1.1                          A bill for an act 
  1.2             relating to financial institutions; regulating 
  1.3             advertising, prepayment penalties, credit extensions, 
  1.4             electronic financial terminals, bank powers, and 
  1.5             depository accounts; amending Minnesota Statutes 1996, 
  1.6             sections 45.025, subdivision 1; 47.20, subdivision 5; 
  1.7             47.59, subdivisions 1, 3, 4, 5, 6, 7, 10, 11, 12, and 
  1.8             14; 47.62, subdivision 5; 47.69, subdivision 3; 48.15, 
  1.9             subdivisions 2, 2a, and by adding subdivisions; 
  1.10            48.512, subdivision 7; 48.61, subdivisions 7 and 8; 
  1.11            and 168.72, subdivision 5. 
  1.12  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.13                             ARTICLE 1
  1.14                            ADVERTISING 
  1.15     Section 1.  Minnesota Statutes 1996, section 45.025, 
  1.16  subdivision 1, is amended to read: 
  1.17     Subdivision 1.  [DEFINITIONS.] For the purposes of this 
  1.18  section only, the following terms have the meanings given them: 
  1.19     (a) "Advertisement" includes: 
  1.20     (1) printed or published material, audio visual material, 
  1.21  and descriptive literature of an issuer or agent used in direct 
  1.22  mail, newspapers, magazines, other periodicals, radio scripts, 
  1.23  television scripts, billboards, and other similar displays, 
  1.24  excluding advertisements prepared for the sole purpose of 
  1.25  obtaining employees, agents, or agencies; 
  1.26     (2) descriptive literature and sales aids of all kinds 
  1.27  issued by an issuer or agent for presentation to members of the 
  1.28  public, including but not limited to circulars, leaflets, 
  2.1   booklets, depictions, illustrations, and form letters; 
  2.2      (3) prepared sales talks, presentations, and materials for 
  2.3   use by issuers and agents and representations made by issuers 
  2.4   and agents in accordance with these talks, presentations, and 
  2.5   materials; and 
  2.6      (4) statements, written or oral, by an agent or issuer.  
  2.7      "Advertisement" does not include materials, literature, 
  2.8   statements, or other written or oral communications pertaining 
  2.9   to an investment product that is issued, given, or made after 
  2.10  sale of the investment product. 
  2.11     (b) "Agent" is a person who effects or attempts to effect 
  2.12  or assist in the purchase or sale of an investment product.  
  2.13     (c) "Commissioner" means the commissioner of commerce.  
  2.14     (d) "Effective annual yield" is the annualized income 
  2.15  expressed as a simple interest rate per annum based on the 
  2.16  initial investment principal. 
  2.17     (e) "Effective net annual yield" means the effective annual 
  2.18  yield, based on a hypothetical $1,000 investment, minus any 
  2.19  annual fee or similar regular periodic charges.  
  2.20     (f) "Investment product" includes but is not limited to:  
  2.21     (1) certificate of deposits, deposits, or fiduciary funds 
  2.22  entrusted to banks, savings associations, trust companies, 
  2.23  credit unions, savings banks, industrial loan and thrift 
  2.24  companies, and any other financial institution whether or not 
  2.25  licensed by or registered with the department of commerce; 
  2.26     (2) annuities, endowment policies, or other life insurance 
  2.27  products; 
  2.28     (3) securities, including:  a note; stock; treasury stock; 
  2.29  bond; debenture; evidence of indebtedness; certificate of 
  2.30  interest or participation in any profit sharing agreement; 
  2.31  collateral trust certificate; preorganizational certificate or 
  2.32  subscription; transferable shares; investment contract, 
  2.33  including but not limited to metals, gems, and coins; voting 
  2.34  trust certificate; certificate of deposit for a security; 
  2.35  certificate of interest or participation in an oil, gas, or 
  2.36  mining right, title or lease, or in payments out of production 
  3.1   under the right, title or lease; or, in general, any interest or 
  3.2   instrument commonly known as a security, or any certificate of 
  3.3   interest or participation in, temporary or interim certificate 
  3.4   for, receipt for guarantee of, or warrant or right to subscribe 
  3.5   to or purchase, any of the securities listed in this clause. 
  3.6      (g) "Issuer" includes but is not limited to:  banks, 
  3.7   savings associations, trust companies, credit unions, savings 
  3.8   banks, industrial loan and thrift companies, insurance 
  3.9   companies, investment companies, trusts, or a person who issues 
  3.10  an investment product.  
  3.11     (h) "Person" means an individual, corporation, a 
  3.12  partnership, an association, a joint stock company, a trust 
  3.13  where the interests of the beneficiaries are evidenced by a 
  3.14  security, an unincorporated organization, a government, a 
  3.15  political subdivision of a government, or any other entity.  
  3.16     (i) "Yield to maturity" means the discount rate which, when 
  3.17  applied to all future principal and interest payments to be 
  3.18  received from an investment product assuming the investment 
  3.19  product is held to maturity, results in a present value exactly 
  3.20  equal to the price of the investment product. 
  3.21                             ARTICLE 2
  3.22                         CREDIT EXTENSIONS
  3.23     Section 1.  Minnesota Statutes 1996, section 47.59, 
  3.24  subdivision 1, is amended to read: 
  3.25     Subdivision 1.  [DEFINITIONS.] For purposes of this 
  3.26  section, the following definitions shall apply. 
  3.27     (a) "Actuarial method" has the meaning given the term in 
  3.28  the Code of Federal Regulations, title 12, part 226, and 
  3.29  appendix J thereto. 
  3.30     (b) "Annual percentage rate" has the meaning given the term 
  3.31  in the Code of Federal Regulations, title 12, part 226, but 
  3.32  using the definition of "finance charge" used in this section. 
  3.33     (c) "Borrower" means a debtor under a loan or a purchaser 
  3.34  or debtor under a credit sale contract. 
  3.35     (d) "Business purpose" means a purpose other than a 
  3.36  personal, family, household, or agricultural purpose. 
  4.1      (e) "Cardholder" means a person to whom a credit card is 
  4.2   issued or who has agreed with the financial institution to pay 
  4.3   obligations arising from the issuance to or use of the card by 
  4.4   another person. 
  4.5      (f) "Consumer loan" means a loan made by a financial 
  4.6   institution in which: 
  4.7      (1) the debtor is a person other than an organization; 
  4.8      (2) the debt is incurred primarily for a personal, family, 
  4.9   or household purpose; and 
  4.10     (3) the debt is payable in installments or a finance charge 
  4.11  is made. 
  4.12     (g) "Credit" means the right granted by a financial 
  4.13  institution to a borrower to defer payment of a debt, to incur 
  4.14  debt and defer its payment, or to purchase property or services 
  4.15  and defer payment. 
  4.16     (h) "Credit card" means a card or device issued under an 
  4.17  arrangement pursuant to which a financial institution gives to a 
  4.18  cardholder the privilege of obtaining credit from the financial 
  4.19  institution or other person in purchasing or leasing property or 
  4.20  services, obtaining loans, or otherwise.  A transaction is 
  4.21  "pursuant to a credit card" only if credit is obtained according 
  4.22  to the terms of the arrangement by transmitting information 
  4.23  contained on the card or device orally, in writing, by 
  4.24  mechanical or electronic methods, or in any other manner.  A 
  4.25  transaction is not "pursuant to a credit card" if the card or 
  4.26  device is used solely in that transaction to: 
  4.27     (1) identify the cardholder or evidence the cardholder's 
  4.28  creditworthiness and credit is not obtained according to the 
  4.29  terms of the arrangement; 
  4.30     (2) obtain a guarantee of payment from the cardholder's 
  4.31  deposit account, whether or not the payment results in a credit 
  4.32  extension to the cardholder by the financial institution; or 
  4.33     (3) effect an immediate transfer of funds from the 
  4.34  cardholder's deposit account by electronic or other means, 
  4.35  whether or not the transfer results in a credit extension to the 
  4.36  cardholder by the financial institution. 
  5.1      (i) "Credit sale contract" means a contract evidencing a 
  5.2   credit sale.  "Credit sale" means a sale of goods or services, 
  5.3   or an interest in land, in which: 
  5.4      (1) credit is granted by a seller who regularly engages as 
  5.5   a seller in credit transactions of the same kind; and 
  5.6      (2) the debt is payable in installments or a finance charge 
  5.7   is made. 
  5.8      (j) "Finance charge" has the meaning given in the Code of 
  5.9   Federal Regulations, title 12, part 226, except that the 
  5.10  following will not in any event be considered a finance charge: 
  5.11     (1) a charge as a result of default or delinquency under 
  5.12  subdivision 6 if made for actual unanticipated late payment, 
  5.13  delinquency, default, or other similar occurrence, and a charge 
  5.14  made for an extension or deferment under subdivision 5, unless 
  5.15  the parties agree that these charges are finance charges; 
  5.16     (2) an additional charge under subdivision 6; ~~or~~ 
  5.17     (3) a discount, if a financial institution purchases a loan 
  5.18  at less than the face amount of the obligation or purchases or 
  5.19  satisfies obligations of a cardholder pursuant to a credit card 
  5.20  and the purchase or satisfaction is made at less than the face 
  5.21  amount of the obligation~~.~~ 
  5.22     (4) fees paid by a borrower to a broker, provided the 
  5.23  financial institution or a person described in subdivision 4 
  5.24  does not require use of the broker to obtain credit; or 
  5.25     (5) a commission, expense reimbursement, or other sum 
  5.26  received by a financial institution or a person described in 
  5.27  subdivision 4 in connection with insurance described in 
  5.28  subdivision 6. 
  5.29     (k) "Financial institution" means a state or federally 
  5.30  chartered bank, a state or federally chartered bank and trust, a 
  5.31  trust company with banking powers, a state or federally 
  5.32  chartered saving bank, a state or federally chartered savings 
  5.33  association, an industrial loan and thrift company, or a 
  5.34  regulated lender. 
  5.35     (l) "Loan" means: 
  5.36     (1) the creation of debt by the financial institution's 
  6.1   payment of money to the borrower or a third person for the 
  6.2   account of the borrower; 
  6.3      (2) the creation of debt pursuant to a credit card in any 
  6.4   manner, including a cash advance or the financial institution's 
  6.5   honoring a draft or similar order for the payment of money drawn 
  6.6   or accepted by the borrower, paying or agreeing to pay the 
  6.7   borrower's obligation, or purchasing or otherwise acquiring the 
  6.8   borrower's obligation from the obligee or the borrower's 
  6.9   assignee; 
  6.10     (3) the creation of debt by a cash advance to a borrower 
  6.11  pursuant to an overdraft line of credit arrangement; 
  6.12     (4) the creation of debt by a credit to an account with the 
  6.13  financial institution upon which the borrower is entitled to 
  6.14  draw immediately; 
  6.15     (5) the forbearance of debt arising from a loan; and 
  6.16     (6) the creation of debt pursuant to open-end credit. 
  6.17     "Loan" does not include the forbearance of debt arising 
  6.18  from a sale or lease, a credit sale contract, or an overdraft 
  6.19  from a person's deposit account with a financial institution 
  6.20  which is not pursuant to a written agreement to pay overdrafts 
  6.21  with the right to defer repayment thereof. 
  6.22     (m) "Official fees" means: 
  6.23     (1) fees and charges which actually are or will be paid to 
  6.24  public officials for determining the existence of or for 
  6.25  perfecting, releasing, terminating, or satisfying a security 
  6.26  interest or mortgage relating to a loan or credit sale, and any 
  6.27  separate fees or charges which actually are or will be paid to 
  6.28  public officials for recording a notice described in section 
  6.29  580.032, subdivision 1; and 
  6.30     (2) premiums payable for insurance in lieu of perfecting a 
  6.31  security interest or mortgage otherwise required by a financial 
  6.32  institution in connection with a loan or credit sale, if the 
  6.33  premium does not exceed the fees and charges described in clause 
  6.34  (1), which would otherwise be payable. 
  6.35     (n) "Organization" means a corporation, government, 
  6.36  government subdivision or agency, trust, estate, partnership, 
  7.1   joint venture, cooperative, limited liability company, limited 
  7.2   liability partnership, or association. 
  7.3      (o) "Person" means a natural person or an organization. 
  7.4      (p) "Principal" means the total of: 
  7.5      (1) the amount paid to, received by, or paid or repayable 
  7.6   for the account of, the borrower; and 
  7.7      (2) to the extent that payment is deferred: 
  7.8      (i) the amount actually paid or to be paid by the financial 
  7.9   institution for additional charges permitted under this section; 
  7.10  and 
  7.11     (ii) prepaid finance charges. 
  7.12     Sec. 2.  Minnesota Statutes 1996, section 47.59, 
  7.13  subdivision 3, is amended to read: 
  7.14     Subd. 3.  [FINANCE CHARGE FOR LOANS.] (a) With respect to a 
  7.15  loan, including a loan pursuant to open-end credit but excluding 
  7.16  open-end credit pursuant to a credit card, a financial 
  7.17  institution may contract for and receive a finance charge on the 
  7.18  unpaid balance of the principal amount not to exceed the greater 
  7.19  of:  
  7.20     (1) an annual percentage rate not exceeding 21.75 percent; 
  7.21  or 
  7.22     (2) the total of: 
  7.23     (i) 33 percent per year on that part of the unpaid balance 
  7.24  of the principal amount not exceeding $750; and 
  7.25     (ii) 19 percent per year on that part of the unpaid balance 
  7.26  of the principal amount exceeding $750.  
  7.27     With respect to open-end credit pursuant to a credit card, 
  7.28  the financial institution may contract for and receive a finance 
  7.29  charge on the unpaid balance of the principal amount at an 
  7.30  annual percentage rate not exceeding 18 percent per year. 
  7.31     (b) On a loan where the finance charge is calculated 
  7.32  according to the method provided for in paragraph (a), clause 
  7.33  (2), the finance charge must be contracted for and earned as 
  7.34  provided in that provision or at the single annual percentage 
  7.35  rate computed to the nearest one-tenth of one percent that would 
  7.36  earn the same total finance charge at maturity of the contract 
  8.1   as would be earned by the application of the graduated rates 
  8.2   provided in paragraph (a), clause (2), when the debt is paid 
  8.3   according to the agreed terms and the calculations are made 
  8.4   according to the actuarial method. 
  8.5      (c) With respect to a loan, the finance charge must be 
  8.6   considered not to exceed the maximum annual percentage rate 
  8.7   permitted under this section if the finance charge contracted 
  8.8   for and received does not exceed the equivalent of the maximum 
  8.9   annual percentage rate calculated in accordance with Code of 
  8.10  Federal Regulations, title 12, part 226, but using the 
  8.11  definition of finance charge provided in this section.  
  8.12     (d) This subdivision does not limit or restrict the manner 
  8.13  of calculating the finance charge, whether by way of add-on, 
  8.14  discount, discount points, precomputed charges, single annual 
  8.15  percentage rate, variable rate, interest in advance, 
  8.16  compounding, average daily balance method, or otherwise, if the 
  8.17  annual percentage rate does not exceed that permitted by this 
  8.18  section.  Discount points permitted by this paragraph and not 
  8.19  collected but included in the principal amount must not be 
  8.20  included in the amount on which credit insurance premiums are 
  8.21  calculated and charged. 
  8.22     (e) With respect to a loan secured by real estate, if a 
  8.23  finance charge is calculated or collected in advance, or 
  8.24  included in the principal amount of the loan, and the borrower 
  8.25  pays or prepays the loan in full, the financial institution 
  8.26  shall credit the borrower with a refund of the charge to the 
  8.27  extent that the annual percentage rate yield on the loan would 
  8.28  exceed the maximum rate permitted under paragraph (a), taking 
  8.29  into account the payment or prepayment in full.  The refund need 
  8.30  not be made if it would be less than $5.  
  8.31     (f) With respect to all other loans, if the finance charge 
  8.32  is calculated or collected in advance, or included in the 
  8.33  principal amount of the loan, and the borrower pays or prepays 
  8.34  the loan in full, the financial institution shall credit the 
  8.35  borrower with a refund of the charge to the extent the annual 
  8.36  percentage rate yield on the loan would exceed the annual 
  9.1   percentage rate on the loan as originally determined under 
  9.2   paragraph (a) and taking into account the payment or prepayment 
  9.3   in full.  The refund need not be made if it would be less than 
  9.4   $5.  
  9.5      (g) For the purpose of calculating the refund under this 
  9.6   subdivision, the financial institution may assume that the 
  9.7   contract was paid before the date of payment or prepayment in 
  9.8   full according to the schedule of payments under the loan and 
  9.9   that all payments were paid on their due dates. 
  9.10     (h) For loans repayable in substantially equal successive 
  9.11  monthly installments, the financial institution may calculate 
  9.12  the refund under paragraph (f) as the portion of the finance 
  9.13  charge allocable on an actuarial basis to all wholly unexpired 
  9.14  payment periods following the date of payment or prepayment in 
  9.15  full, based on the annual percentage rate on the loan as 
  9.16  originally determined under paragraph (a), and for the purpose 
  9.17  of calculating the refund may assume that all payments are made 
  9.18  on the due date. 
  9.19     (i) The dollar amounts in this subdivision and subdivision 
  9.20  6, paragraph (a), clause (4), shall change periodically, as 
  9.21  provided in this section, according to and to the extent of 
  9.22  changes in the implicit price deflator for the gross domestic 
  9.23  product, 1987 = 100, compiled by the United States Department of 
  9.24  Commerce, and hereafter referred to as the index.  The index for 
  9.25  December 1991 is the reference base index for adjustments of 
  9.26  dollar amounts. 
  9.27     (j) The designated dollar amounts shall change on July 1 of 
  9.28  each even-numbered year if the percentage of change, calculated 
  9.29  to the nearest whole percentage point, between the index for 
  9.30  December of the preceding year and the reference base index is 
  9.31  ten percent or more; but 
  9.32     (1) the portion of the percentage change in the index in 
  9.33  excess of a multiple of ten percent shall be disregarded and the 
  9.34  dollar amounts shall change only in multiples of ten percent of 
  9.35  the amounts appearing in Laws 1995, chapter 202, on May 24, 
  9.36  1995; and 
 10.1      (2) the dollar amounts shall not change if the amounts 
 10.2   required by this section are those currently in effect pursuant 
 10.3   to Laws 1995, chapter 202, as a result of earlier application of 
 10.4   this section. 
 10.5      (k) If the index is revised, the percentage of change 
 10.6   pursuant to this section shall be calculated on the basis of the 
 10.7   revised index.  If a revision of the index changes the reference 
 10.8   base index, a revised reference base index shall be determined 
 10.9   by multiplying the reference base index then applicable by the 
 10.10  rebasing factor furnished by the department of commerce.  If the 
 10.11  index is superseded, the index referred to in this section is 
 10.12  the one represented by the department of commerce as reflecting 
 10.13  most accurately changes in the purchasing power of the dollar 
 10.14  for consumers. 
 10.15     (l) The commissioner shall announce and publish: 
 10.16     (1) on or before April 30 of each year in which dollar 
 10.17  amounts are to change, the changes in dollar amounts required by 
 10.18  paragraph (j); and 
 10.19     (2) promptly after the changes occur, changes in the index 
 10.20  required by paragraph (k) including, if applicable, the 
 10.21  numerical equivalent of the reference base index under a revised 
 10.22  reference base index and the designation or title of any index 
 10.23  superseding the index. 
 10.24     (m) A person does not violate this chapter with respect to 
 10.25  a transaction otherwise complying with this chapter if that 
 10.26  person relies on dollar amounts either determined according to 
 10.27  paragraph (j), clause (2), or appearing in the last publication 
 10.28  of the commissioner announcing the then current dollar amounts. 
 10.29     (n) The adjustments provided in this section shall not be 
 10.30  affected unless explicitly provided otherwise by law. 
 10.31     Sec. 3.  Minnesota Statutes 1996, section 47.59, 
 10.32  subdivision 4, is amended to read: 
 10.33     Subd. 4.  [FINANCE CHARGE FOR CREDIT SALES MADE BY A THIRD 
 10.34  PARTY.] (a) A person may enter into a credit sale contract for 
 10.35  sale to a financial institution and a financial institution may 
 10.36  purchase and enforce the contract, if the annual percentage rate 
 11.1   provided for in the contract does not exceed that permitted in 
 11.2   this section, or, in the case of ~~contracts governed by sections~~ 
 11.3   ~~168.66 to 168.77~~ motor vehicle retail installment sales as 
 11.4   defined in section 168.66, the annual percentage rates permitted 
 11.5   by subdivision 4a.  A person who is authorized to enter into 
 11.6   motor vehicle retail installment contracts under sections 168.66 
 11.7   to 168.77 may enter into a credit sale contract under 
 11.8   subdivisions 1 and 4 to 14 for the credit sale of a motor 
 11.9   vehicle, whether or not the credit sale contract is for sale to 
 11.10  a financial institution. 
 11.11     (b) The annual percentage rate may not exceed the 
 11.12  equivalent of the greater of either of the following:  
 11.13     (1) the total of:  
 11.14     (i) 36 percent per year on that part of the unpaid balances 
 11.15  of the amount financed that is $300 or less; 
 11.16     (ii) 21 percent per year on that part of the unpaid 
 11.17  balances of the amount financed which exceeds $300 but does not 
 11.18  exceed $1,000; and 
 11.19     (iii) 15 percent per year on that part of the unpaid 
 11.20  balances of the amount financed which exceeds $1,000; or 
 11.21     (2) 19 percent per year on the unpaid balances of the 
 11.22  amount financed.  
 11.23     (c) This subdivision does not limit or restrict the manner 
 11.24  of calculating the finance charge whether by way of add-on, 
 11.25  discount, discount points, single annual percentage rate, 
 11.26  precomputed charges, variable rate, interest in advance, 
 11.27  compounding, or otherwise, if the annual percentage rate 
 11.28  calculated under paragraph (d) does not exceed that permitted by 
 11.29  this section.  The finance charge may be contracted for and 
 11.30  earned at the single annual percentage rate that would earn the 
 11.31  same finance charge as the graduated rates when the debt is paid 
 11.32  according to the agreed terms and the finance charge is 
 11.33  calculated under paragraph (d).  If the finance charge is 
 11.34  calculated and collected in advance, or included in the 
 11.35  principal amount of the contract, and the borrower pays or 
 11.36  prepays the contract in full, the financial institution shall 
 12.1   credit the borrower with a refund of the charge to the extent 
 12.2   the annual percentage rate yield on the contract would exceed 
 12.3   the annual percentage rate on the contract as originally 
 12.4   determined under paragraph (d) and taking into account 
 12.5   the payment or prepayment in full.  For the purpose of 
 12.6   calculating the refund under this subdivision, the financial 
 12.7   institution may assume that the contract was paid before the 
 12.8   date of payment or prepayment in full according to the schedule 
 12.9   of payments under the contract and that all payments were paid 
 12.10  on their due dates.  For contracts repayable in substantially 
 12.11  equal successive monthly installments, the financial institution 
 12.12  may calculate the refund as the portion of the finance charge 
 12.13  allocable on an actuarial basis to all wholly unexpired payment 
 12.14  periods following the date of payment or prepayment in full, 
 12.15  based on the annual percentage rate on the contract as 
 12.16  originally determined under paragraph (d), and for the purpose 
 12.17  of calculating the refund may assume that all payments are made 
 12.18  on the due date.  
 12.19     (d) The annual percentage rate must be calculated in 
 12.20  accordance with Code of Federal Regulations, title 12, part 226, 
 12.21  except that the following will not in any event be considered a 
 12.22  finance charge:  
 12.23     (1) a charge as a result of delinquency or default under 
 12.24  subdivision 6 if made for actual unanticipated late payment, 
 12.25  delinquency, default, or other similar occurrence, and a charge 
 12.26  made for an extension or deferment under subdivision 5, unless 
 12.27  the parties agree that these charges are finance charges; 
 12.28     (2) an additional charge under subdivision 6; or 
 12.29     (3) a discount, if a financial institution purchases a 
 12.30  contract evidencing a credit sale at less than the face amount 
 12.31  of the obligation or purchases or satisfies obligations of a 
 12.32  cardholder according to a credit card and the purchase or 
 12.33  satisfaction is made at less than the face amount of the 
 12.34  obligation.  
 12.35     Sec. 4.  Minnesota Statutes 1996, section 47.59, 
 12.36  subdivision 5, is amended to read: 
 13.1      Subd. 5.  [EXTENSIONS, DEFERMENTS, AND CONVERSION TO 
 13.2   INTEREST BEARING.] (a) The parties may agree in writing, either 
 13.3   in the loan contract or credit sale contract or in a subsequent 
 13.4   agreement, to a deferment of wholly unpaid installments.  For 
 13.5   precomputed loans and credit sale contracts, the manner of 
 13.6   deferment charge shall be determined as provided for in this 
 13.7   section.  A deferment postpones the scheduled due date of the 
 13.8   earliest unpaid installment and all subsequent installments as 
 13.9   originally scheduled, or as previously deferred, for a period 
 13.10  equal to the deferment period.  The deferment period is that 
 13.11  period during which no installment is scheduled to be paid by 
 13.12  reason of the deferment.  The deferment charge for a one-month 
 13.13  period may not exceed the applicable charge for the installment 
 13.14  period immediately following the due date of the last undeferred 
 13.15  payment.  A proportionate charge may be made for deferment 
 13.16  periods of more or less than one month.  A deferment charge is 
 13.17  earned pro rata during the deferment period and is fully earned 
 13.18  on the last day of the deferment period.  If a loan or credit 
 13.19  sale is prepaid in full during a deferment period, the financial 
 13.20  institution or a person described in subdivision 4 shall make or 
 13.21  credit to the borrower a refund of the unearned deferment charge 
 13.22  in addition to any other refund or credit made for prepayment of 
 13.23  the loan or credit sale in full.  
 13.24     For the purpose of this subdivision, "applicable charge" 
 13.25  means the amount of finance charge attributable to each monthly 
 13.26  installment period for the loan or credit sale contract.  The 
 13.27  applicable charge is computed as if each installment period were 
 13.28  one month and any charge for extending the first installment 
 13.29  period beyond the one month, or reduction in charge for a first 
 13.30  installment less than one month, is ignored.  The applicable 
 13.31  charge for any installment period is that which would have been 
 13.32  made for the period had the loan been made on an 
 13.33  interest-bearing basis at the single annual percentage rate 
 13.34  provided for in the contract based upon the assumption that all 
 13.35  payments were made according to schedule.  For convenience in 
 13.36  computation, the financial institution or a person described in 
 14.1   subdivision 4 may round the single annual rate to the nearest 
 14.2   one quarter of one percent. 
 14.3      (b) Subject to a refund of unearned finance or deferment 
 14.4   charge required by this section, a financial institution or a 
 14.5   person described in subdivision 4 may convert a loan or credit 
 14.6   sale contract to an interest bearing balance, if: 
 14.7      (1) the loan contract or credit sale contract so provides 
 14.8   and is subject to a change of the terms of the written agreement 
 14.9   between the parties; or 
 14.10     (2) the loan contract so provides and two or more 
 14.11  installments are delinquent one full month or more on any due 
 14.12  date. 
 14.13     ~~Thereafter, and in lieu of any other default, extension, or~~ 
 14.14  ~~deferment charges, the single annual percentage rate must be~~ 
 14.15  ~~determined under the applicable charge provisions of this~~ 
 14.16  ~~subdivision.~~  Thereafter, the single annual percentage rate and 
 14.17  other charges must be determined as provided under this section 
 14.18  for interest-bearing transactions. 
 14.19     Sec. 5.  Minnesota Statutes 1996, section 47.59, 
 14.20  subdivision 6, is amended to read: 
 14.21     Subd. 6.  [ADDITIONAL CHARGES.] (a) In addition to the 
 14.22  finance charges permitted by this section, a financial 
 14.23  institution or a person described in subdivision 4 may contract 
 14.24  for and receive the following additional charges that may be 
 14.25  included in the principal amount of the loan or credit sale 
 14.26  unpaid balances:  
 14.27     (1) official fees and taxes; 
 14.28     (2) charges for insurance as described in paragraph (b); 
 14.29     (3) with respect to a loan or credit sale contract secured 
 14.30  by real estate, the following "closing costs," if they are bona 
 14.31  fide, reasonable in amount, and not for the purpose of 
 14.32  circumvention or evasion of this section: 
 14.33     (i) fees or premiums for title examination, abstract of 
 14.34  title, title insurance, surveys, or similar purposes; 
 14.35     (ii) fees for preparation of a deed, mortgage, settlement 
 14.36  statement, or other documents, if not paid to the financial 
 15.1   institution; 
 15.2      (iii) escrows for future payments of taxes, including 
 15.3   assessments for improvements, insurance, and water, sewer, and 
 15.4   land rents; 
 15.5      (iv) fees for notarizing deeds and other documents; 
 15.6      (v) appraisal and credit report fees; and 
 15.7      (vi) fees for determining whether any portion of the 
 15.8   property is located in a flood zone and fees for ongoing 
 15.9   monitoring of the property to determine changes, if any, in 
 15.10  flood zone status; 
 15.11     (4) a delinquency charge on a payment, including the 
 15.12  minimum payment due in connection with ~~the~~ open-end credit, if 
 15.13  not paid in full on or before the tenth day after its due date 
 15.14  in an amount not to exceed five percent of the amount of the 
 15.15  payment or $5.20, whichever is greater; 
 15.16     (5) for a returned check or returned automatic payment 
 15.17  withdrawal request, an amount not in excess of the service 
 15.18  charge limitation in section 332.50; and 
 15.19     (6) charges for other benefits, including insurance, 
 15.20  conferred on the borrower that are of a type that is not for 
 15.21  credit. 
 15.22     (b) An additional charge may be made for insurance written 
 15.23  in connection with the loan or credit sale contract, which may 
 15.24  be included in the principal amount of the loan or credit sale 
 15.25  unpaid balances:  
 15.26     (1) with respect to insurance against loss of or damage to 
 15.27  property, or against liability arising out of the ownership or 
 15.28  use of property, if the financial institution or a person 
 15.29  described in subdivision 4 furnishes a clear, conspicuous, and 
 15.30  specific statement in writing to the borrower setting forth the 
 15.31  cost of the insurance if obtained from or through the financial 
 15.32  institution or a person described in subdivision 4 and stating 
 15.33  that the borrower may choose the person through whom the 
 15.34  insurance is to be obtained; 
 15.35     (2) with respect to credit insurance or mortgage insurance 
 15.36  providing life, accident, health, or unemployment coverage, if 
 16.1   the insurance coverage is not required by the financial 
 16.2   institution or a person described in subdivision 4, and this 
 16.3   fact is clearly and conspicuously disclosed in writing to the 
 16.4   borrower, and the borrower gives specific, dated, and separately 
 16.5   signed affirmative written indication of the borrower's desire 
 16.6   to do so after written disclosure to the borrower of the cost of 
 16.7   the insurance; and 
 16.8      (3) with respect to the vendor's single interest insurance, 
 16.9   but only (i) to the extent that the insurer has no right of 
 16.10  subrogation against the borrower; and (ii) to the extent that 
 16.11  the insurance does not duplicate the coverage of other insurance 
 16.12  under which loss is payable to the financial institution as its 
 16.13  interest may appear, against loss of or damage to property for 
 16.14  which a separate charge is made to the borrower according to 
 16.15  clause (1); and (iii) if a clear, conspicuous, and specific 
 16.16  statement in writing is furnished by the financial 
 16.17  institution or a person described in subdivision 4 to the 
 16.18  borrower setting forth the cost of the insurance if obtained 
 16.19  from or through the financial institution or a person described 
 16.20  in subdivision 4 and stating that the borrower may choose the 
 16.21  person through whom the insurance is to be obtained. 
 16.22     (c) In addition to the finance charges and other additional 
 16.23  charges permitted by this section, a financial institution or a 
 16.24  person described in subdivision 4 may contract for and receive 
 16.25  the following additional charges in connection with open-end 
 16.26  credit, which may be included in the principal amount of the 
 16.27  loan or balance upon which the finance charge is computed:  
 16.28     (1) annual charges, not to exceed $50 per annum, payable in 
 16.29  advance, for the privilege of opening and maintaining open-end 
 16.30  credit; 
 16.31     (2) charges for the use of an automated teller machine; 
 16.32     (3) charges for any monthly or other periodic payment 
 16.33  period in which the borrower has exceeded or, except for the 
 16.34  financial institution's or person's dishonor would have 
 16.35  exceeded, the maximum approved credit limit, in an amount not in 
 16.36  excess of the service charge permitted in section 332.50; 
 17.1      (4) charges for obtaining a cash advance in an amount not 
 17.2   to exceed the service charge permitted in section 332.50; and 
 17.3      (5) charges for check ~~and~~, draft, and statement copies and 
 17.4   for the replacement of lost or stolen credit cards.  
 17.5      (d) In addition to the finance charges and other additional 
 17.6   charges permitted by this section, a financial institution or a 
 17.7   person described in subdivision 4 may contract for and receive a 
 17.8   one-time ~~loan~~ administrative fee not exceeding $25 in connection 
 17.9   with closed-end credit, which may be included in the principal 
 17.10  balance upon which the finance charge is computed.  This 
 17.11  paragraph applies only to closed-end credit in an original 
 17.12  principal amount of $4,320 or less and to motor vehicle retail 
 17.13  installment sales as defined in section 168.66 regardless of 
 17.14  amount.  The determination of an original principal amount must 
 17.15  exclude the administrative fee contracted for and received 
 17.16  according to this paragraph. 
 17.17     Sec. 6.  Minnesota Statutes 1996, section 47.59, 
 17.18  subdivision 7, is amended to read: 
 17.19     Subd. 7.  [ADVANCES TO PERFORM COVENANTS OF BORROWER OR 
 17.20  PURCHASER.] (a) If the agreement with respect to a loan or 
 17.21  credit sale contract contains covenants by the borrower or 
 17.22  purchaser to perform certain duties pertaining to insuring or 
 17.23  preserving collateral and the financial institution or a person 
 17.24  described in subdivision 4 according to the agreement pays for 
 17.25  performance of the duties on behalf of the borrower or 
 17.26  purchaser, the financial institution or a person described in 
 17.27  subdivision 4 may add to the debt or contract balance the 
 17.28  amounts so advanced.  Before or within a reasonable time not 
 17.29  less than 30 days after advancing any sums, the financial 
 17.30  institution or a person described in subdivision 4 shall state 
 17.31  to the borrower or purchaser in writing the amount of sums 
 17.32  advanced or to be advanced, any charges with respect to this 
 17.33  amount, and any revised payment schedule and, if the duties of 
 17.34  the borrower or purchaser performed by the financial institution 
 17.35  or a person described in subdivision 4 pertain to insurance, a 
 17.36  brief description of the insurance paid for or to be paid for by 
 18.1   the financial institution or a person described in subdivision 4 
 18.2   including the type and amount of coverages.  Additional 
 18.3   information need not be given.  The actions of the financial 
 18.4   institution or a person described in subdivision 4 pursuant to 
 18.5   this subdivision shall not be deemed to cure the borrower's 
 18.6   failure to perform covenants in the loan or credit sale 
 18.7   contract, unless the loan or credit sale contract expressly 
 18.8   provides otherwise. 
 18.9      (b) A finance charge equal to that specified in the loan 
 18.10  agreement or credit sale contract may be made for sums advanced 
 18.11  under paragraph (a). 
 18.12     Sec. 7.  Minnesota Statutes 1996, section 47.59, 
 18.13  subdivision 10, is amended to read: 
 18.14     Subd. 10.  [CREDIT INSURANCE.] (a) The sale of credit 
 18.15  insurance or mortgage insurance is subject to chapters 61A, 62A, 
 18.16  and 62B, as applicable, and the rules adopted under those 
 18.17  chapters, if any.  In case there are multiple consumers 
 18.18  obligated under a transaction subject to this chapter, no policy 
 18.19  or certificate of insurance providing credit life insurance may 
 18.20  be procured by or through a financial institution or a person 
 18.21  described in subdivision ~~2~~ 4 upon more than two of the 
 18.22  consumers, in which case they may be insured jointly.  
 18.23     (b) A financial institution or a person described in 
 18.24  subdivision 4 that provides credit insurance in relation to 
 18.25  open-end credit may calculate the charge to the borrower in each 
 18.26  billing cycle by applying the current premium rate to the 
 18.27  balance in the manner permitted with respect to finance charges 
 18.28  by the provisions on finance charge in this section.  
 18.29     (c) Upon prepayment in full of a consumer loan or credit 
 18.30  sale contract by the proceeds of credit insurance or mortgage 
 18.31  insurance, the consumer or the consumer's estate is entitled to 
 18.32  a refund of any portion of a separate charge for insurance that 
 18.33  by reason of prepayment is retained by the financial institution 
 18.34  or a person described in subdivision 4 or returned to it by the 
 18.35  insurer, unless the charge was computed from time to time on the 
 18.36  basis of the balances of the consumer's loan or credit sale 
 19.1   contract.  
 19.2      (d) This section does not require a financial institution 
 19.3   or a person described in subdivision 4 to grant a refund to the 
 19.4   consumer if all refunds due to the consumer under paragraph (c) 
 19.5   amount to less than $5 and, except as provided in paragraph (c), 
 19.6   does not require the financial institution or a person described 
 19.7   in subdivision 4 to account to the consumer for any portion of a 
 19.8   separate charge for insurance because:  
 19.9      (1) the insurance is terminated by performance of the 
 19.10  insurer's obligation; 
 19.11     (2) the financial institution or a person described in 
 19.12  subdivision 4 pays or accounts for premiums to the insurer in 
 19.13  amounts and at times determined by the agreement between them; 
 19.14  or 
 19.15     (3) the financial institution or a person described in 
 19.16  subdivision 4 receives directly or indirectly under a policy of 
 19.17  insurance a gain or advantage not prohibited by law.  
 19.18     (e) Except as provided in paragraph (d), the financial 
 19.19  institution or a person described in subdivision 4 shall 
 19.20  promptly make or cause to be made an appropriate refund to the 
 19.21  consumer with respect to a separate charge made to the consumer 
 19.22  for insurance if:  
 19.23     (1) the insurance is not provided or is provided for a 
 19.24  shorter term than for which the charge to the borrower for 
 19.25  insurance was computed; or 
 19.26     (2) the insurance terminates before the end of the term for 
 19.27  which it was written because of prepayment in full or otherwise. 
 19.28     (f) If a financial institution or a person described in 
 19.29  subdivision 4 requires insurance, upon notice to the borrower, 
 19.30  the borrower has the option of providing the required insurance 
 19.31  through an existing policy of insurance owned or controlled by 
 19.32  the borrower, or through a policy to be obtained and paid for by 
 19.33  the borrower, but the financial institution or a person 
 19.34  described in subdivision 4 for reasonable cause may decline the 
 19.35  insurance provided by the borrower.  
 19.36     Sec. 8.  Minnesota Statutes 1996, section 47.59, 
 20.1   subdivision 11, is amended to read: 
 20.2      Subd. 11.  [PROPERTY AND LIABILITY INSURANCE.] (a) Except 
 20.3   as otherwise provided in this section and subject to the 
 20.4   provisions on additional charges and maximum finance charges in 
 20.5   this section, a financial institution or a person described in 
 20.6   subdivision 4 may agree to sell, as an agent, property and 
 20.7   liability insurance, and may contract for and receive a charge 
 20.8   for this insurance separate from and in addition to other 
 20.9   charges.  This section does not authorize the issuance of the 
 20.10  insurance prohibited under any statute or rule governing the 
 20.11  business of insurance nor does it authorize a financial 
 20.12  institution or a person described in subdivision 4 to underwrite 
 20.13  insurance.  
 20.14     (b) This section does not apply to an insurance premium 
 20.15  loan.  A financial institution or a person described in 
 20.16  subdivision 4 may request cancellation of a policy of property 
 20.17  or liability insurance only after the borrower's default or in 
 20.18  accordance with a written authorization by the borrower.  In 
 20.19  either case, the cancellation does not take effect until written 
 20.20  notice is delivered to the borrower or mailed to the borrower at 
 20.21  the borrower's address as stated by the borrower.  The notice 
 20.22  must state that the policy may be canceled on a date not less 
 20.23  than ten days after the notice is delivered, or, if the notice 
 20.24  is mailed, not less than 13 days after it is mailed.  A 
 20.25  cancellation may not take effect until those notice periods 
 20.26  expire.  
 20.27     Sec. 9.  Minnesota Statutes 1996, section 47.59, 
 20.28  subdivision 12, is amended to read: 
 20.29     Subd. 12.  [CONSUMER PROTECTIONS.] (a) Financial 
 20.30  institutions or persons described in subdivision 4 shall comply 
 20.31  with the requirements of the federal Truth in Lending Act, 
 20.32  United States Code, title 15, sections 1601 to 1693, as amended, 
 20.33  in connection with a consumer loan or credit sale for a consumer 
 20.34  purpose where the federal Truth in Lending Act is applicable.  
 20.35     (b) Financial institutions or persons described in 
 20.36  subdivision 4 shall comply with the following consumer 
 21.1   protection provisions in connection with a consumer loan or 
 21.2   credit sale for a consumer purpose:  sections 325G.02 to 
 21.3   325G.05; 325G.06 to 325G.11; 325G.15 to 325G.22; and 325G.29 to 
 21.4   325G.36, and Code of Federal Regulations, title 12, part 535, 
 21.5   where those statutes or regulations are applicable.  
 21.6      (c) An assignment of a consumer's earnings by the consumer 
 21.7   to a financial institution or a person described in subdivision 
 21.8   4 as payment or as security for payment of a debt arising out of 
 21.9   a consumer loan or consumer credit sale is unenforceable by the 
 21.10  financial institution or a person described in subdivision 4 and 
 21.11  revocable by the consumer.  
 21.12     Sec. 10.  Minnesota Statutes 1996, section 47.59, 
 21.13  subdivision 14, is amended to read: 
 21.14     Subd. 14.  [EFFECT OF VIOLATIONS ON RIGHTS OF PARTIES.] (a) 
 21.15  If a financial institution or a person described in subdivision 
 21.16  4 has violated any provision of this section applying to 
 21.17  collection of finance or other charges, the borrower or 
 21.18  purchaser under a credit sale contract may recover from the 
 21.19  financial institution actual damages and, in an action other 
 21.20  than a class action, a penalty in an amount determined by the 
 21.21  court but not less than $100 nor more than $1,000.  With respect 
 21.22  to violations arising from other than open-end credit 
 21.23  transactions, no action may be brought according to this 
 21.24  paragraph and no set-off or recoupment may be asserted according 
 21.25  to this paragraph more than one year after the making of the 
 21.26  debt.  
 21.27     (b) A borrower or purchaser under a credit sale contract is 
 21.28  not obligated to pay a charge in excess of that allowed by this 
 21.29  section and has a right of refund of any excess charge paid.  A 
 21.30  refund may not be made by reducing the borrower's or purchaser's 
 21.31  obligation by the amount of the excess charge, unless the 
 21.32  financial institution or a person described in subdivision 4 has 
 21.33  notified the borrower or purchaser that the borrower or 
 21.34  purchaser may request a refund and the borrower or purchaser has 
 21.35  not so requested within 30 days thereafter.  If the borrower or 
 21.36  purchaser has paid an amount in excess of the lawful obligation 
 22.1   under the agreement, the borrower or purchaser may recover the 
 22.2   excess amount from the financial institution or a person 
 22.3   described in subdivision 4 that made the excess charge or from 
 22.4   an assignee of the financial institution's or person's rights 
 22.5   that undertakes direct collection of payments from or 
 22.6   enforcement of rights against borrowers or purchasers arising 
 22.7   from the debt.  
 22.8      (c) If a financial institution or a person as described in 
 22.9   subdivision 4 has contracted for or received a charge in excess 
 22.10  of that allowed by this section, or if a borrower or purchaser 
 22.11  under a credit sale contract is entitled to a refund and a 
 22.12  person liable to the borrower or purchaser refuses to make a 
 22.13  refund within a reasonable time after demand, the borrower or 
 22.14  purchaser may recover from the financial institution or a person 
 22.15  described in subdivision 4 or the person liable in an action 
 22.16  other than a class action a penalty in an amount determined by 
 22.17  the court but not less than $100 nor more than $1,000.  With 
 22.18  respect to excess charges arising from other than open-end 
 22.19  credit transactions, no action according to this paragraph may 
 22.20  be brought more than one year after the making of the debt.  For 
 22.21  purposes of this paragraph, a reasonable time is presumed to be 
 22.22  30 days.  
 22.23     (d) A violation of this section does not impair rights on a 
 22.24  debt.  
 22.25     (e) A financial institution or a person described in 
 22.26  subdivision 4 is not liable for a penalty under paragraph (a) or 
 22.27  (c) if it notifies the borrower or purchaser under a credit sale 
 22.28  contract of a violation before the financial institution or a 
 22.29  person described in subdivision 4 receives from the borrower or 
 22.30  purchaser written notice of the violation or the borrower or 
 22.31  purchaser has brought an action under this section, and the 
 22.32  financial institution or a person described in subdivision 4 
 22.33  corrects the violation within 45 days after notifying the 
 22.34  borrower or purchaser.  If the violation consists of a 
 22.35  prohibited agreement, giving the borrower or purchaser a 
 22.36  corrected copy of the writing containing the violation is 
 23.1   sufficient notification and correction.  If the violation 
 23.2   consists of an excess charge, correction must be made by an 
 23.3   adjustment or refund.  
 23.4      (f) A financial institution or a person described in 
 23.5   subdivision 4 may not be held liable in an action brought under 
 23.6   this section for a violation of this section if the financial 
 23.7   institution or a person described in subdivision 4 shows by a 
 23.8   preponderance of evidence that the violation was not intentional 
 23.9   and resulted from a bona fide error notwithstanding the 
 23.10  maintenance of procedures reasonably adopted to avoid the error. 
 23.11     (g) In an action in which it is found that a financial 
 23.12  institution or a person described in subdivision 4 has violated 
 23.13  this section, the court shall award to the borrower or the 
 23.14  purchaser under a credit sale contract the costs of the action 
 23.15  and to the borrower's or purchaser's attorneys their reasonable 
 23.16  fees.  
 23.17     Sec. 11.  Minnesota Statutes 1996, section 168.72, 
 23.18  subdivision 5, is amended to read: 
 23.19     Subd. 5.  ~~In lieu of this section and sections 168.66,~~ 
 23.20  ~~subdivisions 9, 10, and 11; 168.71; 168.73; and 168.74, a retail~~ 
 23.21  ~~seller may proceed under section 47.59 relating to credit sales~~ 
 23.22  ~~made by a third party.  In cases where the retail seller~~ 
 23.23  ~~proceeds under section 47.59, the remaining provisions of~~ 
 23.24  ~~sections 168.66 to 168.77 apply notwithstanding section 47.59.~~ A 
 23.25  retail seller may, but need not, enter into a retail installment 
 23.26  contract with a retail buyer according to section 47.59 in lieu 
 23.27  of sections 168.71 to 168.74, and if so, the retail installment 
 23.28  contracts are subject to section 47.59 and not sections 168.71 
 23.29  to 168.74 except this subdivision or section 168.75. 
 23.30                             ARTICLE 3 
 23.31                        PREPAYMENT PENALTIES 
 23.32     Sec. 1.  Minnesota Statutes 1996, section 47.20, 
 23.33  subdivision 5, is amended to read: 
 23.34     Subd. 5.  [PREPAYMENT PENALTY.] (a) Unless the mortgagor 
 23.35  waives its right to prepay the mortgage loan without penalty, in 
 23.36  a uniform written disclosure waiver approved by the commissioner 
 24.1   and signed by the mortgagor, no conventional loan or loan 
 24.2   authorized in subdivision 1 shall contain a provision requiring 
 24.3   or permitting the imposition of a penalty in the event the loan 
 24.4   or advance of credit is prepaid.  The prepayment penalty shall 
 24.5   not exceed the lesser of two percent of the unpaid principal 
 24.6   balance or 60 days interest on the unpaid principal balance.  A 
 24.7   lender that offers a mortgage loan with a prepayment penalty 
 24.8   shall also offer a mortgage loan without a prepayment penalty. 
 24.9      This section does not permit the imposition of a prepayment 
 24.10  penalty in the event that the property securing the mortgage 
 24.11  loan is sold or the mortgage loan is prepaid in part.  No 
 24.12  prepayment penalty may be enforced after 42 months from the date 
 24.13  of the mortgage loan.  The mortgagor's failure to sign the 
 24.14  uniform written disclosure waiver does not affect the validity 
 24.15  or enforceability of a mortgage containing a prepayment 
 24.16  penalty.  If a mortgagor does not waive the right to prepay the 
 24.17  mortgage loan, the lender may not collect the prepayment 
 24.18  penalty, and the mortgagor's only remedy is that the mortgagor 
 24.19  will not have to pay a prepayment penalty. 
 24.20     (b) A precomputed conventional loan or precomputed loan 
 24.21  authorized in subdivision 1 shall provide for a refund of the 
 24.22  precomputed finance charge according to the actuarial method if 
 24.23  the loan is paid in full by cash, renewal or refinancing, or a 
 24.24  new loan, one month or more before the final installment due 
 24.25  date.  The actuarial method for the purpose of this section is 
 24.26  the amount of interest attributable to each fully unexpired 
 24.27  monthly installment period of the loan contract following the 
 24.28  date of prepayment in full, calculated as if the loan was made 
 24.29  on an interest-bearing basis at the rate of interest provided 
 24.30  for in the note based on the assumption that all payments were 
 24.31  made according to schedule.  A precomputed loan for the purpose 
 24.32  of this section means a loan for which the debt is expressed as 
 24.33  a sum comprised of the principal amount and the amount of 
 24.34  interest for the entire term of the loan computed actuarially in 
 24.35  advance on the assumption that all scheduled payments will be 
 24.36  made when due, and does not include a loan for which interest is 
 25.1   computed from time to time by application of a rate to the 
 25.2   unpaid principal balance, interest-bearing loans, or 
 25.3   simple-interest loans.  For the purpose of calculating a refund 
 25.4   for precomputed loans under this section, any portion of the 
 25.5   finance charge for extending the first payment period beyond one 
 25.6   month may be ignored.  Nothing in this section shall be 
 25.7   considered a limitation on discount points or other finance 
 25.8   charges charged or collected in advance, and nothing in this 
 25.9   section shall require a refund of the charges in the event of 
 25.10  prepayment.  Nothing in this section shall be considered to 
 25.11  supersede section 47.204. 
 25.12                             ARTICLE 4
 25.13                   ELECTRONIC FINANCIAL TERMINALS
 25.14     Section 1.  Minnesota Statutes 1996, section 47.69, 
 25.15  subdivision 3, is amended to read: 
 25.16     Subd. 3.  Every financial institution using an electronic 
 25.17  financial terminal shall maintain reasonable procedures to 
 25.18  minimize losses from unauthorized withdrawals from its 
 25.19  customers' accounts by use of an electronic financial terminal.  
 25.20  ~~After a customer makes a bona fide deposit or payment at an~~ 
 25.21  ~~electronic financial terminal and has received a receipt, any~~ 
 25.22  ~~loss due to theft or other reason shall not be borne by the~~ 
 25.23  ~~customer; provided, loss due to the nonpayment or dishonor of a~~ 
 25.24  ~~check, or other order for payment, deposited at an electronic~~ 
 25.25  ~~financial terminal shall be governed by the applicable~~ 
 25.26  ~~provisions of chapter 336.  A financial institution shall be~~ 
 25.27  ~~liable for all unauthorized withdrawals unless the unauthorized~~ 
 25.28  ~~withdrawal was due to the loss or theft of the customer machine~~ 
 25.29  ~~readable card in which case the customer shall be liable,~~ 
 25.30  ~~subject to a maximum liability of $50, for those unauthorized~~ 
 25.31  ~~withdrawals made prior to the time the financial institution is~~ 
 25.32  ~~notified of the loss or theft.  The limitation on liability is~~ 
 25.33  ~~effective only if the issuer is notified of unauthorized charges~~ 
 25.34  ~~contained in a bill within 60 days of receipt of the bill by the~~ 
 25.35  ~~person in whose name the card is issued.~~  The amount of a 
 25.36  customer's liability for an unauthorized withdrawal from an 
 26.1   electronic financial terminal or a series of related 
 26.2   unauthorized withdrawals from an electronic financial terminal 
 26.3   shall not exceed $50 or the amount of the unauthorized transfers 
 26.4   that occur before notice to the financial institution, whichever 
 26.5   is less, unless one or both of the exceptions in paragraphs (a) 
 26.6   and (b) apply. 
 26.7      (a) If the customer fails to notify the financial 
 26.8   institution within two business days after learning of the loss 
 26.9   or theft of the customer's machine readable card or access 
 26.10  device, the customer's liability shall not exceed the lesser of 
 26.11  $500 or the sum of: 
 26.12     (1) $50 or the amount of the unauthorized withdrawals from 
 26.13  the electronic financial terminal that occur before the close of 
 26.14  the two business days, whichever is less; and 
 26.15     (2) the amount of unauthorized withdrawals from the 
 26.16  electronic financial terminal that the financial institution 
 26.17  establishes would not have occurred but for the failure of the 
 26.18  customer to notify the institution within two business days 
 26.19  after the customer learns of the loss or theft of the machine 
 26.20  readable card or access device, and that occur after the close 
 26.21  of the two business days and before notice to the financial 
 26.22  institution. 
 26.23     (b) If the customer fails to report within 60 days of 
 26.24  transmittal of the periodic statement any unauthorized 
 26.25  withdrawal from an electronic financial terminal that appears on 
 26.26  the statement, the customer's liability shall not exceed the sum 
 26.27  of: 
 26.28     (1) the lesser of $50 or the amount of unauthorized 
 26.29  withdrawals from the electronic financial terminal that appear 
 26.30  on the periodic statement or that occur during the 60-day 
 26.31  period; and 
 26.32     (2) the amount of the unauthorized withdrawals from the 
 26.33  electronic financial terminal that occur after the close of the 
 26.34  60 days and before notice to the financial institution and that 
 26.35  the financial institution establishes would not have occurred 
 26.36  but for the failure of the customer to notify the financial 
 27.1   institution within that time. 
 27.2      For purposes of this subdivision, "unauthorized withdrawal" 
 27.3   means a withdrawal by a person other than the customer without 
 27.4   actual authority to initiate the withdrawal and from which the 
 27.5   customer receives no benefit.  The term does not include any 
 27.6   withdrawal that is:  (1) initiated by a person who was furnished 
 27.7   with the card by the customer, unless the customer has notified 
 27.8   the financial institution involved that transfers by that person 
 27.9   are no longer authorized; (2) initiated with fraudulent intent 
 27.10  by the customer or any person acting in concert with the 
 27.11  customer; or (3) initiated by the financial institution or its 
 27.12  employee.  
 27.13                             ARTICLE 5
 27.14                            BANK POWERS
 27.15     Section 1.  Minnesota Statutes 1996, section 47.62, 
 27.16  subdivision 5, is amended to read: 
 27.17     Subd. 5.  [ESTABLISHMENT BY NOTICE.] A bank, savings bank, 
 27.18  savings association, or credit union organized under the laws of 
 27.19  this state may, after completing the notification procedure 
 27.20  required by this subdivision, establish and maintain one or more 
 27.21  electronic financial terminals without geographic restriction.  
 27.22  The filing must be on forms provided by the commissioner.  No 
 27.23  electronic financial terminal may be established under sections 
 27.24  47.61 to 47.74 if disallowed by order of the commissioner within 
 27.25  15 days of the filing of a complete and acceptable notification 
 27.26  of the intent to establish an electronic financial terminal. 
 27.27     Sec. 2.  Minnesota Statutes 1996, section 48.15, 
 27.28  subdivision 2, is amended to read: 
 27.29     Subd. 2.  Notwithstanding section 48.61, a bank or trust 
 27.30  company organized under the laws of this state may undertake any 
 27.31  activities, exercise any powers, or make any investments that 
 27.32  are authorized activities, powers, or investments as of January 
 27.33  2, 1997, for any national banks doing business in this state, 
 27.34  subject to the same restrictions as apply to national banks.  
 27.35  Authorized activities, powers, and investments of national banks 
 27.36  are those authorized by statute, regulation, interpretation, or 
 28.1   ruling.  The commissioner ~~of commerce~~ may authorize banks and 
 28.2   trust companies organized under the laws of this state to ~~engage~~ 
 28.3   ~~in any banking activity in which banks subject to the~~ 
 28.4   ~~jurisdiction of the federal government may hereafter be~~ 
 28.5   ~~authorized to engage by federal legislation, ruling, or~~ 
 28.6   ~~regulation.  The commissioner may not authorize state banks as~~ 
 28.7   ~~defined by section 48.01, to engage in any banking activity~~ 
 28.8   ~~prohibited by the laws of this state.~~ undertake any activities, 
 28.9   exercise any powers, or make any investments that become 
 28.10  authorized activities, powers, or investments for national banks 
 28.11  after January 2, 1997, subject to the same restrictions as apply 
 28.12  to national banks.  This authority is in addition to the 
 28.13  authority granted to state banks and trust companies under other 
 28.14  provisions of state law. 
 28.15     Sec. 3.  Minnesota Statutes 1996, section 48.15, 
 28.16  subdivision 2a, is amended to read: 
 28.17     Subd. 2a.  [AUTHORIZED ACTIVITIES.] ~~The commissioner may~~ 
 28.18  ~~authorize a state bank to undertake any activities, exercise any~~ 
 28.19  ~~powers, or make any investments that are authorized activities,~~ 
 28.20  ~~powers, or investments as of August 1, 1995, for any state~~ 
 28.21  ~~savings bank doing business in this state, or that become~~ 
 28.22  ~~authorized activities, powers, or investments for state savings~~ 
 28.23  ~~banks after August 1, 1995.  The commissioner may not authorize~~ 
 28.24  ~~state banks to engage in any banking activity prohibited by the~~ 
 28.25  ~~laws of this state.~~ Notwithstanding section 48.61, a bank or 
 28.26  trust company organized under the laws of this state may 
 28.27  undertake any activities, exercise any powers, or make any 
 28.28  investments that are authorized activities, powers, or 
 28.29  investments as of January 2, 1997, for any state savings bank, 
 28.30  subject to the same restrictions that apply to state savings 
 28.31  banks.  Authorized activities, powers, and investments of state 
 28.32  savings banks are those authorized by statute, regulation, 
 28.33  interpretation, or ruling.  The commissioner may authorize banks 
 28.34  and trust companies organized under the laws of this state to 
 28.35  undertake any activities, exercise any powers, or make any 
 28.36  investments that become authorized activities, powers, or 
 29.1   investments for state savings banks after January 2, 1997, 
 29.2   subject to the same restrictions that apply to state savings 
 29.3   banks.  This authority is in addition to the authority granted 
 29.4   to state banks and trust companies under other provisions of 
 29.5   state law. 
 29.6      Sec. 4.  Minnesota Statutes 1996, section 48.61, 
 29.7   subdivision 7, is amended to read: 
 29.8      Subd. 7.  [SUBSIDIARIES.] (a) In addition to the authority 
 29.9   set forth in this subdivision, subdivisions 8 and 9, and section 
 29.10  48.15, a state bank or trust company may organize, acquire, or 
 29.11  invest in a subsidiary located in this state for the purposes of 
 29.12  engaging in one or more of the following activities, subject to 
 29.13  the prior written approval of the commissioner: 
 29.14     (1) any activity, not including receiving deposits or 
 29.15  paying checks, that a state bank is authorized to engage in 
 29.16  under state law or rule or under federal law or regulation 
 29.17  unless the activity is prohibited by the laws of this state; 
 29.18     (2) any activity that a bank clerical service corporation 
 29.19  is authorized to engage in under section 48.89; and 
 29.20     (3) any other activity authorized for a national bank, a 
 29.21  bank holding company, or a subsidiary of a national bank or bank 
 29.22  holding company under federal law or regulation of general 
 29.23  applicability, and approved by the commissioner by rule.  
 29.24     (b) A bank or trust company subsidiary may engage in an 
 29.25  activity under this section only upon application together with 
 29.26  a filing fee of $250 and with the prior written approval of the 
 29.27  commissioner.  In approving or denying a proposed activity, the 
 29.28  commissioner shall consider the financial and management 
 29.29  strength of the bank or trust company, the current written 
 29.30  operating plan and policies of the proposed subsidiary 
 29.31  corporation, the bank or trust company's community reinvestment 
 29.32  record, and whether the proposed activity should be conducted 
 29.33  through a subsidiary of the bank or trust company. 
 29.34     (c) The aggregate amount of funds invested in either an 
 29.35  equity or loan capacity in all of the subsidiaries of the bank 
 29.36  or trust company authorized under this subdivision shall not 
 30.1   exceed 25 percent of the capital stock and paid in surplus of 
 30.2   the bank or trust company. 
 30.3      (d) A subsidiary organized or acquired under this 
 30.4   subdivision is subject to the examination and enforcement 
 30.5   authority of the commissioner under chapters 45 and 46 to the 
 30.6   same extent as a state bank or trust company. 
 30.7      (e) For the purposes of this section, "subsidiary" means a 
 30.8   corporation of which more than 50 percent of the voting shares 
 30.9   are owned or controlled by the bank or trust company. 
 30.10     Sec. 5.  Minnesota Statutes 1996, section 48.61, 
 30.11  subdivision 8, is amended to read: 
 30.12     Subd. 8.  [PARITY WITH NATIONAL BANKS.] Notwithstanding 
 30.13  anything in this section to the contrary, a state bank or trust 
 30.14  company may invest in any securities that are authorized 
 30.15  investments for national banks on ~~May 27, 1989~~ January 2, 1997, 
 30.16  subject to the same restrictions as apply to national banks.  
 30.17  The commissioner may authorize a state bank or trust company to 
 30.18  invest in any securities that become authorized investments for 
 30.19  national banks after ~~May 27, 1989~~ January 2, 1997, subject to 
 30.20  the same restrictions as apply to national banks.  This 
 30.21  authority is in addition to the investment authority granted to 
 30.22  state banks and trust companies under other provisions of state 
 30.23  law. 
 30.24                             ARTICLE 6
 30.25                        DEPOSITORY ACCOUNTS
 30.26     Section 1.  Minnesota Statutes 1996, section 48.15, is 
 30.27  amended by adding a subdivision to read: 
 30.28     Subd. 5.  [DEPOSIT ACCOUNTS.] (a) A deposit account with a 
 30.29  bank is subject to a lien for the payment of charges that may 
 30.30  accrue on the account under this chapter.  A deposit account is 
 30.31  subject to a debt offset for the debts of the deposit account 
 30.32  holder to the bank.  Deposit accounts may not be assessed for 
 30.33  any debts or losses of the bank. 
 30.34     (b) The bank shall determine the rate and amount of 
 30.35  interest, if any, to be paid on or credited to deposit 
 30.36  accounts.  The bank may establish reasonable classifications of 
 31.1   accounts based on the types of accounts, the minimum balances of 
 31.2   accounts required for payment of interest, the frequency and 
 31.3   extent of the activity on accounts, location of the account, or 
 31.4   other classifications the bank considers appropriate. 
 31.5      (c) Deposit accounts must be represented only by the 
 31.6   account of each deposit account holder on the books of the bank, 
 31.7   and the accounts or any interest is transferable only on the 
 31.8   books of the bank and upon proper written application by the 
 31.9   transferee.  The bank may treat the holder of record of a 
 31.10  deposit account as the owner of it for all purposes without 
 31.11  being affected by any notice to the contrary unless the bank has 
 31.12  acknowledged in writing notice of a pledge of the deposit 
 31.13  account.  A bank may offer negotiable time deposits. 
 31.14     (d) A bank may issue deposit accounts to or in the name of 
 31.15  a minor.  The accounts must be held for the exclusive right and 
 31.16  benefit of the minor, free from the control or lien of all other 
 31.17  persons, except creditors, and, together with interest or 
 31.18  dividends, shall be paid to the minor.  The minor's receipt, 
 31.19  draft, negotiable order of withdrawal, or acquittance in any 
 31.20  form is sufficient release and discharge of the bank for 
 31.21  withdrawal, until a guardian appointed in this state for the 
 31.22  minor has delivered a certificate of appointment to the bank. 
 31.23     (e) A bank may contract with the proper authorities of a 
 31.24  public or nonpublic elementary or secondary school or 
 31.25  institution of higher learning, or a public or charitable 
 31.26  institution caring for minors, for the participation and 
 31.27  implementation by the bank in a school or institution thrift or 
 31.28  savings plan, and it may accept savings accounts at the school 
 31.29  or institution, either by its own collector or by a 
 31.30  representative of the school or institution which becomes the 
 31.31  agent of the association for this purpose. 
 31.32     (f) When a deposit is made in the names of two or more 
 31.33  persons jointly, or by a person payable on death (P.O.D.) to 
 31.34  another, or by a person in trust for another, the rights of the 
 31.35  parties and the bank are determined by sections 524.6-201 to 
 31.36  524.6-214. 
 32.1      (g) The pledge or hypothecation to a bank of all or part of 
 32.2   a deposit account in joint tenancy signed by a tenant or 
 32.3   tenants, whether minor or adult, upon whose signature or 
 32.4   signatures withdrawals may be made from the account must, unless 
 32.5   the terms of the deposit account provide specifically to the 
 32.6   contrary, be a valid pledge and transfer to the bank of that 
 32.7   part of the account pledged or hypothecated, and must not 
 32.8   operate to sever or terminate the joint and survivorship 
 32.9   ownership of all or any part of the account. 
 32.10     (h) A bank may accept deposits in the name of any 
 32.11  administrator, executor, custodian, conservator, guardian, 
 32.12  trustee, or other fiduciary for a named beneficiary or 
 32.13  beneficiaries.  The fiduciary may open, make additions to, and 
 32.14  withdraw the account in whole or in part.  The withdrawal value 
 32.15  of the account, and interest, or other rights relating to it may 
 32.16  be paid or delivered, in whole or in part, to the fiduciary 
 32.17  without regard to any notice to the contrary as long as the 
 32.18  fiduciary is living.  The payment or delivery to the fiduciary 
 32.19  or a receipt or acquittance signed by the fiduciary to whom the 
 32.20  payment or delivery of rights is made is a valid and sufficient 
 32.21  release and discharge of a bank for the payment or delivery so 
 32.22  made.  Whenever a person holding an account in a fiduciary 
 32.23  capacity dies and no written notice of the revocation or 
 32.24  termination of the fiduciary relationship has been given to a 
 32.25  bank and the bank has no written notice of any other disposition 
 32.26  of the beneficial estate, the withdrawal value of the account, 
 32.27  and interest or dividends, or other rights relating to it may, 
 32.28  at the option of the bank, be paid or delivered, in whole or in 
 32.29  part, to the beneficiary or beneficiaries.  The payment or 
 32.30  delivery to the beneficiary, beneficiaries, or designated 
 32.31  persons for the payment or delivery is a valid and sufficient 
 32.32  release and discharge of a bank for the payment or delivery.  
 32.33  This section does not apply to P.O.D. accounts under sections 
 32.34  524.6-201 to 524.6-214. 
 32.35     (i) When a deposit account is held in a bank by a person 
 32.36  who becomes incompetent and an adjudication of incompetency has 
 33.1   been made by a court of competent jurisdiction, the bank may pay 
 33.2   or deliver the withdrawal value of the deposit account and any 
 33.3   earnings that may have accrued on it to the guardian for the 
 33.4   person upon proof of appointment and qualification.  If the bank 
 33.5   has received no written notice and is not on actual notice that 
 33.6   the deposit account holder has been adjudicated incompetent, it 
 33.7   may pay or deliver the funds to the holder according to the 
 33.8   deposit account contract, and the receipt or acquittance of the 
 33.9   holder is a valid and sufficient release and discharge of the 
 33.10  bank for the payment or delivery so made. 
 33.11     (j) Administrators, executors, custodians, conservators, 
 33.12  guardians, trustees, and other fiduciaries of every kind and 
 33.13  nature, insurance companies, business and manufacturing 
 33.14  companies, banks, trust companies, credit unions, and other 
 33.15  types of similar financial organizations, charitable, 
 33.16  educational, eleemosynary, and public corporations authorized by 
 33.17  law, funds, and organizations, are specifically authorized and 
 33.18  empowered to invest funds held by them, without any order of any 
 33.19  court, in deposit accounts of a bank, and the investments are 
 33.20  considered legal investments for the funds. 
 33.21     (k) A bank may contract with depositors for service charges 
 33.22  in connection with the opening and maintaining of deposit 
 33.23  accounts and for providing services ancillary to the opening and 
 33.24  maintaining of deposit accounts.  The service charges are a 
 33.25  matter of contract between the bank and the depositor, and the 
 33.26  contract will be fully enforceable in accordance with its stated 
 33.27  terms. 
 33.28     Sec. 2.  Minnesota Statutes 1996, section 48.15, is amended 
 33.29  by adding a subdivision to read: 
 33.30     Subd. 6.  [NATIONAL BANKS.] Subdivision 5 applies to 
 33.31  national banks, except to the extent inconsistent with federal 
 33.32  laws or regulations. 
 33.33     Sec. 3.  Minnesota Statutes 1996, section 48.512, 
 33.34  subdivision 7, is amended to read: 
 33.35     Subd. 7.  [TRANSACTION ACCOUNT SERVICE CHARGES AND CHARGES 
 33.36  RELATING TO DISHONORED CHECKS.] (a) The establishment of 
 34.1   transaction account service charges and the amounts of the 
 34.2   charges not otherwise limited or prescribed by law or rule is a 
 34.3   business decision to be made by each financial intermediary 
 34.4   according to sound business judgment and safe, sound financial 
 34.5   institution operational standards.  In establishing transaction 
 34.6   account service charges, the financial intermediary may 
 34.7   consider, but is not limited to considering: 
 34.8      (1) costs incurred by the institution, plus a profit 
 34.9   margin, in providing the service; 
 34.10     (2) the deterrence of misuse by customers of financial 
 34.11  institution services; 
 34.12     (3) the establishment of the competitive position of the 
 34.13  financial institution in accordance with the institution's 
 34.14  marketing strategy; and 
 34.15     (4) maintenance of the safety and soundness of the 
 34.16  institution. 
 34.17     (b) ~~Transaction account service charges must be reasonable~~ 
 34.18  ~~in relation to these considerations and should be arrived at by~~ 
 34.19  ~~each financial intermediary on a competitive basis and not on~~ 
 34.20  ~~the basis of any agreement, arrangement, undertaking, or~~ 
 34.21  ~~discussion with other financial intermediaries or their officers.~~
 34.22  Notwithstanding anything in paragraphs (a) and (c) to the 
 34.23  contrary, transaction account service charges are a matter of 
 34.24  contract between a person and the financial intermediary.  The 
 34.25  contract will be fully enforceable according to its stated 
 34.26  terms, except that transaction account service charges may not 
 34.27  be arrived at by a financial intermediary on the basis of any 
 34.28  express or implied agreement with other financial intermediaries 
 34.29  or their officers. 
 34.30     (c) A financial intermediary may not impose a service 
 34.31  charge in excess of $4 for a dishonored check on any person 
 34.32  other than the issuer of the check.