Minnesota Session Laws - 1984, Regular Session

  

                         Laws of Minnesota 1984 

                        CHAPTER 473-S.F.No. 1732
           An act relating to financial institutions; authorizing 
          industrial loan and thrift companies to act as 
          trustees or custodians of certain retirement accounts; 
          authorizing the removal of the bond requirement on the 
          advertisement and sale of certain evidences of 
          indebtedness; allowing special powers without 
          inclusion in articles of incorporation; providing 
          certain conventional loans on the same terms as other 
          lenders; authorizing open-end loans; providing an 
          alternative to filing fee charges; authorizing the 
          deposit of real estate broker and salesperson trust 
          funds in industrial loan and thrifts; amending 
          Minnesota Statutes 1982, sections 47.75, subdivision 
          1; 53.04, subdivision 1, and by adding a subdivision; 
          56.131, subdivision 2; 82.24, subdivisions 1, 2, and 
          6; Minnesota Statutes 1983 Supplement, sections 53.04, 
          subdivision 3a; and 53.05; proposing new law coded in 
          Minnesota Statutes, chapter 56.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1982, section 47.75, 
subdivision 1, is amended to read:  
    Subdivision 1.  [RETIREMENT ACCOUNTS.] A commercial bank, 
savings bank, savings, building and loan association, or credit 
union, or industrial loan and thrift company may act as trustee 
or custodian under the Federal Self-Employed Individual Tax 
Retirement Act of 1962, as amended, and also under the Federal 
Employee Retirement Income Security Act of 1974, as amended.  
The trustee or custodian may accept the trust funds if the funds 
are invested only in savings accounts or time deposits in the 
commercial bank, savings bank, savings, building and loan 
association, or credit union, or industrial loan and thrift 
company.  All funds held in the fiduciary capacity may be 
commingled by the financial institution in the conduct of its 
business, but individual records shall be maintained by the 
fiduciary for each participant and shall show in detail all 
transactions engaged under authority of this subdivision.  
    Sec. 2.  Minnesota Statutes 1982, section 53.04, 
subdivision 1, is amended to read: 
    Subdivision 1.  Industrial loan and thrift companies, in 
addition to the general and usual powers incidental to ordinary 
corporations in this state, which are not specifically 
restricted in this chapter, shall have the special powers 
enumerated in subdivisions 2 to 6, which powers must be set 
forth in their articles of incorporation or amendments thereto 5.
    Sec. 3.  Minnesota Statutes 1983 Supplement, section 53.04, 
subdivision 3a, is amended to read: 
    Subd. 3a.  (a) The right to make loans, secured or 
unsecured, at the rates and on the terms and other conditions 
permitted licensees under chapter 56.  Loans made under the 
authority of section 6 must be in amounts in compliance with 
section 53.05, clause (7).  All other loans made under the 
authority of chapter 56 must be in amounts in compliance with 
section 53.05, clause (3) (7), or 56.131, subdivision 1, 
paragraph (a), whichever is less.  The right to extend credit or 
lend money and to collect and receive charges therefor as 
provided by chapter 334, or in lieu thereof to charge, collect, 
and receive interest at the rate of 21.75 percent per annum.  
The provisions of sections 47.20 and 47.21 do not apply to loans 
made under this section, except as specifically provided in this 
subdivision.  Nothing in this subdivision is deemed to 
supersede, repeal, or amend any provision of section 53.05.  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.  
    (b) Loans made under this section at a rate of interest not 
in excess of that provided for in paragraph (a) may be secured 
by real or personal property, or both.  If the proceeds of a 
loan made after August 1, 1984 are used in whole or in part to 
satisfy the balance owed on a contract for deed, the rate of 
interest charged on the loan must not exceed the rate provided 
in section 47.20, subdivision 4a.  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) A loan made under this section that is secured by real 
estate and that is in a principal amount of $7,500 or more and a 
maturity of 60 months or more may contain a provision permitting 
discount points, if the loan does not provide a loan yield in 
excess of the maximum rate of interest permitted by this 
subdivision.  Loan yield means the annual rate of return 
obtained by a licensee computed as the annual percentage rate is 
computed under Federal Regulation Z.  If the loan is prepaid in 
full, the licensee must make a refund to the borrower to the 
extent that the loan yield will exceed the maximum rate of 
interest provided by this subdivision when the prepayment is 
taken into account.  
    Sec. 4.  Minnesota Statutes 1982, section 53.04, is amended 
by adding a subdivision to read:  
    Subd. 3b.  The right to make loans under chapter 47 on the 
same terms and subject to the same conditions as apply to other 
lenders under that chapter.  
    Sec. 5.  Minnesota Statutes 1983 Supplement, 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 commercial or demand banking accounts; 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, exclusive 
of those held by the company, as security for loans made by it 
of more than seven times the sum of the contributed capital and 
appropriated reserves of the company until July 1, 1985, or the 
date an industrial loan and thrift company obtains a commitment 
for insurance or guarantee of accounts acceptable to the 
commissioner as required by section 53.10, whichever is earlier, 
and thereafter 15 times the sum of contributed capital and 
appropriated reserves of the company; 
    (3) accept trusts, except as provided in section 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 contributed capital and appropriated reserves without prior 
written approval of the commissioner of banks;  
    (6) take any instrument in which blanks are left to be 
filled in after execution; or 
    (7) lend money in excess of ten percent of its contributed 
capital and appropriated reserves to a person primarily liable. 
"Contributed capital and appropriated reserves" means the total 
of the company's contributed capital and appropriated reserves 
at all its authorized locations.  
    If a loan has been made to a person primarily liable and 
payments have been made on a certificate of indebtedness 
securing it, the amount of the payments may be added to the 
limitation contained in this clause for the purpose of 
determining whether additional loans may be made to that person. 
    Sec. 6.  [56.125] [OPEN-END LOANS.] 
    Subdivision 1.  [Authorization.] A licensee may make 
open-end loans under this chapter other than loans under a 
credit card or overdraft checking plan and may charge a daily, 
monthly, or other periodic rate of finance charge on unpaid 
balances not in excess of the maximum rate of interest permitted 
by section 56.131, subdivision 1, paragraph (a), clause (2). For 
purposes of this section "open-end loan" means an agreement 
whereby:  (1) the licensee pursuant to written agreement permits 
the borrower to obtain advances of money from the licensee from 
time to time or the licensee advances money on behalf of the 
borrower from time to time as directed by the borrower; (2) the 
borrower has the option of paying the balance in full at any 
time without penalty; (3) the amount of each advance and 
permitted charges and costs are debited to the borrower's 
account and payments and other credits are credited to the same 
account; and (4) the charges are computed on the unpaid 
principal balance of the account from time to time.  A finance 
charge imposed on a transaction subject to this section must be 
computed on:  (1) the previous balance after deducting all 
payments on accounts received by the licensee during the cycle 
and all credits to the account during the cycle applicable to 
any transaction reflected in the previous balance; (2) the 
average daily balance determined by adding the daily balances on 
the account for each day in the billing cycle and dividing the 
total by the number of days in the billing cycle; or (3) daily 
balances.  The daily balance is figured by taking the beginning 
balance of the account each day, adding any new advances, 
subtracting any principal payments or credits, and any unpaid 
interest.  The average daily balance is calculated by adding 
together all of the daily balances for the billing cycle, and 
the sum is then divided by the total number of days in the 
billing cycle.  A billing cycle is considered to be monthly if 
the billing dates are on the same day of each month or do not 
vary by more than four days from that day.  
    Subd. 2.  [REAL ESTATE AS SECURITY.] A licensee may take a 
lien upon real estate as security for any open-end loan at or 
after such time as the outstanding balance first exceeds 
$2,700.  A subsequent reduction in the balance below $2,700 has 
no effect on the lien.  A licensee may retain the security 
interest until it terminates the open-end account.  If there is 
no outstanding balance in the account and there is no commitment 
by the licensee to a line of credit in excess of $2,700, the 
licensee shall, within 20 days following written demand by the 
borrower, deliver to the borrower a release of the mortgage on 
any real property taken as security for the open-end loan 
agreement.  A real estate mortgage authorized for a financial 
institution secures all advances and obligations thereunder from 
the date of recording.  
    Subd. 3.  [CHARGES.] In addition to the charges authorized 
in subdivision 1, a licensee may contract for and receive in 
connection with an open-end loan agreement the additional 
charges, fees, costs, and expenses with respect to the line of 
credit limit permitted by sections 56.131, subdivisions 1, 
paragraph (f), clauses (4) and (5), 2, 5, and 6;  and 56.155 
with respect to other loans, with the following variations:  
    (1) If credit life or disability insurance is provided and 
if the insured dies or becomes disabled when there is an 
outstanding open-end loan indebtedness, the amount of the 
insurance may not exceed the total balance of the loan due on 
the date of the borrower's death or on the date of the last 
billing statement in the case of credit life insurance, or all 
minimum payments which become due on the loan during the covered 
period of disability in the case of credit disability 
insurance.  The additional charge for credit life insurance or 
credit disability insurance must be calculated in each billing 
cycle by applying the current monthly premium rate for the 
insurance to the unpaid balances in the borrower's account.  
    (2) The amount, terms, and conditions of any credit 
insurance against loss or damage to property must be reasonable 
in relation to the character and value of the property insured.  
    Subd. 4.  [ALTERNATIVE COMPLIANCE.] Compliance by a 
licensee making open-end loans pursuant to this section with the 
open-end credit provisions of the federal Truth-in-Lending Act 
and regulations issued thereunder is required, and the 
disclosure requirements in sections 56.12 and 56.14 do not apply 
with respect to open-end loans made pursuant to this section. In 
addition, prior to any licensee taking a lien upon the 
borrower's homestead, as defined in chapter 510, as security for 
any open-end loan pursuant to subdivision 2, the borrower shall 
be provided with a statement in substantially the following 
form, in bold face type of a minimum size of 12 points, signed 
and dated by the borrower at the time of the execution of the 
contract surrendering the homestead exemption, immediately 
adjacent to a listing of the homestead property:  "I understand 
that some or all of the above real estate is normally protected 
by law from the claims of creditors, and I voluntarily give up 
my right to that protection for the above listed property with 
respect to claims arising out of this contract."  
    Sec. 7.  Minnesota Statutes 1982, section 56.131, 
subdivision 2, is amended to read:  
    Subd. 2.  [ADDITIONAL CHARGES.] In addition to the charges 
provided for by this section and section 56.155, no further or 
other amount whatsoever, shall be directly or indirectly 
charged, contracted for, or received for the loan made, except 
actual out of pocket expenses of the licensee to realize on a 
security after default, and except for the following additional 
charges which may be included in the principal amount of the 
loan:  
    (a) Lawful fees and taxes paid to any public officer to 
record, file, or release security;  
    (b) With respect to a loan secured by an interest in real 
estate, the following closing costs, if they are bona fide, 
reasonable in amount, and not for the purpose of circumvention 
or evasion of this section; provided the costs do not exceed one 
percent of the principal amount or $250, whichever is greater:  
    (1) Fees or premiums for title examination, abstract of 
title, title insurance, surveys, or similar purposes;  
    (2) An amount not to exceed $150, if not paid to the 
licensee, an employee of the licensee, or a person related to 
the licensee, for fees for preparation of a mortgage, settlement 
statement, or other documents, fees for notarizing mortgages and 
other documents, and appraisal fees;  
    (c) The premium for insurance in lieu of perfecting and 
releasing a security interest to the extent that the premium 
does not exceed the fees described in paragraph (a).  
    Sec. 8.  Minnesota Statutes 1982, section 82.24, 
subdivision 1, is amended to read:  
    Subdivision 1.  [GENERALLY.] All trust funds received by a 
broker or his salespersons shall be deposited forthwith upon 
receipt in a trust account, maintained by the broker for such 
purpose in a bank or an industrial loan and thrift company with 
deposit liabilities designated by the broker, except as such 
moneys may be paid to one of the parties pursuant to express 
written agreement between the parties to a transaction.  The 
depository bank shall be a Minnesota bank or trust company or 
any foreign bank and shall authorize the commissioner to examine 
its records of such deposits upon demand by the commissioner.  
The industrial loan and thrift company shall be organized under 
chapter 53.  
    Sec. 9.  Minnesota Statutes 1982, section 82.24, 
subdivision 2, is amended to read:  
    Subd. 2.  [LICENSEE ACTING AS PRINCIPAL.] Any licensed real 
estate broker or salesperson acting in the capacity of principal 
in the sale of interests in real estate owned by him shall 
deposit in a Minnesota bank or trust company, or any foreign 
bank which authorizes the commissioner to examine its records of 
such deposits, or an industrial loan and thrift company 
organized under chapter 53 with deposit liabilities, in a trust 
account, those parts of all payments received on contracts which 
are necessary to meet any amounts concurrently due and payable 
on any existing mortgages, contracts for deed or other 
conveyancing instruments, and reserve for taxes and insurance or 
any other encumbrance on such receipts.  Such deposits shall be 
maintained until disbursement is made under the terms of the 
encumbrance pertaining thereto and proper accounting on such 
property made to the parties entitled thereto.  
    Sec. 10.  Minnesota Statutes 1982, section 82.24, 
subdivision 6, is amended to read:  
    Subd. 6.  [NOTICE OF TRUST ACCOUNT STATUS.] The names of 
the banks and industrial loan and thrift companies and the trust 
account numbers used by a broker shall be provided to the 
commissioner at the time of application for the broker's 
license.  The broker shall immediately report to the 
commissioner any change of trust account status including 
changes in banks and industrial loan and thrift companies, 
account numbers, or additional accounts in the same or other 
banks and industrial loan and thrift companies.  A broker shall 
not close an existing trust account without giving ten days 
written notice to the commissioner. 
    Sec. 11.  [EFFECTIVE DATE.] 
    Sections 1 to 10 are effective the day following final 
enactment. 
    Approved April 25, 1984