1998 Minnesota Statutes

     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 16D.07.  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 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 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, 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) 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 
 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 
 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 16A.1285. 

    HIST: 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