Office of the Revisor of Statutes
Minnesota Session Laws - 1988, Regular Session
Key: (1) language to be deleted (2) new language
Laws of Minnesota 1988
CHAPTER 666-S.F.No. 1956
An act relating to financial institutions; savings and
loan associations; defining terms; adding clarifying
language; regulating incorporations; regulating mutual
to stock conversions; providing for corporate
governance of capital stock associations; regulating
the powers of saving associations; regulating deposit
accounts; regulating investments; regulating terms and
conditions of loans, contracts, and extensions of
credit; amending Minnesota Statutes 1986, sections
51A.02; 51A.03, by adding a subdivision; 51A.041,
subdivisions 1 and 4, and by adding a subdivision;
51A.05, subdivision 1, and by adding a subdivision;
51A.06, subdivision 3; 51A.065, subdivisions 1, 3, 4,
8, and by adding a subdivision; 51A.07; 51A.10;
51A.11, subdivision 1; 51A.12; 51A.13; 51A.15,
subdivision 2; 51A.17; 51A.19, subdivisions 1, 8, and
10; 51A.21, subdivisions 1, 5, 7, 9, 14, 15, 17, 21,
and by adding subdivisions; 51A.251; 51A.261; 51A.262;
51A.28; 51A.31, subdivision 1; 51A.32; 51A.35; 51A.361;
51A.37, subdivisions 1, 2, 3, 4, and by adding
subdivisions; 51A.38, subdivisions 1, 2, 3, 4, 5, 7,
and 8; 51A.40; 51A.44, subdivision 1; 51A.48; 51A.50;
51A.51, subdivision 1; 51A.53; 51A.56; and 118.005,
subdivision 1; Minnesota Statutes 1987 Supplement,
section 51A.23, subdivision 1; proposing coding for
new law in Minnesota Statutes, chapters 48 and 51A;
repealing Minnesota Statutes 1986, sections 51A.03,
subdivision 2a; 51A.05, subdivisions 3, 4, and 5;
51A.091; 51A.11, subdivision 3; 51A.18; 51A.19,
subdivisions 2 and 3; 51A.21, subdivisions 6 and 19;
51A.23, subdivisions 2, 3, 4, and 5; 51A.37,
subdivisions 7 and 9; 51A.38, subdivision 6; and
51A.39.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. [48.194] [INSTALLMENT SALES CONTRACTS; LOANS.]
A person may enter into a credit sale or service contract
for sale to a state or national bank doing business in this
state, and a bank may purchase and enforce the contract under
the terms and conditions set forth in section 66, subdivision
2. A state bank or national bank may extend credit pursuant to
the terms and conditions set forth in section 66.
Sec. 2. Minnesota Statutes 1986, section 51A.02, is
amended to read:
51A.02 [DEFINITIONS.]
Subdivision 1. [SCOPE.] When used in sections 51A.01 to
51A.57, the words and phrases defined in this section have the
meanings given them, except to the extent that any such word or
phrase specifically is qualified by its context.
Subd. 2. [AFFILIATE.] "Affiliate" means a person or
organization controlled by, controlling, or under common control
with another person or organization.
Subd. 3. [AGREEMENT.] "Agreement" means the bargain of the
parties in fact as found in their contract language or by
implication from other circumstances including course of
dealings, usage of trade, or course of performance.
Subd. 4. [AGRICULTURAL PURPOSE.] "Agricultural purpose"
means a purpose relating to the production, harvest, exhibition,
marketing, transportation, processing, or manufacture of
agricultural products. "Agricultural products" includes
agricultural, horticultural, viticultural, and dairy products,
livestock, wildlife, poultry, bees, forest products, fish and
shellfish, and their products, including processed and
manufactured products, and products raised or produced on farms,
including processed or manufactured products.
Subd. 5. [AMOUNT FINANCED.] "Amount financed" has the
meaning given the term in the Code of Federal Regulations, title
12, part 226.
Subd. 6. [ANNUAL PERCENTAGE RATE.] "Annual percentage rate"
has the meaning given the term in the Code of Federal
Regulations, title 12, part 226.
Subd. 2 7. [ASSOCIATION.] "Association" means a mutual or
capital stock savings association or savings and loan
association subject to chartered under the provisions of
sections 51A.01 to 51A.57.
Subd. 8. [BRANCH OFFICE.] "Branch office" means an office
other than the home office at which deposit accounts are opened
and loans are made.
Subd. 9. [BUSINESS PURPOSE.] "Business purpose" means a
purpose other than personal, family, household, or agricultural
purpose.
Subd. 2a 10. [CAPITAL STOCK.] "Capital stock" means the
aggregate of shares of nonwithdrawable capital issued by a
capital stock association, but does not include nonwithdrawable
capital represented by capital certificates.
Subd. 11. [CARD ISSUER.] "Card issuer" means a person who
provides credit by issuing a credit card.
Subd. 12. [CARDHOLDER.] "Cardholder" means a person to
whom a credit card is issued or who has agreed with the card
issuer to pay obligations arising from the issuance to or use of
the card by another person.
Subd. 3 13. [COMMISSIONER.] "Commissioner" means the
commissioner of commerce of the state of Minnesota.
Subd. 4. [DIRECT REDUCTION LOAN.] "Direct reduction loan"
means a loan or other obligation repayable in consecutive
monthly installments, equal or unequal, beginning not later than
90 days after the date of the advance, sufficient to retire the
debt, interest, and principal within 40 years, the initial
contract of which shall not provide for any subsequent monthly
installment of interest and principal of an amount larger than
any previous monthly installment, except that provisions may be
contained in the contract which specify that one or more
consecutive monthly installments may be lapsed to the extent
that monthly installments have been made ahead of schedule or,
in the event of an emergency to the borrower affecting the
borrower's ability to pay, to the extent of no more than six
monthly installments but that nevertheless the full amount of
principal and interest shall be paid within the scheduled term
of the loan; provided, that in the case of construction loans
the first installment under the contract shall be payable not
later than 18 months after the date of the first advance. The
loan or obligation is an amortized loan.
Subd. 4a. [DIRECT REDUCTION LOAN.] Pursuant to rules the
commissioner finds necessary and proper "direct reduction loan"
also means renegotiable rate notes or bonds secured by mortgages
or trust deeds where the notes or bonds do not exceed 95 percent
of the appraised value of the security for the same.
For the purposes of this subdivision, a renegotiable rate
mortgage loan is a loan issued for a term of three years to five
years, secured by a mortgage maturing in not to exceed 30 years,
and automatically renewable at equal intervals after the
original loan term which may be up to six months shorter or
longer than subsequent terms. The loan must be repayable in
equal monthly installments of principal and interest during the
loan term, in an amount at least sufficient to amortize a loan
with the same principal and at the same interest rate over the
remaining life of the mortgage.
In the mortgage documents, the association must grant to
the borrower an option to renew the loan for a new term, but not
beyond the maturity date of the mortgage, at a new interest rate
which shall be the association's current market rate of interest
on similar loans determined 60 days before the due date of the
loan: provided, that the maximum interest rate increase shall
be equal to one-half of one percent per year multiplied by the
number of years in the loan term with a maximum net increase of
five percent over the life of the mortgage. Interest rate
increases are optional with the association; net decreases from
the previous loan term are mandatory.
The borrower may not be charged costs connected with the
renewal of the loan.
Sixty days before the due date of the loan, the association
shall send a written notification to the borrower containing the
following information: (i) The date on which the entire balance
of borrower's loan is due and payable; (ii) a statement that the
loan will be renewed automatically by the association at the
rate specified in the notice unless the borrower pays the loan
by the due date; (iii) the amount of the monthly payment,
calculated according to the new rate determined at the time of
notice; (iv) a statement that the borrower may prepay the loan
without penalty at any time after the original loan becomes due
and payable; and (v) the name and phone number of an association
employee who will answer the borrowers' questions concerning the
information in the notice.
An applicant for a renegotiable rate mortgage loan must be
given, at the time an application is requested, written
disclosure materials prepared in reasonably simple terms that
contain at least the following information: (i) An explanation
of how a renegotiable rate mortgage differs from a standard
fixed rate mortgage; (ii) an example of a renegotiable rate
mortgage indicating the maximum possible interest rate increase
and monthly payment calculated on that rate at the time of the
first renewal; and (iii) an explanation of how the association
determines what the rate will be at the end of each loan term.
Subd. 14. [CONDITIONAL SALE CONTRACT.] "Conditional sale
contract" means a contract evidencing a credit sale.
Subd. 15. [CONSPICUOUS.] "Conspicuous" means, in reference
to a term or clause, that it is written so that a reasonable
person against whom it is to operate ought to have noticed it.
Subd. 16. [CONSUMER.] "Consumer" means the debtor to whom
credit is granted in a consumer loan.
Subd. 17. [CONSUMER LOAN.] "Consumer loan" means a loan
made by an association in which:
(1) the debtor is a person other than an organization;
(2) the debt is incurred primarily for a personal, family,
household, or agricultural purpose; and
(3) the debt is payable in installments or a finance charge
is made.
Subd. 18. [CREDIT.] "Credit" means the right granted by an
association to a borrower to defer payment of debt, to incur
debt and defer its payment, or to purchase property or services
and defer payment.
Subd. 19. [CREDIT CARD.] "Credit card" means a card or
device issued under an arrangement pursuant to which a card
issuer gives to a cardholder the privilege of obtaining credit
from the card issuer or other person in purchasing or leasing
property or services, obtaining loans, or otherwise. A
transaction is "pursuant to a credit card" only if credit is
obtained according to the terms of the arrangement by
transmitting information contained on the card or device orally,
in writing, by mechanical or electronic methods, or in any other
manner. A transaction is not "pursuant to a credit card" if the
card or device is used solely in that transaction to:
(1) identify the cardholder or evidence the cardholder's
creditworthiness and credit is not obtained according to the
terms of the arrangement;
(2) obtain a guarantee of payment from the cardholder's
deposit account, whether or not the payment results in a credit
extension to the cardholder by the card issuer; or
(3) effect an immediate transfer of funds from the
cardholder's deposit account by electronic or other means,
whether or not the transfer results in a credit extension to the
cardholder by the card issuer.
Subd. 20. [CREDIT SALE.] "Credit sale" means a sale of
goods, services, or an interest in land in which:
(1) credit is granted by a seller who regularly engages as
a seller in credit transactions of the same kind; and
(2) the debt is payable in installments or a finance charge
is made.
Subd. 21. [DEMAND DEPOSIT ACCOUNT.] "Demand deposit
account" has the meaning given the term in the Code of Federal
Regulations, title 12, part 204.
Subd. 22. [DEPOSIT ACCOUNT.] "Deposit account" means funds
deposited with an association in the form of a savings account,
time deposit account, NOW account, demand deposit account, or
treasury and tax loan account.
Subd. 5 23. [DWELLING UNIT.] "Dwelling unit" means a
single, unified combination of rooms designed for residential
use by one family in a multiple dwelling unit structure, and
which is not "home property."
Subd. 6 24. [EARNINGS.] "Earnings" means that part of the
sources available for payment of earnings of an association
which is declared payable on savings accounts from time to time
by the board of directors, and is the cost of savings money to
the association. Earnings also may be referred to as "interest"
or "dividends."
Subd. 25. [FEDERAL ASSOCIATION.] "Federal association"
means an association or savings bank with its home office in
this state and chartered under the federal Home Owners' Loan Act
of 1933, United States Code, title 12, sections 1461 to 1470.
Subd. 26. [FINANCE CHARGE.] "Finance charge" has the
meaning given the term in the Code of Federal Regulations, title
12, part 226, except that the following will not in any event be
considered a finance charge:
(1) a charge as a result of default or delinquency under
section 66 if made for actual unanticipated late payment,
delinquency, default, or other similar occurrence, unless the
parties agree that these charges are finance charges;
(2) any additional charge under section 66, subdivision 5;
or
(3) a discount, if an association purchases a contract
evidencing a contract sale at less than the face amount of the
obligation or purchases or satisfies obligations of a cardholder
pursuant to a credit card and the purchase or satisfaction is
made at less than the face amount of the obligation.
Subd. 7 27. [FINANCIAL INSTITUTION.] "Financial
institution" means a thrift institution savings association,
commercial bank, trust company, credit union, or industrial loan
and thrift company or investment company.
Subd. 28. [HOME OFFICE.] "Home office" means the office of
the association designated by it as its principal office.
Subd. 8 29. [HOME PROPERTY.] "Home property" means real
estate on which there is located, or will be located pursuant to
a real estate loan, either a structure designed for residential
use by one family or a single condominium unit, or unit in a
residential cooperative, including all elements pertinent
thereto, designed for residential use by one family in a
multiple dwelling unit structure or complex, and includes
fixtures, furnishings and equipment.
Subd. 9 30. [IMPAIRED CONDITION.] "Impaired condition"
means a condition in which, based upon accepted examination
practices, the assets of an association do not have an aggregate
value equal to the aggregate amount of liabilities of the
association to its creditors, including its members and all
other persons.
Subd. 10 31. [IMPROVED REAL ESTATE.] "Improved real estate"
means real estate on which there is a structure or an enclosure,
or which is reclaimed, prepared as building lots or sites, or
otherwise occupied, made better, more useful, or of greater
value by care so as to provide an enjoyment thereof.
Subd. 11 32. [INSURED ASSOCIATION.] "Insured association"
means an association the saving deposit accounts of which are
insured wholly or in part in accordance with the provisions of
sections 51A.01 to 51A.57.
Subd. 33. [LENDER CREDIT CARD.] "Lender credit card" means
a credit card issued by an association or federal association.
Subd. 12 34. [LIQUID ASSETS.] "Liquid assets" means cash
on hand; cash on deposit in federal home loan banks, state banks
performing similar reserve functions, commercial banks, or
insured savings and loan associations or federal associations,
which is withdrawable upon not more than 30 days' notice and
which is not pledged as security for indebtedness, except that
any deposits in a bank under the control or in the possession of
any supervisory authority shall not be considered as liquid
assets; and obligations of the United States, or such government
guaranteed obligations as are approved by the Federal Savings
and Loan Insurance Corporation.
Subd. 35. [LOAN.] "Loan":
(a) Except as provided in paragraph (b), "loan" includes:
(1) the creation of debt by the association's or federal
association's payment of or agreement to pay money to the
borrower or to a third person for the account of the borrower;
(2) the creation of debt pursuant to a lender credit card
in any manner, including a cash advance or the card issuer's
honoring a draft or similar order for the payment of money drawn
or accepted by the borrower, paying or agreeing to pay the
borrower's obligation, or purchasing or otherwise acquiring the
borrower's obligation from the obligee or the borrower's
assignee;
(3) the creation of debt by a cash advance to a borrower
pursuant to an overdraft line of credit arrangement;
(4) the creation of debt by a credit to an account with the
lender upon which the borrower is entitled to draw immediately;
(5) the forbearance of debt arising from a loan; and
(6) the creation of debt pursuant to open-end credit.
(b) "Loan" does not include the forbearance of debt arising
from a sale or lease.
Subd. 13 36. [MEMBER.] "Member" means a person holding a
savings deposit account of an a mutual association, and a person
borrowing from or assuming or obligated upon a loan or interest
therein held by an a mutual association, or purchasing property
securing a loan or interest held by an a mutual association, and
any other person obligated to an a mutual association. A joint
and survivorship relationship, whether of savers or borrowers,
constitutes a single membership.
Subd. 37. [MONEY MARKET DEPOSIT ACCOUNT.] "Money market
deposit account" has the meaning given the term in the Code of
Federal Regulations, title 12, part 561.
Subd. 14 38. [NET INCOME.] "Net income" means gross
revenues for an accounting period less all expenses paid or
incurred, taxes, and losses sustained as shall not have been
charged to reserves pursuant to the provisions of sections
51A.01 to 51A.57.
Subd. 39. [NOW ACCOUNT.] "NOW account" has the meaning
given the term in the Code of Federal Regulations, title 12,
part 561.
Subd. 40. [OFFICIAL FEES.] "Official fees" means:
(1) fees and charges which actually are or will be paid to
public officials for determining the existence of or for
perfecting, releasing, terminating, or satisfying a security
interest or mortgage related to a loan;
(2) premiums payable for insurance in lieu of perfecting a
security interest or mortgage otherwise required by an
association in connection with a loan, if the premium does not
exceed the fees and charges described in clause (1) which would
otherwise be payable.
Subd. 15 41. [ONE BORROWER.] "One borrower" means (1) any
person or entity which is, or which upon the making of a loan
will become, obligor on a real estate loan, (2) nominees of such
obligor, (3) all persons, trusts, partnerships, syndicates, and
corporations of which such obligor is a nominee or a
beneficiary, partner, member, or record or beneficial
stockholder owning ten percent or more of the capital stock, and
(4) if such obligor is a trust, partnership, syndicate, or
corporation, all trusts, partnerships, syndicates, and
corporations of which any beneficiary, partner, member, or
record or beneficial stockholder owning ten percent or more of
the capital stock, is also a beneficiary, partner, member, or
record or beneficial stockholder owning ten percent or more of
the capital stock of such obligor.
Subd. 42. [OPEN-END CREDIT.] "Open-end credit" means an
arrangement pursuant to which:
(1) an association may permit a borrower, from time to
time, to obtain loans, including but not limited to an overdraft
checking line of credit arrangement, a secured or unsecured line
of credit agreement, or a credit card line of credit;
(2) the amounts financed and the finance and other
appropriate charges are debited to an account; and
(3) the finance charge, if made, is computed on the account
periodically.
Subd. 43. [ORGANIZATION.] "Organization" means a
corporation, government or governmental subdivision or agency,
trust, estate, partnership, joint venture, cooperative, or
association.
Subd. 44. [PAYABLE IN INSTALLMENTS.] "Payable in
installments" means that payment is required or permitted by
agreement to be made in more than four periodic payments. If
any periodic payment under an agreement requiring or permitting
two or more periodic payments is more than twice the amount of
any other periodic payment, a loan is "payable in installments."
Subd. 45. [PERSON.] "Person" means a natural person or an
organization.
Subd. 16. [PRIMARILY RESIDENTIAL PROPERTY.] "Primarily
residential property" means real estate on which there is
located or will be located pursuant to a real estate loan, any
of the following: a structure or structures designed or used
primarily for residential rather than nonresidential purposes
and consisting of more than one dwelling unit; a structure or
structures designed or used primarily for residential rather
than nonresidential purposes for students, residents, and
persons under care, employees or members of the staff of an
educational, health, or welfare institution or facility; and a
structure or structures which are used in part for residential
purposes for not more than one family and in part for business
purposes, provided that the residential use of such structure or
structures must be substantial and permanent, and the area used
for business purposes shall not exceed twice the area of the
residence.
Subd. 17 46. [PRIMARY LENDING AREA.] "Primary lending area"
means the state of Minnesota.
Subd. 18 47. [REAL ESTATE LOAN.] "Real estate loan" means
any loan or other obligation secured by a first lien on real
estate held in fee or in a leasehold extending or renewable
automatically for a period of at least ten years beyond the date
scheduled for the final principal payment of such loan or
obligation, or any transaction out of which a first lien or
claim is created against such real estate, including inter alia
the purchase of such real estate in fee by an association and
the concurrent or immediate sale thereof on installment contract.
Subd. 19 48. [SAVINGS ACCOUNT.] "Savings account" means
that part of the savings liability of the association which is
credited to the account of the holder thereof. A savings
account also may be referred to as a deposit any deposit account
other than a time deposit account, a NOW account, a demand
deposit account, or a treasury tax and loan account. Savings
accounts include but are not limited to money market deposit
accounts.
Subd. 20 49. [SAVINGS LIABILITY.] "Savings liability"
means the aggregate amount of savings accounts of members,
including earnings credited to such accounts, less redemptions
and withdrawals.
Subd. 21 50. [SERVICE ORGANIZATION.] "Service organization"
means an affiliate organization substantially all the activities
of which consist of originating, purchasing, selling, and
servicing loans upon real estate and participating interests
therein, or clerical, bookkeeping, accounting, statistical, or
similar functions performed primarily for savings and loan
associations, as clearly permitted under appropriate federal
laws or regulations, and such other activities as the
commissioner may approve.
Subd. 22 51. [SOURCES AVAILABLE FOR PAYMENT OF EARNINGS.]
"Sources available for payment of earnings" means net income for
an accounting period less amounts transferred to reserves as
provided in or permitted by sections 51A.01 to 51A.57, plus any
balance of undivided profits whether same are designated as such
or by other language from preceding accounting periods.
Subd. 22a 52. [STOCKHOLDER.] "Stockholder" means the
holder of one or more shares of any class of capital stock of a
capital stock association organized and operating pursuant to
the provisions of Laws 1981, chapter 276.
Subd. 22b 53. [SURPLUS.] "Surplus" means the aggregate
amount of the undistributed net income for an association held
as undivided profits or unallocated reserves for general
corporate purposes, and any paid-in surplus held by an
association.
Subd. 23 54. [THRIFT INSTITUTION.] "Thrift institution"
means an association, a mutual savings bank, a cooperative bank,
a homestead association, a savings and loan association, a
building and loan association, a federal savings association, a
federal savings and loan association, and a supervised thrift
and residential financing institution of a substantially similar
nature.
Subd. 55. [TIME DEPOSIT.] "Time deposit" has the meaning
given the term in the Code of Federal Regulations, title 12,
part 204.
Subd. 24. [UNAMORTIZED REAL ESTATE LOAN.] "Unamortized
real estate loan" means a real estate loan repayable within five
years from date, with or without amortization of principal, but
with interest payable at least semiannually.
Subd. 25 56. [WITHDRAWAL VALUE.] "Withdrawal value" means
the amount credited to a savings deposit account of a member,
less lawful deduction therefrom, as shown by the records of the
association.
Sec. 3. Minnesota Statutes 1986, section 51A.03, is
amended by adding a subdivision to read:
Subd. 2b. [REGULATION OF CAPITAL STOCK ASSOCIATIONS.] The
incorporation, formation, and corporate governance of capital
stock associations are governed by chapter 300, except to the
extent the provisions of this chapter conflict with the
provisions of chapter 300, in which case the provisions of this
chapter govern.
Sec. 4. Minnesota Statutes 1986, section 51A.041,
subdivision 1, is amended to read:
Subdivision 1. [SELECTION OF CHAIR OF INCORPORATORS;
SURETY BOND REQUIRED; CAPITAL REQUIRED.] The incorporators of a
capital stock association shall appoint one of their number as
chair of the incorporators and the chair shall procure from a
surety company or other surety acceptable to the commissioner, a
surety bond in an amount at least equal to the amount of capital
stock contributions, plus the additional amounts described in
subdivision 2. The bond shall name the commissioner as obligee
and shall be delivered to the commissioner. It shall assure the
safekeeping of the funds described; their delivery to the
association after the issuance of the certificate of
incorporation and after the bonding of the officers; and, in the
event of the failure to complete organization, the return of the
amounts collected to the respective subscribers or their
assigns, less reasonable expenses which shall be deducted from
the paid-in surplus. Before a certificate of incorporation is
issued, the capital of the association shall be paid in by
subscribers to the chair in cash or authorized securities and
shall be the sum of the par or initially stated value of all
shares of voting capital stock. Each share of capital stock
shall entitle the holder thereof to one vote. The minimum
required capital shall be not less than $500,000, provided the
commissioner may require a larger amount to be paid in. No
portion of the capital stock shall be withdrawn by any person or
in any way, either in dividends or otherwise, except as provided
by law. No dividend on capital stock shall be made except as
provided in section 51A.21, subdivision 21. No commissions,
fees, or other remuneration shall be paid for the sale of shares
of capital stock, and no incentive stock shall be issued.
Sec. 5. Minnesota Statutes 1986, section 51A.041, is
amended by adding a subdivision to read:
Subd. 1a. [QUALIFICATIONS REQUIRED OF DIRECTORS OF STOCK
ASSOCIATIONS.] Except with the written consent of the
commissioner, no person shall be eligible for election or shall
serve as director or officer of an association who has been
adjudicated a bankrupt or convicted of a criminal offense
involving dishonesty or a breach of trust. A director shall
automatically cease to be a director when adjudicated a bankrupt
or convicted of a criminal offense as herein provided.
Sec. 6. Minnesota Statutes 1986, section 51A.041,
subdivision 4, is amended to read:
Subd. 4. [ISSUANCE OF CAPITAL STOCK.] As of the date
corporate existence begins, the association shall issue capital
stock as necessary to satisfy the minimum capital requirements
of this section and additional capital stock as may be approved
for issuance by its board of directors up to the amount
authorized in its certificate of incorporation, and thereafter
shall issue no other shares except as authorized in Laws 1981,
chapter 276. Any capital stock of an association, when issued,
shall constitute permanent capital and shall not be retired or
withdrawn except as hereinafter provided until all liabilities
of the association have been satisfied in full, including the
withdrawal value of all savings deposit accounts, and until
outstanding capital certificates have been retired. An
association may issue shares of common stock and preferred
stock, with or without par value, and the common and preferred
stock may be divided into classes and the classes into series.
Capital stock of an association shall be issued pursuant to the
following requirements:
(a) Except for stock issued pursuant to the incorporation
of the association, an employee stock option plan, or other
forms of stock-based compensation or a plan of merger,
consolidation, conversion from a mutual to a capital stock
association, or other type of reorganization which has been
approved by the commissioner, the consideration for the issuance
of capital stock shall be paid in cash. The par value or stated
value of the stock shall be maintained as the permanent capital
of the association, and any additional amount paid in shall be
credited to paid-in surplus.
(b) The aggregate par value or stated value of all
outstanding shares of capital stock shall be the permanent
capital of the association, and except as otherwise specifically
provided by Laws 1981, chapter 276 the capital stock shall not
be retired until final liquidation of the association. No
association shall reduce the par or stated value of its
outstanding capital stock without first obtaining the written
approval of the commissioner, and the approval shall be withheld
if the reduction will cause the par or stated value of
outstanding capital stock to be less than the minimum required
by Laws 1981, chapter 276 or will result in less than adequate
net worth as the commissioner may determine. No association
shall retire any part of its capital stock unless the retirement
is approved by the commissioner. With the written approval of
the commissioner, an association may purchase its capital stock
from the personal representative of a deceased stockholder; and
with the written approval, an association may contract with a
living stockholder for this purpose upon the stockholder's
death. Any purchase shall be for the price, and upon the terms
and conditions, agreed upon by the association and the
stockholder or personal representative; provided, however, that
the purchase shall not reduce the net worth accounts of the
association, or any of them, to an amount less than required by
applicable law or by any approved insurer of the association's
savings accounts. An association agreeing with a stockholder to
purchase that stockholder's capital stock upon the stockholder's
death may purchase insurance upon the life of the stockholder to
fund or partially fund the purchase. Any stock purchased from a
decedent's personal representative may be resold by the
association at the price, and upon the terms and conditions, as
the board of directors of the association shall approve, or may
be retired; provided, however, that prior to the resale, notice
shall be filed with the commissioner disclosing the price,
terms, and conditions of the proposed resale.
Sec. 7. Minnesota Statutes 1986, section 51A.05,
subdivision 1, is amended to read:
Subdivision 1. [CORPORATE NAME.] The name of every
association shall include either the words "savings
association," word "saving" or "savings and loan
association." These words shall be preceded by an appropriate
descriptive word or words approved by the commissioner. An
ordinal number may not be used as a single descriptive word
preceding the words "savings association," or "savings and loan
association," unless such words are followed by the words "of
.......................," the blank being filled by the name of
the community, town, city, or county in which the association
has its principal office. An ordinal number may be used
together with another descriptive word, preceding the words
"savings association" or "savings and loan association,"
provided the other descriptive word has not been used in the
corporate name of any other association in the state, in which
case the suffix mentioned above is not required to be used. An
ordinal number may be used, together with another descriptive
word, preceding the words "savings association" or "savings and
loan association," even when such other descriptive word has
been used in the corporate name of an association in the state,
provided the suffix "of .........................," as provided
above, is also used. The suffix provided above may be used in
any corporate name. The use of the words, "national,"
"federal," "United States," "insured," "guaranteed," or any form
thereof, separately or in any combination thereof with other
words or syllables, is prohibited as part of the corporate name
of an association. No certificate of incorporation of a
proposed association having the same name as a corporation
authorized to do business under the laws of this state or a name
so nearly resembling it as to be likely to deceive shall be
issued by the commissioner, except to an association formed by
the reincorporation, reorganization, or consolidation of the
association with other associations, or upon the sale of the
property or franchise of an association. The use of the words
"national," "federal," or "United States," or any form of these
words, separately or in any combination with other words or
syllables, is prohibited as part of the corporate name of an
association. Any association in existence at the time of the
adoption of sections 51A.01 to 51A.57 may continue to operate
under its existing name.
Sec. 8. Minnesota Statutes 1986, section 51A.05, is
amended by adding a subdivision to read:
Subd. 3a. [OFFICES.] The association shall obtain approval
from the commissioner pursuant to rules prior to opening a
branch office. The association shall not change the location of
any branch office without prior written approval of the
commissioner. The association may, however, operate other
business facilities not constituting branch offices as defined
in section 51A.02, subdivision 8, including automated teller
machines and loan production offices upon providing notice under
this subdivision.
Sec. 9. Minnesota Statutes 1986, section 51A.06,
subdivision 3, is amended to read:
Subd. 3. [LIMITATION.] No conversion of an association or
a federal association, direct or indirect, shall be permitted
except as specifically authorized by sections 51A.01 to 51A.57
or other provision of the Minnesota Statutes.
Sec. 10. Minnesota Statutes 1986, section 51A.065,
subdivision 1, is amended to read:
Subdivision 1. [TYPES OF CONVERSIONS.] Any state mutual or
capital stock association, state capital stock association,
federal mutual savings and loan association or federal capital
stock savings and loan or mutual or capital stock federal
association, if substantial business benefit to the applicant
will result, and if otherwise permitted by federal law and
regulations, may apply to convert to one of the following other
forms of organization: state mutual association, state capital
stock association, federal mutual savings and loan mutual
federal association, or federal capital stock savings and
loan federal association in accordance with the provisions of
subdivisions 2 to 4 and one of the three plans of conversion set
forth in subdivisions 5 to 7. This section shall have no
application to conversions where neither the converting nor the
converted applicant is an association as defined in Laws 1981,
chapter 276.
Sec. 11. Minnesota Statutes 1986, section 51A.065,
subdivision 3, is amended to read:
Subd. 3. [SUPERVISORY APPROVAL OF PLAN.] Upon approval of
the plan of conversion by the board of directors, the plan and
the resolution approving it shall be submitted to the
commissioner or other appropriate supervisory authority.
The authority commissioner may approve or disapprove the plan of
conversion in its discretion, but shall not approve the plan
unless a finding is made, after appropriate examination, that:
substantial business benefit to the applicant will result; the
plan of conversion is fair and equitable; the interests of the
applicant, its members or stockholders, its savings account
holders and the public are adequately protected; and the
converting applicant has complied with the requirements of this
section. If the authority commissioner approves the plan of
conversion, the approval, which shall be in writing and sent to
the home office of the converting applicant, may prescribe terms
and conditions to be fulfilled either before or after the
conversion to cause the applicant to conform with the
requirements of Laws 1981, chapter 276. If the authority
commissioner disapproves the plan of conversion, the objections
shall be stated in writing and sent to the home office of the
converting applicant, and the applicant afforded an opportunity
to amend and resubmit the plan within a reasonable time as
prescribed by the authority. In the event that the
authority commissioner disapproves the plan after resubmission,
written notice of the final disapproval shall be sent by
certified mail to the applicant's home office.
Sec. 12. Minnesota Statutes 1986, section 51A.065,
subdivision 4, is amended to read:
Subd. 4. [SUBMISSION TO MEMBERS OR STOCKHOLDERS.] If the
commissioner or other appropriate supervisory authority approves
a plan of conversion in accordance with subdivision 3, the plan
must be submitted for adoption to the members or stockholders of
the converting applicant by vote at a meeting called to consider
the action. Except in the case of a conversion of a state an
association to a federally chartered federal association of like
corporate form, or vice versa pursuant to subdivision 7 and in
addition to any notice of annual or special meeting required by
Laws 1981, chapter 276 and at least three weeks prior to the
meeting, a copy of the plan, together with an accurate summary
plan description explaining the operation of the plan and the
rights, duties, obligations, liabilities, conditions, and
requirements which may be imposed upon the members or
stockholders and the converted applicant as a result of the
adoption of the plan, must be mailed to each member or
stockholder eligible to vote at the meeting. The plan of
conversion may be approved by not less than a majority of the
total number of votes eligible to be cast at the meeting. If
the plan is approved, action must be taken to obtain a charter,
articles of incorporation, articles of association or similar
instrument, adopt bylaws, elect directors and officers and take
other action prescribed or appropriate for the type of
corporation into which the converting applicant will be
converted. A certified report of the proceedings at the meeting
must be filed promptly with the commissioner or other
appropriate supervisory authority.
Sec. 13. Minnesota Statutes 1986, section 51A.065,
subdivision 8, is amended to read:
Subd. 8. [CERTIFICATE OF CONVERSION.] If the commissioner
or other appropriate supervisory authority finds that a
conversion proceeding has been completed in accordance with the
requirements of this section and any other applicable law and
regulations, the authority commissioner shall issue to the
applicant a certificate of conversion, attaching as a part of
the certificate a copy of the charter, articles of
incorporation, articles of association or similar instrument.
The conversion shall not become effective until the issuance of
the certificate as provided in this section.
Sec. 14. Minnesota Statutes 1986, section 51A.065, is
amended by adding a subdivision to read:
Subd. 11. [FEDERAL ASSOCIATION.] Nothing in this section
applies to the conversion of a federal association to another
form of federally-chartered institution.
Sec. 15. Minnesota Statutes 1986, section 51A.07, is
amended to read:
51A.07 [POWER TO REORGANIZE, MERGE OR CONSOLIDATE.]
Pursuant to a plan adopted by the board of directors and
approved by the commissioner as equitable to the members or
stockholders of the association and as not impairing the
usefulness and success of other properly conducted associations
in the community, an association shall have power to reorganize
or to merge or consolidate with another association or federal
association within its primary lending area; provided, that the
plan of the reorganization, merger, or consolidation shall be
approved at an annual meeting or at any special meeting of the
members or stockholders called to consider the action by a vote
of 51 percent or more than 50 percent of the total number of
votes of the members cast in person or by proxy. In all cases
the corporate continuity of the resulting corporation shall
possess the same incidents as that of an association which has
converted in accordance with sections 51A.01 to 51A.57. No
association, directly or indirectly, shall convert or
reorganize, or merge, consolidate, assume liability to pay
savings accounts or other liabilities of, transfer assets in
consideration of the assumption of liabilities for any portion
of the savings accounts, deposits made in, or other liabilities
of the association to, or acquire the assets of or assume
liability to pay any liabilities of, any financial institution
or any other organization, person, or entity, except as
specifically authorized by sections 51A.01 to 51A.57 the
commissioner. Any association aggrieved by any action or
nonaction of the commissioner under this section may appeal
therefrom and the proceedings shall be conducted pursuant to the
provisions of the administrative procedure act relating to
judicial review of agency decisions, sections 14.63 to 14.70,
and the scope of judicial review in the proceedings shall be as
provided therein.
Sec. 16. Minnesota Statutes 1986, section 51A.10, is
amended to read:
51A.10 [MEMBERSHIP CHARGES PROHIBITED.]
The mutual association shall not directly or indirectly
charge any membership, admission, withdrawal, or any fee or sum
of money for the privilege of becoming, remaining, or ceasing to
be a member of the mutual association, except reasonable charges
upon the making or modification of a loan charges authorized by
this chapter. Except as authorized by sections 51A.01 to 51A.57
this chapter, the mutual association shall not charge any member
any sum of money by way of fine or penalty for any cause, except
that a reasonable charge may be made against borrowers for
defaults or prepayments.
Sec. 17. Minnesota Statutes 1986, section 51A.11,
subdivision 1, is amended to read:
Subdivision 1. [EXCLUSIVENESS OF ACCESS.] Every member or
stockholder shall have the right to inspect books and records of
an association that pertain to that person's loan or savings
account or the determination of that person's voting rights.
Otherwise, The right of inspection and examination of the books
and records of an association including those pertaining to
loans and accounts shall be limited (1) to the commissioner or
duly authorized representatives as provided in sections 51A.01
to 51A.57, (2) to persons duly authorized by the association to
act for the association, and (3) to affiliates, and (4) to any
federal or state instrumentality or agency authorized by the
association to inspect or examine the books and records of an
insured association. The books and records pertaining to the
accounts and, loans of members, and voting rights of depositors,
borrowers, or stockholders shall otherwise be kept confidential
by the such association, its directors, officers, and employees,
and by the commissioner, the commissioner's examiners and
representatives, except where the disclosure thereof shall be
compelled by a court of competent jurisdiction or public
authority in accordance with law, and no member depositor,
borrower, or stockholder or any other person shall have access
to the books and records or shall be furnished or shall possess
a partial or complete list of the members depositors, borrowers,
or stockholders except upon express action and authority of the
board of directors.
Sec. 18. Minnesota Statutes 1986, section 51A.12, is
amended to read:
51A.12 [FINANCIAL STATEMENT; MUTUAL ASSOCIATIONS.]
Every mutual association shall prepare and publish annually
within 30 days of the close of the association's fiscal year in
a newspaper of general circulation in the county in which the
principal office of the association is located, and shall
deliver to each member or stockholder upon application therefor,
a statement of its financial condition in the form prescribed or
approved by the commissioner.
Sec. 19. Minnesota Statutes 1986, section 51A.13, is
amended to read:
51A.13 [DIRECTORS OF MUTUAL ASSOCIATIONS.]
Subdivision 1. [ASSOCIATION MUTUAL ASSOCIATIONS UNDER
DIRECTION OF BOARD OF DIRECTORS.] The business of the
association shall be directed by a board of directors of not
less than five nor more than 15 as determined by, and elected by
ballot from among, the members by a plurality of the votes of
the members present. If authorized by vote of the members the
directors may elect all directors. At all times at least
two-thirds of the directors shall be bona fide residents of this
state.
Subd. 2. [QUALIFICATIONS REQUIRED OF DIRECTORS OF MUTUAL
ASSOCIATIONS.] Except with the written consent of the
commissioner, no member shall be eligible for election or shall
serve as a director or officer of an association who has been
adjudicated a bankrupt or convicted of a criminal offense
involving dishonesty or a breach of trust. A director shall
automatically cease to be a director on ceasing to be a member,
on being adjudicated a bankrupt, or on being convicted of a
criminal offense as herein provided, but no action of the board
of directors shall be invalidated through the participation of
the director in the action. However, if a director becomes
ineligible under the terms of this subdivision by reason of the
exercise by the association of the right of redemption of
savings accounts provided for in section 51A.34, the director
shall remain validly in office until the expiration of the term
of office or until the director otherwise becomes ineligible,
resigns, or is removed, whichever may occur first.
Subd. 2a. [QUALIFICATIONS REQUIRED OF DIRECTORS OF STOCK
ASSOCIATIONS.] Except with the written consent of the
commissioner, no person shall be eligible for election or shall
serve as director or officer of an association who has been
adjudicated a bankrupt or convicted of a criminal offense
involving dishonesty or a breach of trust. A director shall
automatically cease to be a director when adjudicated a bankrupt
or convicted of a criminal offense as herein provided.
Subd. 3. [CLASSIFICATION OF DIRECTORS OF MUTUAL
ASSOCIATIONS.] At the first annual meeting, the members shall by
majority vote divide the directors into three classes of as
nearly equal numbers as possible. The term of office of
directors of the first class shall expire at the annual meeting
next after the first election; of the second class, one year
thereafter; and of the third class, two years thereafter; and at
each annual election thereafter directors shall be chosen for a
full term of three years to succeed those whose terms expire.
Subd. 4. [NUMBER OF DIRECTORS OF MUTUAL ASSOCIATIONS
CHANGED ONLY BY MEMBERS.] The authorized number of directors
determined by the members within the limits hereinabove
specified may subsequently be increased or decreased only by
vote of the members.
Subd. 5. [HOW VACANCY ON BOARD OF DIRECTORS OF MUTUAL
ASSOCIATIONS CAUSED BY INCREASE IN NUMBER OF DIRECTORS IS TO BE
FILLED.] If the members fail to elect a director to fill each
vacancy created by any increase, the directors may fill the
vacancy by electing a director to serve until the next annual
meeting of the members, at which time a director shall be
elected to fill the vacancy for the unexpired term for the class
of director in which the vacancy exists.
Subd. 6. [CLASSIFICATION OF NEW DIRECTORS OF MUTUAL
ASSOCIATIONS ELECTED TO FILL VACANCIES.] Whenever under the
provisions hereof the number of directors is changed and
vacancies caused by the change are filled, the directors so
elected shall be classified in accordance with the provisions
hereof, so that each of the three classes shall always contain
numbers as nearly equal as possible.
Subd. 7. [WHEN VACANCY ON BOARD OF DIRECTORS OF MUTUAL
ASSOCIATIONS MAY BE FILLED BY DIRECTORS.] Any vacancy among
directors, not so filled by the members, may be filled by a
majority vote of the remaining directors, though less than a
quorum, by electing a director to serve until the next annual
meeting of the members, at which time a director shall be
elected to fill the vacancy for the unexpired term for the class
of director in which the vacancy exists. In event of a vacancy
on the board of directors from any cause, the remaining
directors shall have full power and authority to continue
direction of the association until the vacancy is filled.
Sec. 20. [51A.131] [DIRECTORS OF CAPITAL STOCK
ASSOCIATIONS.]
The duties and qualifications required of directors of
capital stock associations are governed by chapter 300.
Sec. 21. Minnesota Statutes 1986, section 51A.15,
subdivision 2, is amended to read:
Subd. 2. [DUAL STATUS.] No officer or director of an
association shall hold office or status as a director or officer
of another nonaffiliated financial institution the principal
office of which is located in the association's primary lending
area; except such directors or officers who are holding office
at the time of the adoption of sections 51A.01 to 51A.57, and
such directors or officers may continue to be reelected for two
additional terms.
Sec. 22. Minnesota Statutes 1986, section 51A.17, is
amended to read:
51A.17 [INDEMNIFICATION OF OFFICERS, DIRECTORS AND
EMPLOYEES.]
Any person shall be indemnified or reimbursed by the
association for reasonable expenses, including but not limited
to attorney fees, actually incurred in connection with any
action, suit, or proceeding, instituted or threatened, judicial
or administrative, civil or criminal, to which that person is
made a party by reason of being or having been a director,
officer, or employee of an association; provided, however, that
no person shall be so indemnified or reimbursed, nor shall that
person retain any advancement or allowance for indemnification
which may have been made by the association in advance of final
disposition, in relation to such action, suit, or proceeding in
which and to the extent that the person finally shall be
adjudicated to have been guilty of a breach of good faith, to
have been negligent in the performance of duties, or to have
committed an action or failed to perform a duty for which there
is a common law or a statutory liability; and provided further,
that a person may, with the approval of the commissioner, be so
indemnified or reimbursed for (1) amounts paid in compromise or
settlement of any action, suit, or proceeding, including
reasonable expenses incurred in connection therewith, or (2)
reasonable expenses including fines and penalties incurred in
connection with a criminal or civil action, suit, or proceeding
in which such person has been adjudicated guilty, negligent, or
liable if it shall be determined by the board of directors and
by the commissioner that such person was acting in good faith
and in what that person believed to be the best interests of the
association and without knowledge that the action was illegal
and if such indemnification or reimbursement is approved at an
annual or special meeting of the members by a majority of the
votes eligible to be cast. Amounts paid to the association,
whether pursuant to judgment or settlement by any person within
the meaning of this section shall not be indemnified or
reimbursed in any case. The indemnification of officers,
directors, and employees of associations is governed by section
300.083.
Sec. 23. Minnesota Statutes 1986, section 51A.19,
subdivision 1, is amended to read:
Subdivision 1. [RECORDS TO BE KEPT AT PRINCIPAL HOME
OFFICE.] Every association shall keep at the principal home
office correct and complete books of account and minutes of the
proceedings of members, directors, stockholders, and the
executive committee. Complete records of all business
transacted at the principal home office shall be maintained at
the principal home office. Control records of all business
transacted at other offices shall be maintained at the principal
home office.
Sec. 24. Minnesota Statutes 1986, section 51A.19,
subdivision 8, is amended to read:
Subd. 8. [APPRAISAL OF REAL ESTATE OWNED AND THAT SECURING
DELINQUENT LOANS.] Every association shall have appraised each
parcel of real estate at the time of acquisition thereof. The
report of each such appraisal shall be submitted in writing to
the board of directors and shall be kept in the records of the
association. In addition to the powers under section 51A.44,
subdivision 6, the commissioner may require the appraisal of
real estate securing loans which are delinquent more than four
months.
Sec. 25. Minnesota Statutes 1986, section 51A.19,
subdivision 10, is amended to read:
Subd. 10. [MAINTENANCE OF MEMBERSHIP RECORDS.] Every
mutual association shall maintain membership records, which
shall show the name and address of the member, the status of the
member as a savings account holder, or an obligor, or a savings
account holder and obligor, and the date of membership thereof.
In the case of members holding a savings account the mutual
association shall obtain a savings account contract containing
the signature of each holder of such account or a duly
authorized representative, and shall preserve such contract in
the records of the association.
Sec. 26. Minnesota Statutes 1986, section 51A.21,
subdivision 1, is amended to read:
Subdivision 1. [GENERALLY.] Every association incorporated
pursuant to or operating under the provisions of sections 51A.01
to 51A.57 shall have all the powers enumerated, authorized, and
permitted by sections 51A.01 to 51A.57 and such other rights,
privileges, and powers as may be incidental to or reasonably
necessary or appropriate for the accomplishment of the objects
and purposes of the association, and in addition shall have
those powers possessed by corporations organized under chapter
300. Among others, and except as otherwise limited by the
provisions of sections 51A.01 to 51A.57, every association shall
have the powers set forth in this section.
Sec. 27. Minnesota Statutes 1986, section 51A.21,
subdivision 5, is amended to read:
Subd. 5. [BORROWING.] If and when an association is not a
member of a federal home loan bank, To borrow from sources,
individual or corporate, not more than an aggregate amount equal
to one-fourth one-half of its savings liability total assets on
the date of borrowing and additional sums the commissioner
approves. If and when an association is a member of a federal
home loan bank, to secure advances of not more than an aggregate
amount equal to one-half of its savings liability; within the
amount equal to one-half of its savings liability, the
association may borrow from sources, individual or corporate
other than the federal home loan bank, an aggregate amount not
in excess of 20 percent of its savings liability. The advance
written approval of the commissioner, who has sole discretionary
authority to grant or withhold such approval, is required for
sources of borrowing other than financial institutions or
federal home loan banks. A subsequent reduction of savings
liability total assets shall not affect in any way outstanding
obligations for borrowed money. All loans and advances
borrowing under this subdivision may be secured by property of
the association, and may be evidenced by notes, bonds,
debentures, commercial paper, bankers' acceptances, or other
obligations or securities, (except capital stock and capital
certificates) the commissioner authorizes for all associations;
provided, that authorization by the commissioner shall not be
required in the case of securities guaranteed pursuant to
section 306(g) of the National Housing Act of 1934, as amended.
Sec. 28. Minnesota Statutes 1986, section 51A.21, is
amended by adding a subdivision to read:
Subd. 6a. [LOANS AND CONTRACTS.] To make, sell, purchase,
invest in, and participate or otherwise deal in loans and
conditional sale contracts and other forms of indebtedness and
leases, and to take any manner of security for the loans and
contracts.
Sec. 29. Minnesota Statutes 1986, section 51A.21, is
amended by adding a subdivision to read:
Subd. 6b. [BUSINESS PROPERTY.] To acquire or own real
property or interests in real property the directors consider
necessary or convenient for the conduct of the business of the
association, which for the purposes of sections 51A.01 to 51A.57
includes the ownership of stock of a wholly owned subsidiary
corporation having as its exclusive activity the ownership and
management of this property or interests. The amount so
invested must not exceed the sum equal to five percent of net
assets of the association, provided that the commissioner may
authorize a greater amount to be so invested.
Sec. 30. Minnesota Statutes 1986, section 51A.21,
subdivision 7, is amended to read:
Subd. 7. [INSURANCE OF ACCOUNTS.] To obtain and maintain
insurance of its savings accounts by the federal savings and
loan insurance corporation or any agency of this state or other
federal agency established for the purpose of insuring savings
accounts in associations.
Sec. 31. Minnesota Statutes 1986, section 51A.21,
subdivision 9, is amended to read:
Subd. 9. [EMPLOYEES.] To appoint and remove officers,
agents, and employees as its business shall require and to
provide them suitable compensation; to provide for life, health,
and casualty insurance for officers and employees, and to adopt
and operate reasonable bonus plans and retirement benefits for
such officers and employees; and to provide for indemnification
of its officers, employees, and directors as prescribed or
permitted in sections 51A.01 to 51A.57 whether by insurance or
otherwise.
Sec. 32. Minnesota Statutes 1986, section 51A.21,
subdivision 14, is amended to read:
Subd. 14. [SERVICING.] To service loans and investments
for others, provided that the maximum principal amount of loans
and investments serviced for others at any one time shall not
exceed 75 percent of the amount of the savings liability of such
association.
Sec. 33. Minnesota Statutes 1986, section 51A.21,
subdivision 15, is amended to read:
Subd. 15. [SAVINGS, LOANS, INVESTMENTS.] To acquire
savings deposits and pay earnings thereon, and to lend and
commit to lend, extend credit, and invest its funds as provided
in sections 51A.01 to 51A.57.
Sec. 34. Minnesota Statutes 1986, section 51A.21,
subdivision 17, is amended to read:
Subd. 17. [AGENCY.] To act as agent or holder of an escrow
for others in any transaction incidental to the operation of its
business.
Sec. 35. Minnesota Statutes 1986, section 51A.21,
subdivision 21, is amended to read:
Subd. 21. [DIVIDENDS ON CAPITAL STOCK.] To declare and pay
dividends on capital stock in cash or property out of the
unreserved and unrestricted earned surplus of the association,
or its own shares from time to time except when the association
has failed within the preceding 12 months to make any minimum
allocation to surplus or reserve accounts required by section
51A.20 or to maintain any minimum required level, and except
when the association is in an impaired condition or when the
payment thereof would cause the association to be in an impaired
condition. A split-up or division of the issued shares of
capital stock into a greater number of shares without increasing
the state capital of the association is authorized, and shall
not be construed to be a dividend within the meaning of this
section.
Sec. 36. Minnesota Statutes 1986, section 51A.21, is
amended by adding a subdivision to read:
Subd. 22. [LIMITED TRUSTEESHIP.] To act and receive
compensation as trustee of a trust created or organized in the
United States and forming a part of a stock bonus, pension, or
profit-sharing plan that qualifies or is qualified for specific
tax treatment under section 401 of the Internal Revenue Code of
1986, as amended through December 31, 1987, and to act as
trustee or custodian of an individual retirement account within
the meaning of section 408 of that code if the funds of the
trust or account are invested only in savings accounts of the
association or in obligations or securities issued by the
association. All funds held in a fiduciary capacity by the
association under the authority of this subdivision may be
commingled and consolidated for appropriate purposes of
investment if records reflecting each separate beneficial
interest are maintained by the fiduciary unless the
responsibility is lawfully assumed by another appropriate party.
Sec. 37. Minnesota Statutes 1986, section 51A.21, is
amended by adding a subdivision to read:
Subd. 23. [AUTOMATED TELLER MACHINES.] To own or use
automated teller machines and establish electronic financial
terminals and transmission facilities as provided in sections
47.61 to 47.74.
Sec. 38. Minnesota Statutes 1986, section 51A.21, is
amended by adding a subdivision to read:
Subd. 24. [PAYROLL SAVINGS.] To contract with an employer
with respect to the following:
(1) Soliciting, collecting, and receiving savings by
payroll deduction. These savings are to be credited to a
designated account of an employee who may voluntarily
participate in a payroll deduction plan.
(2) Direct deposit of wages or salary paid by the employer
to an employee's account in a financial depository institution.
Deposits may be made by electronic or other medium. Direct
deposits may be made if the employee authorizes the deposits in
writing and designates the association or other financial
depository institution as the recipient of these deposits.
Sec. 39. Minnesota Statutes 1986, section 51A.21, is
amended by adding a subdivision to read:
Subd. 25. [DRAFTS.] To issue drafts and similar
instruments drawn on the association to aid in effecting
withdrawals and for other purposes of the association.
Sec. 40. Minnesota Statutes 1986, section 51A.21, is
amended by adding a subdivision to read:
Subd. 26. [DEPOSITS.] To raise funds in the form of (1)
savings accounts; (2) time deposit accounts; (3) NOW accounts;
(4) demand deposit accounts; and (5) treasury tax and loan
accounts.
Sec. 41. Minnesota Statutes 1986, section 51A.21, is
amended by adding a subdivision to read:
Subd. 27. [TRUST POWERS.] Upon application and approval by
the commissioner, to act as trustee, executor, administrator,
personal representative, conservator, custodian, guardian, or in
any other fiduciary capacity in which state banks, trust
companies, or other corporations are permitted to act, and to
receive reasonable compensation therefore.
Sec. 42. Minnesota Statutes 1987 Supplement, section
51A.23, subdivision 1, is amended to read:
Subdivision 1. [OWNERSHIP.] Savings accounts may be opened
and held solely and absolutely by, or in trust or other
fiduciary capacity for, any person, including an adult or minor
individual, male or female, single or married, partnership,
association, fiduciary, or corporation. Trust funds received by
a real estate broker or the broker's salespersons in trust may
be deposited in a savings and loan association. Savings Deposit
accounts shall be represented only by the account of each
savings deposit account holder on the books of the association,
and such the accounts or any interest therein shall be
transferable only on the books of the association and upon
proper written application by the transferee and upon acceptance
by the association of the transferee as a member upon terms
approved by the board of directors. The association may treat
the holder of record of a savings account as the owner thereof
of it for all purposes without being affected by any notice to
the contrary unless the association has acknowledged in writing
notice of a pledge of such savings the deposit account.
Notwithstanding the foregoing, an association or federal
association may offer negotiable time deposits.
An association may issue savings deposit accounts to or in
the name of a minor, which shall be held for the exclusive right
and benefit of the minor, free from the control or lien of all
other persons, except creditors, and, together with dividends
thereon, shall be paid to the minor, and receipt or acquittance
in any form, shall be sufficient release and discharge of the
association for withdrawal, until a guardian appointed in this
state for the minor shall have delivered a certificate of
appointment.
Sec. 43. Minnesota Statutes 1986, section 51A.251, is
amended to read:
51A.251 [MARRIED PERSONS AND MINORS.]
An association and any federal association may issue
savings deposit accounts or negotiable order of withdrawal
accounts to any married person or minor as the sole and absolute
owner of the account, and receive payments thereon by or for the
other, and pay withdrawals or drafts, accept pledges to the
association, and act in any other manner with respect to the
accounts on the order of the married person or minor. Any
payment or delivery of rights to a married person or to any
minor, or a receipt of or acquisition signed by a married person
or by a minor who holds an account, shall be a valid and
sufficient release and discharge of the association for any
payment so made or delivery of rights to the married person or
minor. In the case of a minor, the receipt, acquittance, pledge
or other action required by the association to be taken by the
minor shall be binding upon the minor as if the minor were of
full age and legal capacity. The parent or guardian of the
minor shall not in the capacity as parent or guardian have the
power to attach or in any manner to transfer any account issued
to or in the name of the minor; provided, however, that in the
event of the death of the minor the receipt or acquittance of
either parent or of a person standing in loco parentis to the
minor shall be a valid and sufficient discharge of the
association for any sum or sums not exceeding in the aggregate
$2,500 unless the minor shall have given written notice to the
association to accept the signature of the parent or person.
Sec. 44. Minnesota Statutes 1986, section 51A.261, is
amended to read:
51A.261 [DEPOSITS IN NAME OF MINOR.]
A deposit made at an association in the name of a minor, or
shares issued in a minor's name, shall be held for the exclusive
right and benefit of the minor, free from the control or lien of
all other persons except creditors, and together with the
dividends or interest thereon shall be paid the minor, and the
minor's receipt, check, or acquittance in any form shall be a
sufficient release and discharge of the depository for the
deposits or shares, or any part thereof, until a conservator or
guardian appointed for the minor has delivered a certificate of
appointment to the depository.
Sec. 45. Minnesota Statutes 1986, section 51A.262, is
amended to read:
51A.262 [MULTIPARTY ACCOUNTS.]
When any deposit is made in the names of two or more
persons jointly, or by any person payable on death (P.O.D.) to
another, or by any person in trust for another, the rights of
the parties and the financial institution association are
determined by chapter 528.
Sec. 46. Minnesota Statutes 1986, section 51A.28, is
amended to read:
51A.28 [ACCOUNTS OF ADMINISTRATORS, EXECUTORS, GUARDIANS,
CUSTODIANS, TRUSTEES, AND OTHER FIDUCIARIES.]
Any association or federal association may accept savings
deposit accounts in the name of any administrator, executor,
custodian, conservator, guardian, trustee, or other fiduciary
for a named beneficiary or beneficiaries. Any such fiduciary
shall have power to vote as a member in a mutual association as
if the membership were held absolutely, to open and to make
additions to, and to withdraw any such account in whole or in
part. The withdrawal value of any such account, and earnings
thereon, or other rights relating thereto may be paid or
delivered, in whole or in part, to such fiduciary without regard
to any notice to the contrary as long as such fiduciary is
living. The payment or delivery to any such fiduciary or a
receipt or acquittance signed by any such fiduciary to whom any
such payment or any such delivery of rights is made shall be a
valid and sufficient release and discharge of an association for
the payment or delivery so made. Whenever a person holding an
account in a fiduciary capacity dies and no written notice of
the revocation or termination of the fiduciary relationship
shall have been given to an association and the association has
no written notice of any other disposition of the beneficial
estate, the withdrawal value of such account, and earnings
thereon, or other rights relating thereto may, at the option of
an association, be paid or delivered, in whole or in part, to
the beneficiary or beneficiaries. The payment or delivery to
any such beneficiary, beneficiaries, or designated person, or a
receipt or acquittance signed by any such beneficiary,
beneficiaries, or designated person for any such payment or
delivery shall be a valid and sufficient release and discharge
of an association for the payment or delivery so made. This
section does not apply to a P.O.D. account under chapter 528.
Sec. 47. Minnesota Statutes 1986, section 51A.31,
subdivision 1, is amended to read:
Subdivision 1. [LEGAL INVESTMENTS.] Administrators,
executors, custodians, conservators, guardians, trustees, and
other fiduciaries of every kind and nature, insurance companies,
business and manufacturing companies, banks, trust companies,
credit unions, and other types of similar financial
organizations, charitable, educational, eleemosynary and such
public corporations as are authorized by law, funds, and
organizations, are specifically authorized and empowered to
invest funds held by them, without any order of any court, in
savings accounts of savings associations which are under state
supervision, and in accounts of federal associations organized
under the laws of the United States and under federal
supervision, and such investments shall be deemed and held to be
legal investments for such funds.
Sec. 48. Minnesota Statutes 1986, section 51A.32, is
amended to read:
51A.32 [EARNINGS.]
Subdivision 1. [MUTUAL ASSOCIATION.] An A mutual
association may pay earnings on its savings accounts from
sources available for payment of earnings at such rate and at
such times and for such time or notice periods as shall be
determined by resolution of its board of directors. All savings
deposit account holders shall participate equally in earnings
pro rata to the withdrawal value of their respective accounts,
except that an association may classify its savings deposit
accounts according to the character, amount, or duration
thereof, or regularity of additions thereto, and may agree in
advance to pay an additional or different rate of earnings not
to exceed one percent over and above the rate of earnings paid
on all savings deposit accounts on accounts based on such
classification, and shall regulate such earnings in such manner
that each savings deposit account in the same classification
shall receive the same ratable portion of such additional
earnings, except for accounts which shall be classified
according to a specified contractual time or notice period.
Earnings shall be declared on the withdrawal value of
each savings deposit account at the beginning of the accounting
period, plus additions thereto made during the period (less
amounts previously withdrawn and noticed for withdrawal, which
for earnings purposes shall be deducted from the latest previous
additions thereto) computed at the declared rate for the time
the funds have been invested, determined as next provided. The
date of investment shall be the date of actual receipt by the
association of an account or an addition to an account, except
that if the board of directors shall so determine, accounts in
one or more classifications or additions thereto received by the
association on or before a date not later than the 20th day of
the month in which such payments were received; if the board
shall make such determination, it also shall determine that
payments received subsequent to such determination date shall
either (1) receive earnings as if invested on the first day of
the next succeeding month, or (2) receive earnings from the date
of actual receipt by the association. Unless the commissioner
shall issue approval in writing, no earnings shall be declared
or paid for an accounting period unless the allocation to the
general reserve for the preceding accounting period required by
section 51A.20 or approved by the commissioner thereunder has
been made. Notwithstanding the provisions of the second
sentence of this section, the board of directors, by resolution,
may determine that earnings shall not be paid on any savings
deposit account which has a withdrawal value of a specified
amount less than $50 or which by written agreement is intended
to be closed within a specified period less than 15 months from
the date on which such savings the account is opened, provided
that an exception may be made and earnings paid on savings
deposit accounts opened pursuant to section 51A.24. The
directors shall determine by resolution the method of
calculating the amount of any earnings on savings accounts as
herein provided, and the time or times when earnings are to be
declared, paid, or credited.
Subd. 2. [CAPITAL STOCK ASSOCIATIONS.] A capital stock
association may pay interest, if any, on its savings accounts in
accordance with the terms of the account contract.
Sec. 49. Minnesota Statutes 1986, section 51A.35, is
amended to read:
51A.35 [INVESTMENT IN SECURITIES.]
Savings Associations shall have power to invest in
securities as follows:
(a) [INVESTMENTS NOT SUBJECT TO LIMITATION.] Without limit,
in obligations of, or obligations which are fully guaranteed as
to principal and interest by, the United States or this state or
the political subdivision of this state in stock or obligations
of any federal home loan bank or banks; in stock or obligations
of the federal savings and loan insurance corporation; in
demand, time, or savings deposits, shares or accounts, or other
obligations of any financial institution the accounts of which
are insured by a federal agency.
(b) [INVESTMENTS SUBJECT TO 25 PERCENT OF ASSETS
LIMITATION.] Not in excess of 25 percent of its assets in (1)
bonds, notes, or other evidences of indebtedness which are a
general obligation of, or guaranteed as to principal and
interest by, any agency or instrumentality of the United States
not specified in subparagraph (a) or of this state, or any city,
town, county, district, or other municipal corporation or
political subdivision of this state, or any instrumentality or
authority of any one or more of the foregoing; (2) capital
stock, obligations, or other securities of service
organizations, provided that the aggregate of such investments
shall not thereupon exceed one three percent of its assets
liabilities.
Sec. 50. Minnesota Statutes 1986, section 51A.361, is
amended to read:
51A.361 [RESERVES.]
An association shall maintain reserves in the form of
liquid assets, as defined in section 51A.02, subdivision 12 34,
at a level reasonably necessary to meet anticipated withdrawals,
commitments, and loan demand. The commissioner of commerce may
prescribe the required amount of reserves for any individual
association from time to time based upon examination findings or
other reports relating to the association that are available to
the commissioner. The determination by the commissioner of a
required amount of reserves for an association shall not be
considered a rule as defined by section 14.02, subdivision 4.
Reserves for an individual association as prescribed by the
commissioner pursuant to this section shall be enforced in
accordance with sections 46.24 and 46.30 to 46.33.
Sec. 51. Minnesota Statutes 1986, section 51A.37,
subdivision 1, is amended to read:
Subdivision 1. [GENERALLY.] Every savings association
shall have power to invest in loans and other investments as set
forth in this section.
Sec. 52. Minnesota Statutes 1986, section 51A.37,
subdivision 2, is amended to read:
Subd. 2. [SAVINGS ACCOUNT LOANS.] Loans secured by its
savings accounts to the extent of the withdrawal value thereof.
Sec. 53. Minnesota Statutes 1986, section 51A.37,
subdivision 3, is amended to read:
Subd. 3. [REAL ESTATE LOANS.] Real estate loans in any
amount not exceeding the value of the security, subject to the
following conditions:
(a) No association shall make a real estate loan to one
borrower if the sum of (1) the amount of the loan and (2) the
total balances of all outstanding real estate loans owed to the
association by the borrower exceeds an amount equal to ten
percent of the association's savings liability or an amount
equal to the sum of the association's reserves for losses and
undivided profits, whichever amount is less, except that any
such loan may be made if the sum of (1) and (2) does not exceed
$100,000.
(b) An association may (1) participate with one or more
financial institutions, or other entities having a tax exemption
under section 501(a) of the internal revenue code, in any real
estate loan of the type in which the association is authorized
to invest on its own account, provided that the participating
interest of the association is not subordinated or inferior to
any other participating interest; and (2) participate in real
estate loans with other than financial institutions or those
entities described, provided that the participating interest of
the association is superior to the participating interests of
the other participants.
(c) (b) The aggregate balances outstanding of real estate
loans on real estate located outside the primary lending area of
an association shall at no time exceed ten percent of the assets
of the association, except that (1) loans insured or guaranteed
in whole or in part by the United States, or a federal agency
and (2) loans in which an association owns or has purchased no
more than a 75 percent participation interest are not subject to
this restriction; and
(d) Direct reduction real estate loans on home property and
not in excess of 90 percent of the value of the security except
as may be provided by the Federal Home Loan Bank Board for
federally insured associations, and direct reduction real estate
loans on primarily residential property not in excess of 80
percent of the value of the security, including participating
interests in the loans, shall average annually, based on monthly
computations, at least 70 percent of assets, other than liquid
assets, held by the association.
(e) (c) Real estate loans on home property by mortgage or
contract for deed, as provided in clauses paragraphs (a) through
(d) above and (b) with no limit on purchase or sale thereof; and
may participate with other lenders in the making, purchasing, or
selling of the loans, provided (1) the property securing same is
within 100 miles of the servicing office of the other lender or
lenders and (2) that the other lender or lenders participate to
the extent of at least ten percent in the loan and further
provided not more than 25 percent of the assets of the
association licensed hereunder shall be in the loan.
(f) (d) An association may purchase, at any sheriff's,
judicial, or other sale, public or private, any real estate upon
which it has a mortgage, judgment, or other lien, or in which it
has any interest. It may acquire title to any real estate on
which it holds any lien, in full or part satisfaction thereof,
and may sell, convey, hold, lease, or mortgage the same. In
transactions involving the purchase by a vendee of improved real
estate for home purposes, or for the construction of a home, a
savings and loan an association organized under the laws of this
state, or of the United States of America, may, when authorized
by its bylaws, acquire the title thereof, and it may give to the
vendee a contract to convey the same as upon a sale thereof.
Provided, that no association shall hereafter invest more than
50 percent of its assets in such contracts to convey. Upon
default in the conditions of the contract, the association may
terminate the interest of the vendee or the vendee's
representatives or assigns by serving the notice provided by
section 559.21, upon the vendee, or the vendee's representative
or assigns.
Sec. 54. Minnesota Statutes 1986, section 51A.37,
subdivision 4, is amended to read:
Subd. 4. [INSURANCE POLICY LOANS.] Loans secured by the
pledge of policies of life insurance, the assignment of which is
properly acknowledged by the insurer, but not exceeding the cash
value of such policies providing such pledge is made as
additional collateral for real estate, home improvement, or
manufactured home loans.
Sec. 55. Minnesota Statutes 1986, section 51A.37, is
amended by adding a subdivision to read:
Subd. 10. [CONSUMER LOANS.] Consumer loans.
Sec. 56. Minnesota Statutes 1986, section 51A.37, is
amended by adding a subdivision to read:
Subd. 11. [BUSINESS LOANS.] Loans to organizations and
natural persons for business purposes.
Sec. 57. Minnesota Statutes 1986, section 51A.37, is
amended by adding a subdivision to read:
Subd. 12. [AGRICULTURAL LOANS.] Loans for agricultural
purposes.
Sec. 58. Minnesota Statutes 1986, section 51A.37, is
amended by adding a subdivision to read:
Subd. 13. [LOAN TO ONE BORROWER LIMITS.] (a) No mutual
association shall make a loan to one borrower if the sum of (1)
the amount of the loan and (2) the total balances of all
outstanding loans owed to the association by the borrower
exceeds an amount equal to ten percent of the association's
savings liability or an amount equal to the sum of the
association's reserves for losses and undivided profits,
whichever amount is less, except that any such loan may be made
if the sum of clauses (1) and (2) does not exceed $500,000.
(b) No stock association shall make a loan to one borrower
if the sum of (1) the amount of the loan and (2) the total
balances of all outstanding loans owed to the association by the
borrower exceeds an amount equal to ten percent of the
association's savings liability or an amount equal to the sum of
the association's reserves for losses and capital and surplus,
whichever amount is less, except that any such loan may be made
if the sum of clauses (1) and (2) does not exceed $500,000.
Sec. 59. Minnesota Statutes 1986, section 51A.38,
subdivision 1, is amended to read:
Subdivision 1. [GENERALLY.] Real estate loans and other
loans secured by a mortgage on real estate that are eligible for
investment by an association under sections 51A.01 to 51A.57 may
be written upon the plan set forth in according to this section
and section 66, or upon any other plan approved by the
commissioner.
Sec. 60. Minnesota Statutes 1986, section 51A.38,
subdivision 2, is amended to read:
Subd. 2. [APPRAISAL.] No investment in a real estate loan,
the proceeds of which are used for the purchase of the real
estate, shall be made until a qualified person or persons
approved by the board of directors shall have made a physical
inspection and submitted a signed appraisal of the value of the
real estate securing such loan.
Sec. 61. Minnesota Statutes 1986, section 51A.38,
subdivision 3, is amended to read:
Subd. 3. [PAYMENTS.] Payments on real estate loans shall
be applied first to other charges, then to the payment of
interest on the unpaid balance of the loan, and the remainder on
the reduction of principal; provided that if the loan is in
default in any manner or is being assumed by the assignee of the
mortgagor, payments may be applied by the association to payment
of penalties or assumption charges as provided in the loan
contract. All real estate loans may be prepaid in part or in
full, at any time and the association shall not charge for such
privilege of anticipatory payment an amount greater than 5
percent of the amount of such anticipatory payment. An
association may charge a borrower a prepayment fee on any loan
that is not a consumer loan. Unless otherwise agreed in
writing, any prepayment of principal on any loan may, at the
option of the association, be applied on the final installment
of the note or other obligation until fully paid, and thereafter
on the installments in the inverse order of their maturity, or,
at the option of the association, the payments may be applied
from time to time wholly or partially to offset payments which
subsequently accrue under the loan contract.
Sec. 62. Minnesota Statutes 1986, section 51A.38,
subdivision 4, is amended to read:
Subd. 4. [EVIDENCE OF LOAN.] Every loan shall be evidenced
by a note or instrument of obligation for the amount of the
loan. The note or instrument shall specify the amount, rate of
interest, or manner of calculating the rate of interest of a
variable rate loan, and terms of repayment including any
prepayment penalty or charge for late payment, mortgage
assumption fee, and may contain all other terms of the loan
contract.
Sec. 63. Minnesota Statutes 1986, section 51A.38,
subdivision 5, is amended to read:
Subd. 5. [SECURITY INSTRUMENT FOR LOANS SECURED BY REAL
ESTATE.] Every real estate loan secured by a mortgage on real
property, including a real estate loan, shall be
secured evidenced by a mortgage, deed of trust, or other
transaction or instrument constituting a first lien or claim, or
the full equivalent thereof, upon the real estate securing the
loan, according to any lawful and recognized practice which is
suited to the transaction. Any such instrument or
transaction constituting a first lien or claim is herein termed
a "mortgage." Such mortgage shall provide specifically for full
protection to the association with respect to such loan and
additional advances and the usual insurance risks, ground rents,
taxes, assessments, other governmental levies, maintenance, and
repairs. It may provide for an assignment of rents, and if such
assignment is made, any such assignment shall be absolute upon
the borrower's default, becoming operative upon written demand
made by the association. All such mortgages shall be recorded
in accordance with the law of this state.
Sec. 64. Minnesota Statutes 1986, section 51A.38,
subdivision 7, is amended to read:
Subd. 7. [ADVANCES FOR TAXES.] An association may pay
taxes, assessments, ground rents, insurance premiums, and other
similar charges for the protection of its real estate loans any
loan secured by a mortgage on real property, including a real
estate loan. All such payments shall be added to the unpaid
balance of the loan and shall be equally secured by the first
lien on the property as provided above. An association may
require life insurance to be assigned as additional collateral
upon any real estate loan. In such event, the association shall
obtain a first lien upon such policy and may advance premiums
thereon, and such premium advances shall be added to the unpaid
balance of the loan and shall be equally secured by the first a
lien on the property as provided above.
Sec. 65. Minnesota Statutes 1986, section 51A.38,
subdivision 8, is amended to read:
Subd. 8. [PROVISION FOR TAXES, INSURANCE.] An association
may require the a borrower on any loan secured by a mortgage on
real property, including a real estate loan, to pay monthly in
advance, in addition to interest or interest and principal
payments, the equivalent of 1/12 of the estimated annual taxes,
assessments, insurance premiums, ground rents, and other charges
upon the real estate securing a loan, or any of such charges, so
as to enable the association to pay such charges as they become
due from the funds so received. The amount of such monthly
charges may be increased or decreased so as to provide
reasonably for the payment of the estimated annual taxes,
assessment, insurance premiums, and other charges. The
association at its option may hold such funds in trust and
commingle them with other such funds and use the same for such
purposes, or hold such funds in open account and commingle them
with its own funds and advance like amounts for such purposes,
or credit such funds as received to the mortgage account and
advance a like amount for the purposes stated. If such funds
are held in trust or invested in savings accounts, the
amounts shall may be pledged to further secure the indebtedness
and, if held in open account or credited to the loan account,
the amounts when advanced for the purposes stated shall may be
secured by the mortgage with the same priority as the original
amount advanced under the mortgage. The association shall have
no obligation to pay interest, earnings, or other increment to
the borrower upon such monthly payments, nor to invest the same
for the benefit of the borrower, unless such funds have been
placed in a savings account or accounts in the borrower's name.
Every association shall keep a record of the status of taxes,
assessments, insurance, ground rents, and other charges on all
real estate securing its real estate loans and on all real and
other property owned by it.
Sec. 66. [51A.385] [TERMS AND CONDITIONS OF LOANS,
CONTRACTS, AND EXTENSIONS OF CREDIT.]
Subdivision 1. [APPLICATION.] Except as otherwise provided
in this section, this section applies to loans made and
contracts purchased by federal and state associations, and
"association" as used in this section applies to federal and
state associations.
Subd. 2. [FINANCE CHARGE FOR CREDIT SALES MADE BY A THIRD
PARTY.] (a) A person may enter into a credit sale contract for
sale to an association and an association may purchase and
enforce a contract evidencing the sale, if the annual percentage
rate provided for in the contract does not exceed that permitted
in this section, or, in the case of contracts governed by
sections 168.66 to 168.77, the rates permitted by those sections.
(b) Except as provided in subdivision 4, the annual
percentage rate may not exceed the equivalent of the greater of
either of the following:
(1) the total of:
(i) 36 percent per year on that part of the unpaid balances
of the amount financed which is $300 or less;
(ii) 21 percent per year on that part of the unpaid
balances of the amount financed which exceeds $300 but does not
exceed $1,000; and
(iii) 15 percent per year on that part of the unpaid
balances of the amount financed which exceeds $1,000; or
(2) 19 percent per year on the unpaid balances of the
amount financed.
(c) This subdivision does not limit or restrict the manner
of calculating or charging the finance charge whether by way of
add-on, discount, discount points, single annual percentage
rate, precomputed charges, variable rate, interest in advance,
compounding or otherwise, if the annual percentage rate
calculated under paragraph (d) does not exceed that permitted by
this section. The finance charge may be contracted for and
earned at the single annual percentage rate that would earn the
same finance charge as the graduated rates when the debt is paid
according to the agreed terms and the finance charge is
calculated under paragraph (d). If the finance charge is
calculated or collected in advance, or included in the principal
amount of the contract, and the borrower prepays the contract in
full, the association shall credit the borrower with a refund of
the charge to the extent the charge would exceed the annual
percentage rate on the contract as originally determined under
paragraph (d) and taking into account the prepayment. For the
purpose of calculating the refund, the association may assume
that the contract was paid before the date of prepayment
according to the schedule of payments under the contract and
that all payments were paid on their due dates. For contracts
repayable in substantially equal successive monthly
installments, the association may calculate the refund as the
portion of the finance charge allocable to all unexpired payment
periods following the date of prepayment, based on the annual
percentage rate on the contract as originally determined under
paragraph (d), and for the purpose of calculating the refund may
assume that all payments are made on the due date.
(d) The annual percentage rate must be calculated in
accordance with Code of Federal Regulations, title 12, part 226,
but using the definition of finance charge in section 51A.02,
and computed on the basis of a 365-day year.
Subd. 3. [FINANCE CHARGE FOR LOANS.] Except as provided in
subdivision 4:
(a) With respect to a loan, including a loan pursuant to
open-end credit but excluding open-end credit pursuant to a
credit card, an association may contract for and receive a
finance charge at an annual percentage rate not exceeding 19
percent per year. With respect to open-end credit pursuant to a
credit card, an association may contract for and receive a
finance charge at an annual percentage rate not exceeding 18
percent per year. With respect to a loan, the finance charge
shall be considered not to exceed the maximum annual percentage
rate permitted pursuant to this section if the finance charge
contracted for and received does not exceed the equivalent of
the maximum annual percentage rate computed on a 365-day year
calculated in accordance with Code of Federal Regulations, title
12, part 226, but using the definition of finance charge in
section 51A.02.
(b) This subdivision does not limit or restrict the manner
of calculating the finance charge, whether by way of add-on,
discount, single annual percentage rate, variable rate, interest
in advance, compounding, average daily balance method, or
otherwise, if the annual percentage rate does not exceed that
permitted by this section. With respect to a loan secured by
real estate, including a real estate loan, if a finance charge
is calculated or collected in advance, or included in the
principal amount of the loan, and the borrower prepays the loan
in full, the association shall credit the borrower with a refund
of the charge to the extent that the annual percentage rate on
the loan would exceed the maximum rate permitted under paragraph
(a), taking into account the prepayment. With respect to all
other loans, if the finance charge is calculated or collected in
advance, or included in the principal amount of the loan, and
the borrower prepays the loan in full, the association shall
credit the borrower with a refund of the charge to the extent
the charge would exceed the annual percentage rate on the loan
as originally determined under paragraph (a) and taking into
account the prepayment. For the purpose of calculating the
refund under this subdivision, the association may assume that
the contract was paid before the date of prepayment according to
the schedule of payments under the loan and that all payments
were paid on their due dates. For loans repayable in
substantially equal successive monthly installments, the
association may calculate the refund under this subdivision as
the portion of the finance charge allocable to all unexpired
payment periods following the date of prepayment, based on the
annual percentage rate on the loan as originally determined
under paragraph (a), and for the purpose of calculating the
refund may assume that all payments are made on the due date.
Subd. 4. [ADDITIONAL AUTHORITY.] Extensions of credit, and
purchases of extensions of credit, authorized by sections 47.20,
subdivision 1, 3, or 4a; 47.204; 47.21; 48.153; 48.185; sections
168.66 to 168.77, or section 334.01, subdivision 2; and section
334.011 may, but need not, be made pursuant to those sections in
lieu of the authority set forth in subdivisions 1 to 3, and if
so, are subject to the provisions of those sections, and not the
provisions of this section, except this subdivision. An
association may also charge an organization any 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 the
association elects to make under section 334.01, subdivision 2;
or 334.011, the provisions of chapter 334 do not apply to
extensions of credit made pursuant to this section or the
sections mentioned in this subdivision.
Subd. 5. [ADDITIONAL CHARGES.] (a) In addition to the
finance charges permitted by this section, an association may
contract for and receive the following additional charges which
may be included in the amount financed:
(1) official fees and taxes;
(2) charges for insurance as described in paragraph (b);
(3) with respect to a loan secured by real estate,
including a real estate loan, the following "closing costs," if
they are bona fide, reasonable in amount, and not for the
purpose of circumvention or evasion of this section:
(i) fees or premiums for title examination, abstract of
title, title insurance, surveys, or similar purposes;
(ii) fees for preparation of a deed, mortgage, settlement
statement, or other documents, if not paid to the association;
(iii) escrows for future payments of taxes, including
assessments for improvements, insurance, and water, sewer, and
land rents;
(iv) fees for notarizing deeds and other documents; and
(v) appraisal and credit report fees;
(4) a delinquency charge on any installment, including the
minimum payment due in connection with the open-end credit, not
paid in full on or before the tenth day after its due date in an
amount not to exceed five percent of the amount of the
installment;
(5) for any returned check or returned automatic payment
withdrawal request, an amount not in excess of the service
charge limitation in section 332.50; and
(6) charges for other benefits, including insurance,
conferred on the borrower that are of a type that is not for
credit.
(b) An additional charge may be made for insurance written
in connection with the loan:
(1) with respect to insurance against loss of or damage to
property, or against liability arising out of the ownership or
use of property, if the association furnishes a clear,
conspicuous, and specific statement in writing to the borrower
setting forth the cost of the insurance if obtained from or
through the association and stating that the borrower may choose
the person through whom the insurance is to be obtained;
(2) with respect to credit insurance providing life,
accident, health, or unemployment coverage, if the insurance
coverage is not required by the association, and this fact is
clearly and conspicuously disclosed in writing to the borrower,
and the borrower gives specific, dated, and separately signed
affirmative written indication of the borrower's desire to do so
after written disclosure to the borrower of the cost of the
insurance; and
(3) with respect to vendor's single interest insurance, but
only (i) to the extent that the insurer has no right of
subrogation against the borrower, and (ii) to the extent that
the insurance does not duplicate the coverage of other insurance
under which loss is payable to the association as its interest
may appear, against loss of or damage to property for which a
separate charge is made to the borrower pursuant to paragraph
(b), clause (1), and (iii) if a clear, conspicuous, and specific
statement in writing is furnished by the association to the
borrower setting forth the cost of the insurance if obtained
from or through the association and stating that the borrower
may choose the person through whom the insurance is to be
obtained.
(c) In addition to the finance charges and other additional
charges permitted by this section, an association may contract
for and receive the following additional charges in connection
with open-end credit:
(1) annual charges, not to exceed $50 per annum, payable in
advance, for the privilege of opening and maintaining open-end
credit;
(2) charges for the use of an automated teller machine;
(3) charges for any monthly or other periodic payment
period in which the borrower has exceeded or, except for the
association's dishonor would have exceeded, the maximum approved
credit limit, in an amount not in excess of the service charge
permitted in section 332.50;
(4) charges for obtaining a cash advance in an amount not
to exceed the service charge permitted in section 332.50; and
(5) charges for check and draft copies and for the
replacement of lost or stolen credit cards.
Subd. 6. [ADVANCES TO PERFORM COVENANTS OF BORROWER OR
PURCHASER.] (a) If the agreement with respect to a loan or
contract contains covenants by the borrower or purchaser to
perform certain duties pertaining to insuring or preserving
collateral and the association pursuant to the agreement pays
for performance of the duties on behalf of the borrower or
purchaser, the association may add to the debt or contract
balance the amounts so advanced. Within a reasonable time after
advancing any sums, the association shall state to the borrower
or purchaser in writing the amount of sums advanced, any charges
with respect to this amount, and any revised payment schedule
and, if the duties of the borrower or purchaser performed by the
association pertain to insurance, a brief description of the
insurance paid for by the association including the type and
amount of coverages. Further information need not be given.
(b) A finance charge equal to that specified in the loan
agreement or contract may be made for sums advanced under
paragraph (a).
Subd. 7. [ATTORNEY'S FEES.] With respect to a loan or
credit sale, the agreement may provide for payment by the
borrower of the attorney's fees incurred in connection with
collection or foreclosure.
Subd. 8. [RIGHT TO PREPAY.] The borrower or purchaser may
prepay in full the unpaid balance of a consumer loan or
contract, at any time without penalty.
Subd. 9. [CREDIT INSURANCE.] (a) The sale of credit
insurance is subject to the provisions of chapter 62B and the
rules adopted under that chapter, but the term of the insurance
may exceed 60 months if the loan exceeds 60 months and the
insurance will nevertheless be subject to chapter 62B and the
rules adopted under that chapter.
(b) An association which provides credit insurance in
relation to open-end credit may calculate the charge to the
borrower in each billing cycle by applying the current premium
rate to the balance in the manner permitted with respect to
finance charges by the provisions on finance charge in this
section.
(c) Upon prepayment in full of a consumer loan by the
proceeds of credit insurance, the consumer or the consumer's
estate is entitled to a refund of any portion of a separate
charge for insurance which by reason of prepayment is retained
by the association or returned to it by the insurer, unless the
charge was computed from time to time on the basis of the
balances of the consumer's loan.
(d) This section does not require an association to grant a
refund to the consumer if all refunds due to the consumer under
paragraph (c) amount to less than $1 and, except as provided in
paragraph (c), does not require the association to account to
the consumer for any portion of a separate charge for insurance
because:
(1) the insurance is terminated by performance of the
insurer's obligation;
(2) the association pays or accounts for premiums to the
insurer in amounts and at times determined by the agreement
between them; or
(3) the association receives directly or indirectly under
any policy of insurance a gain or advantage not prohibited by
law.
(e) Except as provided in paragraph (d), the association
shall promptly make or cause to be made an appropriate refund to
the consumer with respect to any separate charge made to the
consumer for insurance if:
(1) the insurance is not provided or is provided for a
shorter term than for which the charge to the borrower for
insurance was computed; or
(2) the insurance terminates before the end of the term for
which it was written because of prepayment in full or otherwise.
(f) If an association requires insurance, upon notice to
the borrower, the borrower has the option of providing the
required insurance through an existing policy of insurance owned
or controlled by the borrower, or through a policy to be
obtained and paid for by the borrower, but the association for
reasonable cause may decline the insurance provided by the
borrower.
Subd. 10. [PROPERTY AND LIABILITY INSURANCE.] (a) Except
as otherwise provided in this section and subject to the
provisions on additional charges and maximum finance charges in
this section, an association may agree to sell, as an agent,
property and liability insurance, and may contract for and
receive a charge for such insurance separate from and in
addition to other charges. An association need not make a
separate charge for the insurance provided or required by it.
This section does not authorize the issuance of the insurance
prohibited under any statute or rule governing the business of
insurance nor does it authorize an association to underwrite
insurance.
(b) This section does not apply to an insurance premium
loan. An association may request cancellation of a policy of
property or liability insurance only after the borrower's
default or in accordance with a written authorization by the
borrower. In either case, the cancellation does not take effect
until written notice is delivered to the borrower or mailed to
the borrower at the borrower's address as stated by the
borrower. The notice must state that the policy may be canceled
on a date not less than ten days after the notice is delivered,
or, if the notice is mailed, not less than 13 days after it is
mailed. A cancellation may not take effect until those notice
periods expire.
Subd. 11. [CONSUMER PROTECTIONS.] (a) Associations shall
comply with the requirements of the Federal Truth in Lending
Act, United States Code, title 15, section 1601 to 1693, in
connection with a consumer loan or credit sale for a consumer
purpose.
(b) Associations shall comply with the following consumer
protection provisions in connection with a consumer loan or
credit sale for a consumer purpose: sections 325G.02 to
325G.05; 325G.06 to 325G.11; 325G.15 to 325G.22; and 325G.29 to
325G.36, and the Code of Federal Regulations, title 12, part 535.
(c) An assignment of a consumer's earnings by the consumer
to an association as payment or as security for payment of a
debt arising out of a consumer loan or consumer credit sale is
unenforceable by the association and revocable by the consumer.
Subd. 12. [LOANS OTHER THAN CONSUMER LOANS.] Loans other
than consumer loans are not subject to the provisions and
limitations of subdivisions 8, 9, 10, paragraph (b), and 11.
Subd. 13. [EFFECT OF VIOLATIONS ON RIGHTS OF PARTIES.] (a)
If an association has violated any provision of this section
applying to collection of finance or other charges, the borrower
has a cause of action to recover damages and also a right in an
action other than a class action, to recover from the
association violating this section a penalty in an amount
determined by the court not less than $100 nor more than
$1,000. With respect to violations arising from other than
open-end credit transactions, no action may be brought pursuant
to this paragraph and no set-off or recoupment may be asserted
pursuant to this paragraph, more than one year after the making
of the debt.
(b) A borrower is not obligated to pay a charge in excess
of that allowed by this section and has a right of refund of any
excess charge paid. A refund may not be made by reducing the
borrower's obligation by the amount of the excess charge, unless
the association has notified the borrower that the borrower may
request a refund and the borrower has not so requested within 30
days thereafter. If the debtor has paid an amount in excess of
the lawful obligation under the agreement, the borrower may
recover the excess amount from the association who made the
excess charge or from an assignee of the association's rights
who undertakes direct collection of payments from or enforcement
of rights against borrowers arising from the debt.
(c) If an association has contracted for or received a
charge in excess of that allowed by this section, or if a
borrower is entitled to a refund and a person liable to the
borrower refuses to make a refund within a reasonable time after
demand, the borrower may recover from the association or the
person liable in an action other than a class action a penalty
in an amount determined by the court not less than $100 nor more
than $1,000. With respect to excess charges arising from other
than open-end credit transactions, no action pursuant to this
paragraph may be brought more than one year after the making of
the debt. For purposes of this paragraph, a reasonable time is
presumed to be 30 days.
(d) A violation of this section does not impair rights on a
debt.
(e) An association is not liable for a penalty under
paragraph (a) or (c) if it notifies the borrower of a violation
before the association receives from the borrower written notice
of the violation or the borrower has brought an action under
this section, and the association corrects the violation within
45 days after notifying the borrower. If the violation consists
of a prohibited agreement, giving the borrower a corrected copy
of the writing containing the violation is sufficient
notification and correction. If the violation consists of an
excess charge, correction must be made by an adjustment or
refund.
(f) An association may not be held liable in an action
brought under this section for a violation of this section if
the association shows by a preponderance of evidence that the
violation was not intentional and resulted from a bona fide
error notwithstanding the maintenance of procedures reasonably
adopted to avoid the error.
(g) In an action in which it is found that an association
has violated this section, the court shall award to the borrower
the costs of the action and to the borrower's attorneys their
reasonable fees.
Sec. 67. Minnesota Statutes 1986, section 51A.40, is
amended to read:
51A.40 [DEALING WITH SUCCESSORS IN INTEREST.]
In the case of any investment made by an association in
a real estate loan secured by a mortgage on real property,
including a real estate loan, in the event the ownership of the
real estate security or any part thereof becomes vested in a
person other than the party or parties originally executing the
security instruments, and provided there is not an agreement in
writing to the contrary, an association may, without notice to
such party or parties, deal with such successor or successors in
interest with reference to said mortgage and the debt thereby
secured in the same manner as with such party or parties, and
may forbear to sue or may extend time for payment of or
otherwise modify the terms of the debt secured thereby, without
discharging or in any way affecting the original liability of
such party or parties thereunder or upon the debt thereby
secured.
Sec. 68. Minnesota Statutes 1986, section 51A.44,
subdivision 1, is amended to read:
Subdivision 1. [ANNUAL REPORT.] On or before the last day
of January April in each year, every association shall make an
annual written report to the commissioner, upon a form to be
prescribed and furnished by the commissioner, of its affairs and
operations, which shall include a complete statement of its
financial condition, including a statement of income and expense
since its last previous similar report, for the 12 months ending
on the 31st day of December of the previous year. Every such
report shall be verified by the president and treasurer.
Sec. 69. Minnesota Statutes 1986, section 51A.48, is
amended to read:
51A.48 [RIGHT TO DECLARATORY JUDGMENT.]
At any time after any controversy has arisen between the
commissioner and an association with respect to any question of
law or rule or with respect to any question involving
immeasurable or irreparable damage to the association, and prior
to an administrative or judicial hearing, the association or the
commissioner may apply to any court of competent jurisdiction in
the county in which the principal home office of the association
is located for a declaratory judgment as to such question, and
such court shall have and shall take jurisdiction and decide the
controversy on its merits in accordance with the weight of the
evidence, and such court shall have full power to enforce its
orders.
Sec. 70. Minnesota Statutes 1986, section 51A.50, is
amended to read:
51A.50 [FEDERAL SAVINGS ASSOCIATIONS AND SAVINGS BANKS.]
Federal savings associations, federal savings banks, or
federal savings and loan associations, incorporated pursuant to
the laws of the United States, as now or hereafter amended, are
not foreign corporations or foreign associations. Unless
federal laws or regulations provide otherwise, federal
associations, federal savings banks, and the members or
stockholders thereof shall possess all of the rights, powers,
privileges, benefits, immunities, and exemptions that are now
provided or that hereafter may be provided by the laws of this
state for savings associations organized under the laws of this
state and for the members or stockholders thereof. This
provision is additional and supplemental to any provision which,
by specific reference, is applicable to federal associations and
the members or stockholders thereof. Federal savings banks
shall possess all of the rights, powers, privileges, benefits,
immunities, liabilities, and exemptions that are now provided or
that hereafter may be provided by the laws of this state for
federal savings and loan associations. The following sections
apply to federal associations, except to the extent they are
inconsistent with federal law or regulations: sections 51A.01;
51A.02; 51A.065; 51A.15, subdivision 6; 51A.21, subdivisions 6a,
15, 16, 22, 25, 27, and 28; 51A.23, subdivision 1; 51A.24;
51A.251; 51A.261; 51A.262; 51A.27; 51A.28; 51A.29; 51A.30;
51A.31; 51A.37, subdivisions 1, 2, 3, paragraphs (a), (c), (d),
4, 5, 6, 7, 8, 9, 10, 11, and 12; 51A.38; 51A.385; 51A.40;
51A.50; 51A.52; 51A.56; and 51A.57.
Sec. 71. Minnesota Statutes 1986, section 51A.51,
subdivision 1, is amended to read:
Subdivision 1. [FEES TO BE PAID TO STATE TREASURER.]
Associations An association shall pay fees by delivering to the
commissioner a check payable to the state treasurer.
Sec. 72. Minnesota Statutes 1986, section 51A.53, is
amended to read:
51A.53 [POWERS OF FEDERAL SAVINGS AND LOAN ASSOCIATIONS;
APPROVAL.]
Subject to the approval of the commissioner, any savings
and loan association organized under sections 51A.01 to 51A.57
is hereby vested with all the powers conferred upon a
federal savings and loan association organized under the laws
and regulations of the United States or its agencies, as
amended, as fully and completely as if the powers were
specifically enumerated and described herein, provided that the
same are not specifically prohibited by state law.
Sec. 73. Minnesota Statutes 1986, section 51A.56, is
amended to read:
51A.56 [ACT CONTROLLING.]
Insofar as the provisions of sections 51A.01 to 51A.57 are
inconsistent with the provisions of any other law
affecting savings associations, the provisions of sections
51A.01 to 51A.57 shall control.
Sec. 74. Minnesota Statutes 1986, section 118.005,
subdivision 1, is amended to read:
Subdivision 1. The governing body of every municipality,
as defined in section 118.01, which has the power to receive and
disburse funds, shall designate as a depository of the funds
such national, insured state banks or thrift institutions as
defined in section 51A.02, subdivision 23 54, as it may deem
proper. The governing body may authorize the treasurer or chief
financial officer to exercise the powers of the governing body
in designating a depository of the funds.
For purposes of this chapter, a credit union is a thrift
institution.
Sec. 75. [REPEALER.]
Minnesota Statutes 1986, sections 51A.03, subdivision 2a;
51A.05, subdivisions 3, 4, and 5; 51A.091; 51A.11, subdivision
3; 51A.18; 51A.19, subdivisions 2 and 3; 51A.21, subdivisions 6
and 19; 51A.23, subdivisions 2, 3, 4, and 5; 51A.37,
subdivisions 7 and 9; 51A.38, subdivision 6; and 51A.39 are
repealed.
Sec. 76. [EFFECTIVE DATE.]
Sections 1 to 75 are effective the day following final
enactment.
Approved April 26, 1988
Official Publication of the State of Minnesota
Revisor of Statutes