital represented by shares of common
stock new text begin or membership interests new text end of less than $25,000 in cities with less than 50,000 people;
$50,000 in cities with more than 50,000 people and less than 100,000 people; and $75,000
in cities with 100,000 people, or more, according to the last official census; each share of
that common stock new text begin or each membership interest new text end to have a par value of not less than $1
per share new text begin or unit new text end . No corporation new text begin or limited liability company new text end shall begin doing business
under this chapter unless the required capital is fully paid, and unless a surplus of no less
than ten percent of that required capital shall have also been fully paid and set up. After
the required capital of a corporation new text begin or limited liability company new text end organized or doing
business under this chapter shall have been fully paid and a surplus of not less than ten
percent thereof also fully paid and set up, additional capital stock in that corporation new text begin or
additional membership interests in that limited liability company new text end may be sold at not less
than par, provided, however, that there is always maintained a surplus of at least ten
percent of the capital of the corporation represented by shares of common stock new text begin , or in the
case of a limited liability company, at least ten percent of the capital of the company
represented by membership interests in the company new text end .

Sec. 4.

Minnesota Statutes 2010, section 53.03, is amended to read:

53.03 CERTIFICATE.

Subdivision 1.

Application, fee, notice.

Any corporation new text begin or limited liability
company new text end hereafter organized as an industrial loan and thrift company, shall, after
compliance with the requirements set forth in sections 53.01 and 53.02, file a written
application with the Department of Commerce for a certificate of authorization. A
corporation new text begin or limited liability company new text end that will not sell or issue thrift certificates for
investment as permitted by this chapter need not comply with subdivision 2b. The
application must be in the form prescribed by the Department of Commerce. The
application must be made in the name of the corporation new text begin or limited liability company new text end ,
executed and acknowledged by an officer designated by the board of directors of the
corporation new text begin or board of governors of the limited liability company new text end , requesting a certificate
authorizing the corporation new text begin or limited liability company new text end to transact business as an
industrial loan and thrift company, at the place and in the name stated in the application. At
the time of filing the application the applicant shall pay $1,500 filing fee if the corporation new text begin
or limited liability company new text end will not sell or issue thrift certificates for investment, and a
filing fee of $8,000 if the corporation new text begin or limited liability company new text end will sell or issue thrift
certificates for investment. The fees must be turned over by the commissioner to the
commissioner of management and budget and credited to the general fund. The applicant
shall also submit a copy of the bylaws of the corporation new text begin or operating agreement of the
limited liability company new text end , its articles of incorporation new text begin or articles of organization new text end and all
amendments thereto at that time. An application for powers under subdivision 2b must
also require that a notice of the filing of the application must be published once within
30 days of the receipt of the form prescribed by the Department of Commerce, at the
expense of the applicant, in a qualified newspaper published in the municipality in which
the proposed industrial loan and thrift company is to be located, or, if there be none, in
a qualified newspaper likely to give notice in the municipality in which the company is
proposed to be located. If the Department of Commerce receives a written objection to
the application from any person within 15 days of the notice having been fully published,
the commissioner shall proceed in the same manner as required under section 46.041,
subdivisions 3 and 4, relating to state banks.

Subd. 2.

Department of Commerce; duties.

Upon receiving an application the
Department of Commerce shall make, or cause to be made, an examination to ascertain
whether the assets of such corporation new text begin or limited liability company new text end , over and above
all its liabilities, have an actual value of not less than the par value of all of its capital
represented by shares of common stock new text begin or membership interests new text end , which shall not be less
than the amount prescribed by section 53.02. If upon its investigation or hearing provided
for in subdivision 1 those facts appear and it further appears that the bylaws and articles
of incorporation and amendments thereto are in accordance with law new text begin or in the case of a
limited liability company that the operating agreement and articles of organization and
amendments thereto are in accordance with law new text end ; that the shareholders of the corporation new text begin
or the members of the limited liability company new text end are of good moral character and financial
integrity; that the company reasonably anticipates public demand for the loans it proposes
to make in the location specified in the application, and that the proposed company will be
properly and safely managed, the application shall be granted; otherwise it shall be denied.

Subd. 2a.

Selection, change of name.

Before filing the articles of incorporation new text begin or
articles of organization new text end or an amendment to them, the proposed name of the industrial loan
and thrift company shall be submitted to the commissioner. If it is likely to confuse the
public as to the character of its business, or is otherwise objectionable, additional names
shall be submitted. When a satisfactory name is selected, the commissioner shall give
written approval of it and issue an amended certificate of authorization.

Subd. 2b.

Additional duties; thrift certificates for investment.

If an application
includes the right to issue thrift certificates for investment, the Department of Commerce
must, in addition to the duties in subdivision 2, make a determination that there is a
reasonable public demand for that company and that the probable volume of business in
that location is sufficient to insure the solvency of any then existing industrial loan and
thrift companies or banks in that locality, without endangering the safety of the company
or bank in the locality as a place for investing or depositing public and private money.

Subd. 3a.

Actions on applications.

If the application be granted without hearing
the Department of Commerce shall, not later than 60 days after the application has been
accepted, issue a certificate authorizing the corporation new text begin or limited liability company new text end to
transact business as an industrial loan and thrift company as provided in this chapter. If
the application be denied without hearing the Department of Commerce shall, not later
than 60 days after the application has been accepted, notify the corporation new text begin or limited
liability company new text end of the denial and the reasons for the denial. The applicant may request
within 30 days of receiving the notice of denial, and shall be granted, a contested case
hearing on the application which shall then be conducted as if no order of denial had been
issued. If the commissioner approves the application after a hearing the commissioner
shall, not later than 30 days after a hearing, issue a certificate authorizing the corporation
to transact business as an industrial loan and thrift company as provided in this chapter. If
the application be denied after a hearing the commissioner shall, not later than 30 days
after a hearing, notify the corporation new text begin or limited liability company new text end of the denial.

Subd. 5.

Place of business.

Not more than one place of business may be maintained
under any certificate of authorization issued subsequent to the enactment of Laws 1943,
chapter 67, pursuant to the provisions of this chapter, but the Department of Commerce
may issue more than one certificate of authorization to the same corporation new text begin or limited
liability company new text end upon compliance with all the provisions of this chapter governing
an original issuance of a certificate of authorization. To the extent that previously filed
applicable information remains unchanged, the applicant need not refile this information,
unless requested. The filing fee for a branch application shall be $500 and the investigation
fee $250. An industrial loan and thrift corporation with deposit liabilities may change one
or more of its locations upon the written approval of the commissioner of commerce. A
fee of $100 must accompany each application to the commissioner for approval to change
the location of an established office. An industrial loan and thrift corporation new text begin or limited
liability company new text end that does not sell and issue thrift certificates for investment may change
one or more locations by giving 30 days' written notice to the Department of Commerce
which shall promptly amend the certificate of authorization accordingly. No change in
place of business of a company to a location outside of its current trade area or more than
25 miles from its present location, whichever distance is greater, shall be permitted under
the same certificate unless all of the applicable requirements of this section have been met.

Subd. 6.

Amended certificates, thrift certificates for investment, application,
fee, notice.

Upon approval by the commissioner of commerce of a commitment for
insurance or guarantee of certificates to be held for investment as required in section
53.10, subdivision 3, an industrial loan and thrift company may apply to the Department
of Commerce for an amended certificate of authorization and consent to sell and issue
thrift certificates for investment.

The application, in triplicate, must be in the form prescribed by the Department of
Commerce and filed in its office. At the time of filing the application, the applicant shall
pay a filing fee of $8,000 and if an application is contested, 50 percent of an additional
fee equal to the actual costs incurred by the Department of Commerce in approving or
disapproving the application, payable to the commissioner of management and budget
and credited by the commissioner of management and budget to the general fund, must
be paid by the applicant and 50 percent equally by the intervening parties. A notice of
the filing of the application must be published once within 30 days of the receipt of the
form prescribed by the Department of Commerce, at the expense of the applicant, in
a newspaper published in the municipality in which the place of business under the
application is located, or if there is none, in a newspaper published at the county seat of
the county in which the place of business is located. Not more than one place of business
maintained under a certificate of authorization may be the subject of an application.

Subd. 7.

Objection to application.

Upon receiving written objection to the
application from any person within 15 days of the notice having been fully published,
the Department of Commerce shall order a contested case hearing to be conducted on
the application.

Subd. 8.

Investigation.

Upon receiving an application, the Department of
Commerce shall make or cause to be made, an investigation of the application to determine
that the corporation new text begin or limited liability company new text end is in a solvent condition, meets current
thrift industry standards of management quality and asset condition, is in compliance
with the requirements of this chapter. If upon completion of its investigation and any
hearing provided for in subdivision 7, it appears to the Department of Commerce that the
requirements for approval contained in this subdivision have been met, the application
shall be approved. In all other cases, the application shall be denied. As a condition of
approval, the capital funds of the applicant corporation new text begin or limited liability company new text end shall
not be less than the total amount which the Department of Commerce considers necessary
having in mind the potential for the issuance of certificates for investment by the applicant.
The procedure in subdivision 3a shall be followed in decisions, notice, and hearing of
applications for consent to sell and issue thrift certificates for investment by issuance of
an amended certificate of authorization.

Sec. 5.

Minnesota Statutes 2010, section 53.04, subdivision 1, is amended to read:

Subdivision 1.

Authorization.

Industrial loan and thrift companies, in addition
to the general and usual powers incidental to ordinary corporations new text begin or limited liability
companies new text end in this state, which are not specifically restricted in this chapter, shall have the
special powers enumerated in subdivisions 2 to 5.

Sec. 6.

Minnesota Statutes 2010, section 53.04, subdivision 3a, is amended to read:

Subd. 3a.

Loans.

(a) The right to make loans, secured or unsecured, at the rates
and on the terms and other conditions permitted under chapters 47 new text begin , 325J, new text end and 334. Loans
made under this authority must be in amounts in compliance with section 53.05, clause
(7). A licensee making a loan under this chapter secured by a lien on real estate shall
comply with the requirements of section 47.20, subdivision 8.

(b) Loans made under this subdivision may be secured by real or personal property,
or both. If the proceeds of a loan secured by a first lien on the borrower's primary
residence are used to finance the purchase of the borrower's primary residence, the loan
must comply with the provisions of section 47.20.

(c) An agency or instrumentality of the United States government or a corporation
otherwise created by an act of the United States Congress or a lender approved or
certified by the secretary of housing and urban development, or approved or certified
by the administrator of veterans affairs, or approved or certified by the administrator
of the Farmers Home Administration, or approved or certified by the Federal Home
Loan Mortgage Corporation, or approved or certified by the Federal National Mortgage
Association, that engages in the business of purchasing or taking assignments of mortgage
loans and undertakes direct collection of payments from or enforcement of rights
against borrowers arising from mortgage loans, is not required to obtain a certificate of
authorization under this chapter in order to purchase or take assignments of mortgage
loans from persons holding a certificate of authorization under this chapter.

(d) This subdivision does not authorize an industrial loan and thrift company to
make loans under an overdraft checking plan.

Sec. 7.

Minnesota Statutes 2010, section 53.06, is amended to read:

53.06 DIRECTORS, RESIDENCE.

At least three-fourths of the directors new text begin or governors new text end of any industrial loan and
thrift company holding a certificate that includes the right to issue thrift certificates for
investment must be residents of Minnesota.

Sec. 8.

Minnesota Statutes 2010, section 53.08, is amended to read:

53.08 DIVIDENDS new text begin AND DISTRIBUTIONS new text end .

Subdivision 1.

General conditions for dividends.

When an industrial loan and
thrift company is organized under this chapter or operating thereunder, the board of
directors new text begin or board of governors new text end may declare a dividend new text begin or distribution new text end of so much of
the net profits of the corporation new text begin or limited liability company new text end , after providing for all
expenses, reserves, interest, and taxes accrued or due from the corporation new text begin or limited
liability company new text end , as they shall judge expedient, but before any dividend new text begin or distribution new text end is
declared, not less than one-tenth of the net profits of the industrial loan and thrift company
of the preceding half year, or for such period as is covered by the dividend new text begin or distribution new text end ,
shall be carried to surplus until the aggregate of undivided profits and surplus shall amount
to 20 percent of its capital represented by shares of common stock new text begin or membership interest new text end .

Subd. 2.

Special conditions for deposit companies.

In addition to the conditions in
subdivision 1, industrial loan and thrift companies having outstanding time certificates
of indebtedness, savings accounts, or savings deposits must comply with the following
special conditions:

(1) the dividend new text begin or distribution new text end period for the purpose of declaring dividends new text begin or
distributions new text end shall be the period beginning on January 1 and ending as of the close of
business December 31 of each calendar year and the net income for this period shall be
determined from the consolidated report of income of each company;

(2) the Department of Commerce will supply each company with forms to be
completed with information called for. The forms must be mailed or delivered to the
commissioner within ten days of the date of declaration of any dividend and at least 15
days before the proposed payment date of any dividend new text begin or distribution new text end . The forms shall
contain a statement by the commissioner providing that if certain requirements as set
forth in the statement are met, the company may pay a cash dividend new text begin or distribution new text end or
dividends new text begin or distributions new text end without specific approval of the commissioner in the year after
the dividend new text begin or distribution new text end period in amounts so as not to reduce the company's capital,
surplus, undivided profits, and reserves below these requirements;

(3) declared dividends new text begin or distributions new text end shall be deducted from undivided profits and
carried on the books as another liability entitled "dividends payable." The other liability
account shall be reversed upon payment or nonapproval by the commissioner; and

(4) except as provided in clause (2), no company shall pay a cash dividend new text begin or
distribution new text end to its stockholders new text begin or members new text end until written approval for the dividend new text begin or
distribution new text end has been obtained from the commissioner.

Sec. 9.

Minnesota Statutes 2010, section 53.09, subdivision 1, is amended to read:

Subdivision 1.

General examinations.

The commissioner shall make examinations
for the purposes set forth in section 46.04, subdivision 1, at least once every 18 calendar
months, of each authorized place of business of every industrial loan and thrift company
with the right to issue thrift certificates for investment organized or operating under this
chapter to satisfy the commissioner that the corporation new text begin or limited liability company new text end is in a
solvent condition and is complying with the requirements of this chapter and operating
according to sound business principles. In order to enforce actions in this connection,
the commissioner is hereby vested with the same authority as in the examination and
regulation of state banks. The corporation new text begin or limited liability company new text end so examined
shall pay to the commissioner such fees as may be required under section 46.131. The
commissioner may maintain an action for the recovery of such costs in any court of
competent jurisdiction.