Skip to main content Skip to office menu Skip to footer
Capital IconMinnesota Legislature

HF 290

1st Engrossment - 93rd Legislature (2023 - 2024) Posted on 02/28/2023 10:23am

KEY: stricken = removed, old language.
underscored = added, new language.
Line numbers 1.1 1.2 1.3 1.4 1.5 1.6
1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14 1.15 1.16 1.17 1.18 1.19 1.20 1.21 1.22 1.23 1.24 2.1 2.2 2.3
2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 2.18 2.19 2.20
2.21 2.22 2.23 2.24 2.25 2.26 2.27 2.28 2.29 2.30 2.31 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20 3.21
3.22 3.23 3.24 3.25 3.26 3.27 3.28 3.29 3.30 3.31 3.32 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19
4.20 4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28 4.29 4.30 4.31 4.32 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
5.10 5.11 5.12 5.13 5.14 5.15 5.16 5.17 5.18 5.19 5.20 5.21 5.22 5.23 5.24 5.25 5.26 5.27 5.28 5.29 5.30 5.31 6.1 6.2 6.3 6.4 6.5 6.6 6.7
6.8 6.9 6.10 6.11 6.12 6.13 6.14 6.15 6.16 6.17 6.18 6.19 6.20 6.21 6.22 6.23 6.24 6.25 6.26 6.27 6.28 6.29 6.30 7.1 7.2 7.3 7.4 7.5 7.6 7.7
7.8 7.9 7.10 7.11 7.12 7.13 7.14 7.15 7.16 7.17 7.18 7.19 7.20 7.21 7.22 7.23 7.24
7.25 7.26 7.27 7.28 7.29 7.30 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12 8.13 8.14 8.15 8.16 8.17 8.18 8.19 8.20
8.21 8.22 8.23 8.24 8.25 8.26 8.27 8.28 8.29 8.30 8.31 8.32 9.1 9.2 9.3 9.4 9.5 9.6
9.7 9.8 9.9

A bill for an act
relating to financial institutions; regulating consumer short-term and small loans;
amending Minnesota Statutes 2022, sections 47.59, subdivision 2; 47.60,
subdivisions 1, 2, by adding a subdivision; 47.601, subdivisions 1, 2, 6, by adding
a subdivision; 53.04, subdivision 3a; 56.131, subdivision 1.

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

Section 1.

Minnesota Statutes 2022, section 47.59, subdivision 2, is amended to read:


Subd. 2.

Application.

Extensions of credit or purchases of extensions of credit by
financial institutions under sections 47.20, 47.21, 47.201, 47.204, 47.58, deleted text begin47.60,deleted text end 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.

Sec. 2.

Minnesota Statutes 2022, section 47.60, subdivision 1, is amended to read:


Subdivision 1.

Definitions.

For purposes of this section, the terms defined have the
meanings given them:

(a) "Consumer small loan" is a loan transaction in which cash is advanced to a borrower
for the borrower's own personal, family, or household purpose. A consumer small loan is
a short-term, unsecured loan to be repaid in a single installment. The cash advance of a
consumer small loan is equal to or less than $350. A consumer small loan includes an
indebtedness evidenced by but not limited to a promissory note or agreement to defer the
presentation of a personal check for a fee.

(b) "Consumer small loan lender" is a financial institution as defined in section 47.59
or a business entity registered with the commissioner and engaged in the business of making
consumer small loans.

new text begin (c) "Annual percentage rate" means a measure of the cost of credit, expressed as a yearly
rate, that relates the amount and timing of value received by the consumer to the amount
and timing of payments made. Annual percentage interest rate includes all interest, finance
charges, and fees. The annual percentage rate shall be determined in accordance with either
the actuarial method or the United States Rule method.
new text end

Sec. 3.

Minnesota Statutes 2022, section 47.60, subdivision 2, is amended to read:


Subd. 2.

Authorization, terms, conditions, and prohibitions.

(a) In deleted text beginlieu of the interest,
finance charges, or fees in any other law
deleted text endnew text begin connection with a consumer small loannew text end, a consumer
small loan lender may charge deleted text beginthe following:deleted text endnew text begin an annual percentage rate of up to 36 percent.
No other charges or payments are permitted or may be received by the lender in connection
with a consumer small loan.
new text end

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

deleted text begin (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;
deleted text end

deleted text begin (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;
deleted text end

deleted text begin (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.
deleted text end

(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. 4.

Minnesota Statutes 2022, section 47.60, is amended by adding a subdivision to
read:


new text begin Subd. 8. new text end

new text begin No evasion. new text end

new text begin (a) No person shall engage in any device, subterfuge, or pretense
to evade the requirements of this section, including but not limited to:
new text end

new text begin (1) making loans disguised as a personal property sale and leaseback transaction;
new text end

new text begin (2) disguising loan proceeds as a cash rebate for the pretextual installment sale of goods
or services; or
new text end

new text begin (3) making, offering, assisting, or arranging for a debtor to obtain a loan with a greater
rate or amount of interest, consideration, charge, or payment than is permitted by this section
through any method including mail, telephone, Internet, or any electronic means regardless
of whether a person has a physical location in this state.
new text end

new text begin (b) A person is a consumer small loan lender subject to the requirements of this section
notwithstanding the fact that a person purports to act as an agent or service provider, or acts
in another capacity for another person that is not subject to this section, if a person:
new text end

new text begin (1) directly or indirectly holds, acquires, or maintains the predominant economic interest,
risk, or reward in a loan or lending business; or
new text end

new text begin (2) both: (i) markets, solicits, brokers, arranges, or facilitates a loan; and (ii) holds, or
holds the right, requirement, or first right of refusal to acquire, loans, receivables, or other
direct or interest in a loan.
new text end

new text begin (c) A person is a consumer small loan lender subject to the requirements of this section
if the totality of the circumstances indicate that a person is a lender and the transaction is
structured to evade the requirements of this section. Circumstances that weigh in favor of
a person being a lender in a transaction include but are not limited to where a person:
new text end

new text begin (1) indemnifies, insures, or protects a person not subject to this section from any costs
or risks related to a loan;
new text end

new text begin (2) predominantly designs, controls, or operates lending activity;
new text end

new text begin (3) holds the trademark or intellectual property rights in the brand, underwriting system,
or other core aspects of a lending business; or
new text end

new text begin (4) purports to act as an agent or service provider, or acts in another capacity, for a person
not subject to this section while acting directly as a lender in one or more states.
new text end

Sec. 5.

Minnesota Statutes 2022, section 47.601, subdivision 1, is amended to read:


Subdivision 1.

Definitions.

(a) For the purposes of this section, the terms defined in this
subdivision have the meanings given.

(b) "Borrower" means an individual who obtains a consumer short-term loan primarily
for personal, family, or household purposes.

(c) "Commissioner" means the commissioner of commerce.

(d) "Consumer short-term loan" means a loan to a borrower which has a principal amount,
or an advance on a credit limit, of deleted text begin$1,000deleted text endnew text begin $2,000new text end or less and requires a minimum payment
within deleted text begin60deleted text endnew text begin 120new text end days of loan origination or credit advance of more than 25 percent of the
principal balance or credit advance. For the purposes of this section, each new advance of
money to a borrower under a consumer short-term loan agreement constitutes a new consumer
short-term loan. A "consumer short-term loan" does not include any transaction made under
chapter 325J or a loan made by a consumer short-term lender where, in the event of default
on the loan, the sole recourse for recovery of the amount owed, other than a lawsuit for
damages for the debt, is to proceed against physical goods pledged by the borrower as
collateral for the loan.

(e) "Consumer short-term lender" means an individual or entity engaged in the business
of making or arranging consumer short-term loans, other than a state or federally chartered
bank, savings bank, or credit union.new text begin For the purposes of this paragraph, arranging consumer
short-term loans includes but is not limited to any substantial involvement in facilitating,
marketing, lead-generating, underwriting, servicing, or collecting consumer short-term
loans.
new text end

Sec. 6.

Minnesota Statutes 2022, 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 deleted text begin47.59, subdivision 6, ordeleted text end 47.60, subdivision 2deleted text begin, other than by de minimis amounts if
no pattern or practice exists
deleted text end.

(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.

Sec. 7.

Minnesota Statutes 2022, section 47.601, is amended by adding a subdivision to
read:


new text begin Subd. 5a. new text end

new text begin No evasion. new text end

new text begin (a) No person shall engage in any device, subterfuge, or pretense
to evade the requirements of this section, including but not limited to:
new text end

new text begin (1) making loans disguised as a personal property sale and leaseback transaction;
new text end

new text begin (2) disguising loan proceeds as a cash rebate for the pretextual installment sale of goods
or services; or
new text end

new text begin (3) making, offering, assisting, or arranging for a debtor to obtain a loan with a greater
rate or amount of interest, consideration, charge, or payment than is permitted by this section
through any method including mail, telephone, Internet, or any electronic means regardless
of whether a person has a physical location in this state.
new text end

new text begin (b) A person is a consumer short-term loan lender subject to the requirements of this
section notwithstanding the fact that a person purports to act as an agent or service provider,
or acts in another capacity for another person that is not subject to this section, if a person:
new text end

new text begin (1) directly or indirectly holds, acquires, or maintains the predominant economic interest,
risk, or reward in a loan or lending business; or
new text end

new text begin (2) both: (i) markets, solicits, brokers, arranges, or facilitates a loan; and (ii) holds, or
holds the right, requirement, or first right of refusal to acquire, loans, receivables, or other
direct or interest in a loan.
new text end

new text begin (c) A person is a consumer short-term loan lender subject to the requirements of this
section if the totality of the circumstances indicate that a person is a lender and the transaction
is structured to evade the requirements of this section. Circumstances that weigh in favor
of a person being a lender in a transaction include but are not limited to where a person:
new text end

new text begin (1) indemnifies, insures, or protects a person not subject to this section from any costs
or risks related to a loan;
new text end

new text begin (2) predominantly designs, controls, or operates lending activity;
new text end

new text begin (3) holds the trademark or intellectual property rights in the brand, underwriting system,
or other core aspects of a lending business; or
new text end

new text begin (4) purports to act as an agent or service provider, or acts in another capacity, for a person
not subject to this section while acting directly as a lender in one or more states.
new text end

Sec. 8.

Minnesota Statutes 2022, section 47.601, subdivision 6, is amended to read:


Subd. 6.

Penalties for violation; private right of action.

(a) Except for a "bona fide
error" as set forth under United States Code, chapter 15, section 1640, subsection (c), an
individual or entity who violates subdivision 2 deleted text beginordeleted text endnew text begin,new text end 3new text begin, or 5anew text end is liable to the borrower for:

(1) all money collected or received in connection with the loan;

(2) actual, incidental, and consequential damages;

(3) statutory damages of up to $1,000 per violation;

(4) costs, disbursements, and reasonable attorney fees; and

(5) injunctive relief.

(b) In addition to the remedies provided in paragraph (a), a loan is void, and the borrower
is not obligated to pay any amounts owing if the loan is made:

(1) by a consumer short-term lender who has not obtained an applicable license from
the commissioner;

(2) in violation of any provision of subdivision 2 or 3; or

(3) in which interest, fees, charges, or loan amounts exceed the interest, fees, charges,
or loan amounts allowable under deleted text beginsections 47.59, subdivision 6, anddeleted text endnew text begin sectionnew text end 47.60, subdivision
2
.

Sec. 9.

Minnesota Statutes 2022, 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 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.new text begin A licensee making a loan that is a consumer small loan, as
defined in section 47.60, subdivision 1, paragraph (a), must comply with section 47.60. A
licensee making a loan that is a consumer short-term loan, as defined in section 47.601,
subdivision 1, paragraph (d), must comply with section 47.601.
new text end

(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. 10.

Minnesota Statutes 2022, section 56.131, subdivision 1, is amended to read:


Subdivision 1.

Interest rates and charges.

(a) On any loan in a principal amount not
exceeding $100,000 or 15 percent of a Minnesota corporate licensee's capital stock and
surplus as defined in section 53.015, if greater, a licensee may contract for and receive
interest, finance charges, and other charges as provided in section 47.59.

new text begin (b) A licensee making a loan that is a consumer small loan, as defined in section 47.60,
subdivision 1, paragraph (a), must comply with section 47.60. A licensee making a loan
that is a consumer short-term loan, as defined in section 47.601, subdivision 1, paragraph
(d), must comply with section 47.601.
new text end

deleted text begin (b)deleted text endnew text begin (c)new text end With respect to a loan secured by an interest in real estate, and having a maturity
of more than 60 months, the original schedule of installment payments must fully amortize
the principal and interest on the loan. The original schedule of installment payments for any
other loan secured by an interest in real estate must provide for payment amounts that are
sufficient to pay all interest scheduled to be due on the loan.

deleted text begin (c)deleted text endnew text begin (d)new text end A licensee may contract for and collect a delinquency charge as provided for in
section 47.59, subdivision 6, paragraph (a), clause (4).

deleted text begin (d)deleted text endnew text begin (e)new text end A licensee may grant extensions, deferments, or conversions to interest-bearing
as provided in section 47.59, subdivision 5.

Sec. 11. new text beginEFFECTIVE DATE; APPLICATION.
new text end

new text begin Sections 1 to 10 are effective August 1, 2023, and apply to consumer small loans and
consumer short-term loans originated on or after that date.
new text end