Minnesota Session Laws - 1994, Regular Session

                            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.