HF 2293

1st Unofficial Engrossment - 88th Legislature (2013 - 2014)

Posted on 05/16/2014 06:30 p.m.

1.1A bill for an act 1.2relating to commerce; regulating payday lending; amending Minnesota Statutes 1.32012, section 47.601, subdivisions 1, 2, 3. 1.4BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.5    Section 1. Minnesota Statutes 2012, section 47.601, subdivision 1, is amended to read: 1.6    Subdivision 1. Definitions. (a) For the purposes of this section, the terms defined in 1.7this subdivision have the meanings given. 1.8(b) "Borrower" means an individual who obtains a consumer short-term loan 1.9primarily for personal, family, or household purposes. 1.10(c) "Commissioner" means the commissioner of commerce. 1.11(d) "Consumer short-term loan" means a loan to a borrower which has a principal 1.12amount, or an advance on a credit limit, of $1,000 or less and requires a minimum 1.13payment within 60 days of loan origination or credit advance of more than 25 percent of 1.14the principal balance or credit advance. For the purposes of this section, each new advance 1.15of money new text begin credit new text end to a borrower under a consumer short-term loan agreement constitutes 1.16a new consumer short-term loan. A "consumer short-term loan" does not include any 1.17transaction made under chapter 325J or a loan made by a consumer short-term lender 1.18where, in the event of default on the loan, the sole recourse for recovery of the amount 1.19owed, other than a lawsuit for damages for the debt, is to proceed against physical goods 1.20pledged by the borrower as collateral for the loan. 1.21(e) "Consumer short-term lender" means an individual or entity engaged in the 1.22business of making new text begin , offering, new text end or arranging consumer short-term loans, other than a state or 1.23federally chartered bank, savings bank, or credit union. 2.1    Sec. 2. Minnesota Statutes 2012, section 47.601, subdivision 2, is amended to read: 2.2    Subd. 2. Consumer short-term loan contract. (a) No contract or agreement 2.3between a consumer short-term loan lender and a borrower residing in Minnesota may 2.4contain the following: 2.5(1) a provision selecting a law other than Minnesota law under which the contract 2.6is construed or enforced; 2.7(2) a provision choosing a forum for dispute resolution other than the state of 2.8Minnesota; or 2.9(3) a provision limiting class actions against a consumer short-term lender for 2.10violations of subdivision 3 or for making consumer short-term loans: 2.11(i) without a required license issued by new text begin , or a required registration with, new text end the 2.12commissioner; or 2.13(ii) in which interest rates, fees, charges, or loan amounts exceed those allowable 2.14under section 47.59, subdivision 6, or 47.60, subdivision 2, other than by de minimis 2.15amounts if no pattern or practice exists. 2.16(b) Any provision prohibited by paragraph (a) is void and unenforceable. 2.17(c) A consumer short-term loan lender must furnish a copy of the written loan 2.18contract to each borrower. The contract and disclosures must be written in the language in 2.19which the loan was negotiated with the borrower and must contain: 2.20(1) the name; address, which may not be a post office box; and telephone number of 2.21the lender making the consumer short-term loan; 2.22(2) the name and title of the individual employee or representative who signs the 2.23contract on behalf of the lender; 2.24(3) an itemization of the fees and interest charges to be paid by the borrower; 2.25(4) in bold, 24-point type, the annual percentage rate as computed under United 2.26States Code, chapter 15, section 1606; and 2.27(5) a description of the borrower's payment obligations under the loan. 2.28(d) The holder or assignee of a check or other instrument evidencing an obligation of 2.29a borrower in connection with a consumer short-term loan takes the instrument subject to 2.30all claims by and defenses of the borrower against the consumer short-term lender. 2.31    Sec. 3. Minnesota Statutes 2012, section 47.601, subdivision 3, is amended to read: 2.32    Subd. 3. Debt collection new text begin Requirements; prohibitions new text end . new text begin (a) new text end A consumer short-term 2.33lender collecting or attempting to collect on an indebtedness in connection with a 2.34consumer short-term loan must not engage in the prohibited debt collection practices 2.35referenced in section 332.37. 3.1 new text begin (b) A consumer short-term lender may not make a consumer short-term loan to new text end 3.2 new text begin a borrower who is presently indebted to the consumer short-term lender or any other new text end 3.3 new text begin consumer short-term lender. new text end 3.4 new text begin (c) Subject to paragraphs (b) and (d), a consumer short-term lender may not make new text end 3.5 new text begin a consumer short-term loan to a borrower that will cause a borrower to have, as of the new text end 3.6 new text begin date of the loan and within the immediately preceding 12 months, more than ten consumer new text end 3.7 new text begin short-term loans. A consumer short-term lender may not make a consumer short-term loan new text end 3.8 new text begin to a borrower if the lender is unable to verify the number of consumer short-term loans, new text end 3.9 new text begin in total from all consumer short-term lenders, that the borrower has taken within the new text end 3.10 new text begin immediately preceding 12 months. new text end 3.11 new text begin (d) A consumer short-term lender may not make a consumer short-term loan unless new text end 3.12 new text begin 45 days has elapsed from satisfaction of the fourth and seventh consumer short-term loan new text end 3.13 new text begin within the preceding 12 months. new text end 3.14 new text begin (e) A consumer short-term lender must independently verify whether making a new text end 3.15 new text begin consumer short-term loan would violate paragraphs (b), (c), and (d). Verification must new text end 3.16 new text begin include: new text end 3.17 new text begin (1) examination of the consumer short-term lender's own records, including records new text end 3.18 new text begin maintained at the location at which the borrower is applying for the transaction and new text end 3.19 new text begin records maintained at other locations within the state that are owned and operated by the new text end 3.20 new text begin consumer short-term lender; and new text end 3.21 new text begin (2) utilization of a consumer reporting service. new text end 3.22 new text begin For purposes of this subdivision, a "consumer reporting service" means a real-time, new text end 3.23 new text begin electronically accessible service that the commissioner determines is capable of providing new text end 3.24 new text begin the consumer short-term lender with adequate verification information to ensure new text end 3.25 new text begin compliance with this paragraph. new text end 3.26 new text begin The commissioner shall make the determination by evaluating: new text end 3.27 new text begin (1) lenders' ease of electronically communicating with the consumer reporting new text end 3.28 new text begin service; new text end 3.29 new text begin (2) the cost per communication; new text end 3.30 new text begin (3) the technological capability of the consumer reporting service; new text end 3.31 new text begin (4) the service's ability to generate reports to the commissioner; and new text end 3.32 new text begin (5) the protocols in place to protect information reported by the consumer short-term new text end 3.33 new text begin lenders. new text end 3.34 new text begin (f) A consumer short-term lender shall have a duty to promptly report each consumer new text end 3.35 new text begin short-term loan transaction to the consumer reporting service. new text end 4.1 new text begin (g) A consumer short-term lender shall have a duty to verify whether the borrower is a new text end 4.2 new text begin covered borrower, as defined in Code of Federal Regulations, title 32, section 232.3(c). No new text end 4.3 new text begin consumer short-term lender may make a consumer short-term loan to a covered borrower: new text end 4.4 new text begin (1) without first providing the disclosures required under Code of Federal new text end 4.5 new text begin Regulations, title 32, section 232.5; or new text end 4.6 new text begin (2) which violates any of the terms and conditions set forth in Code of Federal new text end 4.7 new text begin Regulations, title 32, section 232.4, for the issuance of consumer credit, as defined in new text end 4.8 new text begin Code of Federal Regulations, title 32, section 232.3(b), except that for purposes of this new text end 4.9 new text begin subdivision, "consumer credit" includes open-end credit. new text end 4.10    Sec. 4. new text begin EFFECTIVE DATE. new text end 4.11 new text begin Sections 1 and 2 are effective August 1, 2014. new text end 4.12 new text begin Section 3 is effective October 1, 2014, and applies to consumer short-term loans new text end 4.13 new text begin made on or after that date. new text end