Minnesota Session Laws - 1990, Regular Session

  

                         Laws of Minnesota 1990 

                        CHAPTER 464-H.F.No. 1913 
           An act relating to commerce; regulating dividends on 
          claims in liquidation proceedings; regulating the 
          lending practices of regulated lenders; specifying the 
          loan fees and charges that may be imposed by regulated 
          lenders; amending Minnesota Statutes 1988, sections 
          49.24, subdivision 9; 56.131, subdivisions 1, and 2; 
          56.14; and 325G.22, by adding a subdivision.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
     Section 1.  Minnesota Statutes 1988, section 49.24, 
subdivision 9, is amended to read: 
    Subd. 9.  [DIVIDENDS ON CLAIMS.] At any time after the 
expiration of the date fixed for the presentation of claims the 
commissioner may, out of the funds remaining on hand after the 
payment of expenses and amounts due to depositors, declare one 
or more dividends, and after the expiration of one year from the 
first publication of notice to creditors, may declare a final 
dividend, such dividends to be paid to such persons in such 
amounts as may be directed by the district court.  
    If any dividend on any claim shall be less than $1, the 
commissioner may hold that dividend until it with subsequent 
dividends amounts to the sum of $1 or more.  The commissioner 
shall pay all dividends so withheld with the final dividend.  
    Sec. 2.  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 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 $750; and (ii) 19 percent per year on that part of the 
unpaid balance of the principal amount exceeding $350 $750; 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.  
    (8) With respect to a loan secured by an interest in real 
estate, and having a maturity of more than 60 months, the 
original schedule of installment payments must fully amortize 
the principal and interest on the loan.  The original schedule 
of installment payments for any other loan secured by an 
interest in real estate must provide for payment amounts that 
are sufficient to pay all interest scheduled to be due on the 
loan. 
    Sec. 3.  Minnesota Statutes 1988, section 56.131, 
subdivision 2, is amended to read: 
    Subd. 2.  [ADDITIONAL CHARGES.] In addition to the charges 
provided for by this section and section 56.155, no further or 
other amount whatsoever, shall be directly or indirectly 
charged, contracted for, or received for the loan made, except 
actual out of pocket expenses of the licensee to realize on a 
security after default, and except for the following additional 
charges which may be included in the principal amount of the 
loan:  
    (a) lawful fees and taxes paid to any public officer to 
record, file, or release security; 
    (b) with respect to a loan secured by an interest in real 
estate, the following closing costs, if they are bona fide, 
reasonable in amount, and not for the purpose of circumvention 
or evasion of this section; provided the costs do not exceed one 
percent of the principal amount or $250, whichever is greater: 
    (1) fees or premiums for title examination, abstract of 
title, title insurance, surveys, or similar purposes; 
    (2) fees, if not paid to the licensee, an employee of the 
licensee, or a person related to the licensee, for preparation 
of a mortgage, settlement statement, or other documents, fees 
for notarizing mortgages and other documents, and appraisal 
fees; 
    (c) the premium for insurance in lieu of perfecting and 
releasing a security interest to the extent that the premium 
does not exceed the fees described in paragraph (a).; 
    (d) discount points and appraisal fees may not be included 
in the principal amount of a loan secured by an interest in real 
estate when the loan is a refinancing for the purpose of 
bringing the refinanced loan current and is made within 24 
months of the original date of the refinanced loan.  For 
purposes of this paragraph, a refinancing is not considered to 
be for the purpose of bringing the refinanced loan current if 
new funds advanced to the customer, not including closing costs 
or delinquent installments, exceed $1,000.  
    Sec. 4.  Minnesota Statutes 1988, section 56.14, is amended 
to read: 
    56.14 [DUTIES OF LICENSEE.] 
    Every licensee shall: 
    (1) deliver to the borrower (or if there are two or more 
borrowers to one of them) at the time any loan is made a 
statement making the disclosures and furnishing the information 
required by the federal Truth-in-Lending Act, United States 
Code, title 15, sections 1601 to 1667e, as amended from time to 
time, with respect to the contract of loan.  A copy of the loan 
contract may be delivered in lieu of a statement if it discloses 
the required information; 
    (2) deliver or mail to the borrower without request, a 
written receipt within 30 days following payment for each 
payment by coin or currency made on account of any loan wherein 
charges are computed and paid on unpaid principal balances for 
the time actually outstanding, specifying the amount applied to 
charges and the amount, if any, applied to principal, and 
stating the unpaid principal balance, if any, of the loan; and 
wherein precomputed charges have been added to the principal of 
the loan specifying the amount of the payment applied to 
principal and charges combined, the amount applied to default or 
extension charges, if any, and stating the unpaid balance, if 
any, of the precomputed loan contract.  A periodic statement 
showing a payment received by mail complies with this clause; 
    (3) permit payment to be made in advance in any amount on 
any contract of loan at any time, but the licensee may apply the 
payment first to all charges in full at the agreed rate up to 
the date of the payment; 
    (4) upon repayment of the loan in full, mark indelibly 
every obligation and security, other than a mortgage or security 
agreement which secures a new loan to the licensee, signed by 
the borrower with the word "Paid" or "Canceled," and release any 
mortgage or security agreement which no longer secures a loan to 
the licensee, restore any pledge, and cancel and return any 
note, and any assignment given to the licensee which does not 
secure a new loan to the licensee within 20 days after the 
repayment; 
    (5) display prominently in each licensed place of business 
a full and accurate schedule, to be approved by the 
commissioner, of the charges to be made and the method of 
computing the same; furnish a copy of the contract of loan to 
any person obligated on it or who may become obligated on it at 
any time upon the request of that person; 
    (6) show in the loan contract or statement of loan the rate 
or rates of charge on which the charge in the contract is based, 
expressed in terms of rate or rates per annum.  The rate 
expression shall be printed in at least 8-point type on the loan 
statement or copy of the loan contract given to the borrower. 
    Sec. 5.  Minnesota Statutes 1988, section 325G.22, is 
amended by adding a subdivision to read:  
    Subd. 1a.  [ADJUSTMENT OF DOLLAR AMOUNTS.] The dollar 
amount in subdivision 1 shall change periodically as provided in 
section 550.37, subdivision 4a. 
    Sec. 6.  [EFFECTIVE DATE.] 
    Sections 1 to 5 are effective the day following final 
enactment. 
    Presented to the governor April 19, 1990 
    Deposited with the Secretary of State April 23, 1990