16D.11 COLLECTION COSTS.
Subdivision 1. Imposition.
As determined by the commissioner of finance, collection
costs shall be added to the debts referred to the commissioner or private collection agency for
collection. Collection costs are collectible by the commissioner or private agency from the debtor
at the same time and in the same manner as the referred debt. The referring agency shall advise
the debtor of collection costs under this section and the debtor's right to cancellation of collection
costs under subdivision 3 at the time the agency sends notice to the debtor under section
If the commissioner or private agency collects an amount less than the total due, the payment is
applied proportionally to collection costs and the underlying debt unless the commissioner of
finance has waived this requirement for certain categories of debt pursuant to the department's
internal guidelines. Collection costs collected by the commissioner under this subdivision or
retained under subdivision 6 shall be deposited in the general fund as nondedicated receipts.
Collection costs collected by private agencies are appropriated to the referring agency to pay
the collection fees charged by the private agency. Collections of collection costs in excess of
collection agency fees must be deposited in the general fund as nondedicated receipts.
Subd. 2. Computation.
At the time a debt is referred, the amount of collection costs is equal
to 15 percent of the debt, or 25 percent of the debt remaining unpaid if the commissioner or private
collection agency has to take enforced collection action by serving a summons and complaint on or
entering judgment against the debtor, or by utilizing any of the remedies authorized under section
16D.08, subdivision 2
, except for the remedies in sections
or when referred
by the commissioner for additional collection activity by a private collection agency. If, after
referral of a debt to a private collection agency, the debtor requests cancellation of collection costs
under subdivision 3, the debt must be returned to the commissioner for resolution of the request.
Subd. 3. Cancellation.
Collection costs imposed under subdivision 1 shall be canceled and
subtracted from the amount due if:
(1) the debtor's household income as defined in section
290A.03, subdivision 5
the exemption subtractions in subdivision 3, paragraph (3) of that section, for the 12 months
preceding the date of referral is less than twice the annual federal poverty guideline under United
States Code, title 42, section 9902, subsection (2);
(2) within 60 days after the first contact with the debtor by the enterprise or collection
agency, the debtor establishes reasonable cause for the failure to pay the debt prior to referral of
the debt to the enterprise;
(3) a good faith dispute as to the legitimacy or the amount of the debt is made, and payment
is remitted or a payment agreement is entered into within 30 days after resolution of the dispute;
(4) good faith litigation occurs and the debtor's position is substantially justified, and if the
debtor does not totally prevail, the debt is paid or a payment agreement is entered into within 30
days after the judgment becomes final and nonappealable; or
(5) collection costs have been added by the referring agency and are included in the amount
of the referred debt.
Subd. 4. Appeal.
Decisions of the commissioner denying an application to cancel collection
costs under subdivision 3 are subject to the contested case procedure under chapter 14.
Subd. 5. Refund.
If collection costs are collected and then canceled, the amount of the
collection costs shall be refunded to the debtor within 30 days. The amount necessary to pay the
refunds is annually appropriated to the commissioner.
Subd. 6. Charge to referring agency.
If collection costs are canceled under subdivision
3, an amount equal to the costs is retained by the commissioner from the debt collected, and is
accounted for and subject to the same provisions of this chapter as if the costs had been collected
from the debtor.
Subd. 7. Adjustment of rate.
By June 1 of each year, the commissioner of finance shall
determine the rate of collection costs for debts referred to the enterprise during the next fiscal
year. The rate is a percentage of the debts in an amount that most nearly equals the costs of the
enterprise necessary to process and collect referred debts under this chapter. In no event shall
the rate of collection costs when a debt is first referred exceed three-fifths of the maximum
collection costs, and in no event shall the rate of the maximum collection costs exceed 25 percent
of the debt. Determination of the rate of collection costs under this section is not subject to the
fee setting requirements of section
History: 1995 c 254 art 5 s 9; 1996 c 390 s 23,24; 1997 c 187 art 3 s 3; 1998 c 366 s 35;
2002 c 379 art 1 s 9; 2005 c 151 art 2 s 17