language to be deleted (2) new language
CHAPTER 638-H.F.No. 2016 An act relating to commerce; regulating accelerated mortgage payment services; requiring a bond or other security; permitting third-party background checks; regulating contracts and the handling of payments; segregating accounts; requiring a study; amending Minnesota Statutes 1992, section 332.13, subdivision 2; proposing coding for new law in Minnesota Statutes, chapter 332. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: Section 1. Minnesota Statutes 1992, section 332.13, subdivision 2, is amended to read: Subd. 2. "Debt prorating" means the performance of any one or more of the following: (a) managing the financial affairs of an individual by distributing income or money to the creditors thereof; (b) receiving funds for the purpose of distributing said funds among creditors in payment or partial payment of obligations of a debtor; or (c) settling, adjusting, prorating, pooling, or liquidating the indebtedness of a debtor. Any person so engaged or holding out as so engaged shall be deemed to be engaged in debt prorating regardless of whether or not a fee is charged for such services. This term shall not include services performed by the following when engaged in the regular course of their respective businesses and professions: (1) Attorneys at law, escrow agents, accountants, broker-dealers in securities; (2) Banks, state or national, trust companies, savings and loan associations, building and loan associations, title insurance companies, insurance companies and all other lending institutions duly authorized to transact business in the state of Minnesota, provided no fee is charged for such service; (3) Persons who, as employees on a regular salary or wage of an employer not engaged in the business of debt prorating, perform credit services for their employer; (4) Public officers acting in their official capacities and persons acting pursuant to court order; (5) Nonprofit corporations, organized under Minnesota Statutes 1967, Chapter 317, giving debt prorating service, provided no fee is charged for such service; (6) Any person while performing services incidental to the dissolution, winding up or liquidation of a partnership, corporation or other business enterprise; (7) The state of Minnesota, its political subdivisions, public agencies and their employees; (8) Credit unions, provided no fee is charged for such service; (9) "Qualified organizations" designated as representative payees for purposes of the Social Security and Supplemental Security Income representative payee system and the federal Omnibus Budget Reconciliation Act of 1990, Public Law Number 101-508; and (10) Accelerated mortgage payment providers. "Accelerated mortgage payment providers" are persons who, after satisfying the requirements of sections 332.30 to 332.303, receive funds to make mortgage payments to a lender or lenders, on behalf of mortgagors, in order to exceed regularly scheduled minimum payment obligations under the terms of the indebtedness. The term does not include: (i) persons or entities described in clauses (1) to (9); (ii) mortgage lenders or servicers, industrial loan and thrift companies, or regulated lenders under chapter 56; or (iii) persons authorized to make loans under section 47.20, subdivision 1. For purposes of this clause and sections 332.30 to 332.303, "lender" means the original lender or that lender's assignee, whichever is the current mortgage holder. Sec. 2. [332.30] [ACCELERATED MORTGAGE PAYMENT PROVIDER; BOND REQUIREMENTS.] (a) Before beginning business in this state, an accelerated mortgage payment provider, as defined in section 332.13, subdivision 2, clause (10), shall submit to the commissioner of commerce either: (1) a surety bond in which the accelerated mortgage payment provider is the obligor, in an amount determined by the commissioner; or (2) if the commissioner agrees to accept it, a deposit: (i) in cash in an amount equivalent to the bond amount; or (ii) of authorized securities, as defined in section 50.14, with an aggregate market value equal to the bond amount. The cash or securities must be deposited with the state treasurer. (b) The amount of the bond required by the commissioner shall vary with the amount of Minnesota client funds held or to be held by the obligor. For new businesses, the bond must be no less than $100,000, except as provided in section 332.301. The commissioner may increase the required bond amount upon 30 days notice to the accelerated mortgage payment provider. (c) If a bond is submitted, it must name as surety an insurance company authorized to transact fidelity and surety business in this state. The bond must run to the state of Minnesota for the use of the state and of any person who may have a claim against the obligor arising out of the obligor's activities as an accelerated mortgage payment provider. The bond must be conditioned that the obligor will not commit any fraudulent act and will faithfully conform to and abide by the provisions of accelerated mortgage payment agreements with Minnesota residents. If an accelerated mortgage payment provider has failed to account to a mortgagor or distribute funds to the mortgagee as required by an accelerated mortgage payment agreement, the mortgagor or the mortgagor's legal representative or receiver or the commissioner shall have, in addition to any other legal remedies, a right of action in the name of the debtor on the bond or the security given pursuant to this section. Sec. 3. [332.301] [BOND; BACKGROUND CHECK.] The commissioner may accept an initial surety bond or deposit in an amount less than $100,000 based upon the business plan of the accelerated mortgage payment provider, provided the commissioner obtains a third-party background check at the expense of the accelerated mortgage payment provider and from a source to be determined by the commissioner. The commissioner may require a third-party background check in connection with any accelerated mortgage payment provider at the expense of the accelerated mortgage payment provider, but no more often than annually. Sec. 4. [332.302] [CONTRACTS; NOTICE TO MORTGAGOR.] A contract entered into between an accelerated mortgage payment provider and a mortgagor shall be in writing and include all applicable terms and conditions including, but not limited to, all fees, costs, and charges. A conforming copy must be provided to the mortgagor before any fees in connection with the accelerated mortgage payment services are received by the accelerated mortgage payment provider. A contract shall provide that the arrangement between the accelerated mortgage payment provider and lender or lenders requires: (1) that if the original terms of the mortgage, mortgage note, or escrow agreement are in default because of nonpayment by the accelerated mortgage payment provider, the lender or lenders mail or otherwise deliver to the mortgagor a written notice within 30 days of the default; and (2) that a written summary of payments received by the accelerated mortgage payment provider by date and amount, payments made to the lender or lenders on behalf of the mortgagor by date and amount, and unremitted balance held by the accelerated mortgage payment provider be provided to the mortgagor at least annually or more frequently on a date or dates mutually agreed upon between the accelerated mortgage payment provider and mortgagor. Sec. 5. [332.303] [SEGREGATED ACCOUNTS.] A payment received by an accelerated mortgage payment provider from or on behalf of a client shall be held by the accelerated mortgage payment provider in a separate trust account clearly designated for client funds. The account shall be in a bank or other depository institution authorized or chartered under the laws of any state or of the United States. The accelerated mortgage payment provider shall not commingle funds held for payment to lenders with its own property or funds. Sec. 6. [SERVICE PROVISION STUDY.] The commissioner of commerce shall report by January 15, 1995, to the commerce and consumer protection committee in the senate and the financial institutions and insurance committee in the house, on the feasibility of requiring financial institutions to offer to mortgagors the option of making their payments on a semimonthly, biweekly, or other accelerated basis, at no additional charge or fee, in order to exceed regularly scheduled minimum payment obligations under the terms of the indebtedness. Sec. 7. [EFFECTIVE DATE.] Sections 1 to 6 are effective the day following final enactment. Presented to the governor May 6, 1994 Signed by the governor May 10, 1994, 3:54 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes