Minnesota Session Laws - 1989, Regular Session

  

                         Laws of Minnesota 1989 

                        CHAPTER 217-H.F.No. 1548 
           An act relating to financial institutions; regulating 
          charges and fees on loans and extensions of credit by 
          financial institutions and others; making various 
          internal reference changes; amending Minnesota 
          Statutes 1988, sections 51A.01; 51A.02, subdivision 
          14; 51A.38, subdivision 3; 51A.385, subdivisions 4, 5, 
          6, 7, 8, 9, 11, 12, and 13; 51A.51, subdivision 4; 
          51A.53; 51A.55, subdivisions 1 and 2; 51A.56; 51A.57; 
          56.131, subdivision 1; 168.72, subdivision 1; 168.73; 
          and 507.45, subdivision 2. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
     Section 1.  Minnesota Statutes 1988, section 51A.01, is 
amended to read: 
    51A.01 [CITATION.] 
    Sections 51A.01 to 51A.57 51A.58 may be cited as the 
"savings association act."  
    Sec. 2.  Minnesota Statutes 1988, section 51A.02, 
subdivision 14, is amended to read: 
    Subd. 14.  [CONDITIONAL SALE CONTRACT.] "Conditional sale 
contract" or "credit sale contract" means a contract evidencing 
a credit sale on credit. 
    Sec. 3.  Minnesota Statutes 1988, 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 and the payment of 
interest on the unpaid balance of the loan, in the manner 
determined by the association, and the remainder on the 
reduction of principal.  All loans may be prepaid in part or in 
full, at any time.  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. 4.  Minnesota Statutes 1988, section 51A.385, 
subdivision 4, is amended to read: 
    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; 48.195; 
59A.01 to 59A.15; 168.66 to 168.77, or; 334.01, subdivision 2; 
and 334.011; and 334.012 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,; or 334.012, 
the provisions of chapter 334 do not apply to extensions of 
credit made pursuant to this section or the sections mentioned 
in this subdivision. 
    Sec. 5.  Minnesota Statutes 1988, section 51A.385, 
subdivision 5, is amended to read: 
    Subd. 5.  [ADDITIONAL CHARGES.] (a) In addition to the 
finance charges permitted by this section, an association, or a 
person described in subdivision 2, to the extent not otherwise 
prohibited by law, 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 or credit sale contract 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 payment, 
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 payment; 
    (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 or credit sale contract, which may 
be included in the amount financed: 
    (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, which may be included in the amount 
financed or balance upon which the finance charge is computed: 
    (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. 
    Sec. 6.  Minnesota Statutes 1988, section 51A.385, 
subdivision 6, is amended to read: 
    Subd. 6.  [ADVANCES TO PERFORM COVENANTS OF BORROWER OR 
PURCHASER.] (a) If the agreement with respect to a loan 
or credit sale 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.  Before or within a 
reasonable time after advancing any sums, the association shall 
state to the borrower or purchaser in writing the amount of sums 
advanced or to be 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 or 
to be 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 credit sale contract may be made for sums advanced 
under paragraph (a). 
    Sec. 7.  Minnesota Statutes 1988, section 51A.385, 
subdivision 7, is amended to read: 
    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 and court costs incurred in 
connection with collection or foreclosure.  This subdivision is 
not a limitation on attorney's fees that may be charged to an 
organization. 
    Sec. 8.  Minnesota Statutes 1988, section 51A.385, 
subdivision 8, is amended to read: 
    Subd. 8.  [RIGHT TO PREPAY.] The borrower or purchaser may 
prepay in full the unpaid balance of a consumer loan or credit 
sale contract, at any time without penalty.  
    Sec. 9.  Minnesota Statutes 1988, section 51A.385, 
subdivision 9, is amended to read: 
    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 or credit sale contract exceeds 
60 months and the insurance will nevertheless be subject to 
chapter 62B and the rules adopted under that chapter.  In case 
there are multiple consumers obligated under a transaction 
subject to this chapter, no policy or certificate or insurance 
providing credit life insurance may be procured by or through an 
association or person described in subdivision 2 upon more than 
two of the consumers, in which case they may be insured jointly. 
    (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 or credit 
sale contract 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 or credit sale contract. 
    (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. 
    Sec. 10.  Minnesota Statutes 1988, section 51A.385, 
subdivision 11, is amended to read: 
    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 where the federal Truth in Lending Act is applicable. 
    (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, where those statutes or regulations are applicable. 
    (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. 
    Sec. 11.  Minnesota Statutes 1988, section 51A.385, 
subdivision 12, is amended to read: 
    Subd. 12.  [LOANS AND CONTRACTS OTHER THAN CONSUMER LOANS 
AND CONTRACTS.] Loans and credit sale contracts other than 
consumer loans and consumer credit sale contracts are not 
subject to the provisions and limitations of subdivisions 8, 9, 
10, paragraph (b), and 11. 
    Sec. 12.  Minnesota Statutes 1988, section 51A.385, 
subdivision 13, is amended to read: 
    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 
or purchaser under a credit sale contract 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 or purchaser under a credit sale contract 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 or purchaser's 
obligation by the amount of the excess charge, unless the 
association has notified the borrower or purchaser that the 
borrower or purchaser may request a refund and the borrower or 
purchaser has not so requested within 30 days thereafter.  If 
the debtor borrower or purchaser has paid an amount in excess of 
the lawful obligation under the agreement, the borrower or 
purchaser 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 or purchasers 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 or purchaser under a credit sale contract is entitled 
to a refund and a person liable to the borrower or purchaser 
refuses to make a refund within a reasonable time after demand, 
the borrower or purchaser 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 or purchaser 
under a credit sale contract of a violation before the 
association receives from the borrower or purchaser written 
notice of the violation or the borrower or purchaser has brought 
an action under this section, and the association corrects the 
violation within 45 days after notifying the borrower or 
purchaser.  If the violation consists of a prohibited agreement, 
giving the borrower or purchaser 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 
or the purchaser under a credit sale contract the costs of the 
action and to the borrower's or purchaser's attorneys their 
reasonable fees. 
    Sec. 13.  Minnesota Statutes 1988, section 51A.51, 
subdivision 4, is amended to read: 
    Subd. 4.  [SUPERVISION AND EXAMINATION FEE.] At the time of 
filing its annual report each association shall pay to the 
commissioner as a fee for supervision and examination an annual 
assessment as determined by the commissioner pursuant to the 
provisions of section 46.131.  Such assessment shall be in lieu 
of all other license fees and charges of any kind whatsoever to 
any other state department or office, municipality, county, or 
other political subdivision; provided that the commissioner may 
assess against any such association the actual and necessary per 
diem expenses of and incidental to any additional examinations, 
or to supervision, or to any appraisal or special audit made 
pursuant to an order of the commissioner acting under authority 
of sections 51A.01 to 51A.57 51A.58. 
    Sec. 14.  Minnesota Statutes 1988, section 51A.53, is 
amended to read: 
     51A.53 [POWERS OF FEDERAL ASSOCIATIONS; APPROVAL.] 
     Subject to the approval of the commissioner, any savings 
and loan association organized under sections 51A.01 to 51A.57 
51A.58 is vested with all powers conferred upon a federal 
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. 15.  Minnesota Statutes 1988, section 51A.55, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ALL THRIFT AND HOME FINANCING 
ORGANIZATIONS, TO BE SUBJECT TO PROVISIONS OF SECTIONS 51A.01 TO 
51A.57.] All persons accepting moneys from the public and 
engaged in home financing, whether or not incorporated, and 
every corporation heretofore incorporated under the statutes of 
this state which has for its purpose the promotion of thrift and 
the financing of homes, except those regulated under other 
Minnesota Statutes or federal laws, by whatever name known, 
shall at the time sections 51A.01 to 51A.57 51A.58 become 
effective be subject to the provisions of sections 51A.01 
to 51A.57 51A.58 and shall be deemed to exist hereunder.  
    Sec. 16.  Minnesota Statutes 1988, section 51A.55, 
subdivision 2, is amended to read: 
    Subd. 2.  [ALL SUCH EXISTING CORPORATIONS HERETOFORE 
INCORPORATED CONFORMED TO PROVISIONS OF SECTIONS 51A.01 TO 
51A.57.] The name, rights, powers, privileges, and immunities of 
every such corporation heretofore incorporated in this state 
shall be governed, controlled, construed, extended, limited, and 
determined by the provisions of sections 51A.01 to 51A.57 51A.58 
to the same extent and effect as if such corporation had been 
incorporated pursuant hereto, and the articles of association, 
certificate of incorporation, or charter, however entitled, 
bylaws and constitution, or other rules of every such 
corporation heretofore made or existing are hereby modified, 
altered, and amended to conform to the provisions of sections 
51A.01 to 51A.57 51A.58, with or without the issuance or 
approval by the commissioner of conformed copies of such 
documents, and the same are declared void to the extent that the 
same are inconsistent with the provisions of sections 51A.01 
to 51A.57 51A.58; except that the obligations of any such 
existing corporation, whether between such corporation and its 
members, or any of them, or any other person or persons, or any 
valid contract between the members of any such corporation, or 
between such corporation and any other person or persons, 
existing on July 1, 1969, shall not be in any way impaired by 
the provisions of sections 51A.01 to 51A.57 51A.58, and, with 
such exceptions, every such corporation shall possess the 
rights, powers, privileges, and immunities and shall be subject 
to the duties, liabilities, disabilities, and restrictions 
conferred and imposed by sections 51A.01 to 51A.57 51A.58, 
notwithstanding anything to the contrary in its certificate of 
incorporation, bylaws, constitution, or rules. 
    Sec. 17.  Minnesota Statutes 1988, section 51A.56, is 
amended to read: 
    51A.56 [ACT CONTROLLING.] 
    Insofar as the provisions of sections 51A.01 to 51A.57 
51A.58 are inconsistent with the provisions of any other law 
affecting associations, the provisions of sections 51A.01 
to 51A.57 51A.58 shall control. 
    Sec. 18.  Minnesota Statutes 1988, section 51A.57, is 
amended to read: 
    51A.57 [SEPARABILITY.] 
    If any provision, clause, or phrase of sections 51A.01 to 
51A.57 51A.58 or the application thereof to any person or 
circumstance is held invalid, such invalidity shall not affect 
other provisions or applications of sections 51A.01 to 51A.57 
51A.58 which can be given effect without the invalid provisions 
or application, and to this end the provisions of sections 
51A.01 to 51A.57 51A.58 are declared to be separable.  
    Sec. 19.  Minnesota Statutes 1988, section 56.131, 
subdivision 1, is amended to read: 
    Subdivision 1.  [INTEREST RATES AND CHARGES.] (a) On any 
loan in a principal amount not exceeding $35,000 or ten 15 
percent of a corporate licensee's contributed capital and 
appropriated reserves as defined in section 53.015, if greater, 
a licensee may contract for and receive interest, calculated 
according to the actuarial method, not exceeding the equivalent 
of the greater of any of the following: 
    (1) the total of:  (i) 33 percent per year on that part of 
the unpaid balance of the principal amount not exceeding $350; 
and (ii) 19 percent per year on that part of the unpaid balance 
of the principal amount exceeding $350; or 
    (2) 21.75 percent per year on the unpaid balance of the 
principal amount. 
    (b) On any loan where interest has been calculated 
according to the method provided for in paragraph (a), clause 
(1), interest must be contracted for and earned as provided in 
that provision or at the single annual percentage rate computed 
to the nearest 1/100 of one percent that would earn the same 
total interest at maturity of the contract as would be earned by 
the application of the graduated rates provided in paragraph 
(a), clause (1), when the debt is paid according to the agreed 
terms and the calculations are made according to the actuarial 
method.  
    (c) Loans may be interest-bearing or precomputed. 
    (d) To compute time on interest-bearing and precomputed 
loans, including, but not limited to the calculation of 
interest, a day is considered 1/30 of a month when calculation 
is made for a fraction of a calendar month.  A year is 12 
calendar months.  A calendar month is that period from a given 
date in one month to the same numbered date in the following 
month, and if there is no same numbered date, to the last day of 
the following month.  When a period of time includes a whole 
month and a fraction of a month, the fraction of a month is 
considered to follow the whole month.  
      In the alternative, for interest-bearing loans, a licensee 
may charge interest at the rate of 1/365 of the agreed annual 
rate for each actual day elapsed.  
      (e) With respect to interest-bearing loans: 
      (1) Interest must be computed on unpaid principal balances 
outstanding from time to time, for the time outstanding.  Each 
payment must be applied first to the accumulated interest and 
the remainder of the payment applied to the unpaid principal 
balance; provided however, that if the amount of the payment is 
insufficient to pay the accumulated interest, the unpaid 
interest continues to accumulate to be paid from the proceeds of 
subsequent payments and is not added to the principal balance. 
      (2) Interest must not be payable in advance or compounded.  
However, if part or all of the consideration for a new loan 
contract is the unpaid principal balance of a prior loan, then 
the principal amount payable under the new loan contract may 
include any unpaid interest which has accrued.  The unpaid 
principal balance of a precomputed loan is the balance due after 
refund or credit of unearned interest as provided in paragraph 
(f), clause (3).  The resulting loan contract is deemed a new 
and separate loan transaction for all purposes. 
      (f) With respect to precomputed loans: 
      (1) Loans must be repayable in substantially equal and 
consecutive monthly installments of principal and interest 
combined, except that the first installment period may be more 
or less than one month by not more than 15 days, and the first 
installment payment amount may be larger than the remaining 
payments by the amount of interest charged for the extra days 
and must be reduced by the amount of interest for the number of 
days less than one month to the first installment payment; and 
monthly installment payment dates may be omitted to accommodate 
borrowers with seasonal income. 
      (2) Payments may be applied to the combined total of 
principal and precomputed interest until the loan is fully 
paid.  Payments must be applied in the order in which they 
become due. 
      (3) When any loan contract is paid in full by cash, renewal 
or refinancing, or a new loan, one month or more before the 
final installment due date, a licensee shall refund or credit 
the borrower with the total of the applicable charges for all 
fully unexpired installment periods, as originally scheduled or 
as deferred, which follow the day of prepayment; if the 
prepayment is made other than on a scheduled payment date, the 
nearest scheduled installment payment date must be used in the 
computation; provided further, if the prepayment occurs prior to 
the first installment due date, the licensee may retain 1/30 of 
the applicable charge for a first installment period of one 
month for each day from the date of the loan to the date of 
prepayment, and shall refund or credit the borrower with the 
balance of the total interest contracted for.  If the maturity 
of the loan is accelerated for any reason and judgment is 
entered, the licensee shall credit the borrower with the same 
refund as if prepayment in full had been made on the date the 
judgment is entered. 
     (4) If an installment, other than the final installment, is 
not paid in full within ten days of its scheduled due date, a 
licensee may contract for and receive a default charge not 
exceeding five percent of the amount of the installment, but not 
less than $4. 
     A default charge under this subdivision may not be 
collected on an installment paid in full within ten days of its 
scheduled due date, or deferred installment due date with 
respect to deferred installments, even though a default or 
deferral charge on an earlier installment has not been paid in 
full.  A default charge may be collected at the time it accrues 
or at any time thereafter. 
     (5) If the parties agree in writing, either in the loan 
contract or in a subsequent agreement, to a deferment of wholly 
unpaid installments, a licensee may grant a deferment and may 
collect a deferment charge as provided in this section.  A 
deferment postpones the scheduled due date of the earliest 
unpaid installment and all subsequent installments as originally 
scheduled, or as previously deferred, for a period equal to the 
deferment period.  The deferment period is that period during 
which no installment is scheduled to be paid by reason of the 
deferment.  The deferment charge for a one-month period may not 
exceed the applicable charge for the installment period 
immediately following the due date of the last undeferred 
payment.  A proportionate charge may be made for deferment for 
periods of more or less than one month.  A deferment charge is 
earned pro rata during the deferment period and is fully earned 
on the last day of the deferment period.  Should a loan be 
prepaid in full during a deferment period, the licensee shall 
make or credit to the borrower a refund of the unearned 
deferment charge in addition to any other refund or credit made 
for prepayment of the loan in full. 
       (6) If two or more installments are delinquent one full 
month or more on any due date, and if the contract so provides, 
the licensee may reduce the unpaid balance by the refund credit 
which would be required for prepayment in full on the due date 
of the most recent maturing installment in default.  Thereafter, 
and in lieu of any other default or deferment charges, the 
single annual percentage rate permitted by this subdivision may 
be charged on the unpaid balance until fully paid. 
     (7) Following the final installment as originally scheduled 
or deferred, the licensee, for any loan contract which has not 
previously been converted to interest-bearing under paragraph 
(f), clause (6), may charge interest on any balance remaining 
unpaid, including unpaid default or deferment charges, at the 
single annual percentage rate permitted by this subdivision 
until fully paid.  
    Sec. 20.  Minnesota Statutes 1988, section 168.72, 
subdivision 1, is amended to read: 
    Subdivision 1.  (a) The finance charge authorized by 
sections 168.66 to 168.77 in a retail installment sale may not 
exceed the following simple interest annual percentage rates: 
    Class 1.  Any motor vehicle designated by the manufacturer 
by a year model of the same or not more than one year prior to 
the year in which the sale is made - 18 percent per year. 
    Class 2.  Any motor vehicle designated by the manufacturer 
by a year model of two or three years prior to the year in which 
the sale is made - 19.75 percent per year. 
    Class 3.  Any motor vehicle not in Class 1 or Class 2 - 
23.25 percent per year. 
    (b) The finance charge must be computed on the principal 
balance outstanding from time to time as originally determined 
under section 168.71, clause (b).  The beginning principal 
balance must be as originally determined under section 168.71. 
    Retail installment contracts may be interest-bearing or 
precomputed, and fixed-rate or variable rate.  For precomputed 
retail installment contracts, the finance charge may be 
calculated in advance on the assumption that all scheduled 
payments will be made when due and the effect of prepayment in 
full is governed by section 168.73.  To compute time for the 
purpose of calculating interest under this section and section 
168.73, a day may be considered 1/30 of a month when calculation 
is made for a fraction of a calendar month.  A year is 12 
calendar months.  A calendar month is that period from a given 
date in one month to the same numbered date in the following 
month, and if there is no same-numbered date, to the last day of 
the following month.  When a period of time includes a whole 
month and a fraction of a month, the fraction of a month is 
considered to follow the whole month.  In the alternative, for 
interest-bearing retail installment contracts, a retail seller 
may charge finance charges not to exceed 1/365th of the simple 
interest annual percentage rate permitted in this section for 
each actual day elapsed from the date of the retail installment 
contract through and including the date of payment in full. 
     (c) The finance charge is inclusive of all charges incident 
to investigating and making the contract, and for the extension 
of the credit provided for in the contract and no fee, 
commission, expense or other charge whatsoever may be taken, 
received, reserved, or contracted for except taxes, fees, and 
charges that actually are or will be paid to public officials or 
government agencies for determining the existence of or for 
perfecting, releasing, or satisfying a security interest, and 
except as provided in sections 168.66 to 168.77. 
    Sec. 21.  Minnesota Statutes 1988, section 168.73, is 
amended to read: 
    168.73 [PREPAYMENT IN FULL, REFUND CREDITS, ALLOWANCE.] 
    Notwithstanding the provisions of any retail installment 
contract to the contrary, any retail buyer may pay in full at 
any time before maturity the debt of any retail installment 
contract without penalty.  In paying a precomputed retail 
installment contract in full, the retail buyer shall receive a 
refund credit thereon for such anticipation of payments.  For 
contracts with substantially equal scheduled monthly payments 
remaining after the date of prepayment in full, the refund must 
be calculated for all fully unexpired monthly payment periods 
following the date of payment in full.  For all other contracts, 
the refund must be calculated as of the date in the month 
following prepayment which corresponds to the original contract 
date.  The refund shall be calculated according to the actuarial 
method, less an acquisition cost of $15 after the date 
prepayment is made which may be deducted from the refund so 
calculated.  
    Where the amount of the credit for anticipation of payment 
is less than $1, no refund need be made.  
    The actuarial method means the method of allocating 
payments on a contract between the principal amount and finance 
charge at the contract rate charged under section 168.72, 
whereby a payment is applied first to the accumulated finance 
charge and then to the unpaid principal balance based on the 
original terms of the contract and based on the assumption that 
all payments are made on the due date as originally scheduled or 
deferred. 
    Sec. 22.  Minnesota Statutes 1988, section 507.45, 
subdivision 2, is amended to read: 
    Subd. 2.  No charge for closing services, except a 
charge required to be disclosed by under Regulation Z, Code of 
Federal Regulations, title 12, section 226, or for which an 
estimate has been given pursuant to the Federal Real Estate 
Settlement Procedures Act, may be made by a closing agent unless 
the party to be charged is informed of the charge in writing at 
least five business days before the closing by or on behalf of 
the party charging for the closing services. 
    Presented to the governor May 19, 1989 
    Signed by the governor May 22, 1989, 8:17 p.m.