Minnesota Session Laws - 1998, Regular Session

                            CHAPTER 335-S.F.No. 2550 
                  An act relating to financial institutions; regulating 
                  solicitation of loans by mailing a check payable to 
                  the addressee; proposing coding for new law in 
                  Minnesota Statutes, chapter 47. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  [47.605] [LOAN SOLICITATION; UNREQUESTED CHECKS 
        REGULATED.] 
           Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
        section, the terms defined in this subdivision have the meanings 
        given. 
           (b) "Facsimile check" means a document that resembles a 
        negotiable check, money order, draft, or other instrument. 
           (c) "Live check" means a negotiable check, money order, 
        draft, or other instrument that may be used by a consumer to 
        activate a loan.  
           Subd. 2.  [UNREQUESTED CHECKS.] No financial institution or 
        other lender may offer to make a loan by mailing to a Minnesota 
        resident a live check payable to the addressee, which the 
        addressee is requested to endorse and then cash, deposit, or 
        otherwise negotiate as a means of accepting the loan offered, 
        except as provided in subdivision 3.  This section does not 
        apply if the addressee already has an open-end credit 
        arrangement or business relationship with the financial 
        institution or other lender or if the addressee has requested in 
        writing that the live check be mailed to the addressee.  
           Subd. 3.  [EFFECT OF LIVE CHECKS.] (a) The addressee is not 
        liable for any loan contracted or allegedly contracted by means 
        of a live check that violates subdivision 2, unless the live 
        check is offered in compliance with the requirements in 
        paragraphs (b) to (g). 
           (b) The live check, regardless of its form, must not be 
        negotiable after a period no longer than 30 days after the date 
        shown on the live check.  Printed material accompanying the live 
        check must advise the consumer to void and destroy the live 
        check if it is not going to be negotiated, and must be 
        substantially similar to the following disclosure: 
           "THIS IS A SOLICITATION FOR A LOAN--READ THE ENCLOSED 
        DISCLOSURES BEFORE SIGNING AND CASHING THIS CHECK." 
           (c) Notification of the loan agreement must be on the back 
        of the live check so that the consumer is advised that by 
        signing the back of the live check the consumer will have 
        activated a loan transaction.  The following disclosure must 
        appear on the back of the live check: 
           "By endorsing this instrument, you agree to repay this loan 
        according to the terms of the Loan Agreement, which you 
        acknowledge receiving and which provides you with the contract 
        terms in connection with this loan transaction." 
           (d) Opt-out provisions of United States Code, title 15, 
        section 1681b(e), must be noted by reference in printed 
        materials that accompany the live check. 
           (e) Live check loan solicitations must be mailed in 
        envelopes with no indication that a negotiable instrument is 
        contained in the mailing.  Envelopes must be marked with 
        instructions to the postal service stating that the item is not 
        to be forwarded if the intended addressee is no longer at the 
        location. 
           (f) The creditor who receives a negotiated live check must 
        execute the following steps consistent with the structure of the 
        creditor's business: 
           (1) ensure that the instrument is placed in the consumer's 
        loan folder, record, or other filing procedure consistent with 
        the creditor's business which will enable recovery of the item, 
        or an exact facsimile of the original document; and 
           (2) provide to the customer a coupon book or billing 
        statement or other medium consistent with the creditor's 
        business practice as confirmation of the activation of the loan. 
           (g) In the event that a live check is stolen or incorrectly 
        received by someone other than the intended payee, and the live 
        check is fraudulently cashed or otherwise negotiated, the 
        following safeguards for the consumer must be triggered: 
           (1) the creditor, upon receipt of notification that the 
        consumer did not negotiate the live check, shall provide, and 
        the consumer may complete, a statement confirming that the 
        consumer did not deposit, cash, or otherwise negotiate the live 
        check; 
           (2) completion of the confirmation statement must be 
        facilitated by the creditor by providing the consumer the 
        opportunity to fill it out at a local location of the creditor, 
        by mail, or both, and by explaining that the consumer is 
        relieved from any liability on the loan.  The creditor shall 
        also provide the consumer with a contact person to provide 
        assistance if required; and 
           (3) upon submitting a completed confirmation statement to 
        the creditor, the consumer who was the intended payee shall have 
        no liability for the loan obligation, absent any fraud by that 
        consumer. 
           Subd. 4.  [FACSIMILE CHECKS.] No financial institution or 
        other lender shall mail to a Minnesota resident a solicitation 
        for a cash loan that includes a facsimile check payable to the 
        addressee unless: 
           (1) the facsimile check contains on the front and back, in 
        at least a 30-point bold font, the words: 
           "This is not a check"; 
           (2) the opt-out provisions of United States Code, title 15, 
        section 1681b(e), are noted by reference in printed materials 
        that accompany the facsimile check; and 
           (3) the solicitation is mailed in an envelope that does not 
        make it appear that a negotiable instrument is contained in the 
        mailing. 
           Sec. 2.  [EFFECTIVE DATE.] 
           Section 1 is effective January 1, 1999. 
           Presented to the governor March 23, 1998 
           Signed by the governor March 25, 1998, 9:45 a.m.