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Minnesota Legislature

Office of the Revisor of Statutes

HF 3170

1st Engrossment - 86th Legislature (2009 - 2010) Posted on 03/17/2010 12:46pm

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Engrossments
Introduction Posted on 02/25/2010
1st Engrossment Posted on 03/17/2010

Current Version - 1st Engrossment

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A bill for an act
relating to financial institutions; regulating payday lending; amending Minnesota
Statutes 2008, sections 47.59, subdivision 2; 47.60, subdivision 2, by adding
a subdivision; 53.05; Minnesota Statutes 2009 Supplement, sections 47.60,
subdivision 1; 47.601, subdivisions 2, 6.

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

Section 1.

Minnesota Statutes 2008, 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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2010, and applies to loans
made on or after that date.
new text end

Sec. 2.

Minnesota Statutes 2009 Supplement, 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" deleted text beginisdeleted text endnew text begin meansnew text end 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. deleted text beginThe cash
advance of a consumer small loan is equal to or less than $350.
deleted text end A consumer small loan
includes an indebtedness evidenced by but not limited to a promissory note or agreement
tonew text begin:
new text end

new text begin (1)new text end defer the presentation of a personal check for a feenew text begin;
new text end

new text begin (2) permit preauthorized drafts or debits; or
new text end

new text begin (3) extend a line of creditnew text end.

(b) "Consumer small loan lender" deleted text beginisdeleted text endnew text begin meansnew text end a deleted text beginfinancial institution as defined in
section 47.59 or a
deleted text end business entity registered with the commissioner and engaged in the
business of making consumer small loans.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2010, and applies to loans
made on or after that date.
new text end

Sec. 3.

Minnesota Statutes 2008, section 47.60, subdivision 2, is amended to read:


Subd. 2.

deleted text beginAuthorization, terms, conditions, and prohibitionsdeleted text endnew text begin Interest rates and
fees
new text end.

(a) deleted text beginIn lieu of the interest, finance charges, or fees in any other law, a consumer small
loan lender may charge the following
deleted text endnew text begin On any loan, whether closed-end or open-end, a
lender may charge no more than
new text end:

(1) new text begin$5.50 new text endon anynew text begin loannew text end amount up to and including $50deleted text begin, a charge of $5.50 may be
added
deleted text end;

(2) deleted text beginon amounts in excess of $50, but not more than $100, a charge may be added
equal to
deleted text endnew text begin interest of up tonew text end ten percent of the loan deleted text beginproceedsdeleted text endnew text begin amount,new text end plus a $5 administrative
feenew text begin, on loan amounts in excess of $50 but not more than $100new text end;

(3) deleted text beginon amounts in excess of $100, but not more than $250, a charge may be added
equal to
deleted text endnew text begin interest of up tonew text end seven percent of the loan deleted text beginproceedsdeleted text endnew text begin amountnew text end with a minimum of
$10new text begin,new text end plus a $5 administrative feenew text begin, on loan amounts in excess of $100 but not more than
$250
new text end;

(4) deleted text beginfor amounts in excess of $250 and not greater than the maximum in subdivision
1, paragraph (a), a charge may be added equal to
deleted text endnew text begin interest of up tonew text end six percent of the loan
deleted text begin proceedsdeleted text endnew text begin amountnew text end with a minimum of $17.50new text begin,new text end plus a $5 administrative feenew text begin, on loan amounts
in excess of $250 but not more than $499
new text end.

(b) deleted text beginThe term of a loan made under this section shall be for no more than 30
calendar days.
deleted text endnew text begin A lender authorized to lend under section 47.59 may charge no more for
a closed-end loan than:
new text end

new text begin (1) interest of up to six percent of the loan amount on loan amounts in excess of
$499 but not more than $599;
new text end

new text begin (2) interest of up to five percent of the loan amount on loan amounts of $600 or more
but not more than $699;
new text end

new text begin (3) interest of up to four percent of the loan amount on loan amounts of $700 or
more but not more than $1,000.
new text end

(c) new text beginA lender authorized to lend under section 47.59 may charge no more than an
interest charge of seven percent of the loan proceeds, plus an administrative charge of $5,
for an open-end loan in excess of $499 but not more than $1,000.
new text end

new text begin (d) new text endAfter 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.

deleted text begin (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.
deleted text end

deleted text begin (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.
deleted text end

deleted text begin (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.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2010, and applies to loans
made on or after that date.
new text end

Sec. 4.

Minnesota Statutes 2008, section 47.60, is amended by adding a subdivision to
read:


new text begin Subd. 2a. new text end

new text begin Terms, conditions, and prohibitions. new text end

new text begin (a) The term of a loan made under
this section shall be no more than 30 calendar days.
new text end

new text begin (b) The maximum amount that may be lent under this section is $350.
new text end

new text begin (c) No insurance charges or other charges may be charged, collected, or imposed on
a consumer small loan except as authorized in this section.
new text end

new text begin (d) 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 requested, demanded, or assessed against the borrower.
new text end

new text begin (e) A loan made under this section must not be repaid by the proceeds of another
loan made under this section or under section 47.601 by the same lender or affiliate of
that lender. The proceeds from a loan made under this section must not be applied to
another loan made under this section or under section 47.601 by the same lender or an
affiliate of that lender.
new text end

new text begin (f) No loan to a single borrower made under this section shall be split or divided, and
no single borrower shall have outstanding more than one loan from the same lender or
an affiliate of that lender, with the result of collecting a higher charge than permitted by
this section or in an aggregate amount of principal that exceeds at any time the maximum
of $350.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2010, and applies to loans
made on or after that date.
new text end

Sec. 5.

Minnesota Statutes 2009 Supplement, 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 2new text begin or 2a, whichever is applicablenew text end,
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 EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2010, and applies to loans
made on or after that date.
new text end

Sec. 6.

Minnesota Statutes 2009 Supplement, 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 or 3 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; deleted text beginor
deleted text end

(3) in whichnew text begin thenew text end interest, fees,new text begin ornew text end chargesdeleted text begin, or loan amountsdeleted text end exceed the interest, fees,new text begin
or
new text end chargesdeleted text begin, or loan amountsdeleted text end allowable under deleted text beginsections 47.59, subdivision 6, anddeleted text endnew text begin sectionnew text end
47.60, subdivision 2new text begin; or
new text end

new text begin (4) in which the loan amount or charges exceed the loan amount or charges permitted
under section 47.60, subdivision 2a
new text end.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2010, and applies to loans
made on or after that date.
new text end

Sec. 7.

Minnesota Statutes 2008, 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 beginordeleted 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 checksnew text begin; or
new text end

new text begin (9) make a consumer short-term loan, as defined under section 47.601:
new text end

new text begin (i) that exceeds the interest, fees, or charges allowable under section 47.60,
subdivision 2;
new text end

new text begin (ii) the proceeds of which are repaid by the proceeds of another consumer short-term
loan or by the proceeds of a consumer small loan made under section 47.60, by that
individual loan and thrift company or an affiliate;
new text end

new text begin (iii) the proceeds of which are applied to another consumer short-term loan or to a
consumer small loan made under section 47.60, by that individual loan and thrift company
or an affiliate;
new text end

new text begin (iv) which is repaid by the proceeds of another consumer short-term loan or of a
consumer loan made under section 47.60, by that individual loan and thrift company or
an affiliate; or
new text end

new text begin (v) which is split or divided such that a borrower will have outstanding more than one
loan, resulting in the lender collecting a higher charge than permitted under section 47.60
new text end.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2010, and applies to loans
made on or after that date.
new text end