HF 2936

as introduced - 88th Legislature (2013 - 2014) Posted on 03/10/2014 01:22pm

A bill for an act
relating to commerce; regulating certain lenders, loans, lending practices, health
insurance benefits, and property and casualty cancellations and nonrenewals;
establishing a communications fraud act and prescribing criminal and civil
penalties; amending Minnesota Statutes 2012, sections 47.60, subdivision 2;
47.601, subdivision 2; 53.05; 53C.01, subdivisions 8, 12; 53C.02; 53C.08,
subdivision 1, by adding a subdivision; 72A.20, by adding a subdivision; 332.32;
proposing coding for new law in Minnesota Statutes, chapters 53C; 609.

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

Section 1.

Minnesota Statutes 2012, section 47.60, subdivision 2, is amended to read:

Subd. 2.

Authorization, terms, conditions, and prohibitions.

(a) In lieu of the
interest, finance charges, or fees in any other law, a consumer small loan lender may
charge the following new text begin , but in no event may these charges exceed an annual percentage rate
of interest of 30 percent new text end :

(1) on any amount up to and including $50, a charge of $5.50 may be added;

(2) on amounts in excess of $50, but not more than $100, a charge may be added
equal to ten percent of the loan proceeds plus a $5 administrative fee;

(3) on amounts in excess of $100, but not more than $250, a charge may be
added equal to seven percent of the loan proceeds with a minimum of $10 plus a $5
administrative fee;

(4) for amounts in excess of $250 and not greater than the maximum in subdivision
1, paragraph (a), a charge may be added equal to six percent of the loan proceeds with a
minimum of $17.50 plus a $5 administrative fee.

(b) The term of a loan made under this section shall be for no more than 30 calendar
days.

(c) After maturity, the contract rate must not exceed 2.75 percent per month of the
remaining loan proceeds after the maturity date calculated at a rate of 1/30 of the monthly
rate in the contract for each calendar day the balance is outstanding.

(d) No insurance charges or other charges must be permitted to be charged, collected,
or imposed on a consumer small loan except as authorized in this section.

(e) On a loan transaction in which cash is advanced in exchange for a personal
check, a return check charge may be charged as authorized by section 604.113, subdivision
2, paragraph (a). The civil penalty provisions of section 604.113, subdivision 2, paragraph
(b), may not be demanded or assessed against the borrower.

(f) A loan made under this section must not be repaid by the proceeds of another
loan made under this section by the same lender or related interest. The proceeds from a
loan made under this section must not be applied to another loan from the same lender or
related interest. No loan to a single borrower made pursuant to this section shall be split or
divided and no single borrower shall have outstanding more than one loan with the result
of collecting a higher charge than permitted by this section or in an aggregate amount of
principal exceed at any one time the maximum of $350.

Sec. 2.

Minnesota Statutes 2012, section 47.601, subdivision 2, is amended to read:

Subd. 2.

Consumer short-term loan contract.

(a) No contract or agreement
between a consumer short-term loan lender and a borrower residing in Minnesota may
contain the following:

(1) a provision selecting a law other than Minnesota law under which the contract
is construed or enforced;

(2) a provision choosing a forum for dispute resolution other than the state of
Minnesota; or

(3) a provision limiting class actions against a consumer short-term lender for
violations of subdivision 3 or for making consumer short-term loans:

(i) without a required license issued by the commissioner; or

(ii) in which interest rates, fees, charges, or loan amounts exceed those allowable
under section 47.59, subdivision 6, or 47.60, subdivision 2, other than by de minimis
amounts if no pattern or practice exists.

(b) Any provision prohibited by paragraph (a) is void and unenforceable.

(c) A consumer short-term loan lender must furnish a copy of the written loan
contract to each borrower. The contract and disclosures must be written in the language in
which the loan was negotiated with the borrower and must contain:

(1) the name; address, which may not be a post office box; and telephone number of
the lender making the consumer short-term loan;

(2) the name and title of the individual employee or representative who signs the
contract on behalf of the lender;

(3) an itemization of the fees and interest charges to be paid by the borrower;

(4) in bold, 24-point type, the annual percentage rate as computed under United
States Code, chapter 15, section 1606; and

(5) a description of the borrower's payment obligations under the loan.

(d) The holder or assignee of a check or other instrument evidencing an obligation of
a borrower in connection with a consumer short-term loan takes the instrument subject to
all claims by and defenses of the borrower against the consumer short-term lender.

new text begin (e) A licensee may not knowingly enter into a consumer short-term loan with a
borrower if that borrower is in an extended repayment plan with any licensee until 14
days after the plan is paid in full.
new text end

Sec. 3.

Minnesota Statutes 2012, section 53.05, is amended to read:

53.05 POWERS, LIMITATION.

No industrial loan and thrift company may do any of the following:

(1) carry demand banking accounts; use the word "savings" unless the institution's
investment certificates, savings accounts, and savings deposits are insured by the Federal
Deposit Insurance Corporation and then only if the word is not followed by the words
"and loan" in its corporate name; use the word "bank" or "banking" in its corporate name;
operate as a savings bank;

(2) have outstanding at any one time certificates of indebtedness, savings accounts,
and savings deposits 30 times the sum of capital stock and surplus of the company;

(3) accept trusts, except as provided in section 47.75, subdivision 1, or act as
guardian, administrator, or judicial trustee in any form;

(4) deposit any of its funds in any banking corporation, unless that corporation has
been designated by vote of a majority of directors or of the executive committee present at
a meeting duly called, at which a quorum was in attendance;

(5) change any allocation of capital made pursuant to section 53.03 or reduce or
withdraw in any way any portion of the capital stock and surplus without prior written
approval of the commissioner of commerce;

(6) take any instrument in which blanks are left to be filled in after execution;

(7) lend money in excess of 20 percent of the total of its capital stock and surplus at
all its authorized locations to a person primarily liable. Companies not issuing investment
certificates of indebtedness under section 53.04 need not comply with the requirement if
the amount of money lent does not exceed $100,000 of principal as defined by section
47.59, subdivision 1, paragraph (p).

However, industrial loan and thrift companies with deposit liabilities must comply
with the provisions of section 48.24; deleted text begin or
deleted text end

(8) issue cashier's checks pursuant to section 48.151, unless and at all times the
aggregate liability to all creditors on these instruments is protected by a special fund in
cash or due from banks to be used solely for payment of the cashier's checks deleted text begin . deleted text end new text begin ; or
new text end

new text begin (9) make a consumer short-term loan, as defined in section 47.601, under any section
of law other than section 47.60.
new text end

Sec. 4.

Minnesota Statutes 2012, section 53C.01, subdivision 8, is amended to read:

Subd. 8.

Retail installment contract.

"Retail installment contract" means any
agreement, entered into in this state, evidencing a retail installment sale of a motor vehicle,
other than for the purpose of resale, when purchased primarily for personal, family or
household use, pursuant to which title to, or a lien upon the motor vehicle is retained by
the retail seller as security for the retail buyer's obligation. This term includes a mortgage,
conditional sale contract, or any contract for the bailment or leasing of a motor vehicle by
which the bailee or lessee contracts to pay as compensation for its use a sum substantially
equivalent to the retail installment sale price of the motor vehicle and by which it is agreed
that the bailee or lessee is bound to become, or has the option of becoming, the owner of
such motor vehicle for no additional consideration or for nominal additional consideration.
"Retail installment contract" does not include any agreement deleted text begin , deleted text end entered into deleted text begin in this state,
deleted text end evidencing an installment sale of a motor vehicle purchased primarily for use in business.
For purposes of this subdivision, "business" means a commercial or industrial enterprise
which is carried on for the purpose of active or passive investment or profit.

Sec. 5.

Minnesota Statutes 2012, section 53C.01, subdivision 12, is amended to read:

Subd. 12.

Sales finance company.

"Sales finance company" means a person
engaged, in whole or in part, in the business of purchasing retail installment contracts deleted text begin in
this state deleted text end from one or more retail sellers. The term includes a bank, trust company, or
industrial loan and thrift company, if so engaged. The term also includes a retail seller
engaged, in whole or in part, in the business of creating and holding retail installment
contracts. The term does not include the pledges of an aggregate number of the contracts
to secure a bona fide loan thereon.

Sec. 6.

Minnesota Statutes 2012, section 53C.02, is amended to read:

53C.02 SALES FINANCE COMPANY; LICENSE, FEES, REFUND.

(a) No person shall engage in the business of a sales finance company in this state
without a license therefor as provided in sections 53C.01 to 53C.14 provided, however,
that no bank, trust company, savings bank, savings association, or credit union, whether
state or federally chartered, industrial loan and thrift company, or licensee under the
Minnesota Regulated Loan Act authorized to do business deleted text begin in this state deleted text end shall be required to
obtain a license under sections 53C.01 to 53C.14.

(b) The application for a license shall be in writing, under oath and in the form
prescribed by the commissioner. The application shall contain the name of the applicant;
date of incorporation, if incorporated; the address where the business is or is to be
conducted and similar information as to any branch office of the applicant; the name and
resident address of the owner or partners, or, if a corporation or association, of the directors,
trustees and principal officers, and other pertinent information the commissioner requires.

(c) The licensee fee for the fiscal year beginning July 1 and ending June 30 of the
following year, or any part thereof shall be the sum of $250 for the principal place of
business of the licensee, and the sum of $125 for each branch of the licensee deleted text begin , deleted text end maintained
deleted text begin in this state deleted text end . Any licensee who proves to the satisfaction of the commissioner, by affidavit
or other proof satisfactory to the commissioner, that during the 12 calendar months of the
immediately preceding fiscal year, for which the license has been paid that the licensee
has not held retail installment contracts exceeding $15,000 in amount, shall be entitled
to a refund of that portion of each license fee paid in excess of $25. The commissioner
shall certify to the commissioner of management and budget that the licensee is entitled to
a refund, and payment thereof shall be made by the commissioner of management and
budget. The amount necessary to pay for the refundment of the license fee is appropriated
out of the general fund. All license fees received by the commissioner under sections
53C.01 to 53C.14 shall be deposited with the commissioner of management and budget.

(d) Each license shall specify the location of the office or branch and must be
conspicuously displayed there. In case the location be changed, the commissioner shall
endorse the change of location on the license.

(e) Upon the filing of such application, and the payment of the fee, the commissioner
shall issue a license to the applicant to engage in the business of a sales finance company
under and in accordance with the provisions of sections 53C.01 to 53C.14 for a period
which shall expire the last day of June next following the date of its issuance. The license
shall not be transferable or assignable. No licensee shall transact any business provided
for by sections 53C.01 to 53C.14 under any other name.

Sec. 7.

new text begin [53C.025] BOND.
new text end

new text begin Before a license may be issued to a sales finance company, the applicant shall file
annually with and have approved by the commissioner a surety bond, issued by a bonding
company authorized to do business in this state in the principal amount of $........ The
bond must run to the commissioner and is for the benefit of creditors of the sales finance
company for liability incurred by the sales finance company in connection with providing
its services. The commissioner may require a licensee to file a bond in an additional
amount if the commissioner considers it necessary to meet the requirements of this
section. In determining the additional amount of the bond which may be required, the
commissioner may require the licensee to file its financial records. In no case may the
bond be less than the initial $....... or more than the outstanding liabilities.
new text end

Sec. 8.

Minnesota Statutes 2012, section 53C.08, subdivision 1, is amended to read:

Subdivision 1.

Terms and limitations.

(a) Every retail installment contract shall
be in writing, shall contain all the agreements of the parties, shall be signed by the retail
buyer and seller, and a copy signed by the retail buyer shall be furnished to such retail
buyer at the time the retail buyer executes the contract. new text begin Until new text end the copy signed by both the
retail buyer and retail seller deleted text begin shall be provided to the deleted text end new text begin is received by a new text end retail buyer deleted text begin within
seven days after delivery of the vehicle. With respect to any contract executed prior to
August 1, 1996, which has not been paid in full by the retail buyer, the retail seller shall
provide such retail buyer a copy signed by both the retail buyer and retail seller within 120
days after August 1, 1996 deleted text end new text begin who has not taken delivery of the motor vehicle, the retail buyer
may cancel the agreement and upon cancellation must receive a refund from the holder of
the retail installment contract of all payments made by the retail buyer new text end .

(b) No provisions for confession of judgment or power of attorney therefor contained
in any retail installment contract or contained in a separate agreement relating thereto,
shall be valid or enforceable.

(c) The holder of a precomputed retail installment contract may, if the contract so
provides, collect a delinquency and collection charge on each installment in arrears for a
period not less than ten days in an amount not in excess of five percent of each installment
or $5, whichever is greater. In addition to such delinquency and collection charge, the
retail installment contract, whether interest-bearing or precomputed, may provide for the
payment of attorneys' fees not exceeding 15 percent of the amount due and payable under
such contract where such contract is referred to an attorney not a salaried employee of the
holder of the contract for collection plus the court costs.

(d) Unless written notice has been given to the retail buyer of actual or intended
assignment of a retail installment contract, payment thereunder or tender thereof made
by the retail buyer to the last known holder of such contract shall be binding upon all
subsequent holders or assignees.

(e) Upon written request from the retail buyer, the holder of the retail installment
contract shall give or forward to the retail buyer a written statement of the dates and
amounts of payments and the total amount unpaid under such contract. A retail buyer shall
be given a written receipt for any payment when made in cash.

Sec. 9.

Minnesota Statutes 2012, section 53C.08, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Regulatory agency. new text end

new text begin A retail installment contract must contain the
following statement: "This contract is regulated under the provisions of Minnesota
Statutes, chapter 53C. The regulatory agency is: Minnesota Department of Commerce, 85
Seventh Place East, Suite 500, St. Paul, Minnesota 55101-2198."
new text end

Sec. 10.

Minnesota Statutes 2012, section 72A.20, is amended by adding a subdivision
to read:

new text begin Subd. 40. new text end

new text begin Claims arising from natural causes; limitations on cancellations
and nonrenewals. new text end

new text begin An insurer shall not cancel, refuse to renew, reduce the limits of
coverage, or eliminate coverage for damages to property based solely on claims arising
from natural causes.
new text end

new text begin For purposes of this subdivision: (1) a "natural cause" is an act occasioned
exclusively by the violence of nature where the policyholder's action did not cause the
damage or injury; and (2) "solely" means that claims arising from natural causes and that
are beyond the insured's control cannot be the event that triggers the cancellation, refusal
to renew, reduction in the limits of coverage, or elimination of coverage.
new text end

Sec. 11.

Minnesota Statutes 2012, section 332.32, is amended to read:

332.32 EXCLUSIONS.

(a) The term "collection agency" shall not include persons whose collection activities
are confined to and are directly related to the operation of a business other than that of
a collection agency such as, but not limited to banks when collecting accounts owed to
the banks and when the bank will sustain any loss arising from uncollectible accounts,
abstract companies doing an escrow business, real estate brokers, public officers, persons
acting under order of a court, deleted text begin lawyers deleted text end new text begin exempt attorneys at law new text end , trust companies, insurance
companies, credit unions, savings associations, loan or finance companies unless they
are engaged in asserting, enforcing or prosecuting unsecured claims which have been
purchased from any person, firm, or association when there is recourse to the seller for
all or part of the claim if the claim is not collected. new text begin For purposes of this paragraph,
"exempt attorneys at law" means attorneys licensed or otherwise authorized to practice
law in this state:
new text end

new text begin (1) whose exclusive and principal practice does not involve collection activities; and
new text end

new text begin (2) who do not have a business relationship with a collection agency that involves
collection activities.
new text end

(b) The term "collection agency" shall not include a trade association performing
services authorized by section 604.15, subdivision 4a, but the trade association in
performing the services may not engage in any conduct that would be prohibited for a
collection agency under section 332.37.

Sec. 12.

new text begin [609.8051] COMMUNICATIONS FRAUD.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) As used in this section, the terms in paragraphs
(b) to (f) have the meanings given them.
new text end

new text begin (b) "Communicate" means to originate, emit, disseminate, transmit, transfer, or
cause another person to originate, emit, disseminate, transmit, or transfer, signs, signals,
writing, images, sounds, data, or intelligences of any nature, in whole or in part by
any method including, but not limited to, mail, television, Internet, cable, wire, fiber
optic, wireless, radio, satellite, electromagnetic, photoelectronic, or photooptical system,
including telecommunications and data communications.
new text end

new text begin (c) "Scheme to defraud" means an ongoing course of conduct with the intent to
obtain money, property, services, or identity from one or more persons by false or
fraudulent statements, pretenses, representations, or promises.
new text end

new text begin (d) "Telecommunication" means the origination, emission, dissemination,
transmission, or reception of a communication by any method, including, but not limited
to, a fiber optic, electronic, magnetic, optical, digital, or analog method.
new text end

new text begin (e) "Property," "services," and "value" have the meanings given in section 609.52.
new text end

new text begin (f) "Identity" has the meaning given in section 609.527.
new text end

new text begin Subd. 2. new text end

new text begin Fraud. new text end

new text begin (a) A person is guilty of communications fraud and may
be sentenced as provided in subdivision 3 if the person knowingly engages in a
communication with the purpose of executing or otherwise furthering a scheme to defraud.
new text end

new text begin (b) If a person violates paragraph (a), and the violation occurs as part of a course
of conduct involving additional violations or attempted violations of paragraph (a), or
violations, attempted violations, or conspiracies to violate section 609.52 or 609.527, the
court may aggregate the value of the money, property, services, and identities obtained or
attempted to be obtained by the person.
new text end

new text begin Subd. 3. new text end

new text begin Penalty. new text end

new text begin A person who commits communications fraud may be sentenced
as follows:
new text end

new text begin (1) if the violation involves a single victim and the total combined value of the
money, property, services, or identity the person obtained or intended to obtain is $250 or
less, the person may be sentenced as provided in section 609.52, subdivision 3, clause (5);
new text end

new text begin (2) if the violation involves a single victim and the total combined value of the
money, property, services, or identity the person obtained or intended to obtain is more
than $250 but not more than $500, the person may be sentenced as provided in section
609.52, subdivision 3, clause (4);
new text end

new text begin (3) if the offense involves two or three victims or the total combined value of the
money, property, services, or identities the person obtained or intended to obtain is more
than $500 but not more than $2,500, the person may be sentenced as provided in section
609.52, subdivision 3, clause (3);
new text end

new text begin (4) if the offense involves more than three but not more than seven victims or the
total combined value of the money, property, services, or identities the person obtained
or intended to obtain is more than $2,500, the person may be sentenced as provided in
section 609.52, subdivision 3, clause (2); and
new text end

new text begin (5) if the offense involves eight or more victims or the total combined value of the
money, property, services, or identities the person obtained or intended to obtain is more
than $35,000, the person may be sentenced as provided in section 609.52, subdivision
3, clause (1).
new text end

new text begin Subd. 4. new text end

new text begin Vulnerable adults. new text end

new text begin When the victim of the violation is a vulnerable adult,
as defined by section 609.232, subdivision 11, a person who violates subdivision 2 may
also be subject to the criminal penalties of section 609.2335.
new text end

new text begin Subd. 5. new text end

new text begin No bar to conviction. new text end

new text begin Notwithstanding section 609.035 or 609.04, a
prosecution for or conviction of the crime of communications fraud under subdivision 2 is
not a bar to conviction of or punishment for any other crime.
new text end

new text begin Subd. 6. new text end

new text begin Venue. new text end

new text begin Notwithstanding anything to the contrary in section 627.01, a
violation committed under subdivision 2 may be prosecuted in:
new text end

new text begin (1) the county where the offense occurred;
new text end

new text begin (2) the county of the residence or place of business of the victim; or
new text end

new text begin (3) if violations are committed by a person in more than one county, the person may
be prosecuted in any county in which one of the violations was committed for all of the
violations aggregated under this section.
new text end

new text begin Subd. 7. new text end

new text begin Civil action. new text end

new text begin A person who has been injured by a violation of subdivision
2 may bring a civil action for three times the amount of actual damages sustained by
that person or $1,500, whichever is greater, and costs and disbursements including, at a
minimum, reasonable attorney fees.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2014, and applies to
violations committed on or after that date.
new text end