1997 Minnesota Statutes

     16D.11 Collection penalty. 

    Subdivision 1.    Imposition.  As determined by the 
 commissioner of finance, a penalty shall be added to the debts 
 referred to the commissioner or private collection agency for 
 collection.  The penalty is 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 the penalty under this section and the debtor's 
 right to cancellation of the penalty under subdivision 3 at the 
 time the agency sends notice to the debtor under section 
 16D.07.  If the commissioner or private agency collects an 
 amount less than the total due, the payment is applied 
 proportionally to the penalty and the underlying debt.  
 Penalties collected by the commissioner under this subdivision 
 or retained under subdivision 6 shall be deposited in the 
 general fund as nondedicated receipts.  Penalties collected by 
 private agencies are appropriated to the referring agency to pay 
 the collection fees charged by the private agency.  Penalty 
 collections in excess of collection agency fees must be 
 deposited in the general fund as nondedicated receipts.  

    Subd. 2.    Computation.  Beginning July 1, 1995, at the 
 time a debt is referred, the amount of the penalty 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 270.06, 
 clause (7), and 270.66 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 the penalty under subdivision 3, 
 the debt must be returned to the commissioner for resolution of 
 the request. 

    Subd. 3.    Cancellation.  The penalty 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, excluding 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) penalties 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 the penalty under subdivision 3 
 are subject to the contested case procedure under chapter 14. 

    Subd. 5.    Refund.  If a penalty is collected and then 
 canceled, the amount of the penalty 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 the penalty 
 is canceled under subdivision 3, an amount equal to the penalty 
 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 penalty 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 the 
 penalty 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 the penalty when a debt is first 
 referred exceed three-fifths of the maximum penalty, and in no 
 event shall the rate of the maximum penalty exceed 25 percent of 
 the debt.  Determination of the rate of the penalty under this 
 section is not subject to the fee setting requirements of 
 section 16A.1285. 

    HIST: 1995 c 254 art 5 s 9; 1996 c 390 s 23,24; 1997 c 187 art 
 3 s 3