SF 3740

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to financial institutions; making changes in regulation of consumer small
loans; providing consumer protections; amending Minnesota Statutes 2006,
section 47.60, subdivisions 1, 4; Minnesota Statutes 2007 Supplement, section
47.60, subdivision 2.

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

Section 1.

Minnesota Statutes 2006, 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 deleted text begin $350 deleted text end new text begin $500 new text end . 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 person registered with the commissioner and engaged in the business of making
consumer small loans.

Sec. 2.

Minnesota Statutes 2007 Supplement, section 47.60, subdivision 2, is amended
to read:

Subd. 2.

Authorization, terms, conditions, and prohibitions.

(a) In lieu of the
interest, finance charges, or fees in any other law, a consumer small loan lender may
charge the following deleted text begin :
deleted text end

deleted text begin (1) deleted text end on any amount up to deleted text begin 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 deleted text end new text begin the amount
permitted new text end in subdivision 1, paragraph (a), a charge may be added equal to deleted text begin six deleted text end new text begin 15 new text end percent
of the loan proceeds deleted text begin with a minimum of $17.50 deleted text end plus a $5 administrative fee.

(b) The term of a loan made under this section shall be for no more than deleted text begin 30 deleted text end new text begin 31
new text end calendar days new text begin unless the term of the loan is extended by agreement of both the borrower
and the licensee pursuant to the extended payment plan authorized under this subdivision
and no additional fee or interest is charged new text end .

new text begin (c) The loan contract must include a provision that offers the borrower an optional
extended payment plan that may be invoked by the borrower on the last business day
before the maturity date of the loan.
new text end

new text begin (1) To invoke the extended payment plan, the borrower must return to the office
where the loan was made and sign an amendment to the original loan agreement reflecting
the extended terms of the loan and the new payment schedule.
new text end

new text begin (2) A licensee must offer to each borrower at least one extended payment plan
per calendar year.
new text end

new text begin (3) The extended payment plan must allow the borrower to repay the balance in four
equal payments with the first payment being due on the date the borrower enters into
the extended payment plan and the remaining payments being due on the borrower's
next three scheduled periodic pay dates.
new text end

new text begin (4) No additional interest, fees, or charges may be applied to the loan upon the
borrower entering the extended payment plan as long as the borrower is in compliance
with the terms of the extended payment plan.
new text end

new text begin (5) The contract provision regarding the extended payment plan must stipulate that
the plan may be revoked and the entire balance become immediately due and payable if
the borrower fails to abide by the terms of the extended payment plan.
new text end

new text begin (6) The person originating the loan for the licensee must identify verbally to the
borrower the contract provision regarding the extended payment plan, and the borrower
must verify that the provision has been identified by initialing the contract adjacent to
the provision.
new text end

deleted text begin (c) deleted text end new text begin (d) new text end 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.

deleted text begin (d) deleted text end new text begin (e) new text end 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 begin (e) deleted text end new text begin (f) new text end 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 begin (f) deleted text end new text begin (g) new text end 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 deleted text begin $350 deleted text end new text begin the amount permitted
in subdivision 1, paragraph (a) new text end .

new text begin (h) A loan may be rescinded at no cost if the borrower returns the proceeds of a
consumer small loan transaction by the close of the business day that immediately follows
the day upon which the loan was made.
new text end

new text begin (i) A lender must not threaten to use criminal prosecution to collect on a consumer
small loan. A consumer must not be subject to any criminal penalty in the event the
instrument is dishonored, unless the consumer's account on which the instrument was
written was closed before the agreed upon date of negotiation, subject to the provisions
of section 609.52.
new text end

Sec. 3.

Minnesota Statutes 2006, section 47.60, subdivision 4, is amended to read:

Subd. 4.

Books of account; annual report; schedule of charges; disclosures.

(a)
A lender filing under subdivision 3 shall keep and use in the business books, accounts,
and records as will enable the commissioner to determine whether the filer is complying
with this section.

(b) A lender filing under subdivision 3 shall annually on or before March 15 file a
report to the commissioner giving the information the commissioner reasonably requires
concerning the business and operations during the preceding calendar year.

(c) A lender filing under subdivision 3 shall display prominently in each place of
business a full and accurate schedule, to be approved by the commissioner, of the charges
to be made and the method of computing those charges. A lender shall furnish a copy of
the contract of loan to a person obligated on it or who may become obligated on it at any
time upon the request of that person. This is in addition to any disclosures required by the
federal Truth in Lending Act, United States Code, title 15.

(d) A lender filing under subdivision 3 shall, upon repayment of the loan in
full, mark indelibly every obligation signed by the borrower with the word "Paid" or
"Canceled" within 20 days after repayment.

(e) A lender filing under subdivision 3 shall display prominently, in each licensed
place of business, a full and accurate statement of the charges to be made for loans made
under this section. The statement of charges must be displayed in a notice, on plastic or
other durable material measuring at least 12 inches by 18 inches, headed "CONSUMER
NOTICE REQUIRED BY THE STATE OF MINNESOTA." The notice shall include,
immediately above the statement of charges, the following sentence, or a substantially
similar sentence approved by the commissioner: "These loan charges are higher than
otherwise permitted under Minnesota law. Minnesota law permits these higher charges
only because short-term small loans might otherwise not be available to consumers. If
you have another source of a loan, you may be able to benefit from a lower interest rate
and other loan charges." The notice must not contain any other statement or information,
unless the commissioner has determined that the additional statement or information is
necessary to prevent confusion or inaccuracy. The notice must be designed with a type
size that is large enough to be readily noticeable and legible. The form of the notice must
be approved by the commissioner prior to its use.

new text begin (f) A lender filing under subdivision 3 must display prominently, in each licensed
place of business, a notification of the extended repayment plan, and other locally
available debt repayment services such as consumer credit counseling services.
new text end