1.1                          A bill for an act 
  1.2             relating to consumer protection; requiring the payment 
  1.3             of interest on security deposits for motor vehicle 
  1.4             leases; providing remedies; proposing coding for new 
  1.5             law in Minnesota Statutes, chapter 325F. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  [325F.661] [MOTOR VEHICLE LEASES; SECURITY 
  1.8   DEPOSITS.] 
  1.9      Subdivision 1.  [DEFINITIONS.] (a) For the purposes of this 
  1.10  section, the terms defined in paragraphs (b) to (e) have the 
  1.11  meanings given them. 
  1.12     (b) "Lease" means a contract in the form of a lease or 
  1.13  bailment for the use of a motor vehicle by a natural person for 
  1.14  a period of time exceeding four months, used for personal, 
  1.15  family, or household purposes at least 40 percent of the time, 
  1.16  whether or not the lessee has the option to purchase or 
  1.17  otherwise become the owner of the motor vehicle at the 
  1.18  expiration of the lease. 
  1.19     (c) "Lessee" means a natural person who leases a motor 
  1.20  vehicle from a lessor. 
  1.21     (d) "Lessor" means a person who holds title to the motor 
  1.22  vehicle leased or who holds the lessor's rights under the lease. 
  1.23     (e) "Motor vehicle" means (1) a passenger automobile as 
  1.24  defined in section 168.011, subdivision 7, including pickup 
  1.25  trucks and vans, and (2) the self-propelled motor vehicle 
  2.1   chassis or van portion of recreational equipment as defined in 
  2.2   section 168.011, subdivision 25, that is sold or leased to a 
  2.3   natural person in this state. 
  2.4      Subd. 2.  [APPLICATION.] A deposit of money to secure the 
  2.5   performance of a lease or a part of the lease, other than a 
  2.6   deposit that is exclusively an advance lease payment, is 
  2.7   governed by this section. 
  2.8      Subd. 3.  [INTEREST.] A deposit of money must be held by 
  2.9   the lessor for the lessee and must bear simple noncompounded 
  2.10  interest at the rate of 5-1/2 percent per year, computed from 
  2.11  the first day of the next month following the full payment of 
  2.12  the deposit to the last day of the month in which the lessor, in 
  2.13  good faith, complies with the requirements of subdivision 4 or 
  2.14  to the date upon which judgment is entered in a civil action 
  2.15  involving the lessor's liability for the deposit, whichever date 
  2.16  is earlier.  Any interest amount less than $1 is excluded from 
  2.17  the provisions of this section. 
  2.18     Subd. 4.  [LESSOR'S DUTY TO RETURN.] (a) A lessor shall 
  2.19  within three weeks after termination of the lease, and after 
  2.20  receipt of the lessee's mailing address or delivery 
  2.21  instructions, return the deposit to the lessee, with interest, 
  2.22  or furnish to the lessee a written statement showing the 
  2.23  specific reason for the withholding of the deposit or any 
  2.24  portion of it. 
  2.25     (b) The time requirement of this subdivision is satisfied 
  2.26  if the deposit or written statement required by this subdivision 
  2.27  is placed in the United States mail as first class mail, postage 
  2.28  prepaid, in an envelope with a proper return address, correctly 
  2.29  addressed according to the mailing address or delivery 
  2.30  instructions furnished by the lessee, within the time required 
  2.31  by this subdivision.  The lessor may withhold from the deposit 
  2.32  only amounts reasonably necessary: 
  2.33     (1) to remedy lessee defaults in the lease payments or of 
  2.34  other funds due to the lessor under the lease; or 
  2.35     (2) for any purpose set forth in the lease.  
  2.36     (c) In any action concerning the deposit, the burden of 
  3.1   proving, by a fair preponderance of the evidence, the reason for 
  3.2   withholding all or any portion of the deposit is on the lessor. 
  3.3      Subd. 5.  [LIABILITY FOR FAILURE TO RETURN.] A lessor who 
  3.4   fails to:  
  3.5      (1) provide a written statement within three weeks of 
  3.6   termination of the tenancy; or 
  3.7      (2) transfer or return a deposit as required by subdivision 
  3.8   6, 
  3.9   after receipt of the lessee's mailing address or delivery 
  3.10  instructions, as required in subdivision 4, is liable to the 
  3.11  lessee for damages in an amount equal to the portion of the 
  3.12  deposit withheld by the lessor and interest as provided in 
  3.13  subdivision 3, as a penalty, in addition to the portion of the 
  3.14  deposit wrongfully withheld by the lessor and interest. 
  3.15     Subd. 6.  [TERMINATION OF LESSOR'S INTEREST.] Upon 
  3.16  termination of the lessor's interest in the motor vehicle, 
  3.17  whether by sale, assignment, death, appointment of receiver or 
  3.18  otherwise, the lessor or the lessor's agent shall, within 60 
  3.19  days of termination of the interest or when the successor in 
  3.20  interest is required to return or otherwise account for the 
  3.21  deposit to the lessee, whichever occurs first, do one of the 
  3.22  following acts, either of which shall relieve the lessor or 
  3.23  agent of further liability with respect to the deposit: 
  3.24     (1) transfer the deposit, or any remainder after any lawful 
  3.25  deductions made under subdivision 4, with interest as provided 
  3.26  in subdivision 2, to the lessor's successor in interest and 
  3.27  after the transfer notify the lessee of the transfer and of the 
  3.28  transferee's name and address; or 
  3.29     (2) return the deposit, or any remainder after any lawful 
  3.30  deductions made under subdivision 4, with interest as provided 
  3.31  in subdivision 3, to the lessee. 
  3.32     (b) Upon termination of the lessor's interest in the motor 
  3.33  vehicle, whether by sale, assignment, death, appointment of 
  3.34  receiver or otherwise, the lessor's successor in interest shall 
  3.35  have all of the rights and obligations of the lessor with 
  3.36  respect to the deposit, except, that if lessee does not object 
  4.1   to the stated amount within 20 days after written notice to 
  4.2   lessee of the amount of deposit being transferred or assumed, 
  4.3   the obligation of the lessor's successor to return the deposit 
  4.4   is limited to the amount contained in the notice.  The notice 
  4.5   must contain a stamped envelope addressed to lessor's successor 
  4.6   and may be given by mail or by personal service. 
  4.7      Subd. 7.  [BAD FAITH RETENTION.] The bad faith retention by 
  4.8   a lessor of a deposit, the interest, or any portion of it, in 
  4.9   violation of this section subjects the lessor to punitive 
  4.10  damages not to exceed $200 for each deposit in addition to the 
  4.11  damages provided in subdivision 5.  If the lessor has failed to 
  4.12  comply with subdivision 4 or 6, retention of a deposit is 
  4.13  presumed to be in bad faith unless the lessor returns the 
  4.14  deposit within two weeks after the start of any action for the 
  4.15  recovery of the deposit. 
  4.16     Subd. 8.  [DEPOSIT AS PAYMENT ON THE LEASE.] No lessee may 
  4.17  withhold payment for the last payment period of a lease, on the 
  4.18  grounds that the deposit shall serve as payment.  Withholding 
  4.19  payment for the last payment period of the lease creates a 
  4.20  rebuttable presumption that the lessee withheld the last payment 
  4.21  on the grounds that the deposit should serve as payment.  A 
  4.22  lessee who remains in violation of this subdivision after 
  4.23  written demand and notice of this subdivision is liable to the 
  4.24  lessor for damages in an amount equal to the portion of the 
  4.25  deposit which the lessor is entitled to withhold under 
  4.26  subdivision 4 other than to remedy the lessee's default in the 
  4.27  payment of rent, plus interest on the deposit as provided in 
  4.28  subdivision 3, as a penalty, in addition to the amount of the 
  4.29  payment withheld by the lessee in violation of this subdivision. 
  4.30     Subd. 9.  [VENUE OF RECOVERY ACTION.] An action, including 
  4.31  an action in conciliation court, for the recovery of a security 
  4.32  deposit may be brought in the county where the motor vehicle is 
  4.33  located, or at the option of the lessee, in the county of the 
  4.34  lessor's residence. 
  4.35     Subd. 10.  [WAIVER.] An attempted waiver of this section, 
  4.36  by contract or otherwise, is void and unenforceable. 
  5.1      Sec. 2.  [EFFECTIVE DATE; APPLICATION.] 
  5.2      Section 1 is effective the day following final enactment 
  5.3   and applies to leases entered into on or after that date.