HF 3484

as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to financial institutions; strengthening 
  1.3             regulation of payday loans; amending Minnesota 
  1.4             Statutes 2000, section 47.60. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  Minnesota Statutes 2000, section 47.60, is 
  1.7   amended to read: 
  1.8      47.60 [CONSUMER SMALL LOANS.] 
  1.9      Subdivision 1.  [DEFINITIONS.] For purposes of this 
  1.10  section, the terms defined have the meanings given them:  
  1.11     (a) "Consumer small loan" is a loan transaction in which 
  1.12  cash is advanced to a borrower for the borrower's own personal, 
  1.13  family, or household purpose.  A consumer small loan is a 
  1.14  short-term, unsecured loan to be repaid in a single 
  1.15  installment.  The cash advance of a consumer small loan is equal 
  1.16  to or less than $350.  A consumer small loan includes an 
  1.17  indebtedness evidenced by but not limited to a promissory note 
  1.18  or agreement to defer the presentation of a personal check for a 
  1.19  fee deferred presentation transaction.  
  1.20     (b) "Consumer small loan lender" is a financial institution 
  1.21  as defined in section 47.59 or a person registered with the 
  1.22  commissioner and engaged in the business of making consumer 
  1.23  small loans.  
  1.24     (c) "Deferred presentment provider" means a consumer small 
  1.25  loan lender that engages in a deferred presentment transaction. 
  2.1      (d) "Deferred presentation transaction" means providing 
  2.2   currency or a payment instrument in exchange for a person's 
  2.3   check and agreeing to hold that person's check for a period of 
  2.4   time. 
  2.5      Subd. 2.  [AUTHORIZATION, TERMS, CONDITIONS, AND 
  2.6   PROHIBITIONS.] (a) In lieu of the interest, finance charges, or 
  2.7   fees in any other law, a consumer small loan lender may charge 
  2.8   the following:  
  2.9      (1) on any amount up to and including $50, a charge of 
  2.10  $5.50 may be added; 
  2.11     (2) on amounts in excess of $50, but not more than $100, a 
  2.12  charge may be added equal to ten percent of the loan proceeds 
  2.13  plus a $5 administrative fee; 
  2.14     (3) on amounts in excess of $100, but not more than $250, a 
  2.15  charge may be added equal to seven percent of the loan proceeds 
  2.16  with a minimum of $10 plus a $5 administrative fee; 
  2.17     (4) for amounts in excess of $250 and not greater than the 
  2.18  maximum in subdivision 1, paragraph (a), a charge may be added 
  2.19  equal to six percent of the loan proceeds with a minimum of 
  2.20  $17.50 plus a $5 administrative fee.  
  2.21     (b) The term of a loan made under this section shall be for 
  2.22  no more than 30 calendar days and no fewer than seven days.  
  2.23     (c) After maturity, the contract rate must not exceed 2.75 
  2.24  percent per month of the remaining loan proceeds after the 
  2.25  maturity date calculated at a rate of 1/30 of the monthly rate 
  2.26  in the contract for each calendar day the balance is outstanding.
  2.27     (d) No insurance charges or other charges must be permitted 
  2.28  to be charged, collected, or imposed on a consumer small loan 
  2.29  except as authorized in this section.  
  2.30     (e) On a loan transaction in which cash is advanced in 
  2.31  exchange for a personal check, a return check charge may be 
  2.32  charged as authorized by section 332.50, subdivision 2, 
  2.33  paragraph (a).  
  2.34     (f) A loan made under this section must not be repaid by 
  2.35  the proceeds of another loan made under this section by the same 
  2.36  lender or related interest.  The proceeds from a loan made under 
  3.1   this section must not be applied to another loan from the same 
  3.2   lender or related interest.  No loan to a single borrower made 
  3.3   pursuant to this section shall be split or divided and no single 
  3.4   borrower shall have outstanding more than one loan with the 
  3.5   result of collecting a higher charge than permitted by this 
  3.6   section or in an aggregate amount of principal exceed at any one 
  3.7   time the maximum of $350.  
  3.8      (g) The written loan agreement must contain the name, 
  3.9   address, and telephone number of the department of commerce and 
  3.10  indicate that complaints about the lender may be made to the 
  3.11  department of commerce.  
  3.12     Subd. 2a.  [REQUIREMENTS; DEFERRED PRESENTMENT TRANSACTIONS 
  3.13  AGREEMENTS.] (a) Every deferred presentment transaction must be 
  3.14  documented in a written agreement signed by both the deferred 
  3.15  presentment provider and the drawer. 
  3.16     (b) The deferred presentment transaction agreement must be 
  3.17  executed on the day the deferred presentment provider furnishes 
  3.18  currency or a payment instrument to the drawer. 
  3.19     (c) Each written agreement must contain the following 
  3.20  information: 
  3.21     (1) the name or trade name, address, and telephone number 
  3.22  of the deferred presentment provider, and the name and title of 
  3.23  the person who signs the agreement on behalf of the deferred 
  3.24  presentment provider; 
  3.25     (2) the date the deferred presentment transaction was made; 
  3.26     (3) the amount of the drawer's check; 
  3.27     (4) the length of the deferral period; 
  3.28     (5) the last day of the deferment period; 
  3.29     (6) a provision complying with subdivision 2, paragraph 
  3.30  (g); and 
  3.31     (7) a clear description of the drawer's payment obligations 
  3.32  under the deferred presentment transaction. 
  3.33     (d) The deferred presentment provider must furnish to the 
  3.34  drawer a copy of the deferred presentment transaction agreement. 
  3.35     Subd. 2b.  [PROHIBITIONS; DEFERRED PRESENTMENT 
  3.36  TRANSACTIONS.] (a) the amount of the borrower's check held by 
  4.1   the deferred presentment provider must not exceed the amount of 
  4.2   the loan, plus the fees permitted under this section or the fees 
  4.3   contracted for, whichever is less. 
  4.4      (b) No fees or charges of any kind may be charged unless 
  4.5   authorized in this section. 
  4.6      (c) The fees authorized by this section must not be 
  4.7   collected before the drawer's check is presented for payment by 
  4.8   the deferred presentment provider or redeemed by the drawer. 
  4.9      (d) A deferred presentment provider must not require the 
  4.10  borrower to provide any additional security for the deferred 
  4.11  presentment transaction or require the borrower to provide any 
  4.12  additional guaranty from another person. 
  4.13     (e) A deferred presentment provider must not include any of 
  4.14  the following provisions in any written agreement: 
  4.15     (1) a hold harmless clause; 
  4.16     (2) a confession of judgment clause; 
  4.17     (3) any assignment of or order for payment of wages or 
  4.18  other compensation for services; 
  4.19     (4) a provision in which the drawer agrees not to assert 
  4.20  any claim or defense arising out of the agreement; or 
  4.21     (5) a waiver of any provision of this section. 
  4.22     (f) Upon repayment of the loan, the deferred presentment 
  4.23  provider must immediately provide the drawer with the full 
  4.24  amount of any check to be held, less only the fees permitted 
  4.25  under this section. 
  4.26     (g) The deferred presentment agreement and drawer's check 
  4.27  must bear the same date, and the number of days of the deferment 
  4.28  period must be calculated from this date.  No deferred 
  4.29  presentment provider or other person may alter or delete the 
  4.30  date on any written agreement or check held by the deferred 
  4.31  presentment provider. 
  4.32     (h) No deferred presentment provider or its affiliate may 
  4.33  accept or hold an undated check or a check dated on a date other 
  4.34  than the date on which the deferred presentment provider agreed 
  4.35  to hold the check and signed the deferred presentment 
  4.36  transaction agreement. 
  5.1      (i) The deferred presentment provider must hold the 
  5.2   drawer's check for the agreed number of days, unless the drawer 
  5.3   chooses to redeem the check before the agreed presentment date. 
  5.4      (j) Proceeds in a deferred presentment transaction may be 
  5.5   made to the drawer in the form of the deferred presentment 
  5.6   provider's payment instrument, but no additional fee may be 
  5.7   charged by a deferred presentment provider or its affiliate for 
  5.8   issuing or cashing the deferred presentment provider's payment 
  5.9   instrument. 
  5.10     (k) No deferred presentment provider may require the drawer 
  5.11  to accept its payment instrument in lieu of currency. 
  5.12     Subd. 3.  [FILING.] Before a person other than a financial 
  5.13  institution as defined by section 47.59 engages in the business 
  5.14  of making consumer small loans, the person shall file with the 
  5.15  commissioner as a consumer small loan lender.  The filing must 
  5.16  be on a form prescribed by the commissioner together with a fee 
  5.17  of $250 for each place of business and contain the following 
  5.18  information in addition to the information required by the 
  5.19  commissioner:  
  5.20     (1) evidence that the filer has available for the operation 
  5.21  of the business at the location specified, liquid assets of at 
  5.22  least $50,000; and 
  5.23     (2) a biographical statement on the principal person 
  5.24  responsible for the operation and management of the business to 
  5.25  be certified.  
  5.26     Revocation of the filing and the right to engage in the 
  5.27  business of a consumer small loan lender is the same as in the 
  5.28  case of a regulated lender license in section 56.09.  
  5.29     Subd. 4.  [BOOKS OF ACCOUNT; ANNUAL REPORT; SCHEDULE OF 
  5.30  CHARGES; DISCLOSURES.] (a) A lender filing under subdivision 3 
  5.31  shall keep and use in the business books, accounts, and records 
  5.32  as will enable the commissioner to determine whether the filer 
  5.33  is complying with this section. 
  5.34     (b) A lender filing under subdivision 3 shall annually on 
  5.35  or before March 15 file a report to the commissioner giving the 
  5.36  information the commissioner reasonably requires concerning the 
  6.1   business and operations during the preceding calendar year.  
  6.2      (c) A lender filing under subdivision 3 shall display 
  6.3   prominently in each place of business a full and accurate 
  6.4   schedule, to be approved by the commissioner, of the charges to 
  6.5   be made and the method of computing those charges.  A lender 
  6.6   shall furnish a copy of the contract of loan to a person 
  6.7   obligated on it or who may become obligated on it at any time 
  6.8   upon the request of that person.  This is in addition to any 
  6.9   disclosures required by the federal Truth in Lending Act, United 
  6.10  States Code, title 15.  
  6.11     (d) A lender filing under subdivision 3 shall, upon 
  6.12  repayment of the loan in full, mark indelibly every obligation 
  6.13  signed by the borrower with the word "Paid" or "Canceled" within 
  6.14  20 days after repayment.  
  6.15     (e) A lender filing under subdivision 3 shall display 
  6.16  prominently, in each licensed place of business, a full and 
  6.17  accurate statement of the charges to be made for loans made 
  6.18  under this section.  The statement of charges must be displayed 
  6.19  in a notice, on plastic or other durable material measuring at 
  6.20  least 12 inches by 18 inches, headed "CONSUMER NOTICE REQUIRED 
  6.21  BY THE STATE OF MINNESOTA."  The notice shall include, 
  6.22  immediately above the statement of charges, the following 
  6.23  sentence, or a substantially similar sentence approved by the 
  6.24  commissioner:  "These loan charges are higher than otherwise 
  6.25  permitted under Minnesota law.  Minnesota law permits these 
  6.26  higher charges only because short-term small loans might 
  6.27  otherwise not be available to consumers.  If you have another 
  6.28  source of a loan, you may be able to benefit from a lower 
  6.29  interest rate and other loan charges.  If you have a complaint 
  6.30  about this lender, you may contact the Minnesota department of 
  6.31  commerce at the address or telephone number shown on the loan 
  6.32  agreement."  The notice must not contain any other statement or 
  6.33  information, unless the commissioner has determined that the 
  6.34  additional statement or information is necessary to prevent 
  6.35  confusion or inaccuracy.  The notice must be designed with a 
  6.36  type size that is large enough to be readily noticeable and 
  7.1   legible.  The form of the notice must be approved by the 
  7.2   commissioner prior to its use. 
  7.3      Subd. 5.  [COMPLAINTS ALLEGING VIOLATION.] A person 
  7.4   obligated to or having been obligated to a consumer small loan 
  7.5   lender filing under subdivision 3 and having reason to believe 
  7.6   that this section has been violated may file with the 
  7.7   commissioner a written complaint setting forth the details of 
  7.8   the alleged violation.  The commissioner, upon receipt of the 
  7.9   complaint, may inspect the pertinent books, records, letters, 
  7.10  and contracts of the lender and borrower involved.  The 
  7.11  commissioner may assess against the lender a fee covering the 
  7.12  necessary costs of an investigation under this section.  The 
  7.13  commissioner may maintain an action for the recovery of the 
  7.14  costs in a court of competent jurisdiction. 
  7.15     Subd. 6.  [PENALTIES FOR VIOLATION.] A person or the 
  7.16  person's members, officers, directors, agents, and employees who 
  7.17  violate or participate in the violation of any of the provisions 
  7.18  of this section may be liable in the same manner as in section 
  7.19  56.19. 
  7.20     Sec. 2.  [EFFECTIVE DATE.] 
  7.21     Section 1 is effective August 1, 2002.