Office of the Revisor of Statutes
Minnesota Session Laws - 2000, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 427-S.F.No. 2870
An act relating to financial institutions; regulating
certain loan charges and payments; establishing a
foundation loan portfolio pilot project; regulating
detached banking facilities; making various technical
changes; appropriating money; amending Minnesota
Statutes 1998, sections 47.59, subdivisions 1, 7, 10,
and by adding a subdivision; 47.60, subdivision 2;
48.56; 52.04, subdivision 1; 56.131, subdivision 4;
58.02, subdivision 10; 58.04, subdivisions 2 and 3;
58.05, by adding a subdivision; 58.08, as amended;
58.10, subdivision 1; and 168.72, by adding a
subdivision; Minnesota Statutes 1999 Supplement,
sections 47.52; and 58.04, subdivision 1; proposing
coding for new law in Minnesota Statutes, chapter 58;
repealing Minnesota Statutes 1998, sections 58.02,
subdivision 15; and 58.05, subdivision 2; Minnesota
Rules, parts 2675.4180; and 2675.6141, subpart 1.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1999 Supplement, section
47.52, is amended to read:
47.52 [AUTHORIZATION.]
(a) With the prior approval of the commissioner, any bank
doing business in this state may establish and maintain detached
facilities provided the facilities are located within: (1) the
municipality in which the principal office of the applicant bank
is located; or (2) 5,000 feet of its principal office measured
in a straight line from the closest points of the closest
structures involved; or (3) a municipality in which no bank is
located at the time of application; or (4) a municipality having
a population of more than 10,000; or (5) a municipality having a
population of 10,000 or less, as determined by the commissioner
from the latest available data from the state demographer, or
for municipalities located in the seven-county metropolitan area
from the metropolitan council, and all the banks having a
principal office in the municipality have consented in writing
to the establishment of the facility.
(b) A detached facility shall not be closer than 50 feet to
a detached facility operated by any other bank and shall not be
closer than 100 feet to the principal office of any other bank,
the measurement to be made in the same manner as provided
above. This paragraph shall not be applicable if the proximity
to the facility or the bank is waived in writing by the other
bank and filed with the application to establish a detached
facility.
(c) A bank is allowed, in addition to other facilities,
part-time deposit-taking locations at elementary and secondary
schools located within the municipality in which the main
banking house or a detached facility is located if they are
established in connection with student education programs
approved by the school administration and consistent with safe,
sound banking practices.
(d) In addition to other facilities, a bank may operate
part-time locations at nursing homes and senior citizen housing
facilities located within the municipality in which the main
banking house or a detached facility is located, or within the
seven-county metropolitan area if the bank's main banking
facility or a detached facility is located within the
seven-county metropolitan area, if they are operated in a manner
consistent with safe, sound banking practices.
Sec. 2. Minnesota Statutes 1998, section 47.59,
subdivision 1, is amended to read:
Subdivision 1. [DEFINITIONS.] For purposes of this
section, the following definitions shall apply.
(a) "Actuarial method" has the meaning given the term in
the Code of Federal Regulations, title 12, part 226, and
appendix J thereto.
(b) "Annual percentage rate" has the meaning given the term
in the Code of Federal Regulations, title 12, part 226, but
using the definition of "finance charge" used in this section.
(c) "Borrower" means a debtor under a loan or a purchaser
or debtor under a credit sale contract.
(d) "Business purpose" means a purpose other than a
personal, family, household, or agricultural purpose.
(e) "Cardholder" means a person to whom a credit card is
issued or who has agreed with the financial institution to pay
obligations arising from the issuance to or use of the card by
another person.
(f) "Consumer loan" means a loan made by a financial
institution in which:
(1) the debtor is a person other than an organization;
(2) the debt is incurred primarily for a personal, family,
or household purpose; and
(3) the debt is payable in installments or a finance charge
is made.
(g) "Credit" means the right granted by a financial
institution to a borrower to defer payment of a debt, to incur
debt and defer its payment, or to purchase property or services
and defer payment.
(h) "Credit card" means a card or device issued under an
arrangement pursuant to which a financial institution gives to a
cardholder the privilege of obtaining credit from the financial
institution or other person in purchasing or leasing property or
services, obtaining loans, or otherwise. A transaction is
"pursuant to a credit card" only if credit is obtained according
to the terms of the arrangement by transmitting information
contained on the card or device orally, in writing, by
mechanical or electronic methods, or in any other manner. A
transaction is not "pursuant to a credit card" if the card or
device is used solely in that transaction to:
(1) identify the cardholder or evidence the cardholder's
creditworthiness and credit is not obtained according to the
terms of the arrangement;
(2) obtain a guarantee of payment from the cardholder's
deposit account, whether or not the payment results in a credit
extension to the cardholder by the financial institution; or
(3) effect an immediate transfer of funds from the
cardholder's deposit account by electronic or other means,
whether or not the transfer results in a credit extension to the
cardholder by the financial institution.
(i) "Credit sale contract" means a contract evidencing a
credit sale. "Credit sale" means a sale of goods or services,
or an interest in land, in which:
(1) credit is granted by a seller who regularly engages as
a seller in credit transactions of the same kind; and
(2) the debt is payable in installments or a finance charge
is made.
(j) "Finance charge" has the meaning given in the Code of
Federal Regulations, title 12, part 226, except that the
following will not in any event be considered a finance charge:
(1) a charge as a result of default or delinquency under
subdivision 6 if made for actual unanticipated late payment,
delinquency, default, or other similar occurrence, and a charge
made for an extension or deferment under subdivision 5, unless
the parties agree that these charges are finance charges;
(2) an additional charge under subdivision 6;
(3) a discount, if a financial institution purchases a loan
at less than the face amount of the obligation or purchases or
satisfies obligations of a cardholder pursuant to a credit card
and the purchase or satisfaction is made at less than the face
amount of the obligation;
(4) fees paid by a borrower to a broker, provided the
financial institution or a person described in subdivision 4
does not require use of the broker to obtain credit; or
(5) a commission, expense reimbursement, or other sum
received by a financial institution or a person described in
subdivision 4 in connection with insurance described in
subdivision 6.
(k) "Financial institution" means a state or federally
chartered bank, a state or federally chartered bank and trust, a
trust company with banking powers, a state or federally
chartered saving bank, a state or federally chartered savings
association, an industrial loan and thrift company, or a
regulated lender, or an operating subsidiary of any such
institution.
(l) "Loan" means:
(1) the creation of debt by the financial institution's
payment of money to the borrower or a third person for the
account of the borrower;
(2) the creation of debt pursuant to a credit card in any
manner, including a cash advance or the financial institution's
honoring a draft or similar order for the payment of money drawn
or accepted by the borrower, paying or agreeing to pay the
borrower's obligation, or purchasing or otherwise acquiring the
borrower's obligation from the obligee or the borrower's
assignee;
(3) the creation of debt by a cash advance to a borrower
pursuant to an overdraft line of credit arrangement;
(4) the creation of debt by a credit to an account with the
financial institution upon which the borrower is entitled to
draw immediately;
(5) the forbearance of debt arising from a loan; and
(6) the creation of debt pursuant to open-end credit.
"Loan" does not include the forbearance of debt arising
from a sale or lease, a credit sale contract, or an overdraft
from a person's deposit account with a financial institution
which is not pursuant to a written agreement to pay overdrafts
with the right to defer repayment thereof.
(m) "Official fees" means:
(1) fees and charges which actually are or will be paid to
public officials for determining the existence of or for
perfecting, releasing, terminating, or satisfying a security
interest or mortgage relating to a loan or credit sale, and any
separate fees or charges which actually are or will be paid to
public officials for recording a notice described in section
580.032, subdivision 1; and
(2) premiums payable for insurance in lieu of perfecting a
security interest or mortgage otherwise required by a financial
institution in connection with a loan or credit sale, if the
premium does not exceed the fees and charges described in clause
(1), which would otherwise be payable.
(n) "Organization" means a corporation, government,
government subdivision or agency, trust, estate, partnership,
joint venture, cooperative, limited liability company, limited
liability partnership, or association.
(o) "Person" means a natural person or an organization.
(p) "Principal" means the total of:
(1) the amount paid to, received by, or paid or repayable
for the account of, the borrower; and
(2) to the extent that payment is deferred:
(i) the amount actually paid or to be paid by the financial
institution for additional charges permitted under this section;
and
(ii) prepaid finance charges.
Sec. 3. Minnesota Statutes 1998, section 47.59,
subdivision 7, is amended to read:
Subd. 7. [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 financial institution according to
the agreement pays for performance of the duties on behalf of
the borrower or purchaser, the financial institution may add to
the debt or contract balance the amounts so advanced. Before or
within a reasonable time not less more than 30 days after
advancing any sums, the financial institution 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 financial institution pertain to
insurance, a brief description of the insurance paid for or to
be paid for by the financial institution including the type and
amount of coverages. Additional information need not be given.
The actions of the financial institution pursuant to this
subdivision shall not be deemed to cure the borrower's failure
to perform covenants in the loan or credit sale contract, unless
the loan or credit sale contract expressly provides otherwise.
(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. 4. Minnesota Statutes 1998, section 47.59, is amended
by adding a subdivision to read:
Subd. 9a. [PROMPT CREDITING OF PAYMENTS.] (a) A financial
institution shall credit a payment to the consumer's account as
of the date of receipt except when a delay in crediting does not
result in a finance or other charge or except as provided in
paragraph (b).
(b) If a financial institution, in the loan agreement or,
in the case of open-end credit, on or with a periodic statement
or similar document, specifies requirements for the consumer to
follow in making payments, but accepts a payment that does not
conform to the requirements, the creditor shall credit the
payment within five days of receipt.
(c) If a financial institution fails to credit a payment,
as required by paragraph (a) or (b) in time to avoid the
imposition of finance or other charges, the financial
institution shall adjust the consumer's account so that the
charges imposed are credited to the consumer's account promptly
or, in the case of open-end credit, no later than during the
next billing cycle.
Sec. 5. Minnesota Statutes 1998, section 47.59,
subdivision 10, is amended to read:
Subd. 10. [CREDIT INSURANCE.] (a) The sale of credit
insurance or mortgage insurance is subject to chapters 61A, 62A,
and 62B, as applicable, and the rules adopted under those
chapters, if any. In case there are multiple consumers
obligated under a transaction subject to this chapter, no policy
or certificate of insurance providing credit life insurance may
be procured by or through a financial institution or person
described in subdivision 2 upon more than two of the consumers,
in which case they may be insured jointly.
(b) A financial institution that 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 or mortgage
insurance, the consumer or the consumer's estate is entitled to
a refund of any portion of a separate charge for insurance that
by reason of prepayment is retained by the financial institution
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 a financial institution
to grant a refund to the consumer if all refunds due to the
consumer under paragraph (c) amount to less than $5 and, except
as provided in paragraph (c), does not require the financial
institution 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 financial institution pays or accounts for premiums
to the insurer in amounts and at times determined by the
agreement between them; or
(3) the financial institution receives directly or
indirectly under a policy of insurance a gain or advantage not
prohibited by law.
(e) Except as provided in paragraph (d), the financial
institution shall promptly make or cause to be made an
appropriate refund to the consumer with respect to a 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 a financial institution 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 financial
institution for reasonable cause may decline the insurance
provided by the borrower.
Sec. 6. Minnesota Statutes 1998, section 47.60,
subdivision 2, is amended to read:
Subd. 2. [AUTHORIZATION, TERMS, CONDITIONS, AND
PROHIBITIONS.] (a) In lieu of the interest, finance charges, or
fees in any other law, a consumer small loan lender may charge
the following:
(1) on any amount up to and including $50, a charge of
$5.50 may be added;
(2) on amounts in excess of $50, but not more than $100, a
charge may be added equal to ten percent of the loan proceeds
plus a $5 administrative fee;
(3) on amounts in excess of $100, but not more than $250, a
charge may be added equal to seven percent of the loan proceeds
with a minimum of $10 plus a $5 administrative fee;
(4) for amounts in excess of $250 and not greater than the
maximum in subdivision 1, paragraph (a), a charge may be added
equal to six percent of the loan proceeds with a minimum of
$17.50 plus a $5 administrative fee.
(b) The term of a loan made under this section shall be for
no more than 30 calendar days.
(c) After maturity, the contract rate must not exceed 2.75
percent per month of the remaining loan proceeds after the
maturity date calculated at a rate of 1/30 of the monthly rate
in the contract for each calendar day the balance is outstanding.
(d) No insurance charges or other charges must be permitted
to be charged, collected, or imposed on a consumer small loan
except as authorized in this section.
(e) On a loan transaction in which cash is advanced in
exchange for a personal check, a return check charge may be
charged as authorized by section 332.50, subdivision 2,
paragraph (d) (a).
(f) A loan made under this section must not be repaid by
the proceeds of another loan made under this section by the same
lender or related interest. The proceeds from a loan made under
this section must not be applied to another loan from the same
lender or related interest. No loan to a single borrower made
pursuant to this section shall be split or divided and no single
borrower shall have outstanding more than one loan with the
result of collecting a higher charge than permitted by this
section or in an aggregate amount of principal exceed at any one
time the maximum of $350.
Sec. 7. Minnesota Statutes 1998, section 48.56, is amended
to read:
48.56 [BANKING INSTITUTIONS MAY USE FEDERAL BANKING ACT
LAWS.]
Any banking institution now or hereafter organized under
the laws of this state is hereby empowered, on the authority of
its board of directors, or a majority thereof, to enter into
such contracts, incur such obligations and generally to do and
perform any and all such acts and things as may be necessary or
appropriate in order to take advantage of any and all
memberships, loans, subscriptions, contracts, grants, rights, or
privileges which may at any time be available or enure to
banking institutions or to their depositors, creditors,
stockholders, receivers, or liquidators, by virtue of those
provisions of Section 8 of the federal "Banking Acts of 1933"
(Section 12B of the Federal Reserve Act, as amended (Mason's
United States Code Annotated, title 12, s 264)), which establish
the Federal Deposit Insurance Corporation and provide for the
insurance of deposits, or of any other provisions of that or of
any other act or resolution of Congress to aid, regulate, or
safeguard banking institutions and their depositors, including
any amendments of the same or any substitutions therefor; and to
subscribe for and acquire any stock, debentures, bonds, or other
types of securities of the Federal Deposit Insurance
Corporation, and to comply with the lawful regulations and
requirements from time to time issued or made by such
corporation. Subdivision 1. [GENERAL POWERS.] The board of
directors of a banking institution may enter into a contract,
incur an obligation, or generally do what is necessary or
appropriate to make use of United States Code, title 12, section
1811, or any act or resolution of Congress enacted or resolved
to aid, regulate, or safeguard banking institutions and their
depositors.
Subd. 2. [GENERAL RIGHTS AND PRIVILEGES.] Memberships,
loans, subscriptions, contracts, grants, rights, or privileges
that, under the act or resolution, are available to or enure to
banking institutions, or their depositors, creditors,
stockholders, receivers, or liquidators may be taken advantage
of under this section.
Subd. 3. [PURCHASE OF FDIC SECURITIES.] The board may
subscribe for and acquire securities of the Federal Deposit
Insurance Corporation.
Subd. 4. [COMPLYING WITH FDIC REQUIREMENTS.] The board may
comply with the corporation's requirements.
Sec. 8. Minnesota Statutes 1998, section 52.04,
subdivision 1, is amended to read:
Subdivision 1. A credit union has the following powers:
(1) to offer its members and other credit unions various
classes of shares, share certificates, deposits, or deposit
certificates;
(2) to receive the savings of its members either as payment
on shares or as deposits, including the right to conduct
Christmas clubs, vacation clubs, and other thrift organizations
within its membership. Trust funds received by a real estate
broker or the broker's salespersons in trust may be deposited in
a credit union;
(3) to make loans to members for provident or productive
purposes as provided in section 52.16;
(4) to make loans to a cooperative society or other
organization having membership in the credit union;
(5) to deposit in state and national banks and trust
companies authorized to receive deposits;
(6) to invest in any investment legal for savings banks or
for trust funds in the state and, notwithstanding clause (3), to
invest in and make loans of unsecured days funds (federal funds
or similar unsecured loans) to financial institutions insured by
an agency of the federal government and a member of the Federal
Reserve System or required to maintain reserves at the Federal
Reserve;
(7) to borrow money as hereinafter indicated;
(8) to adopt and use a common seal and alter the same at
pleasure;
(9) to make payments on shares of and deposit with any
other credit union chartered by this or any other state or
operating under the provisions of the Federal Credit Union Act,
in amounts not exceeding in the aggregate 25 percent of its
unimpaired assets. However, payments on shares of and deposit
with credit unions chartered by other states are restricted to
credit unions insured by the National Credit Union
Administration. The restrictions imposed by this clause do not
apply to share accounts and deposit accounts of the Minnesota
corporate credit union in United States central credit union or
to share accounts and deposit accounts of credit unions in the
Minnesota corporate credit union;
(10) to contract with any licensed insurance company or
society to insure the lives of members to the extent of their
share accounts, in whole or in part, and to pay all or a portion
of the premium therefor;
(11) to indemnify each director, officer, or committee
member, or former director, officer, or committee member against
all expenses, including attorney's fees but excluding amounts
paid pursuant to a judgment or settlement agreement, reasonably
incurred in connection with or arising out of any action, suit,
or proceeding to which that person is a party by reason of being
or having been a director, officer, or committee member of the
credit union, except with respect to matters as to which that
person is finally adjudged in the action, suit, or proceeding to
be liable for negligence or misconduct in the performance of
duties. The indemnification is not exclusive of any other
rights to which that person may be entitled under any bylaw,
agreement, vote of members, or otherwise;
(12) upon written authorization from a member, retained at
the credit union, to make payments to third parties by
withdrawals from the member's share or deposit accounts or
through proceeds of loans made to such member, or by permitting
the credit union to make those payments from the member's funds
prior to deposit; to permit draft withdrawals from member
accounts, but a credit union proposing to permit draft
withdrawals shall notify the commissioner of commerce, in the
form prescribed, of its intent not less than 90 days prior to
authorizing draft withdrawals. The board of directors of a
credit union may restrict one class of shares to the extent that
it may not be redeemed, withdrawn, or transferred except upon
termination of membership in the credit union;
(13) to inform its members as to the availability of
various group purchasing plans which are related to the
promotion of thrift or the borrowing of money for provident and
productive purposes by means of informational materials placed
in the credit union's office, through its publications, or by
direct mailings to members by the credit union;
(14) to facilitate its members' voluntary purchase of types
of insurance incidental to promotion of thrift or the borrowing
of money for provident and productive purposes including, but
not limited to the following types of group or individual
insurance: Fire, theft, automobile, life and temporary
disability; to be the policy holder of a group insurance plan or
a subgroup under a master policy plan and to disseminate
information to its members concerning the insurance provided
thereunder; to remit premiums to an insurer or the holder of a
master policy on behalf of a credit union member, if the credit
union obtains written authorization from the member for
remittance by share or deposit withdrawals or through proceeds
of loans made by the members, or by permitting the credit union
to make the payments from the member's funds prior to deposit;
and to accept from the insurer reimbursement for expenses
incurred or in the case of credit life, accident and health, and
involuntary unemployment insurance within the meaning of chapter
62B commissions for the handling of the insurance. The amount
reimbursed or the commissions received may constitute the
general income of the credit union. The directors, officers,
committee members and employees of a credit union shall not
profit on any insurance sale facilitated through the credit
unions;
(15) to contract with another credit union to furnish
services which either could otherwise perform. Contracted
services under this clause are subject to regulation and
examination by the commissioner of commerce like other services;
(16) in furtherance of the twofold purpose of promoting
thrift among its members and creating a source of credit for
them at legitimate rates of interest for provident purposes, and
not in limitation of the specific powers hereinbefore conferred,
to have all the powers enumerated, authorized, and permitted by
this chapter, and such other rights, privileges and powers
incidental to, or necessary for, the accomplishment of the
objectives and purposes of the credit union;
(17) to rent safe deposit boxes to its members if the
credit union obtains adequate insurance or bonding coverage for
losses which might result from the rental of safe deposit boxes;
(18) notwithstanding the provisions of section 52.05, to
accept deposits of public funds in an amount secured by
insurance or other means pursuant to chapter 118 or section
9.031 or other applicable law and to receive deposits of trust
funds provided that either the provider or the beneficial owner
of the funds is a member of the credit union accepting the
deposit;
(19) to accept and maintain treasury tax and loan accounts
of the United States and to pledge collateral to secure the
treasury tax or loan accounts, in accordance with the
regulations of the Department of Treasury of the United States;
(20) to accept deposits pursuant to section 149A.97,
subdivision 5, notwithstanding the provisions of section 52.05,
if the deposits represent funding of prepaid funeral plans of
members;
(21) to sell, in whole or in part, real estate secured
loans provided that:
(a) the loan is secured by a first lien;
(b) the board of directors approves the sale;
(c) if the sale is partial, the agreement to sell a partial
interest shall, at a minimum:
(i) identify the loan or loans covered by the agreement;
(ii) provide for the collection, processing, remittance of
payments of principal and interest, taxes and insurance premiums
and other charges or escrows, if any;
(iii) define the responsibilities of each party in the
event the loan becomes subject to collection, loss or
foreclosure;
(iv) provide that in the event of loss, each owner shall
share in the loss in proportion to its interest in the loan or
loans;
(v) provide for the distribution of payments of principal
to each owner proportionate to its interest in the loan or
loans;
(vi) provide for loan status reports;
(vii) state the terms and conditions under which the
agreement may be terminated or modified; and
(d) the sale is without recourse or repurchase unless the
agreement:
(i) requires repurchase of a loan because of any breach of
warranty or misrepresentation;
(ii) allows the seller to repurchase at its discretion; or
(iii) allows substitution of one loan for another;
(22) in addition to the sale of loans secured by a first
lien on real estate, to sell, pledge, discount, or otherwise
dispose of, in whole or in part, to any source, a loan or group
of loans, other than a self-replenishing line of credit;
provided, that within a calendar year beginning January 1 the
total dollar value of loans sold, other than loans secured by
real estate or insured by a state or federal agency, shall not
exceed 25 percent of the dollar amount of all loans and
participating interests in loans held by the credit union at the
beginning of the calendar year, unless otherwise authorized in
writing by the commissioner;
(23) to designate the par value of the shares of the credit
union by board resolution;
(24) to exercise by resolution the powers set forth in
United States Code, title 12, section 1757, as amended through
December 31, 1992. Before exercising each power, the board must
submit a plan to the commissioner of commerce detailing
implementation of the power to be used;
(25) to offer self-directed individual retirement accounts
and Keogh accounts and act as custodian and trustee of these
accounts if:
(1) all contributions of funds are initially made to a
deposit, share or share certificate account in the credit union;
(2) any subsequent transfer of funds to other assets is
solely at the direction of the member and the credit union
exercises no investment discretion and provides no investment
advice with respect to plan assets; and
(3) the member is clearly notified of the fact that
National Credit Union Share Insurance Fund coverage is limited
to funds held in deposit, share or share certificate accounts of
National Credit Union Share Insurance Fund-insured credit unions.
Sec. 9. Minnesota Statutes 1998, section 56.131,
subdivision 4, is amended to read:
Subd. 4. [ADJUSTMENT OF DOLLAR AMOUNTS.] The dollar
amounts in subdivisions 2 and 6, sections 53.04, subdivision 3a,
paragraph (c), 56.01, 56.12, and 56.125 shall change
periodically, as provided in section 47.59, subdivision 3.
Sec. 10. Minnesota Statutes 1998, section 58.02,
subdivision 10, is amended to read:
Subd. 10. [FINANCIAL INSTITUTION.] "Financial institution"
means a bank, bank and trust, trust company with banking powers,
savings bank, savings association, or credit union, organized
under the laws of this state, any other state, or the United
States; a Minnesota host state branch of an out-of-state
state-chartered bank as provided for in section 49.411; an
industrial loan and thrift under chapter 53; or a regulated
lender under chapter 56. The term "financial institution" also
includes a subsidiary or operating subsidiary of a financial
institution or of a bank holding company as defined in the
federal Bank Holding Company Act, United States Code, title 12,
section 1841 et seq., if the subsidiary or operating subsidiary
can demonstrate to the satisfaction of the commissioner that it
is regulated and subject to active and ongoing oversight and
supervision by a federal banking agency, as defined in the
Federal Deposit Insurance Act, United States Code, title 12,
section 1811 et seq., or the commissioner.
Sec. 11. Minnesota Statutes 1999 Supplement, section
58.04, subdivision 1, is amended to read:
Subdivision 1. [RESIDENTIAL MORTGAGE ORIGINATOR LICENSING
REQUIREMENTS.] (a) Beginning August 1, 1999, no person shall act
as a residential mortgage originator, or make residential
mortgage loans without first obtaining a license from the
commissioner according to the licensing procedures provided in
this chapter.
(b) The following persons are exempt from the residential
mortgage originator licensing requirements:
(1) an employee of one mortgage originator licensee or one
person holding a certificate of exemption;
(2) a person engaged solely in commercial mortgage
activities;
(3) a person licensed as a real estate broker under chapter
82, and who is not licensed to another real estate broker;
(3) an individual real estate licensee who is licensed to
the a real estate broker as described in clause (2) if:
(i) the individual licensee acts only under the name,
authority, and supervision of the broker to whom the licensee is
licensed;
(ii) the broker to whom the licensee is licensed obtains a
certificate of exemption according to section 58.05, subdivision
2;
(iii) the broker does not collect an advance fee for its
residential mortgage-related activities; and
(iv) the residential mortgage origination activities are
incidental to the real estate licensee's primary activities as a
real estate broker or salesperson;
(4) an individual licensed as a property/casualty or
life/health insurance agent under chapter 60K if:
(i) the insurance agent acts on behalf of only one
residential mortgage originator, which is in compliance with
chapter 58;
(ii) the insurance agent has entered into a written
contract with the mortgage originator under the terms of which
the mortgage originator agrees to accept responsibility for the
insurance agent's residential mortgage-related activities;
(iii) the insurance agent obtains a certificate of
exemption under section 58.05, subdivision 2; and
(iv) the insurance agent does not collect an advance fee
for the insurance agent's residential mortgage-related
activities;
(5) a person making who is not in the business of making
residential mortgage loans and who makes no more than five
residential mortgage three such loans, with its own funds,
during any 12-month period;
(6) a financial institution as defined in section 58.02,
subdivision 10;
(7) an agency of the federal government, or of a state or
municipal government;
(8) an employee or employer pension plan making loans only
to its participants;
(9) a person acting in a fiduciary capacity, such as a
trustee or receiver, as a result of a specific order issued by a
court of competent jurisdiction; or
(10) a person exempted by order of the commissioner.
Sec. 12. Minnesota Statutes 1998, section 58.04,
subdivision 2, is amended to read:
Subd. 2. [RESIDENTIAL MORTGAGE SERVICER LICENSING
REQUIREMENTS.] (a) Beginning August 1, 1999, no person shall
engage in activities or practices that fall within the
definition of "servicing a residential mortgage loan" under
section 58.02, subdivision 22, without first obtaining a license
from the commissioner according to the licensing procedures
provided in this chapter.
(b) The following persons are exempt from the residential
mortgage servicer licensing requirements:
(1) a person licensed as a residential mortgage originator;
(2) an employee of one licensee or one person holding a
certificate of exemption based on an exemption under this
subdivision;
(3) a person engaged solely in commercial mortgage
activities;
(4) a person servicing loans made with its own funds, if no
more than five three such loans are made in any 12-month period;
(5) (4) a financial institution as defined in section
58.02, subdivision 10;
(6) (5) an agency of the federal government, or of a state
or municipal government;
(7) (6) an employee or employer pension plan making loans
only to its participants;
(8) (7) a person acting in a fiduciary capacity, such as a
trustee or receiver, as a result of a specific order issued by a
court of competent jurisdiction; or
(9) (8) a person exempted by order of the commissioner.
Sec. 13. Minnesota Statutes 1998, section 58.04,
subdivision 3, is amended to read:
Subd. 3. [CONDUCTING BUSINESS UNDER LICENSE.] No person
required to be licensed under this chapter may, without a
license, do business under a name or title or circulate or use
advertising or make representations or give information to a
person, that indicates or reasonably implies activity within the
scope of this chapter.
No person licensed under this chapter may do business under
more than one name or title.
Sec. 14. Minnesota Statutes 1998, section 58.05, is
amended by adding a subdivision to read:
Subd. 3. [CERTIFICATE OF EXEMPTION.] A person must obtain
a certificate of exemption from the commissioner to qualify as
an exempt person under section 58.04, subdivision 1, paragraph
(b), as a real estate broker under clause (2), an insurance
agent under clause (4), a financial institution under clause
(6), or by order of the commissioner under clause (10); or under
section 58.04, subdivision 2, paragraph (b), as a financial
institution under clause (4), or by order of the commissioner
under clause (8).
Sec. 15. Minnesota Statutes 1998, section 58.08, as
amended by Laws 1999, chapter 151, section 36, is amended to
read:
58.08 [BONDS; LETTERS OF CREDIT.]
Subdivision 1. [REQUIREMENT OF RESIDENTIAL MORTGAGE
ORIGINATORS.] A residential mortgage originator licensee
engaging in servicing a residential mortgage loan shall
continuously maintain a surety bond or irrevocable letter of
credit in an amount not less than $50,000 in a form approved by
the commissioner, issued by an insurance company or bank
authorized to do so in this state. The bond or irrevocable
letter of credit must be available for the recovery of expenses,
fines, and fees levied by the commissioner under this chapter
relating to servicing, and for losses or damages incurred by
borrowers as the result of a licensee's servicing-related
noncompliance with the requirements of this chapter, sections
325D.43 to 325D.48, and 325F.67 to 325F.69, or breach of
contract.
The bond or irrevocable letter of credit must be submitted
with the originator's license application, and evidence of
continued coverage must be submitted with each renewal. Any
change in the bond or letter of credit must be submitted for
approval by the commissioner, within ten days of its execution.
Subd. 2. [REQUIREMENT OF RESIDENTIAL MORTGAGE SERVICERS.]
A residential mortgage servicer licensee shall continuously
maintain a surety bond or irrevocable letter of credit in an
amount not less than $100,000 in a form approved by the
commissioner, issued by an insurance company or bank authorized
to do so in this state. The bond or irrevocable letter of
credit must be available for the recovery of expenses, fines,
and fees levied by the commissioner under this chapter, and for
losses or damages incurred by borrowers or other aggrieved
parties as the result of a licensee's noncompliance with the
requirements of this chapter, sections 325D.43 to 325D.48, and
325F.67 to 325F.69, or breach of contract relating to activities
regulated by this chapter.
The bond or irrevocable letter of credit must be submitted
with the servicer's license application and evidence of
continued coverage must be submitted with each renewal. Any
change in the bond or letter of credit must be submitted for
approval by the commissioner, within ten days of its execution.
Subd. 3. [EXEMPTION.] Subdivisions 1 and 2 do not apply to
mortgage originators or mortgage servicers who are approved as
seller/servicers by the Federal National Mortgage Association or
the Federal Home Loan Mortgage Corporation.
Subd. 4. [IRREVOCABLE LETTER OF CREDIT.] As used in this
chapter, an irrevocable letter of credit must be accepted only
if it is clean, irrevocable, and contains an evergreen clause.
(a) "Clean" means a letter of credit that is not
conditioned on the delivery of any other documents or materials.
(b) "Irrevocable" means a letter of credit that cannot be
modified or revoked without the consent of the beneficiary once
the beneficiary is established.
(c) "Evergreen clause" means one that specifically states
the expiration of a letter of credit will not take place without
a 60-day notice by the issuer and one that allows the issuer to
conduct an annual review of the account party's financial
condition. If prior notice of expiration is not given by the
issuer, the letter of credit is automatically extended for one
year.
A clean irrevocable letter of credit must be accepted only
if it is issued by a financial institution that is authorized to
engage in banking in any of the 50 states or under the laws of
the United States, and whose business is substantially confined
to banking and supervised by the state commissioner of commerce
or similar official, and that has a long-term debt rating by a
recognized national rating agency of investment grade or
better. If no long-term debt rating is available, the financial
institution must have the equivalent investment grade financial
characteristics.
Sec. 16. Minnesota Statutes 1998, section 58.10,
subdivision 1, is amended to read:
Subdivision 1. [AMOUNTS.] The following fees must be paid
to the commissioner:
(1) for an initial residential mortgage originator license,
$800;
(2) for a renewal license, $400;
(3) for an initial residential mortgage servicer's license,
$1,000;
(4) for a renewal license, $500; and
(5) license service fees as set forth in chapter 45; and
(6) for a certificate of exemption, $100.
Sec. 17. [58.135] [RATES AND CHARGES.]
Subdivision 1. [FIRST LIEN MORTGAGES.] A residential
mortgage originator making first lien residential mortgage loans
must comply with the applicable limits on residential mortgage
loan rates, fees, and charges as found in sections 47.20 and
47.204.
Nothing in this subdivision prevents a financial
institution under section 47.59, subdivision 1, paragraph (k),
from making first lien residential mortgage loans under section
47.59 or other provisions of law available to financial
institutions under that section.
Subd. 2. [JUNIOR LIEN MORTGAGES.] (a) A residential
mortgage originator that is a bank, bank and trust, trust
company with banking powers, savings bank, savings association,
or credit union organized under the laws of this or any other
state or the United States, or an industrial loan and thrift
company under chapter 53 or a regulated lender under chapter 56
or an entity in another state subject to regulation
substantially similar to chapter 53 or 56, making junior lien
residential loans, must comply with the limits on residential
mortgage loan rates, fees, and charges as found in section 47.59.
Nothing in this subdivision authorizes a mortgage
originator to make loans on terms and conditions that would not
be available to it in the absence of this section.
(b) A residential mortgage originator other than an entity
designated in paragraph (a) making junior lien residential
loans, must comply with the limits on residential mortgage loan
rates, fees, and charges as found in section 47.20.
Sec. 18. Minnesota Statutes 1998, section 168.72, is
amended by adding a subdivision to read:
Subd. 1a. [PROMPT CREDITING OF PAYMENTS.] (a) A contract
holder shall credit a payment to the customer's account as of
the date of receipt except when a delay in crediting does not
result in a finance or other charge or except as provided in
paragraph (b).
(b) If a retail installment contract or other instructions
specify requirements for the consumer to follow in making
payments, but the contract holder accepts a payment that does
not conform to the requirements, the contract holder shall
credit the payment within five days of receipt.
(c) If a contract holder fails to credit a payment, as
required by paragraphs (a) and (b), in time to avoid the
imposition of finance or other charges, the contract holder
shall adjust the consumer's account so that the charges imposed
are credited to the consumer's account promptly.
Sec. 19. [COMMERCE DEPARTMENT EXAMINATION; FOUNDATION LOAN
PORTFOLIO PILOT PROJECT.]
(a) Any nonprofit charitable organization recognized as
exempt from federal income taxation under section 501(c) (3) of
the federal Internal Revenue Code of 1986, as amended,
participating as a regional organization under the challenge
grant program established under Minnesota Statutes, section
116J.415, and serving the counties of Aitkin, Cook, Lake, St.
Louis, Carlton, Itasca, and Koochiching as of the effective date
of this section, may enter into an agreement with the
commissioner of commerce to facilitate the charitable
organization's participation in the United States Small Business
Administration guaranteed lender program.
(b) The agreement referred to in paragraph (a) shall
provide for a level of examination and supervision by the
department of commerce necessary for the charitable organization
to meet United States Small Business Administration requirements
for guaranteed lender status, including an annual examination of
the books, accounts, records, and files related to the
charitable organization's portfolio of guaranteed loans.
Reports of the commissioner's annual examination shall be made
available to the United States Small Business Administration
upon request.
(c) The charitable organization shall pay the department's
cost, as determined by the commissioner of commerce, of the
supervision and examination required under an agreement entered
into pursuant to this section. The charitable organization
shall also pay the department's cost, as determined by the
commissioner, of negotiating the agreement. Money received by
the department under this subdivision must be deposited in the
state treasury and credited to an account in the special revenue
fund. Money in this account is annually appropriated to the
commissioner for purposes of administering this section.
(d) This section expires December 31, 2003.
Sec. 20. [VASA TOWNSHIP; DETACHED BANKING FACILITY.]
With the prior approval of the commissioner of commerce, a
bank operating its principal office in Cannon Falls may
establish and maintain not more than one detached facility in
Vasa township. A bank desiring to establish such a detached
facility must follow the approval procedure prescribed in
Minnesota Statutes, section 47.54. The establishment of a
detached facility under this section is subject to Minnesota
Statutes, sections 47.51 to 47.57, except to the extent those
sections are inconsistent with this section.
Sec. 21. [REPEALER.]
(a) Minnesota Statutes 1998, sections 58.02, subdivision
15; and 58.05, subdivision 2, are repealed.
(b) Minnesota Rules, part 2675.4180, is repealed.
(c) Minnesota Rules, part 2675.6141, subpart 1, is repealed
effective the day following final enactment.
Sec. 22. [EFFECTIVE DATES.]
Sections 1 to 3, 5 to 16, 19, and 21 are effective the day
after final enactment. Sections 4, 17, and 18 are effective
July 1, 2000. Section 20 is effective the day after compliance
by the governing body of Vasa township with Minnesota Statutes,
section 645.021, subdivision 3.
Presented to the governor April 17, 2000
Signed by the governor April 20, 2000, 10:19 a.m.
Official Publication of the State of Minnesota
Revisor of Statutes