HF 3680

1st Engrossment - 93rd Legislature (2023 - 2024) Posted on 04/04/2024 09:31pm

A bill for an act
relating to commerce; consumer loans; rejecting certain federal amendments
relating to applicable interest rates; amending Minnesota Statutes 2022, section
47.59, subdivision 3; Minnesota Statutes 2023 Supplement, section 47.59,
subdivision 2.

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

Section 1.

Minnesota Statutes 2023 Supplement, section 47.59, subdivision 2, is amended
to read:

Subd. 2.

Application.

new text begin (a) new text end Extensions of credit or purchases of extensions of credit by
financial institutions under sections 47.20, 47.21, 47.201, 47.204, 47.58, 48.153, 48.185,
48.195, 59A.01 to 59A.15, 334.01, 334.011, 334.012, 334.022, 334.06, and 334.061 to
334.19 may, but need not, be made according to those sections in lieu of the authority set
forth in this section to the extent those sections authorize the financial institution to make
extensions of credit or purchase extensions of credit under those sections. If a financial
institution elects to make an extension of credit or to purchase an extension of credit under
those other sections, the extension of credit or the purchase of an extension of credit is
subject to those sections and not this section, except this subdivision, and except as expressly
provided in those sections. A financial institution may also charge an organization a rate of
interest and any charges agreed to by the organization and may calculate and collect finance
and other charges in any manner agreed to by that organization. Except for extensions of
credit a financial institution elects to make under section 334.01, 334.011, 334.012, 334.022,
334.06, or 334.061 to 334.19, chapter 334 does not apply to extensions of credit made
according to this section or the sections listed in this subdivision. This subdivision does not
authorize a financial institution to extend credit or purchase an extension of credit under
any of the sections listed in this subdivision if the financial institution is not authorized to
do so under those sections. A financial institution extending credit under any of the sections
listed in this subdivision shall specify in the promissory note, contract, or other loan document
the section under which the extension of credit is made.

new text begin (b) In accordance with section 525 of the federal Depository Institutions Deregulation
and Monetary Control Act of 1980, Public Law 96-221, the legislature declares that the
state of Minnesota does not want the amendments to the Federal Deposit Insurance Act,
United States Code, title 12, section 1811, et seq., the federal National Housing Act, United
States Code, title 12, section 1701, et seq., and the Federal Credit Union Act, United States
Code, title 12, section 1751, et seq., made by sections 521 to 523 of the federal Depository
Institutions Deregulation and Monetary Control Act of 1980, Public Law 96-221, prescribing
interest rates and preempting state interest rates to apply to consumer loans made in
Minnesota. Consumer loans made in Minnesota are subject to the rates established in this
section and as otherwise provided by the laws of Minnesota.
new text end

new text begin (c) A consumer loan is deemed to be made in Minnesota and is subject to this section
and other applicable laws of Minnesota if the borrower is a Minnesota resident and the
borrower completes the transaction, either personally or electronically, while physically
located in Minnesota.
new text end

Sec. 2.

Minnesota Statutes 2022, section 47.59, subdivision 3, is amended to read:

Subd. 3.

Finance charge for loans.

(a) With respect to a loan, including a loan pursuant
to open-end credit but excluding open-end credit pursuant to a credit card, a financial
institution may contract for and receive a finance charge on the unpaid balance of the
principal amount not to exceed the greater of:

(1) an annual percentage rate not exceeding 21.75 percent; or

(2) the total of:

(i) 33 percent per year on that part of the unpaid balance of the principal amount not
exceeding $1,350; and

(ii) 19 percent per year on that part of the unpaid balance of the principal amount
exceeding $1,350.

With respect to open-end credit pursuant to a credit card, the financial institution may
contract for and receive a finance charge on the unpaid balance of the principal amount at
an annual percentage rate not exceeding 18 percent per year new text begin or, if the financial institution
is an out-of-state bank, as defined in section 48.92, or out-of-state credit union, as defined
in section 52.001, the rate allowed by the financial institution's home state, if that rate
exceeds 18 percent per year new text end .

(b) On a loan where the finance charge is calculated according to the method provided
for in paragraph (a), clause (2), the finance charge must be contracted for and earned as
provided in that provision or at the single annual percentage rate computed to the nearest
one-tenth of one percent that would earn the same total finance charge at maturity of the
contract as would be earned by the application of the graduated rates provided in paragraph
(a), clause (2), when the debt is paid according to the agreed terms and the calculations are
made according to the actuarial method.

(c) With respect to a loan, the finance charge must be considered not to exceed the
maximum annual percentage rate permitted under this section if the finance charge contracted
for and received does not exceed the equivalent of the maximum annual percentage rate
calculated in accordance with Code of Federal Regulations, title 12, part 226, but using the
definition of finance charge provided in this section.

(d) This subdivision does not limit or restrict the manner of calculating the finance
charge, whether by way of add-on, discount, discount points, precomputed charges, single
annual percentage rate, variable rate, interest in advance, compounding, average daily
balance method, or otherwise, if the annual percentage rate does not exceed that permitted
by this section. Discount points permitted by this paragraph and not collected but included
in the principal amount must not be included in the amount on which credit insurance
premiums are calculated and charged.

(e) With respect to a loan secured by real estate, if a finance charge is calculated or
collected in advance, or included in the principal amount of the loan, and the borrower
prepays the loan in full, the financial institution shall credit the borrower with a refund of
the charge to the extent that the annual percentage rate yield on the loan would exceed the
maximum rate permitted under paragraph (a), taking into account the prepayment. The
refund need not be made if it would be less than $9.00.

(f) With respect to all other loans, if the finance charge is calculated or collected in
advance, or included in the principal amount of the loan, and the borrower prepays the loan
in full, the financial institution shall credit the borrower with a refund of the charge to the
extent the annual percentage rate yield on the loan would exceed the annual percentage rate
on the loan as originally determined under paragraph (a) and taking into account the
prepayment. The refund need not be made if it would be less than $9.00.

(g) For the purpose of calculating the refund under this subdivision, the financial
institution may assume that the contract was paid before the date of prepayment according
to the schedule of payments under the loan and that all payments were paid on their due
dates.

(h) For loans repayable in substantially equal successive monthly installments, the
financial institution may calculate the refund under paragraph (f) as the portion of the finance
charge allocable on an actuarial basis to all wholly unexpired payment periods following
the date of prepayment, based on the annual percentage rate on the loan as originally
determined under paragraph (a), and for the purpose of calculating the refund may assume
that all payments are made on the due date.

(i) The dollar amounts in this subdivision, subdivision 6, paragraph (a), clause (4), and
the dollar amount of original principal amount of closed-end credit in subdivision 6,
paragraph (d), shall change periodically, as provided in this section, according to and to the
extent of changes in the implicit price deflator for the gross domestic product, 2005 = 100,
compiled by the United States Department of Commerce, and hereafter referred to as the
index. The index for December 2011 is the reference base index for adjustments of dollar
amounts.

(j) The designated dollar amounts shall change on July 1 of each even-numbered year
if the percentage of change, calculated to the nearest whole percentage point, between the
index for December of the preceding year and the reference base index is ten percent or
more; but

(1) the portion of the percentage change in the index in excess of a multiple of ten percent
shall be disregarded and the dollar amounts shall change only in multiples of ten percent
of the amounts appearing in Laws 1995, chapter 202, on May 24, 1995; and

(2) the dollar amounts shall not change if the amounts required by this section are those
currently in effect pursuant to Laws 1995, chapter 202, as a result of earlier application of
this section.

(k) If the index is revised, the percentage of change pursuant to this section shall be
calculated on the basis of the revised index. If a revision of the index changes the reference
base index, a revised reference base index shall be determined by multiplying the reference
base index then applicable by the rebasing factor furnished by the Department of Commerce.
If the index is superseded, the index referred to in this section is the one represented by the
Department of Commerce as reflecting most accurately changes in the purchasing power
of the dollar for consumers.

(l) The commissioner shall:

(1) announce and publish on or before April 30 of each year in which dollar amounts
are to change, the changes in dollar amounts required by paragraph (j);

(2) announce and publish promptly after the changes occur, changes in the index required
by paragraph (k) including, if applicable, the numerical equivalent of the reference base
index under a revised reference base index and the designation or title of any index
superseding the index; and

(3) promptly notify the revisor of statutes in writing of the changes announced and
published by the commissioner pursuant to clauses (1) and (2). The revisor shall publish
the changes in the next edition of Minnesota Statutes.

(m) A person does not violate this chapter with respect to a transaction otherwise
complying with this chapter if that person relies on dollar amounts either determined
according to paragraph (j), clause (2), or appearing in the last publication of the commissioner
announcing the then current dollar amounts.

(n) The adjustments provided in this section shall not be affected unless explicitly
provided otherwise by law.

Sec. 3. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 and 2 are effective August 1, 2024, and apply to loans executed on or after
that date.
new text end