1st Engrossment - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to financial institutions; regulating 1.3 notices; electronic financial terminals, mergers with 1.4 subsidiaries, the powers and duties of the 1.5 commissioner of commerce, reporting and records 1.6 requirements, lending powers, the powers and duties of 1.7 institutions, detached facilities, interstate banking, 1.8 and pawnbrokers; making technical changes; amending 1.9 Minnesota Statutes 1994, sections 46.04, subdivision 1.10 1, and by adding a subdivision; 46.041, subdivision 4; 1.11 46.046, subdivision 1; 46.048, subdivision 1, and by 1.12 adding subdivisions; 47.10, subdivision 3; 47.11; 1.13 47.20, subdivisions 5 and 10; 47.28, subdivision 1; 1.14 47.52; 47.56; 47.58, subdivision 2; 47.61, subdivision 1.15 3; 47.62, subdivisions 2, 3, and by adding 1.16 subdivisions; 47.67; 47.69, subdivisions 3 and 5; 1.17 47.78; 48.16; 48.194; 48.24, subdivision 5; 48.475, 1.18 subdivision 3; 48.48, subdivisions 1 and 2; 48.49; 1.19 48.61, subdivision 7, and by adding a subdivision; 1.20 48.65; 48.90, subdivision 1; 48.91; 48.92, 1.21 subdivisions 1, 2, 6, 7, 8, 9, and by adding a 1.22 subdivision; 48.93, subdivisions 1, 3, and 4; 48.96; 1.23 48.99, subdivision 1; 49.01, subdivision 3; 51A.02, 1.24 subdivisions 6, 26, and 40; 51A.19, subdivision 9; 1.25 51A.50; 51A.58; 52.04, subdivision 2a; 52.05, 1.26 subdivision 2; 53.015, subdivision 4; 53.04, 1.27 subdivisions 3a, 3c, 4a, and 5a; 53.09, subdivisions 1.28 1, 2, and by adding a subdivision; 56.11; 56.12; 1.29 56.125, subdivisions 1, 2, and 3; 56.131, subdivisions 1.30 1, 2, 4, and 6; 56.132; 56.14; 56.155, subdivision 1; 1.31 56.17; 59A.06, subdivision 2; 61A.09, subdivision 3; 1.32 62B.04, subdivision 1; 62B.08, subdivision 2; 300.20, 1.33 subdivision 1; 325F.91, subdivision 2; 325G.02, 1.34 subdivision 1; 327B.04, subdivision 1; 327B.09, 1.35 subdivision 1; and 332.23, subdivisions 1 and 2; 1.36 proposing coding for new law in Minnesota Statutes, 1.37 chapters 45; 47; 48; 51A; 52; 168; 325G; and 334; 1.38 repealing Minnesota Statutes 1994, sections 46.03; 1.39 48.1585; 48.512, subdivision 6; 48.611; 48.97; 48.991; 1.40 and 51A.385. 1.41 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.42 ARTICLE 1 1.43 FINANCIAL INSTITUTIONS TECHNICAL CORRECTIONS 2.1 Section 1. [45.014] [SEAL OF DEPARTMENT OF COMMERCE.] 2.2 The commissioner of commerce shall devise a seal for 2.3 official use as the seal of the department of commerce. The 2.4 seal must be capable of being legibly reproduced under 2.5 photographic methods. A description of the seal, and a copy of 2.6 it, must be filed in the office of the secretary of state. 2.7 Sec. 2. Minnesota Statutes 1994, section 46.04, 2.8 subdivision 1, is amended to read: 2.9 Subdivision 1. The commissioner of commerce, referred to 2.10 in chapters 46 to5959A, and sections 332.12 to 332.29, as the 2.11 commissioner, is vested with all the powers, authority, and 2.12 privileges which, prior to the enactment of Laws 1909, chapter 2.13 201, were conferred by law upon the public examiner, and shall 2.14 take over all duties in relation to state banks, savings banks, 2.15 trust companies, savings associations, and other financial 2.16 institutions within the state which, prior to the enactment of 2.17 chapter 201, were imposed upon the public examiner. The 2.18 commissioner of commerce shall exercise a constant supervision, 2.19 either personally or through the examiners herein provided for, 2.20 over the books and affairs of all state banks, savings banks, 2.21 trust companies, savings associations, credit unions, industrial 2.22 loan and thrift companies, and other financial institutions 2.23 doing business within this state; and shall, through examiners, 2.24 examine each financial institution at least once every 18 2.25 calendar months. In satisfying this examination requirement, 2.26 the commissioner may accept reports of examination prepared by a 2.27 federal agency having comparable supervisory powers and 2.28 examination procedures. With the exception of industrial loan 2.29 and thrift companies which do not have deposit liabilities and 2.30 licensed regulated lenders, it shall be the principal purpose of 2.31 these examinations to inspect and verify the assets and 2.32 liabilities of each and so far investigate the character and 2.33 value of the assets of each institution as to determine with 2.34 reasonable certainty that the values are correctly carried on 2.35 its books. Assets and liabilities shall be verified in 2.36 accordance with methods of procedure which the commissioner may 3.1 determine to be adequate to carry out the intentions of this 3.2 section. It shall be the further purpose of these examinations 3.3 to assess the adequacy of capital protection and the capacity of 3.4 the institution to meet usual and reasonably anticipated deposit 3.5 withdrawals and other cash commitments without resorting to 3.6 excessive borrowing or sale of assets at a significant loss, and 3.7 to investigate each institution's compliance with applicable 3.8 laws and rules. Based on the examination findings, the 3.9 commissioner shall make a determination as to whether the 3.10 institution is being operated in a safe and sound manner. None 3.11 of the above provisions limits the commissioner in making 3.12 additional examinations as deemed necessary or advisable. The 3.13 commissioner shall investigate the methods of operation and 3.14 conduct of these institutions and their systems of accounting, 3.15 to ascertain whether these methods and systems are in accordance 3.16 with law and sound banking principles. The commissioner may 3.17 make requirements as to records as deemed necessary to 3.18 facilitate the carrying out of the commissioner's duties and to 3.19 properly protect the public interest. The commissioner may 3.20 examine, or cause to be examined by these examiners, on oath, 3.21 any officer, director, trustee, owner, agent, clerk, customer, 3.22 or depositor of any financial institution touching the affairs 3.23 and business thereof, and may issue, or cause to be issued by 3.24 the examiners, subpoenas, and administer, or cause to be 3.25 administered by the examiners, oaths. In case of any refusal to 3.26 obey any subpoena issued under the commissioner's direction, the 3.27 refusal may at once be reported to the district court of the 3.28 district in which the bank or other financial institution is 3.29 located, and this court shall enforce obedience to these 3.30 subpoenas in the manner provided by law for enforcing obedience 3.31 to subpoenas of the court. In all matters relating to official 3.32 duties, the commissioner of commerce has the power possessed by 3.33 courts of law to issue subpoenas and cause them to be served and 3.34 enforced, and all officers, directors, trustees, and employees 3.35 of state banks, savings banks, trust companies, savings 3.36 associations, and other financial institutions within the state, 4.1 and all persons having dealings with or knowledge of the affairs 4.2 or methods of these institutions, shall afford reasonable 4.3 facilities for these examinations, make returns and reports to 4.4 the commissioner of commerce as the commissioner may require; 4.5 attend and answer, under oath, the commissioner's lawful 4.6 inquiries; produce and exhibit any books, accounts, documents, 4.7 and property as the commissioner may desire to inspect, and in 4.8 all things aid the commissioner in the performance of duties. 4.9 Sec. 3. Minnesota Statutes 1994, section 46.041, 4.10 subdivision 4, is amended to read: 4.11 Subd. 4. [HEARING.] In any case in which the commissioner 4.12 grants a request for a hearing or makes the independent 4.13 determination that a hearing is warranted on the basis of the 4.14 conditions in subdivision 3, the commissioner shall fix a time 4.15 for a hearing conducted pursuant to chapter 14 to decide whether 4.16 or not the application will be granted. A notice of the hearing 4.17 must be published by the applicant in the form prescribed by the 4.18 commissioner in a newspaper published in the municipality in 4.19 which the proposed bank is to be located, and if there is no 4.20 such newspaper, thenat the county seat of the countyin a 4.21 qualified newspaper likely to give notice in the municipality in 4.22 which the bank is proposed to be located. The notice must be 4.23 published once, at the expense of the applicants, not less than 4.24 30 days prior to the date of the hearing. At the hearing the 4.25 commissioner shall consider the application and hear the 4.26 applicants and witnesses that appear in favor of or against the 4.27 granting of the application of the proposed bank. If an 4.28 application is contested, 50 percent of an additional fee equal 4.29 to the actual costs incurred by the department of commerce in 4.30 approving or disapproving the application, payable to the 4.31 department of commerce to be deposited in the general fund, must 4.32 be paid by the applicant and 50 percent equally by the 4.33 intervening parties. 4.34 Sec. 4. Minnesota Statutes 1994, section 46.046, 4.35 subdivision 1, is amended to read: 4.36 Subdivision 1. [WORDS, TERMS, AND PHRASES.] Unless the 5.1 language or context clearly indicates that a different meaning 5.2 is intended, the word defined in subdivision 2, for the purposes 5.3 of sections 46.041 to 46.044, shall be given the meaning 5.4 subjoined to it; and the word defined in subdivision 3, for the 5.5 purposes of chapters 46 to7783, shall be given the meaning 5.6 subjoined to it. 5.7 Sec. 5. Minnesota Statutes 1994, section 47.11, is amended 5.8 to read: 5.9 47.11 [SELECTION OF NAME.] 5.10 Before execution of the certificate of incorporation of any 5.11 such corporation or conduct of business under an assumed name, 5.12 its proposed name or proposed assumed name shall be submitted to 5.13 the commissioner of commerce, who shall compare it with those of 5.14 corporations operating in the state, and if it is likely to be 5.15 mistaken for any of them, or to confuse the public as to the 5.16 character of its business, or is otherwise objectionable, 5.17 additional names shall be submitted until a satisfactory one is 5.18 selected, whereupon the commissioner shall issue a certificate 5.19 of approval thereof. 5.20 Sec. 6. Minnesota Statutes 1994, section 47.28, 5.21 subdivision 1, is amended to read: 5.22 Subdivision 1. Any savings bank organized and existing 5.23 under and by virtue of the law of this state may amend its 5.24 articles of incorporation so as to convert itself into a 5.25 savings, building and loanassociation, by complying with the 5.26 following requirements and procedure: 5.27 The savings bank by a two-thirds vote of the entire board 5.28 of trustees, at any regular or special meeting of said board 5.29 duly called for that purpose, shall (a) pass a resolution 5.30 declaring their intention to convert the savings bank into a 5.31 savings, building and loanassociation, and (b) cause an 5.32 application in writing to be executed, by such persons as the 5.33 trustees may direct, in the form prescribed by the department of 5.34 commerce, requesting a certificate of authorization (charter) as 5.35 a savings, building and loanassociation to transact business at 5.36 the place and in the name stated in the application. The 6.1 amendments proposed to the articles of incorporation and bylaws 6.2 shall be included as part of the application. 6.3 The application shall be submitted to, considered and acted 6.4 upon by the department of commerce in the same manner and by the 6.5 same standards as applications are submitted, considered and 6.6 acted upon undersection 51.08chapter 51A. 6.7 Sec. 7. Minnesota Statutes 1994, section 47.58, 6.8 subdivision 2, is amended to read: 6.9 Subd. 2. [AUTHORIZATION.] Pursuant to rules which the 6.10 commissioner of commerceor commissioner of insurancemay find 6.11 to be necessary and proper, if any, and subject to federal laws 6.12 and regulations, lenders may make investments in reverse 6.13 mortgage loans and purchases of obligations representing reverse 6.14 mortgage loans, provided the aggregate total of committed 6.15 principal of the investment in reverse mortgage loans by any 6.16 bank, savings bank, or savings and loan association, does not 6.17 exceed five percent of that lender's total deposits and savings 6.18 accounts. This limitation shall be determined at each June 30 6.19 and December 31 for the following six-month period. Any decline 6.20 in the total of deposits and savings accounts subsequent to a 6.21 determination may be disregarded. Security for loans made under 6.22 this section shall be a first lien on residential property (a) 6.23 which the borrower occupies as principal residence and which 6.24 qualifies for homestead classification pursuant to section 6.25 273.13, and (b) to which the borrower alone has title. 6.26 Sec. 8. Minnesota Statutes 1994, section 47.62, 6.27 subdivision 3, is amended to read: 6.28 Subd. 3. Application for authorization shall be made in 6.29 the manner prescribed by rule. The commissioner shall grant 6.30 authorization for the establishment of an electronic financial 6.31 terminal if the commissioner finds that: 6.32 (a) There is reason to believe that the terminal will be 6.33 properly and safely managed; 6.34 (b) The applicant is financially sound; 6.35 (c) The proposed charges for making the services of the 6.36 terminal available to financial institutions are fair, 7.1 equitable, and nondiscriminatory; 7.2 (d) The applicant has furnished all of the information 7.3 required by rule; 7.4 (e) The terminal applicant will not gain an unfair 7.5 competitive advantage because the terminal is not operationally 7.6 available to other financial institutions or their data 7.7 processors within a reasonable period of time; and. 7.8(f) The location and placement of the electronic financial7.9terminal is not designed to give or promote an unfair7.10competitive advantage to any financial institution.7.11 If the commissioner has not denied the application within 7.12 45 days of its submission, the authorization shall be deemed to 7.13 be granted. 7.14 Sec. 9. Minnesota Statutes 1994, section 48.475, 7.15 subdivision 3, is amended to read: 7.16 Subd. 3. [GENERAL REQUIREMENTS.] If the bank at which a 7.17 trust service office is to be established has exercised trust 7.18 powers, then the trust company or bank which is establishing the 7.19 trust service office shall enter into an agreement respecting 7.20 those fiduciary powers to which the trust company or bank shall 7.21 succeed and shall file the agreement with the commissioner. The 7.22 trust company or bank which is establishing a trust service 7.23 office under subdivision 1 shall publish a notice of the filing 7.24 in the form prescribed by the commissioner in a newspaper 7.25 published in the municipality in which the trust service office 7.26 is to be located, and if there is no such newspaper,then at the7.27county seat of the county in which the trust service office is7.28to be located. The notice shall be published once in a7.29qualified newspaper in the municipality in which the proposed7.30trust service office is to be located, and if there is no such7.31newspaper,then in a qualified newspaper likely to give notice 7.32 in the municipality in which the proposed trust service office 7.33 is to be located, and proof of publication shall be filed with 7.34 the commissioner immediately after publication of the notice of 7.35 filing. After filing and publication, the trust company or bank 7.36 establishing the trust service office shall, as of the date the 8.1 office first opens for business, and without further 8.2 authorization of any kind, succeed to and be substituted for the 8.3 bank at which the trust service office is located as to all 8.4 fiduciary powers, rights, duties, privileges, and liabilities of 8.5 the bank in its capacity as fiduciary for all estates, trusts, 8.6 conservatorships, guardianships, and other fiduciary 8.7 relationships of which the bank is then serving as fiduciary, 8.8 except as may be otherwise specified in the agreement between 8.9 the bank and the trust company or bank which has established the 8.10 trust service office. The trust company or bank which has 8.11 established the trust service office shall also be deemed named 8.12 as fiduciary in all writings, including, but not limited to, 8.13 wills, trusts, court orders, and similar documents and 8.14 instruments, naming the bank at which the trust service office 8.15 is located signed before the date the trust service office first 8.16 opens for business, unless expressly negated by the writing or 8.17 otherwise specified in the agreement between the trust company 8.18 or bank and the bank at which the trust service office is 8.19 located. On the effective date of the substitution, the bank at 8.20 which the trust service office has been established shall be 8.21 released and absolved from all fiduciary duties and obligations 8.22 under the writings and shall discontinue its exercise of trust 8.23 powers on all matters not specifically retained by the 8.24 agreement. This subdivision does not absolve the bank from 8.25 liabilities arising out of any breach of fiduciary duty or 8.26 obligation occurring prior to the date the trust service office 8.27 first opens for business. This subdivision does not affect the 8.28 authority, duties, or obligations of a bank with respect to 8.29 relationships which may be established without trust powers, 8.30 whether the relationships arise before or after the 8.31 establishment of the trust service office. 8.32 Sec. 10. Minnesota Statutes 1994, section 48.61, is 8.33 amended by adding a subdivision to read: 8.34 Subd. 9. [MERGER WITH SUBSIDIARIES; AUTHORITY.] (a) 8.35 Notwithstanding any other law to the contrary, a bank may merge 8.36 a subsidiary authorized and established according to this 9.1 section into itself if it owns 100 percent of the outstanding 9.2 voting stock. 9.3 (b) A merger of a subsidiary authorized by subdivision 1 9.4 must conform to the procedures in section 302A.621. 9.5 (c) Before filing the articles of merger with the secretary 9.6 of state, the merger plan must be filed with and approved in 9.7 writing by the commissioner who shall determine that: 9.8 (1) the provisions of section 302A.621 are followed; and 9.9 (2) the merger will not have an undue adverse effect on the 9.10 safety and soundness of the bank. 9.11 Sec. 11. Minnesota Statutes 1994, section 48.65, is 9.12 amended to read: 9.13 48.65 [TRUST COMPANIES TO COMPLY WITH CERTAIN LAWS.] 9.14 No trust company of this state shall conduct a banking 9.15 business, as defined in section 47.02, without fully complying 9.16 with the provisions of section48.2248.221 relating to the 9.17 reserve requirements of the state banks. 9.18 Sec. 12. Minnesota Statutes 1994, section 48.92, 9.19 subdivision 1, is amended to read: 9.20 Subdivision 1. [TERMS.] When used in sections 48.90 to 9.2148.99148.99, the terms defined in this section have the 9.22 meanings given them, unless their context requires a different 9.23 meaning. 9.24 Sec. 13. Minnesota Statutes 1994, section 49.01, 9.25 subdivision 3, is amended to read: 9.26 Subd. 3. [INVESTMENT COMPANY.] "Investment company" means 9.27 any person, copartnership, association, or corporation referred 9.28 to in sections 54.26 to54.2954.297. 9.29 Sec. 14. Minnesota Statutes 1994, section 51A.58, is 9.30 amended to read: 9.31 51A.58 [INTERSTATE BRANCHING.] 9.32 An association, whether or not the subsidiary of a savings 9.33 and loan holding company, may, by acquisition, merger, purchase 9.34 and assumption of some or all of the assets and liabilities, or 9.35 consolidation, establish or operate branch offices in any 9.36 reciprocating state, and a savings and loan association 10.1 chartered in any reciprocating state may establish or operate 10.2 branch offices in this state by acquisition, merger, purchase, 10.3 and assumption of some or all of the assets or liabilities or 10.4 consolidation. A savings and loan holding company with its 10.5 headquarters in this state may acquire by direct or indirect 10.6 ownership or control the voting shares of a savings and loan 10.7 holding company, savings and loan association, or savings bank 10.8 located in any reciprocating state, and a savings and loan 10.9 holding company with its headquarters in a reciprocating state, 10.10 may acquire by direct or indirect ownership or control the 10.11 voting shares of a savings and loan holding company, a savings 10.12 and loan association, or savings bank located in this state, and 10.13 may acquire and merge with a savings and loan holding company 10.14 with its headquarters in this state. For the purposes of this 10.15 section, "reciprocating state" is a state that authorizes the 10.16 establishment of branch offices in that state by an association 10.17 located in this state, and the acquisition of savings and loan 10.18 associations and savings banks located in that state by a 10.19 savings and loan holding company with its headquarters in this 10.20 state, under conditions no more restrictive than those imposed 10.21 by the laws of Minnesota as determined by the commissioner of 10.22 commerce. 10.23 The commissioner of commerce shall adopt rules to provide 10.24 that procedural requirements equivalent to those contained in 10.25 sections 48.90 to48.99148.99 apply to reciprocal interstate 10.26 branching and acquisitions by savings and loan associations. 10.27 Sec. 15. Minnesota Statutes 1994, section 53.04, 10.28 subdivision 3a, is amended to read: 10.29 Subd. 3a. (a) The right to make loans, secured or 10.30 unsecured, at the rates and on the terms and other conditions 10.31 permitted licensees under chapter 56. Loans made under the 10.32 authority of section 56.125 must be in amounts in compliance 10.33 with section 53.05, clause (7). All other loans made under the 10.34 authority of chapter 56 must be in amounts in compliance with 10.35 section 53.05, clause (7), or 56.131, subdivision 1, paragraph 10.36 (a), whichever is less. The right to extend credit or lend 11.1 money and to collect and receive charges therefor as provided by 11.2 chapter 334, or in lieu thereof to charge, collect, and receive 11.3 interest at the rate of 21.75 percent per annum, including the 11.4 right to contract for, charge, and collect all other charges 11.5 including discount points, fees, late payment charges, and 11.6 insurance premiums on the loans to the same extent permitted on 11.7 loans made under the authority of chapter 56, regardless of the 11.8 amount of the loan. The provisions of sections 47.20 and 47.21 11.9 do not apply to loans made under this subdivision, except as 11.10 specifically provided in this subdivision. Nothing in this 11.11 subdivision is deemed to supersede, repeal, or amend any 11.12 provision of section 53.05. A licensee making a loan under this 11.13 chapter secured by a lien on real estate shall comply with the 11.14 requirements of section 47.20, subdivision 8. 11.15 (b) Loans made under this subdivision at a rate of interest 11.16 not in excess of that provided for in paragraph (a) may be 11.17 secured by real or personal property, or both. If the proceeds 11.18 of a loan secured by a first lien on the borrower's primary 11.19 residence are used to finance the purchase of the borrower's 11.20 primary residence, the loan must comply with the provisions of 11.21 section 47.20. 11.22 (c) A loan made under this subdivision that is secured by 11.23 real estate and that is in a principal amount of$7,500$12,000 11.24 or more and a maturity of 60 months or more may contain a 11.25 provision permitting discount points, if the loan does not 11.26 provide a loan yield in excess of the maximum rate of interest 11.27 permitted by this subdivision. Loan yield means the annual rate 11.28 of return obtained by a licensee computed as the annual 11.29 percentage rate is computed under Federal Regulation Z. If the 11.30 loan is prepaid in full, the licensee must make a refund to the 11.31 borrower to the extent that the loan yield will exceed the 11.32 maximum rate of interest provided by this subdivision when the 11.33 prepayment is taken into account. 11.34 (d) An agency or instrumentality of the United States 11.35 government or a corporation otherwise created by an act of the 11.36 United States Congress or a lender approved or certified by the 12.1 secretary of housing and urban development, or approved or 12.2 certified by the administrator of veterans affairs, or approved 12.3 or certified by the administrator of the farmers home 12.4 administration, or approved or certified by the federal home 12.5 loan mortgage corporation, or approved or certified by the 12.6 federal national mortgage association, that engages in the 12.7 business of purchasing or taking assignments of mortgage loans 12.8 and undertakes direct collection of payments from or enforcement 12.9 of rights against borrowers arising from mortgage loans, is not 12.10 required to obtain a certificate of authorization under this 12.11 chapter in order to purchase or take assignments of mortgage 12.12 loans from persons holding a certificate of authorization under 12.13 this chapter. 12.14 Sec. 16. Minnesota Statutes 1994, section 53.09, 12.15 subdivision 1, is amended to read: 12.16 Subdivision 1. [FREQUENCY AND EXPENSE.] The commissioner 12.17 shall make examinations for the purposes set forth in section 12.18 46.04, subdivision 1, at least once every 18 calendar months, of 12.19 each authorized place of business of every industrial loan and 12.20 thrift company with the right to issue thrift certificates for 12.21 investment organized or operating under this chapter to satisfy 12.22 the commissioner that the corporation is in a solvent condition 12.23 and is complying with the requirements of this chapter and 12.24 operating according to sound business principles. In order to 12.25 enforce actions in this connection, the commissioner is hereby 12.26 vested with the same authority as in the examination and 12.27 regulation of state banks. The corporation so examined shall 12.28 pay to the commissioner such fees as may be required under 12.29 section 46.131. The commissioner may maintain an action for the 12.30 recovery of such costs in any court of competent jurisdiction. 12.31 Sec. 17. Minnesota Statutes 1994, section 53.09, 12.32 subdivision 2, is amended to read: 12.33 Subd. 2. [REPORT TO COMMISSIONER.] (1) Each industrial 12.34 loan and thrift company shall annually on or before the first 12.35 day ofFebruaryMarch file a report with the commissioner 12.36 stating in detail, under appropriate heads, its assets and 13.1 liabilities at the close of business on the last day of the 13.2 preceding calendar year. This report shall be made under oath 13.3 in the form prescribed by the commissioner. 13.4 (2) Each industrial loan and thrift company which holds 13.5 authority to accept accounts pursuant to section 53.04, 13.6 subdivision 5, shall in place of the requirement in clause (1) 13.7 submit the reports and make the publication required of state 13.8 banks pursuant to section 48.48. 13.9 (3) Within 30 days following a change in controlling 13.10 ownership of the capital stock of an industrial loan and thrift 13.11 company, it shall file a written report with the commissioner 13.12 stating in detail the nature of such change in ownership. 13.13 Sec. 18. Minnesota Statutes 1994, section 53.09, is 13.14 amended by adding a subdivision to read: 13.15 Subd. 2a. [COMPLIANCE EXAMINATIONS.] For the purpose of 13.16 discovering violations of this chapter or securing information 13.17 lawfully required by the commissioner under this chapter, the 13.18 commissioner may, at any time, either personally or by a person 13.19 or persons duly designated, investigate the loans and business, 13.20 and examine the books, accounts, records, and files used in the 13.21 business, of every licensee and of every person engaged in the 13.22 business whether or not the person acts or claims to act as 13.23 principal or agent, or under the authority of this chapter. For 13.24 the purposes of this subdivision, the commissioner and duly 13.25 designated representatives have free access to the offices and 13.26 places of business, books, accounts, papers, records, files, 13.27 safes, and vaults of all these persons. The commissioner and 13.28 all persons duly designated may require the attendance of and 13.29 examine, under oath, all persons whose testimony the 13.30 commissioner may require relative to the loans or business or to 13.31 the subject matter of an examination, investigation, or hearing. 13.32 Each licensee shall pay to the commissioner the amount 13.33 required under section 46.131, and the commissioner may maintain 13.34 an action for the recovery of the costs in a court of competent 13.35 jurisdiction. 13.36 Sec. 19. Minnesota Statutes 1994, section 56.11, is 14.1 amended to read: 14.2 56.11 [BOOKS OF ACCOUNT; ANNUAL REPORT.] 14.3 The licensee shall keep and use in the licensee's business 14.4 such books, accounts, and records as will enable the 14.5 commissioner to determine whether the licensee is complying with 14.6 the provisions of this chapter and with the rules lawfully made 14.7 by the commissioner hereunder. Every licensee shall preserve 14.8 such books, accounts, and records, including cards used in the 14.9 card system, if any, for at least two years after making the 14.10 final entry on any loan recorded therein. Accounting systems 14.11 maintained in whole or in part by mechanical or electronic data 14.12 processing methods which provide information equivalent to that 14.13 otherwise required are acceptable for this purpose. 14.14 Each licensee shall annually on or before thefifteenth day14.15of March, except in odd numbered years and then on or before the14.16seventhfirst day ofFebruaryMarch, file a report with the 14.17 commissioner giving such relevant information as the 14.18 commissioner reasonably may require concerning the business and 14.19 operations during the preceding calendar year of each licensed 14.20 place of business, conducted by such licensee within the state. 14.21 Such report shall be made under oath and shall be in the form 14.22 prescribed by the commissioner, who shall make and publish 14.23 annually an analysis and recapitulation of such reports. 14.24 Sec. 20. Minnesota Statutes 1994, section 56.12, is 14.25 amended to read: 14.26 56.12 [ADVERTISING; TAKING OF SECURITY; PLACE OF BUSINESS.] 14.27 No licensee shall advertise, print, display, publish, 14.28 distribute, or broadcast, or cause or permit to be advertised, 14.29 printed, displayed, published, distributed, or broadcast, in any 14.30 manner any statement or representation with regard to the rates, 14.31 terms, or conditions for the lending of money, credit, goods, or 14.32 things in action which is false, misleading, or deceptive. The 14.33 commissioner may order any licensee to desist from any conduct 14.34 which the commissioner shall find to be a violation of the 14.35 foregoing provisions. 14.36 The commissioner may require that rates of charge, if 15.1 stated by a licensee, be stated fully and clearly in such manner 15.2 as the commissioner may deem necessary to prevent 15.3 misunderstanding thereof by prospective borrowers. In lieu of 15.4 the disclosure requirements of this section and section 56.14, a 15.5 licensee may give the disclosures required by the federal 15.6 Truth-in-Lending Act. 15.7 A licensee may take a lien upon real estate as security for 15.8 any loan exceeding$2,700$4,320 in principal amount made under 15.9 this chapter. The provisions of sections 47.20 and 47.21 do not 15.10 apply to loans made under this chapter, except as provided in 15.11 this section. No loan secured by a first lien on a borrower's 15.12 primary residence shall be made pursuant to this section if the 15.13 proceeds of the loan are used to finance the purchase of the 15.14 borrower's primary residence, unless: 15.15 (1) the proceeds of the loan are used to finance the 15.16 purchase of a manufactured home or a prefabricated building; or 15.17 (2) the proceeds of the loan are used in whole or in part 15.18 to satisfy the balance owed on a contract for deed. 15.19 If the proceeds of the loan are used to finance the 15.20 purchase of the borrower's primary residence, the licensee shall 15.21 consent to the subsequent transfer of the real estate if the 15.22 existing borrower continues after transfer to be obligated for 15.23 repayment of the entire remaining indebtedness. The licensee 15.24 shall release the existing borrower from all obligations under 15.25 the loan instruments, if the transferee (1) meets the standards 15.26 of credit worthiness normally used by persons in the business of 15.27 making loans, including but not limited to the ability of the 15.28 transferee to make the loan payments and satisfactorily maintain 15.29 the property used as collateral, and (2) executes an agreement 15.30 in writing with the licensee whereby the transferee assumes the 15.31 obligations of the existing borrower under the loan 15.32 instruments. Any such agreement shall not affect the priority, 15.33 validity or enforceability of any loan instrument. A licensee 15.34 may charge a fee not in excess of one-tenth of one percent of 15.35 the remaining unpaid principal balance in the event the loan is 15.36 assumed by the transferee and the existing borrower continues 16.1 after the transfer to be obligated for repayment of the entire 16.2 assumed indebtedness. A licensee may charge a fee not in excess 16.3 of one percent of the remaining unpaid principal balance in the 16.4 event the remaining indebtedness is assumed by the transferee 16.5 and the existing borrower is released from all obligations under 16.6 the loan instruments, but in no event shall the fee exceed 16.7$150$240. 16.8 A licensee making a loan under this chapter secured by a 16.9 lien on real estate shall comply with the requirements of 16.10 section 47.20, subdivision 8. 16.11 No licensee shall conduct the business of making loans 16.12 under this chapter within any office, room, or place of business 16.13 in which any other business is solicited or engaged in, or in 16.14 association or conjunction therewith, if the commissioner finds 16.15 that the character of the other business is such that it would 16.16 facilitate evasions of this chapter or of the rules lawfully 16.17 made hereunder. The commissioner may promulgate rules dealing 16.18 with such other businesses. 16.19 No licensee shall transact the business or make any loan 16.20 provided for by this chapter under any other name or at any 16.21 other place of business than that named in the license. No 16.22 licensee shall take any confession of judgment or any power of 16.23 attorney. No licensee shall take any note or promise to pay 16.24 that does not accurately disclose the principal amount of the 16.25 loan, the time for which it is made, and the agreed rate or 16.26 amount of charge, nor any instrument in which blanks are left to 16.27 be filled in after execution. Nothing herein is deemed to 16.28 prohibit the making of loans by mail or arranging for settlement 16.29 and closing of real estate secured loans by an unrelated 16.30 qualified closing agent at a location other than the licensed 16.31 location. 16.32 Sec. 21. Minnesota Statutes 1994, section 56.125, 16.33 subdivision 2, is amended to read: 16.34 Subd. 2. [REAL ESTATE AS SECURITY.] A licensee may take a 16.35 lien upon real estate as security for any open-end loan at or 16.36 after such time as the outstanding balance first exceeds 17.1$2,700$4,320. A subsequent reduction in the balance 17.2 below$2,700$4,320 has no effect on the lien. A licensee may 17.3 retain the security interest until it terminates the open-end 17.4 account. If there is no outstanding balance in the account and 17.5 there is no commitment by the licensee to a line of credit in 17.6 excess of$2,700$4,320, the licensee shall, within 20 days 17.7 following written demand by the borrower, deliver to the 17.8 borrower a release of the mortgage on any real property taken as 17.9 security for the open-end loan agreement. A real estate 17.10 mortgage authorized for a financial institution secures all 17.11 advances and obligations thereunder from the date of recording. 17.12 Sec. 22. Minnesota Statutes 1994, section 56.131, 17.13 subdivision 1, is amended to read: 17.14 Subdivision 1. [INTEREST RATES AND CHARGES.] (a) On any 17.15 loan in a principal amount not exceeding$35,000$56,000 or 15 17.16 percent of a Minnesota corporate licensee's capital stock and 17.17 surplus as defined in section 53.015, if greater, a licensee may 17.18 contract for and receive interest, calculated according to the 17.19 actuarial method, not exceeding the equivalent of the greater of 17.20 any of the following: 17.21 (1) the total of: (i) 33 percent per year on that part of 17.22 the unpaid balance of the principal amount not exceeding $750; 17.23 and (ii) 19 percent per year on that part of the unpaid balance 17.24 of the principal amount exceeding $750; or 17.25 (2) 21.75 percent per year on the unpaid balance of the 17.26 principal amount. 17.27 (b) On any loan where interest has been calculated 17.28 according to the method provided for in paragraph (a), clause 17.29 (1), interest must be contracted for and earned as provided in 17.30 that provision or at the single annual percentage rate computed 17.31 to the nearest 1/100 of one percent that would earn the same 17.32 total interest at maturity of the contract as would be earned by 17.33 the application of the graduated rates provided in paragraph 17.34 (a), clause (1), when the debt is paid according to the agreed 17.35 terms and the calculations are made according to the actuarial 17.36 method. 18.1 (c) Loans may be interest-bearing or precomputed. 18.2 (d) To compute time on interest-bearing and precomputed 18.3 loans, including, but not limited to the calculation of 18.4 interest, a day is considered 1/30 of a month when calculation 18.5 is made for a fraction of a calendar month. A year is 12 18.6 calendar months. A calendar month is that period from a given 18.7 date in one month to the same numbered date in the following 18.8 month, and if there is no same numbered date, to the last day of 18.9 the following month. When a period of time includes a whole 18.10 month and a fraction of a month, the fraction of a month is 18.11 considered to follow the whole month. 18.12 In the alternative, for interest-bearing loans, a licensee 18.13 may charge interest at the rate of 1/365 of the agreed annual 18.14 rate for each actual day elapsed. 18.15 (e) With respect to interest-bearing loans: 18.16 (1) Interest must be computed on unpaid principal balances 18.17 outstanding from time to time, for the time outstanding. Each 18.18 payment must be applied first to the accumulated interest and 18.19 the remainder of the payment applied to the unpaid principal 18.20 balance; provided however, that if the amount of the payment is 18.21 insufficient to pay the accumulated interest, the unpaid 18.22 interest continues to accumulate to be paid from the proceeds of 18.23 subsequent payments and is not added to the principal balance. 18.24 (2) Interest must not be payable in advance or compounded. 18.25 However, if part or all of the consideration for a new loan 18.26 contract is the unpaid principal balance of a prior loan, then 18.27 the principal amount payable under the new loan contract may 18.28 include any unpaid interest which has accrued. The unpaid 18.29 principal balance of a precomputed loan is the balance due after 18.30 refund or credit of unearned interest as provided in paragraph 18.31 (f), clause (3). The resulting loan contract is deemed a new 18.32 and separate loan transaction for all purposes. 18.33 (f) With respect to precomputed loans: 18.34 (1) Loans must be repayable in substantially equal and 18.35 consecutive monthly installments of principal and interest 18.36 combined, except that the first installment period may be more 19.1 or less than one month by not more than 15 days, and the first 19.2 installment payment amount may be larger than the remaining 19.3 payments by the amount of interest charged for the extra days 19.4 and must be reduced by the amount of interest for the number of 19.5 days less than one month to the first installment payment; and 19.6 monthly installment payment dates may be omitted to accommodate 19.7 borrowers with seasonal income. 19.8 (2) Payments may be applied to the combined total of 19.9 principal and precomputed interest until the loan is fully 19.10 paid. Payments must be applied in the order in which they 19.11 become due. 19.12 (3) When any loan contract is paid in full by cash, renewal 19.13 or refinancing, or a new loan, one month or more before the 19.14 final installment due date, a licensee shall refund or credit 19.15 the borrower with the total of the applicable charges for all 19.16 fully unexpired installment periods, as originally scheduled or 19.17 as deferred, which follow the day of prepayment; if the 19.18 prepayment is made other than on a scheduled payment date, the 19.19 nearest scheduled installment payment date must be used in the 19.20 computation; provided further, if the prepayment occurs prior to 19.21 the first installment due date, the licensee may retain 1/30 of 19.22 the applicable charge for a first installment period of one 19.23 month for each day from the date of the loan to the date of 19.24 prepayment, and shall refund or credit the borrower with the 19.25 balance of the total interest contracted for. If the maturity 19.26 of the loan is accelerated for any reason and judgment is 19.27 entered, the licensee shall credit the borrower with the same 19.28 refund as if prepayment in full had been made on the date the 19.29 judgment is entered. 19.30 (4) If an installment, other than the final installment, is 19.31 not paid in full within ten days of its scheduled due date, a 19.32 licensee may contract for and receive a default charge not 19.33 exceeding five percent of the amount of the installment, but not 19.34 less than$4$5.20. 19.35 A default charge under this subdivision may not be 19.36 collected on an installment paid in full within ten days of its 20.1 scheduled due date, or deferred installment due date with 20.2 respect to deferred installments, even though a default or 20.3 deferral charge on an earlier installment has not been paid in 20.4 full. A default charge may be collected at the time it accrues 20.5 or at any time thereafter. 20.6 (5) If the parties agree in writing, either in the loan 20.7 contract or in a subsequent agreement, to a deferment of wholly 20.8 unpaid installments, a licensee may grant a deferment and may 20.9 collect a deferment charge as provided in this section. A 20.10 deferment postpones the scheduled due date of the earliest 20.11 unpaid installment and all subsequent installments as originally 20.12 scheduled, or as previously deferred, for a period equal to the 20.13 deferment period. The deferment period is that period during 20.14 which no installment is scheduled to be paid by reason of the 20.15 deferment. The deferment charge for a one-month period may not 20.16 exceed the applicable charge for the installment period 20.17 immediately following the due date of the last undeferred 20.18 payment. A proportionate charge may be made for deferment for 20.19 periods of more or less than one month. A deferment charge is 20.20 earned pro rata during the deferment period and is fully earned 20.21 on the last day of the deferment period. Should a loan be 20.22 prepaid in full during a deferment period, the licensee shall 20.23 make or credit to the borrower a refund of the unearned 20.24 deferment charge in addition to any other refund or credit made 20.25 for prepayment of the loan in full. 20.26 (6) If two or more installments are delinquent one full 20.27 month or more on any due date, and if the contract so provides, 20.28 the licensee may reduce the unpaid balance by the refund credit 20.29 which would be required for prepayment in full on the due date 20.30 of the most recent maturing installment in default. Thereafter, 20.31 and in lieu of any other default or deferment charges, the 20.32 single annual percentage rate permitted by this subdivision may 20.33 be charged on the unpaid balance until fully paid. 20.34 (7) Following the final installment as originally scheduled 20.35 or deferred, the licensee, for any loan contract which has not 20.36 previously been converted to interest-bearing under clause (6), 21.1 may charge interest on any balance remaining unpaid, including 21.2 unpaid default or deferment charges, at the single annual 21.3 percentage rate permitted by this subdivision until fully paid. 21.4 (8) With respect to a loan secured by an interest in real 21.5 estate, and having a maturity of more than 60 months, the 21.6 original schedule of installment payments must fully amortize 21.7 the principal and interest on the loan. The original schedule 21.8 of installment payments for any other loan secured by an 21.9 interest in real estate must provide for payment amounts that 21.10 are sufficient to pay all interest scheduled to be due on the 21.11 loan. 21.12 Sec. 23. Minnesota Statutes 1994, section 56.131, 21.13 subdivision 2, is amended to read: 21.14 Subd. 2. [ADDITIONAL CHARGES.] In addition to the charges 21.15 provided for by this section and section 56.155, no further or 21.16 other amount whatsoever, shall be directly or indirectly 21.17 charged, contracted for, or received for the loan made, except 21.18 actual out of pocket expenses of the licensee to realize on a 21.19 security after default, and except for the following additional 21.20 charges which may be included in the principal amount of the 21.21 loan: 21.22 (a) lawful fees and taxes paid to any public officer to 21.23 record, file, or release security; 21.24 (b) with respect to a loan secured by an interest in real 21.25 estate, the following closing costs, if they are bona fide, 21.26 reasonable in amount, and not for the purpose of circumvention 21.27 or evasion of this section; provided the costs do not exceed one 21.28 percent of the principal amount or$250$400, whichever is 21.29 greater: 21.30 (1) fees or premiums for title examination, abstract of 21.31 title, title insurance, surveys, or similar purposes; 21.32 (2) fees, if not paid to the licensee, an employee of the 21.33 licensee, or a person related to the licensee, for preparation 21.34 of a mortgage, settlement statement, or other documents, fees 21.35 for notarizing mortgages and other documents, and appraisal 21.36 fees; 22.1 (c) the premium for insurance in lieu of perfecting and 22.2 releasing a security interest to the extent that the premium 22.3 does not exceed the fees described in paragraph (a); 22.4 (d) discount points and appraisal fees may not be included 22.5 in the principal amount of a loan secured by an interest in real 22.6 estate when the loan is a refinancing for the purpose of 22.7 bringing the refinanced loan current and is made within 24 22.8 months of the original date of the refinanced loan. For 22.9 purposes of this paragraph, a refinancing is not considered to 22.10 be for the purpose of bringing the refinanced loan current if 22.11 new funds advanced to the customer, not including closing costs 22.12 or delinquent installments, exceed $1,000. 22.13 Sec. 24. Minnesota Statutes 1994, section 56.131, 22.14 subdivision 4, is amended to read: 22.15 Subd. 4. [ADJUSTMENT OF DOLLAR AMOUNTS.] (a) The dollar 22.16 amounts in this section, sections 53.04, subdivision 3a, 22.17 paragraph (c), 56.01, 56.12, and 56.125 shall change 22.18 periodically, as provided in this section, according to and to 22.19 the extent of changes in the implicit price deflator for the 22.20 grossnationaldomestic product,19721987 = 100, compiled by 22.21 the United States Department of Commerce, and hereafter referred 22.22 to as the index. The index for December19801991 is the 22.23 reference base index for adjustments of dollar amounts, except22.24that the index for December 1984 is the reference base index for22.25the minimum default charge of $4. The reference base index for22.26subdivision 1, paragraph (a), clause (1), and subdivision 2,22.27paragraph (d), is December 1990. 22.28 (b) The designated dollar amounts shall change on July 1 of 22.29 each even-numbered year if the percentage of change, calculated 22.30 to the nearest whole percentage point, between the index for 22.31 December of the preceding year and the reference base index is 22.32 ten percent or more, but; 22.33 (1) the portion of the percentage change in the index in 22.34 excess of a multiple of ten percent shall be disregarded and the 22.35 dollar amounts shall change only in multiples of ten percent of 22.36 the amounts appearing inLaws 1981, chapter 258this act, on the 23.1 date of enactment; and 23.2 (2) the dollar amounts shall not change if the amounts 23.3 required by this section are those currently in effect pursuant 23.4 toLaws 1981, chapter 258this act, as a result of earlier 23.5 application of this section. 23.6 (c) If the index is revised, the percentage of change 23.7 pursuant to this section shall be calculated on the basis of the 23.8 revised index. If a revision of the index changes the reference 23.9 base index, a revised reference base index shall be determined 23.10 by multiplying the reference base index then applicable by the 23.11 rebasing factor furnished by the department of commerce. If the 23.12 index is superseded, the index referred to in this section is 23.13 the one represented by the department of commerce as reflecting 23.14 most accurately changes in the purchasing power of the dollar 23.15 for consumers. 23.16 (d) The commissioner shall announce and publish: 23.17 (1) on or before April 30 of each year in which dollar 23.18 amounts are to change, the changes in dollar amounts required by 23.19 paragraph (b); and 23.20 (2) promptly after the changes occur, changes in the index 23.21 required by paragraph (c) including, if applicable, the 23.22 numerical equivalent of the reference base index under a revised 23.23 reference base index and the designation or title of any index 23.24 superseding the index. 23.25 (e) A person does not violate this chapter with respect to 23.26 a transaction otherwise complying with this chapter if that 23.27 person relies on dollar amounts either determined according to 23.28 paragraph (b), clause (2) or appearing in the last publication 23.29 of the commissioner announcing the then current dollar amounts. 23.30 (f) The adjustments provided in this section shall not be 23.31 affected unless explicitly provided otherwise by law. 23.32 Sec. 25. Minnesota Statutes 1994, section 56.131, 23.33 subdivision 6, is amended to read: 23.34 Subd. 6. [DISCOUNT POINTS.] A loan made under this section 23.35 that is secured by real estate and that is in a principal amount 23.36 of$7,500$12,000 or more and has a maturity of 60 months or 24.1 more may contain a provision permitting discount points, if the 24.2 loan does not provide a loan yield in excess of the maximum rate 24.3 of interest permitted by this section. Loan yield means the 24.4 annual rate of return obtained by a licensee computed as the 24.5 annual percentage rate is computed under Federal Regulation Z. 24.6 If the loan is prepaid in full, the licensee must make a refund 24.7 to the borrower to the extent that the loan yield will exceed 24.8 the maximum rate of interest provided by this section when the 24.9 prepayment is taken into account. 24.10 Sec. 26. Minnesota Statutes 1994, section 56.17, is 24.11 amended to read: 24.12 56.17 [LIMITATION; ASSIGNMENT OF WAGES; SECURITY 24.13 AGREEMENT.] 24.14 No assignment of, or order for payment of, any salary, 24.15 wages, commissions, or other compensation for services earned or 24.16 to be earned, given to secure any loan made by any licensee 24.17 under this chapter, shall be valid unless the principal amount 24.18 of the loan is$1,200 or less and ispaid to the borrower 24.19 simultaneously with its execution; nor shall any assignment or 24.20 order, or any security agreement or other lien on household 24.21 furniture then in the possession and use of the borrower, be 24.22 valid unless it is in writing, signed in person by the borrower,24.23nor if the borrower is married, unless it is signed in person by24.24both husband and wife; provided, that written assent of a spouse24.25shall not be required when husband and wife have been living24.26separate and apart for a period of at least five months prior to24.27the making of the assignment, order, security agreement, or lien. 24.28 Under any assignment or order for the payment of future 24.29 salary, wages, commissions, or other compensation for services, 24.30 given as security for a loan made by any licensee under this 24.31 chapter, a sum not to exceed ten percent of the borrower's 24.32 salary, wages, commissions, or other compensation for services 24.33 shall be collectible from the employer of the borrower by the 24.34 licensee at the time for each payment to the borrower of salary, 24.35 wages, commissions, or other compensation for services, from the 24.36 time that a copy of the assignment, verified by the oath of the 25.1 licensee or the licensee's agent, together with a similarly 25.2 verified statement of the amount unpaid upon the loan and a 25.3 printed copy of this section is served upon the employer; 25.4 provided, that this section shall not be construed as giving the 25.5 assignee any greater rights than those under section 181.05. 25.6 This section shall control, with respect to licensees, 25.7 notwithstanding anything in section 47.59, subdivision 12, 25.8 clause (c), to the contrary. 25.9 Sec. 27. [REVISOR INSTRUCTION.] 25.10 The revisor of statutes shall change the term "building and 25.11 loan association" or "savings, building and loan association" or 25.12 similar term to "savings association" or similar term in 25.13 Minnesota Statutes and Minnesota Rules. 25.14 Sec. 28. [REPEALER.] 25.15 Minnesota Statutes 1994, sections 46.03; 48.611; and 48.97, 25.16 subdivisions 2, 3, and 4, are repealed. 25.17 Sec. 29. [EFFECTIVE DATE.] 25.18 Sections 1 to 23 and 25 to 28 are effective the day 25.19 following final enactment. 25.20 ARTICLE 2 25.21 REGULATORY IMPROVEMENT 25.22 Section 1. Minnesota Statutes 1994, section 46.04, is 25.23 amended by adding a subdivision to read: 25.24 Subd. 3. [FINANCIAL INSTITUTIONS AND LICENSEE RECORDS.] 25.25 For purposes of examination and regulation of those entities 25.26 referred to in subdivisions 1 and 2, records may be maintained 25.27 on optical image storage systems acceptable to the 25.28 commissioner. Electronically maintained and stored records must 25.29 meet the following minimum standards: 25.30 (1) a document or record may be transferred to and stored 25.31 on a nonerasable imaging system and retained only in that format 25.32 if all documents and records preserved on nonerasable optical 25.33 imaging systems meet nationally recognized standards for 25.34 permanent records and are available for retrieval for as long as 25.35 applicable law requires; 25.36 (2) a backup copy of the record is created and stored at a 26.1 site other than the site where the original is kept. The backup 26.2 copy must be preserved either: (i) on a nonerasable optical 26.3 imaging system; or (ii) by another reproduction method approved 26.4 by the commissioner; and 26.5 (3) all contracts for third-party maintenance and storage 26.6 of those records must include assurance of access by the 26.7 commissioner consistent with the purposes of this section. 26.8 Sec. 2. Minnesota Statutes 1994, section 47.10, 26.9 subdivision 3, is amended to read: 26.10 Subd. 3. [LEASEHOLD PLACE OF BUSINESS; APPROVAL OF CERTAIN 26.11 LEASE AGREEMENTS.] No bank, trust company, savings bank, or 26.12building and loansavings association may acquire real property 26.13 and improvements of any nature to it for its place of business 26.14 by lease agreement if the lessor has an existing direct or 26.15 indirect interest in the management or ownership of the bank, 26.16 trust company, savings bank, orbuilding and loansavings 26.17 association without prior written approval by the commissioner. 26.18 This includes subsequent amendments and associated leasehold 26.19 improvements. A lessee's expenditures to maintain the leasehold 26.20 premises consistent with ordinary business conditions and within 26.21 the preapproved lease agreement does not constitute an amendment 26.22 requiring prior written approval. 26.23 Sec. 3. Minnesota Statutes 1994, section 47.20, 26.24 subdivision 5, is amended to read: 26.25 Subd. 5. [PREPAYMENT PENALTY.] (a) Unless the mortgagor 26.26 waives its right to prepay the mortgage loan without penalty, in 26.27 a uniform written disclosure waiver approved by the commissioner 26.28 and signed by the mortgagor, no conventional loan or loan 26.29 authorized in subdivision 1made on or after the effective date26.30of Laws 1977, chapter 350shall contain a provision requiring or 26.31 permitting the imposition of a penalty in the event the loan or 26.32 advance of credit is prepaid. The prepayment penalty shall not 26.33 exceed the lesser of two percent of the unpaid principal balance 26.34 or 60 days interest on the unpaid principal balance. A lender 26.35 that offers a mortgage loan with a prepayment penalty shall also 26.36 offer a mortgage loan without a prepayment penalty. 27.1 This section does not permit the imposition of a prepayment 27.2 penalty in the event that the property securing the mortgage 27.3 loan is sold or the mortgage loan is prepaid in part. No 27.4 prepayment penalty may be enforced after 42 months from the date 27.5 of the mortgage loan. 27.6 (b) A precomputed conventional loan or precomputed loan 27.7 authorized in subdivision 1 shall provide for a refund of the 27.8 precomputed finance charge according to the actuarial method if 27.9 the loan is paid in full by cash, renewal or refinancing, or a 27.10 new loan, one month or more before the final installment due 27.11 date. The actuarial method for the purpose of this section is 27.12 the amount of interest attributable to each fully unexpired 27.13 monthly installment period of the loan contract following the 27.14 date of prepayment in full, calculated as if the loan was made 27.15 on an interest-bearing basis at the rate of interest provided 27.16 for in the note based on the assumption that all payments were 27.17 made according to schedule. A precomputed loan for the purpose 27.18 of this section means a loan for which the debt is expressed as 27.19 a sum comprised of the principal amount and the amount of 27.20 interest for the entire term of the loan computed actuarially in 27.21 advance on the assumption that all scheduled payments will be 27.22 made when due, and does not include a loan for which interest is 27.23 computed from time to time by application of a rate to the 27.24 unpaid principal balance, interest-bearing loans, or 27.25 simple-interest loans. For the purpose of calculating a refund 27.26 for precomputed loans under this section, any portion of the 27.27 finance charge for extending the first payment period beyond one 27.28 month may be ignored. Nothing in this section shall be 27.29 considered a limitation on discount points or other finance 27.30 charges charged or collected in advance, and nothing in this 27.31 section shall require a refund of the charges in the event of 27.32 prepayment. Nothing in this section shall be considered to 27.33 supersede section 47.204. 27.34 Sec. 4. Minnesota Statutes 1994, section 47.20, 27.35 subdivision 10, is amended to read: 27.36 Subd. 10. [WAIVER.]Notwithstanding any other lawExcept 28.1 as provided in subdivision 5, the provisions of this section may 28.2 not be waived by any oral or written agreement executed by any 28.3 person. 28.4 Sec. 5. Minnesota Statutes 1994, section 47.52, is amended 28.5 to read: 28.6 47.52 [AUTHORIZATION.] 28.7 (a) With the prior approval of the commissioner, any bank 28.8 doing business in this state may establish and maintain not more 28.9 than five detached facilities provided the facilities are 28.10 located within the municipality in which the principal office of 28.11 the applicant bank is located; or within 5,000 feet of its 28.12 principal office measured in a straight line from the closest 28.13 points of the closest structures involved; or within 100 miles 28.14 of its principal office measured in a straight line from the 28.15 closest points of the closest structures involved, if the 28.16 detached facility is within any municipality in which no bank is 28.17 located at the time of application or if the detached facility 28.18 is in a municipality having a population of more than 10,000, or 28.19 if the detached facility is located in a municipality having a 28.20 population of 10,000 or less, as determined by the commissioner 28.21 from the latest available data from the state demographer, or 28.22 for municipalities located in the seven-county metropolitan area 28.23 from the metropolitan council, and all the banks having a 28.24 principal office in the municipality have consented in writing 28.25 to the establishment of the facility. 28.26 (b) A detached facility shall not be closer than 50 feet to 28.27 a detached facility operated by any other bank and shall not be 28.28 closer than 100 feet to the principal office of any other bank, 28.29 the measurement to be made in the same manner as provided 28.30 above. This paragraph shall not be applicable if the proximity 28.31 to the facility or the bank is waived in writing by the other 28.32 bank and filed with the application to establish a detached 28.33 facility. 28.34 (c) Any bank is allowed, in addition to other facilities, 28.35 one drive-in or walk-up facility located between 150 to 1,500 28.36 feet of the main banking house or within 1,500 feet from a 29.1 detached facility. The drive-in or walk-up facility permitted 29.2 by this clause is subject to paragraph (b) and section 47.53. 29.3 (d) A bank is allowed, in addition to other facilities, 29.4 part-time deposit-taking locations at elementary and secondary 29.5 schools located within the municipality in which the main 29.6 banking house or a detached facility is located if they are 29.7 established in connection with student education programs 29.8 approved by the school administration and consistent with safe, 29.9 sound banking practices. 29.10 Sec. 6. Minnesota Statutes 1994, section 47.56, is amended 29.11 to read: 29.12 47.56 [TRANSFER OF LOCATION.] 29.13 The location of a detached facilitymay betransferred to 29.14 another location,outside of a radius of three miles measured in 29.15 a straight line is subject to the same procedures and approval 29.16 as required hereunder for establishing a new detached facility, 29.17 except that the relocation of a detached facility within a 29.18 municipality of 10,000 or less population shall not require 29.19 consent of other banks required in section 47.52. 29.20 Sec. 7. Minnesota Statutes 1994, section 47.61, 29.21 subdivision 3, is amended to read: 29.22 Subd. 3. (a) "Electronic financial terminal" means an 29.23 electronic information processing device,that is established to 29.24 do either or both of the following: 29.25 (1) capture the data necessary to initiate financial 29.26 transactions; or 29.27 (2) through its attendant support system, store or initiate 29.28 the transmission of the information necessary to consummate a 29.29 financial transaction.other than29.30 (b) "Electronic financial terminal" does not include: 29.31 (1) a telephoneor; 29.32 (2) an electronic information processing device that is 29.33 used internally by a financial institution to conduct the 29.34 business activities of the institution, that is established to29.35do either or both of the following:29.36(a) capture the data necessary to initiate financial30.1transactions; or30.2(b) through its attendant support system, store or initiate30.3the transmission of the information necessary to consummate a30.4financial transaction.; or 30.5 (3) an electronic point-of-sale terminal operated by a 30.6 retailer that is used to process payments for the purchase of 30.7 goods and services by consumers through the use of debit cards, 30.8 which payment transactions are subject to the federal Electronic 30.9 Funds Transfer Act, United States Code, title 12, sections 1693 30.10 et seq., and Regulation E of the Federal Reserve Board, Code of 30.11 Federal Regulations title 12, subpart 205.2; this clause does 30.12 not exempt the retailer from liability for negligent conduct or 30.13 intentional misconduct of the operator under section 47.69, 30.14 subdivision 3. 30.15 Sec. 8. Minnesota Statutes 1994, section 47.62, 30.16 subdivision 2, is amended to read: 30.17 Subd. 2. [APPROVAL REQUIRED.] No electronic financial 30.18 terminal shall be established by a person other than a state or 30.19 federal savingsand loanassociation, state or federal savings 30.20 bank, state or federal credit union, or state bank or national 30.21 banking association unless the commissioner has approved the 30.22 establishment of the terminal. 30.23 Sec. 9. Minnesota Statutes 1994, section 47.62, is amended 30.24 by adding a subdivision to read: 30.25 Subd. 5. [ESTABLISHMENT BY NOTICE.] A bank, savings bank, 30.26 savings association, or credit union organized under the laws of 30.27 this state may, after completing the notification procedure 30.28 required by this subdivision, establish and maintain one or more 30.29 electronic financial terminals. The filing must be on forms 30.30 provided by the commissioner. No electronic financial terminal 30.31 may be established according to sections 47.61 to 47.74 if 30.32 disallowed by order of the commissioner within 15 days of the 30.33 filing of a complete and acceptable notification of the intent 30.34 to establish an electronic financial terminal. 30.35 Sec. 10. Minnesota Statutes 1994, section 47.62, is 30.36 amended by adding a subdivision to read: 31.1 Subd. 6. [RELOCATION; PROCEDURE.] An application or 31.2 notification to relocate an existing financial terminal outside 31.3 a radius of three miles measured in a straight line must be 31.4 approved by, or a notification must be filed with, the 31.5 commissioner of commerce as provided for in this section. 31.6 Sec. 11. Minnesota Statutes 1994, section 47.67, is 31.7 amended to read: 31.8 47.67 [ADVERTISING.] 31.9 No advertisement by a person which relates to an electronic 31.10 financial terminal may be inaccurate or misleading with respect 31.11 to such a terminal. Except with respect to direct mailings by 31.12 financial institutions to their customers, the advertising of 31.13 rate of interest paid on accounts in connection with electronic 31.14 financial terminals is prohibited. Any advertisement, either on 31.15 or off the site of an electronic financial terminal, promoting 31.16 the use or identifying the location of an electronic financial 31.17 terminal, which identifies any financial institution, group or 31.18 combination of financial institutions, or third parties as 31.19 owning or providing for the use of its services is prohibited. 31.20 The following shall be expressly permitted: 31.21 (a) a simple directory listing placed at the site of an 31.22 electronic financial terminal identifying the particular 31.23 financial institutions using its services; 31.24 (b) the use of a generic name, either on or off the site of 31.25 an electronic financial terminal, which does not promote or 31.26 identify any particular financial institution, group or 31.27 combination of financial institutions, or any third parties; 31.28 (c) media advertising or direct mailing of information by a 31.29 financial institution or retailer identifying locations of 31.30 electronic financial terminals and promoting their usage;and31.31 (d) any advertising, whether on or off the site, relating 31.32 to electronic financial terminals, or the services performed at 31.33 the electronic financial terminals located on the premises of 31.34 the main office, or any office or detached facility of any 31.35 financial institution; 31.36 (e) a coupon or other promotional advertising that is 32.1 printed upon the reverse side of the receipt or record of each 32.2 transaction required under section 47.69, subdivision 6; and 32.3 (f) promotional advertising displayed on the electronic 32.4 screen. 32.5 Sec. 12. Minnesota Statutes 1994, section 47.69, 32.6 subdivision 3, is amended to read: 32.7 Subd. 3. Every financial institution using an electronic 32.8 financial terminal shall maintain reasonable procedures to 32.9 minimize losses from unauthorized withdrawals from its 32.10 customers' accounts by use of an electronic financial terminal. 32.11 After a customer makes a bona fide deposit or payment at an 32.12 electronic financial terminal and has received a receipt, any 32.13 loss due to theft or other reason shall not be borne by the 32.14 customer; provided, loss due to the nonpayment or dishonor of a 32.15 check, or other order for payment, deposited at an electronic 32.16 financial terminal shall be governed by the applicable 32.17 provisions of chapter 336. A financial institution shall be 32.18 liable for all unauthorized withdrawals unless the unauthorized 32.19 withdrawal was(1) due to the negligent conduct or the32.20intentional misconduct of the operator of an electronic32.21financial terminal or that operator's agent in which case the32.22operator of an electronic financial terminal or the agent shall32.23be liable, or (2)due to the loss or theft of the customer 32.24 machine readable card in which case the customer shall be 32.25 liable, subject to a maximum liability of $50, for those 32.26 unauthorized withdrawals made prior to the time the financial 32.27 institution is notified of the loss or theft. The limitation on 32.28 liabilitycontained in clause (2)is effective only if the 32.29 issuer is notified of unauthorized charges contained in a bill 32.30 within 60 days of receipt of the bill by the person in whose 32.31 name the card is issued. For purposes of this subdivision, 32.32 "unauthorized withdrawal" means a withdrawal by a person other 32.33 than the customerwho does not have actual, implied, or apparent32.34authority for such withdrawal,and from which withdrawal the 32.35 customer or a member of the customer's family or household 32.36 receives no benefit. 33.1 Sec. 13. Minnesota Statutes 1994, section 47.69, 33.2 subdivision 5, is amended to read: 33.3 Subd. 5. Any customer of a financial institution may bring 33.4 a civil action against any person violating any subdivision of 33.5 this section in the district court in the county of the alleged 33.6 violator's residence or principal place of business or in the 33.7 county wherein the alleged violation occurred. Upon adverse 33.8 adjudication, the defendant shall be liable for actual damages, 33.9 or $500, whichever is greater, punitive damages when applicable, 33.10 together with the court costs and reasonable attorneys' fees 33.11 incurred by the plaintiff. The court may provide such equitable 33.12 relief as it deems necessary or proper, including enjoining the 33.13 defendant from further violations. If the unauthorized 33.14 withdrawal was due to the negligent conduct or the intentional 33.15 misconduct of an operator or person establishing and maintaining 33.16 an electronic financial terminal other than a financial 33.17 institution or agent of a financial institution, that operator 33.18 or person establishing and maintaining an electronic financial 33.19 terminal or its agent is liable and subject to a civil action 33.20 under this subdivision by the financial institution considered 33.21 liable under subdivision 3 and having made reimbursement to the 33.22 customer. 33.23 Sec. 14. Minnesota Statutes 1994, section 48.16, is 33.24 amended to read: 33.25 48.16 [BANKS MAY NOT PLEDGE ASSETS; EXCEPTIONS.] 33.26 No bank or trust company shall pledge, hypothecate, assign, 33.27 transfer, or create a lien upon or charge against any of its 33.28 assets except as follows: 33.29 (1) to the state; 33.30 (2) to secure public deposits; 33.31 (3) to secure funds of trustees in bankruptcy; 33.32 (4) to secure money borrowed in good faith from other 33.33 banks, trust companies, or a financial agency created by act of 33.34 Congress, or the state in programs specifically authorizing 33.35 state banks to participate as an eligible local lender; 33.36 (5) to finance the acquisition of real estate to be carried 34.1 as an asset as provided for in section 47.10; 34.2 (6) to secure a liability that arises from a transfer of a 34.3 direct obligation of, or obligations that are fully guaranteed 34.4 as to principal and interest by, the United States government or 34.5 an agency thereof that the bank or trust company is obligated to 34.6 repurchase. 34.7 This section shall not be construed to permit the use of 34.8 assets as security for public deposits other than the securities 34.9 made eligible by law for that purpose. 34.10 Sec. 15. Minnesota Statutes 1994, section 48.24, 34.11 subdivision 5, is amended to read: 34.12 Subd. 5. Loans or obligations shall not be subject under 34.13 this section to any limitation based upon such capital and 34.14 surplus to the extent that they are secured or covered by 34.15 guarantees, or by commitments or agreements to take over or to 34.16 purchase the same, made by: 34.17 (1) the commissioner of agriculture on the purchase of 34.18 agricultural land; 34.19 (2) any Federal Reserve bank; 34.20 (3) the United States or any department, bureau, board, 34.21 commission, or establishment of the United States, including any 34.22 corporation wholly owned directly or indirectly by the United 34.23 States; 34.24 (4) the Minnesota energy and economic development 34.25 authority;or34.26 (5) the Minnesota export finance authority; or 34.27 (6) a municipality or political subdivision within 34.28 Minnesota to the extent that the guarantee or collateral is a 34.29 valid and enforceable general obligation of that political body. 34.30 Sec. 16. Minnesota Statutes 1994, section 48.48, 34.31 subdivision 1, is amended to read: 34.32 Subdivision 1. [SUBMISSION AND PUBLICATION.] At least four 34.33 times in each year, and at any other time when so requested by 34.34 the commissioner, every bank or trust company shall, within 30 34.35 days of the date of notice, make and transmit to the 34.36 commissioner or to the commissioner's designee, in a form the 35.1 commissioner prescribes, a report,verified by its president or35.2vice-president and by its cashier or treasurer, andattestedby35.3at least twoto in the official minutes of its directors, 35.4 stating in detail, under appropriate heads, as required by the 35.5 commissioner, its assets and liabilities at the close of 35.6 business on the day specified in the request. The commissioner 35.7 may accept a report made to a federal authority having 35.8 supervision of banks or trust companies in fulfilling this 35.9 requirement.This statement shall be published once at the35.10expense of the bank or trust company in a qualified newspaper in35.11the municipality or town in which the bank or trust company is35.12located, and if there is no such newspaper, then in a qualified35.13newspaper likely to give notice in the municipality or town in35.14which the bank or trust company is located. Proof of35.15publication shall be filed with the commissioner immediately35.16after publication of the report, but no later than 60 days35.17following the date of the notice.That portion of the report 35.18 constituting the statement of assets, liabilities, and capital 35.19 and statement of income and expenses must be made available to 35.20 the public within 45 days of the notice at every location of the 35.21 bank or trust company including detached facilities and trust 35.22 service offices. 35.23 Sec. 17. Minnesota Statutes 1994, section 48.48, 35.24 subdivision 2, is amended to read: 35.25 Subd. 2. [PENALTIES FOR LATE SUBMISSION.] For failure to 35.26 send these reports to the commissioner or to the commissioner's 35.27 designee in the time specified, a bank or trust company shall 35.28 forfeit to the state the sum of $25 for each day of delay and 35.29 shall pay the accumulated sum to the commissioner upon a formal 35.30 demand for payment by the commissioner. If it appears that a 35.31 report wasmailedtransmitted by a bank or trust company on or 35.32 before the end of the 30-day period,or proof of publication35.33mailed on or before the end of the 60-day period,the 35.34 commissioner shall waive any forfeit. In the event it does not 35.35 appear that a report was timelymailedtransmitted, the 35.36 commissioner may nevertheless waive forfeit upon a showing by 36.1 the bank or trust company to the satisfaction of the 36.2 commissioner that failure to send the reports was the result of 36.3 causes beyond the control of the bank or trust company. 36.4 Sec. 18. Minnesota Statutes 1994, section 48.49, is 36.5 amended to read: 36.6 48.49 [BOOKS TO BE KEPT.] 36.7 Every such bank shall open and keep such books and accounts 36.8 as the commissioner may prescribe, for the purpose of keeping 36.9 accurate and convenient records of its transactions; and every36.10bank refusing or neglecting so to do shall forfeit $10 for every36.11day of such neglect or refusal. 36.12 Sec. 19. Minnesota Statutes 1994, section 48.61, 36.13 subdivision 7, is amended to read: 36.14 Subd. 7. [SUBSIDIARIES.] (a) A state bank or trust company 36.15 may organize, acquire, or invest in a subsidiary located in this 36.16 state for the purposes of engaging in one or more of the 36.17 following activities, subject to the prior written approval of 36.18 the commissioner: 36.19 (1) any activity, not including receiving deposits, lending36.20money,or paying checks that a state bank is authorized to 36.21 engage in under state law or rule or under federal law or 36.22 regulation unless the activity is prohibited by the laws of this 36.23 state; 36.24 (2) any activity that a bank clerical service corporation 36.25 is authorized to engage in under section 48.89; and 36.26 (3) any other activity authorized for a national bank, a 36.27 bank holding company, or a subsidiary of a national bank or bank 36.28 holding company under federal law or regulation of general 36.29 applicability, and approved by the commissioner by rule. 36.30 (b) A bank or trust company subsidiary may engage in an 36.31 activity under this section only upon application together with 36.32 a filing fee of $250 and with the prior written approval of the 36.33 commissioner. In approving or denying a proposed activity, the 36.34 commissioner shall consider the financial and management 36.35 strength of the bank or trust company, the current written 36.36 operating plan and policies of the proposed subsidiary 37.1 corporation, the bank or trust company's community reinvestment 37.2 record, and whether the proposed activity should be conducted 37.3 through a subsidiary of the bank or trust company. 37.4 (c) The aggregate amount of funds invested in either an 37.5 equity or loan capacity in all of the subsidiaries of the bank 37.6 or trust company authorized under this subdivision shall not 37.7 exceed 25 percent of the capital stock and paid in surplus of 37.8 the bank or trust company. 37.9 (d) A subsidiary organized or acquired under this 37.10 subdivision is subject to the examination and enforcement 37.11 authority of the commissioner under chapters 45 and 46 to the 37.12 same extent as a state bank or trust company. 37.13 (e) For the purposes of this section, "subsidiary" means a 37.14 corporation of which more than 50 percent of the voting shares 37.15 are owned or controlled by the bank or trust company. 37.16 Sec. 20. [52.211] [STUDENT EDUCATION PROGRAMS.] 37.17 A credit union is allowed to establish part-time 37.18 deposit-taking locations at elementary and secondary schools 37.19 provided that the locations are established in connection with 37.20 student education programs approved by the school administration 37.21 and consistent with safe and sound financial institution 37.22 practices. For purposes of this section, students do not need 37.23 to be members of the credit union to participate, and the 37.24 students' parents are not automatically made members by reason 37.25 of their child's participation. 37.26 Sec. 21. Minnesota Statutes 1994, section 53.015, 37.27 subdivision 4, is amended to read: 37.28 Subd. 4. [CAPITAL STOCK.] "Capital stock" means the par 37.29 value of preferred or common stock multiplied by the respective 37.30 number of shares of each type of stock. For purposes of section 37.31 53.05, clause (7), capital stock may include an amount of 37.32 mandatory convertible debentures approved by the commissioner. 37.33 The terms and conditions for redemption of the qualifying 37.34 debentures must include the prior written approval of the 37.35 commissioner as a condition for a redemption, but in no event an 37.36 amount in excess of 50 percent of total preferred or common 38.1 stock. 38.2 Sec. 22. Minnesota Statutes 1994, section 56.14, is 38.3 amended to read: 38.4 56.14 [DUTIES OF LICENSEE.] 38.5 Every licensee shall: 38.6 (1) deliver to the borrower (or if there are two or more 38.7 borrowers to one of them) at the time any loan is made a 38.8 statement making the disclosures and furnishing the information 38.9 required by the federal Truth-in-Lending Act, United States 38.10 Code, title 15, sections 1601 to 1667e, as amended from time to 38.11 time, with respect to the contract of loan. A copy of the loan 38.12 contract may be delivered in lieu of a statement if it discloses 38.13 the required information; 38.14 (2) deliver or mail to the borrower without request, a 38.15 written receipt within 30 days following payment for each 38.16 payment by coin or currency made on account of any loan wherein 38.17 charges are computed and paid on unpaid principal balances for 38.18 the time actually outstanding, specifying the amount applied to 38.19 charges and the amount, if any, applied to principal, and 38.20 stating the unpaid principal balance, if any, of the loan; and 38.21 wherein precomputed charges have been added to the principal of 38.22 the loan specifying the amount of the payment applied to 38.23 principal and charges combined, the amount applied to default or 38.24 extension charges, if any, and stating the unpaid balance, if 38.25 any, of the precomputed loan contract. A periodic statement 38.26 showing a payment received by mail complies with this clause; 38.27 (3) permit payment to be made in advance in any amount on 38.28 any contract of loan at any time, but the licensee may apply the 38.29 payment first to all charges in full at the agreed rate up to 38.30 the date of the payment; 38.31 (4) upon repayment of the loan in full, mark indelibly 38.32 every obligation and security, other than a mortgage or security 38.33 agreement which secures a new loan to the licensee, signed by 38.34 the borrower with the word "Paid" or "Canceled," and release any 38.35 mortgage or security agreement which no longer secures a loan to 38.36 the licensee, restore any pledge, and cancel and return any 39.1 note, and any assignment given to the licensee which does not 39.2 secure a new loan to the licensee within 20 days after the 39.3 repayment. For purposes of this requirement, the document 39.4 including actual evidence of an obligation or security may be 39.5 maintained, stored, and retrieved in a form or format acceptable 39.6 to the commissioner under section 46.04, subdivision 3; 39.7 (5) display prominently in each licensed place of business 39.8 a full and accurate schedule, to be approved by the 39.9 commissioner, of the charges to be made and the method of 39.10 computing the same; furnish a copy of the contract of loan to 39.11 any person obligated on it or who may become obligated on it at 39.12 any time upon the request of that person; 39.13 (6) show in the loan contract or statement of loan the rate 39.14 or rates of charge on which the charge in the contract is based, 39.15 expressed in terms of rate or rates per annum. The rate 39.16 expression shall be printed in at least 8-point type on the loan 39.17 statement or copy of the loan contract given to the borrower.; 39.18 (7) if a payment results in the prepayment of three or more 39.19 installment payments on a precomputed loan, at the same time the 39.20 receipt required by clause (2) is delivered or mailed, deliver 39.21 or mail to the borrower a notice in at least eight-point type as 39.22 part of the receipt or together with the receipt. The notice 39.23 must contain the following statement: 39.24 "You have substantially prepaid the installment payments on 39.25 your loan and may experience an interest savings over the 39.26 remaining term only if you refinance the balance within the 39.27 next 30 days." 39.28 Sec. 23. Minnesota Statutes 1994, section 56.155, 39.29 subdivision 1, is amended to read: 39.30 Subdivision 1. [AUTHORIZATION.] No licensee shall, 39.31 directly or indirectly, sell or offer for sale any insurance in 39.32 connection with any loan made under this chapter except as and 39.33 to the extent authorized by this section. The sale of credit 39.34 life, credit accident and health, and credit involuntary 39.35 unemployment insurance is subject to the provisions of chapter 39.36 62B, except that the term of the insurance may exceed 60 months 40.1 if the term of the loan exceeds 60 months. Life, accident, 40.2 health, and involuntary unemployment insurance, or any of them, 40.3 may be written upon or in connection with any loan but must not 40.4 be required as additional security for the indebtedness. If the 40.5 debtor chooses to procure credit life insurance, credit accident 40.6 and health insurance, or credit involuntary unemployment 40.7 insurance as security for the indebtedness, the debtor shall 40.8 have the option of furnishing this security through existing 40.9 policies of insurance that the debtor owns or controls, or of 40.10 furnishing the coverage through any insurer authorized to 40.11 transact business in this state. A statement in substantially 40.12 the following form must be made orally, except for loans by mail 40.13 pursuant to section 56.12, and provided in writing in bold face 40.14 type of a minimum size of 12 points to the borrower before the 40.15 transaction is completed for each credit life, accident and 40.16 health, and involuntary unemployment insurance coverage sold: 40.17 CREDIT LIFE INSURANCE, CREDIT DISABILITY INSURANCE, AND 40.18 CREDIT INVOLUNTARY UNEMPLOYMENT INSURANCE ARE NOT REQUIRED 40.19 TO OBTAIN CREDIT. YOU MAY BUY ANY INSURANCE FROM ANYONE 40.20 YOU CHOOSE OR YOU MAY USE EXISTING INSURANCE. 40.21 The licensee shall disclose whether or not the benefits 40.22 commence as of the first day of disability or involuntary 40.23 unemployment and shall further disclose the number of days that 40.24 an insured obligor must be disabled or involuntarily unemployed, 40.25 as defined in the policy, before benefits, whether retroactive 40.26 or nonretroactive, commence.In case there are multiple40.27obligors under a transaction subject to this chapter, no policy40.28or certificate of insurance providing credit unemployment40.29benefits may be procured by or through a licensee upon more than40.30one of the obligors.In case there are multiple obligors under 40.31 a transaction subject to this chapter, no policy or certificate 40.32 of insurance providing credit accident and healthor, credit 40.33 life insurance, or credit unemployment benefits may be procured 40.34 by or through a licensee upon more than two of the obligors in 40.35 which case they shall be insured jointly or in the case of 40.36 credit unemployment benefits on a basis provided for in rules 41.1 adopted by the commissioner. The premium or identifiable charge 41.2 for the insurance must not exceed that filed by the insurer with 41.3 the department of commerce. The charge, computed at the time 41.4 the loan is made for a period not to exceed the full term of the 41.5 loan contract on an amount not to exceed the total amount 41.6 required to pay principal and charges, may be deducted from the 41.7 proceeds or may be included as part of the principal of any 41.8 loan. If a borrower procures insurance by or through a 41.9 licensee, the statement required by section 56.14 must disclose 41.10 the cost to the borrower and the type of insurance, and the 41.11 licensee shall cause to be delivered to the borrower a copy of 41.12 the policy, certificate, or other evidence thereof, within a 41.13 reasonable time. No licensee shall decline new or existing 41.14 insurance which meets the standards set out in this section nor 41.15 prevent any obligor from obtaining this insurance coverage from 41.16 other sources. Notwithstanding any other provision of this 41.17 chapter, any gain or advantage to the licensee or to any 41.18 employee, affiliate, or associate of the licensee from this 41.19 insurance or the sale or provision thereof is not an additional 41.20 or further charge in connection with the loan; nor are any of 41.21 the provisions pertaining to insurance contained in this section 41.22 prohibited by any other provision of this chapter. 41.23 Sec. 24. Minnesota Statutes 1994, section 59A.06, 41.24 subdivision 2, is amended to read: 41.25 Subd. 2. Every licensee shall preserve its records of 41.26 premium finance transactions for at least three years after 41.27 making the final entry in respect to any premium finance 41.28 agreement. The records may be preserved in photographic form or 41.29 in a form acceptable to the commissioner under section 46.04, 41.30 subdivision 3. 41.31 Sec. 25. Minnesota Statutes 1994, section 62B.04, 41.32 subdivision 1, is amended to read: 41.33 Subdivision 1. [CREDIT LIFE INSURANCE.] (1) The initial 41.34 amount of credit life insurance shall not exceed the amount of 41.35 principal repayable under the contract of indebtedness plus an 41.36 amount equal to one monthly payment. Thereafter, if the 42.1 indebtedness is repayable in substantially equal installments 42.2 according to a predetermined schedule, the amount of insurance 42.3 shall not exceed the scheduled indebtedness plus one monthly 42.4 payment or actual amount of indebtedness, whichever is greater. 42.5 (2) Notwithstanding clause (1), the amount of credit life 42.6 insurance written in connection with credit transactions 42.7 repayable over a specified term exceeding 63 months shall not 42.8 exceed the greater of: (i) the actual amount of unpaid 42.9 indebtedness as it exists from time to time; or (ii) where an 42.10 indebtedness is repayable in substantially equal installments 42.11 according to a predetermined schedule, the scheduled amount of 42.12 unpaid indebtedness, less any unearned interest or finance 42.13 charges, plus an amount equal to two monthly payments. 42.14 (3) Notwithstanding clauses (1) and (2), insurance on 42.15 educational, agricultural, and horticultural credit transaction 42.16 commitments may be written on a nondecreasing or level term plan 42.17 for the amount of the loan commitment. 42.18 (4) If the contract of indebtedness provides for a variable 42.19 rate of finance charge or interest, the initial rate or the 42.20 scheduled rates based on the initial index shall be used in 42.21 determining the scheduled amount of indebtedness, and subsequent 42.22 changes to the rate shall be disregarded in determining whether 42.23 the contract is repayable in substantially equal installments 42.24 according to a predetermined schedule. 42.25 Sec. 26. Minnesota Statutes 1994, section 62B.08, 42.26 subdivision 2, is amended to read: 42.27 Subd. 2. Each individual policy or group certificate shall 42.28 provide that in the event of termination of the insurance prior 42.29 to the scheduled maturity date of the indebtedness, any refund 42.30 of an amount paid by the debtor for insurance shall be paid or 42.31 credited promptly to the person entitled thereto; provided, 42.32 however, thatthe commissioner shall prescribe a minimum refund42.33and no refund which would be less than such minimum need be made42.34 a premium refund or credit need not be made if the amount 42.35 thereof is less than $5. The formula to be used in computing 42.36 the refund shall be filed with and approved by the commissioner. 43.1 Sec. 27. [168.79] [MOTOR VEHICLE LEASING CONTRACT 43.2 REGULATION.] 43.3 Subdivision 1. [DEFINITIONS.] (a) For purposes of this 43.4 section, the terms defined in this subdivision have the meanings 43.5 given. 43.6 (b) "Acquisition fee" means an origination fee, document 43.7 preparation fee, or similar change regardless of what it is 43.8 called, charged by the lessor or lease finance company for the 43.9 privilege of entering into the lease contract. 43.10 (c) "Capitalized cost" means the charge for the motor 43.11 vehicle and other charges to be financed under the lease 43.12 contract less any capitalized cost reduction. 43.13 (d) "Capitalized cost reduction" means the amount paid by 43.14 the lessee at the time of entering into the leasing contract to 43.15 be applied against the cost of the motor vehicle, regardless of 43.16 whether it is called a down payment or similar term. 43.17 (e) "Commissioner" means the commissioner of commerce or 43.18 that commissioner's designee. 43.19 (f) "Depreciation" means the capitalized cost minus the 43.20 residual. 43.21 (g) "Disposition fee" means a charge for disposing of the 43.22 motor vehicle upon termination fo the leasing contract. 43.23 (h) "Excess mileage charge" means a charge imposed for 43.24 exceeding the mileage allowed under the leasing contract. 43.25 (i) "Gap insurance" means insurance to protect the lessee, 43.26 in the event of a total loss of the motor vehicle, against a 43.27 difference between the amount owing under the leasing contract 43.28 the amount received from insurance on the motor vehicle. 43.29 (j) "Lease finance company" means a person engaged, in 43.30 whole or in part, in the business of purchasing motor vehicle 43.31 leasing contracts, or any rights with respect to them, in this 43.32 state from one or more lessors. The term includes a bank, trust 43.33 company, savings bank, savings association, industrial loan and 43.34 thrift company, or a regulated lender, if so engaged. The term 43.35 also includes a lessor engaged, in whole or in part, in the 43.36 business of creating and holding motor vehicle leasing 44.1 contracts. The term includes a person that obtains a pledge of, 44.2 or other security interest in, motor vehicle leasing contracts. 44.3 (k) "Lessee" means an individual, a small business as 44.4 defined in section 645.445, or a small employer as defined in 44.5 section 62L.02, that enters into a motor vehicle leasing 44.6 contract in this state with a lessor. 44.7 (l) "Lessor" means a person engaged in the business of 44.8 entering into motor vehicle leasing contract in this state with 44.9 lessees. 44.10 (m) "Money factor" means the rate charged under the leasing 44.11 contract for the time value of money, whether called interest or 44.12 not. The money factor is the interest rate divided by 2400. 44.13 (n) "Motor vehicle" has the meaning given in section 44.14 168.66, subdivision 5, except that the term includes all farm 44.15 tractors and other agricultural machinery. 44.16 (o) "Motor vehicle leasing contract" or "leasing contract" 44.17 means a contract for the lease of a motor vehicle entered into 44.18 in this state between a lessor and lessee, provided that a 44.19 contract for the short-term rental of a motor vehicle at a 44.20 daily, weekly, or monthly rental rate is not a lease. 44.21 (p) "MSRP" means the manufacturer's suggested retail price 44.22 of the motor vehicle. 44.23 (q) "Residual" means the lessor's determination of the 44.24 expected value of the motor vehicle at the scheduled termination 44.25 date of the leasing contract. 44.26 Subd. 2. [APPLICABILITY.] (a) This section applies to all 44.27 motor vehicle leasing contracts entered into in this state, 44.28 including those extended or otherwise renewed beyond their 44.29 original term after the effective date of this section. 44.30 (b) This section does not apply to a retail installment 44.31 sales contract, as defined under section 168.66, subdivision 4. 44.32 Subd. 3. [GENERAL REQUIREMENTS AND PROVISIONS.] (a) Motor 44.33 vehicle lease contracts must comply with Regulation Z of the 44.34 Federal Reserve Board. This includes contracts that are not 44.35 covered by Regulation Z but are covered by this section. For 44.36 purposes of the state requirement contained in this paragraph, 45.1 the commissioner may independently determine whether a motor 45.2 vehicle leasing contract complies with Regulation Z and is not 45.3 bound by any such determination made by a federal regulator for 45.4 purposes of federal enforcement. The commissioner is not bound 45.5 by any interpretative opinions or other guidance provided by a 45.6 federal regulator. 45.7 (b) Motor vehicle leasing contracts and any disclosures and 45.8 other documents provided in connection with them must comply 45.9 with the applicable requirements of chapter 72C. The 45.10 certification of the Flesch scale analysis readability score 45.11 must be provided by a qualified person not employed by, or 45.12 regularly retained in any way by, the lessor or lease finance 45.13 company. For purposes of this paragraph, requirements are 45.14 applicable unless clearly inapplicable, as determined by the 45.15 commissioner. 45.16 (c) Motor vehicle leasing contracts must comply with all 45.17 applicable requirements of sections 168.66 to 168.78. For 45.18 purposes of this paragraph, requirements are applicable unless 45.19 clearly inapplicable, as determined by the commissioner. 45.20 Subd. 4. [REQUIRED DISCLOSURE.] (a) This subdivision 45.21 applies to all motor vehicle leasing contracts, in addition to 45.22 requirements under subdivision 3. 45.23 (b) A motor vehicle leasing contract, and all disclosures 45.24 required in connection with it, must not be used in this state 45.25 until the forms have been filed with and approved by the 45.26 commissioner. Any such forms filed with the commissioner must 45.27 be accompanied by the written opinion of an attorney admitted to 45.28 practice in this state, stating that in the attorney's opinion, 45.29 the forms fully comply with all requirements of this section. 45.30 If, however, the attorney believes that there is any uncertainty 45.31 as to whether the forms fully comply, the attorney's opinion 45.32 shall state the uncertainty and the grounds for the 45.33 uncertainty. If the attorney's opinion is based in whole or in 45.34 part upon the analysis by accountants, actuaries, financial 45.35 analysts, or other attorneys, the attorney providing the opinion 45.36 shall attach a copy of the written analyses relied upon. The 46.1 attorney providing the opinion must not be employed by, or 46.2 retained on a regular basis by, the lessor, the lease finance 46.3 company, an affiliate of either, or a trade association of 46.4 either. 46.5 (c) A motor vehicle leasing contract may be canceled by the 46.6 lessee at any time, for any reason or for no reason, prior to 46.7 the end of the fifth business day after the day upon which the 46.8 leasing contract became effective, at no cost to the lessee. 46.9 Upon the cancellation, the lessor or lease finance company shall 46.10 refund to the lessee all payments of any kind made by the lessee 46.11 in connection with the lease contract. 46.12 (d) A motor vehicle leasing contract may be canceled by the 46.13 lessee, for any reason or for no reason, at any time prior to 46.14 the end of the 60th day after the effective date of the leasing 46.15 contract. In the event of a cancellation under this paragraph, 46.16 the total charge to the lessee must not exceed the money factor 46.17 times 24 times the capitalized cost, times the number of months 46.18 since the effective date, in addition to a depreciation charge 46.19 of 1/60 times the charge for the motor vehicle times the number 46.20 of months since the effective date. Partial months must be 46.21 included on a pro rata basis, based upon a 30-day month. 46.22 (e) A motor vehicle leasing contract must be accompanied by 46.23 a completed disclosure form, clearly explaining the differences 46.24 between a leasing contract, a sales finance contract, and a 46.25 purchase for cash. The disclosure must compare the total cost 46.26 to the customer at one-year intervals, including the time value 46.27 of money. 46.28 (f) A motor vehicle leasing contract and any written 46.29 disclosures used with it must prominently display the telephone 46.30 number of the commissioner and state that complaints may be made 46.31 to the commissioner. 46.32 (g) A motor vehicle leasing contract must be accompanied by 46.33 a disclosure form informing the potential lessee of: 46.34 (1) the MSRP of the vehicle and, if the lessor is also in 46.35 the business of selling motor vehicles, the lessor's average 46.36 discount from the MSRP on cash purchases and sales finance 47.1 contracts over the most recent 12 calendar months, not including 47.2 the most recent calendar month; 47.3 (2) the charge for the motor vehicle implicit in the 47.4 leasing contract; 47.5 (3) the annual percentage rate as defined under the Federal 47.6 Truth in Lending Act, United States Code, title 15, sections 47.7 1601 to 1667e; 47.8 (4) the money factor and its relationship to the annual 47.9 percentage rate; 47.10 (5) an amortization schedule showing the allocation of each 47.11 payment among interest, credit against the capitalization cost, 47.12 and credit against other charges, showing with each payment the 47.13 amount required at that point to purchase the motor vehicle for 47.14 cash, if that option is offered; 47.15 (6) the amounts of the acquisition fee, capitalized cost, 47.16 capitalized cost reduction, depreciation, disposition fee, 47.17 excess mileage charge, premiums for gap insurance, the residual, 47.18 and any other charges of any kind; 47.19 (7) the commissions received by the lessor or lease finance 47.20 company for the gap insurance, together with a statement that 47.21 the insurance is not required as a condition of the leasing 47.22 contract; 47.23 (8) precisely how the amount needed to purchase the motor 47.24 vehicle will be determined at each point during the term of the 47.25 leasing contract, if that option is available, and at 47.26 termination; and 47.27 (9) the rights of cancellation under paragraphs (c) and (d). 47.28 Subd. 5. [ENFORCEMENT.] (a) The commissioner shall enforce 47.29 this section and has for purposes of this section all 47.30 enforcement powers otherwise available to the commissioner. 47.31 (b) A lessee or other person damaged by a violation of this 47.32 section has the rights and remedies provided under section 8.31, 47.33 subdivision 3a. 47.34 (c) The penalty or damages assessed against a lessor or 47.35 lease finance company under paragraphs (a) and (b) must be no 47.36 less than the interest that was paid or would have been payable 48.1 by the lessee over the term of the motor vehicle leasing 48.2 contract. 48.3 (d) A motor vehicle leasing contract that violates this 48.4 section is not assignable, transferable, or subject to creation 48.5 of a security interest. Any purported assignment, transfer, or 48.6 creation of a security interest in the leasing contract is 48.7 voidable at the option of the party to whom the contract was 48.8 purportedly assigned, transferred, or pledged as security. A 48.9 lessor, lease finance company, or the assignee of either, must 48.10 provide to prospective assignees, transferees, or recipients of 48.11 a security interest a certification of the commissioner that the 48.12 form of the motor vehicle leasing contract, and all disclosures 48.13 used with it, were approved by the commissioner prior to use and 48.14 have not since that time been disapproved by the commissioner. 48.15 Sec. 28. Minnesota Statutes 1994, section 300.20, 48.16 subdivision 1, is amended to read: 48.17 Subdivision 1. [ELECTION.] The business of savings banks 48.18 must be managed by a board of at least seven trustees, residents 48.19 of this state, each of whom, before being authorized to act, 48.20 must file a written acceptance of the trust. The business of 48.21 other corporations must be managed by a board of at leastthree48.22 five directors, unless a greater number is otherwise required by 48.23 law, elected by ballot by the stockholders or members. A board 48.24 of directors of a financial institution referred to in section 48.25 47.12 which has less than five members on August 1, 1995, is not 48.26 subject to this requirement but may be increased to not more 48.27 than five members by order of the commissioner of commerce. 48.28 Sec. 29. Minnesota Statutes 1994, section 325G.02, 48.29 subdivision 1, is amended to read: 48.30 Subdivision 1. [APPLICABILITY.] For purposes of sections 48.31 325G.02 to325G.04325G.042 the terms defined in this section 48.32 shall have meanings given them. 48.33 Sec. 30. [325G.042] [CONSUMER CREDIT; EQUAL TREATMENT OF 48.34 SPOUSES.] 48.35 Subdivision 1. [CONSIDERATION REQUIRED; SPOUSAL CREDIT 48.36 HISTORY.] (a) To the extent that an issuer of financial 49.1 transaction cards considers credit history in evaluating the 49.2 credit worthiness of similarly qualified applicants for a 49.3 similar type and amount of credit, in evaluating an applicant's 49.4 credit worthiness, the issuer shall consider: 49.5 (1) the credit history, when available, of accounts 49.6 designated as accounts that the applicant and the applicant's 49.7 spouse are permitted to use or for which both are contractually 49.8 liable; and 49.9 (2) at the applicant's request, the credit history, when 49.10 available, of any account reported in the name of the 49.11 applicant's spouse or former spouse that the applicant can 49.12 demonstrate accurately reflects the applicant's credit 49.13 worthiness. 49.14 (b) In considering a credit history referred to in 49.15 paragraph (a), the issuer shall consider it as if the credit 49.16 history were reported in the name of the applicant. 49.17 (c) This section does not affect the right of an issuer to 49.18 decline to issue a financial transaction card to an applicant 49.19 who does not meet the issuer's standards of credit worthiness, 49.20 other than credit history. 49.21 Subd. 2. [CREDIT REPORTING; EQUAL TREATMENT OF 49.22 SPOUSES.] (a) An issuer of financial transaction cards that 49.23 furnishes credit information shall designate: 49.24 (1) any new account to reflect the participation of both 49.25 spouses if the applicant's spouse is permitted to use or is 49.26 contractually liable on the account, other than as a guarantor, 49.27 surety, endorser, or similar party; and 49.28 (2) any existing account to reflect such participation, 49.29 within 90 days after receiving a written request to do so from 49.30 one of the spouses. The issuer shall at least once per year, 49.31 inform the accountholder in writing of the right to make that 49.32 request. 49.33 (b) If an issuer of financial transaction cards furnishes 49.34 credit information to a consumer reporting agency concerning an 49.35 account designated to reflect the participation of both spouses, 49.36 the issuer shall furnish the information in a manner that will 50.1 enable the agency to provide access to the information in the 50.2 name of each spouse. 50.3 (c) If an issuer of financial transaction cards furnishes 50.4 credit information in response to an inquiry concerning an 50.5 account designated to reflect the participation of both spouses, 50.6 the issuer shall furnish the information in the name of the 50.7 spouse about whom the information is requested. 50.8 Subd. 3. [ENFORCEMENT.] Enforcement of this section is 50.9 under section 8.31, except that in the private cause of action 50.10 under subdivision 3a of that section, the damages are limited to 50.11 $1,000 and the plaintiff has no right to recover costs of 50.12 investigation and attorney fees. 50.13 Sec. 31. Minnesota Statutes 1994, section 327B.04, 50.14 subdivision 1, is amended to read: 50.15 Subdivision 1. [LICENSE AND BOND REQUIRED.] No person 50.16 shall act as a dealer in manufactured homes, new or used, 50.17 without a license and a surety bond as provided in this 50.18 section. No person shall manufacture manufactured homes without 50.19 a license and a surety bond as provided in this section. The 50.20 licensing and bonding requirements of this section do not apply 50.21 to any bank, savings bank, savingsand loanassociation, or 50.22 credit union, chartered by either this state or the federal 50.23 government, which acts as a dealer only by repossessing 50.24 manufactured homes and then offering the homes for resale 50.25through the brokering services of a licensed dealer or real50.26estate broker or salesperson. 50.27 Sec. 32. Minnesota Statutes 1994, section 327B.09, 50.28 subdivision 1, is amended to read: 50.29 Subdivision 1. [LICENSE REQUIRED.] No person shall engage 50.30 in the business, either exclusively or in addition to any other 50.31 occupation of manufacturing, selling, offering to sell, 50.32 soliciting or advertising the sale of manufactured homes, or act 50.33 as a broker without being licensed as a manufacturer or a dealer 50.34 as provided in section 327B.04. Any person who manufactures, 50.35 sells, offers to sell, solicits or advertises the sale of 50.36 manufactured homes, or acts as a broker in violation of this 51.1 subdivision shall nevertheless be subject to the duties, 51.2 prohibitions and penalties imposed by sections 327B.01 to 51.3 327B.12. Thissubdivisionchapter does not prohibit either an 51.4 individual from reselling, without a license, a manufactured 51.5 home which is or has been the individual's residence or any 51.6 bank, savings bank, savings association, or credit union, 51.7 chartered by either this state or the federal government, from 51.8 reselling, without a license, a repossessed manufactured home. 51.9 Sec. 33. Minnesota Statutes 1994, section 332.23, 51.10 subdivision 1, is amended to read: 51.11 Subdivision 1. [ORIGINATION FEE, CREDIT BACKGROUND REPORT 51.12 COST.] The licensee may charge an origination fee of not more 51.13 than $25 and collect the actual cost of a credit background 51.14 report from a credit reporting agency not related to or 51.15 affiliated with the licensee. The costs to the debtor of said 51.16 origination fee and credit background report may be made from 51.17 the originating amount paid by the debtor to the licensee. The 51.18 cost of only one credit background report may be collected from 51.19 the debtor in any 12-month period. 51.20 Sec. 34. Minnesota Statutes 1994, section 332.23, 51.21 subdivision 2, is amended to read: 51.22 Subd. 2. [WITHDRAWAL OF FEE.] The licensee may withdraw 51.23 and retain as partial payment of the licensee's total fee not 51.24 more than 15 percent of any sum deposited with the licensee by 51.25 the debtor for distribution. The remaining 85 percent must be 51.26 disbursed to listed creditors pursuant to and in accordance with 51.27 the contract between the debtor and the licensee within 35 days 51.28 after receipt. Total payment to licensee for services rendered, 51.29 excluding the origination fee and any credit background report, 51.30 shall not exceed 15 percent of funds deposited with licensee by 51.31 debtor for distribution. 51.32 Sec. 35. [RECOMMENDATIONS; POINT-OF-SALE TERMINALS.] 51.33 The commissioner of commerce shall select and convene an 51.34 informal workgroup to make recommendations to the commissioner 51.35 regarding whether there is a need to license electronic 51.36 point-of-sale terminals operated by a retailer for use with 52.1 credit cards, rather than debit cards. The informal workgroup 52.2 must include persons representing retailers, financial 52.3 institutions, and consumers. The commissioner shall make 52.4 recommendations to the legislature no later than December 1, 52.5 1994. 52.6 Sec. 36. [EFFECTIVE DATE.] 52.7 Sections 1 to 2, 5 to 15, 17 to 21, 23 to 26, 28, and 31 to 52.8 35 are effective the day following final enactment. Sections 3 52.9 and 4 are effective September 1, 1995. Section 16 is effective 52.10 for reports filed for close of business beginning June 30, 1995. 52.11 Section 22 is effective June 1, 1995. Section 27 is effective 52.12 January 1, 1996. Sections 29 and 30 are effective August 1, 52.13 1995. 52.14 ARTICLE 3 52.15 INTEREST RATE SIMPLIFICATION AND SMALL DOLLAR 52.16 CREDIT AVAILABILITY 52.17 Section 1. [47.59] [FINANCIAL INSTITUTION CREDIT EXTENSION 52.18 MAXIMUM RATES.] 52.19 Subdivision 1. [DEFINITIONS.] For purposes of this 52.20 section, the following definitions shall apply. 52.21 (a) "Actuarial method" has the meaning given the term in 52.22 the Code of Federal Regulations, title 12, part 226, and 52.23 appendix J thereto. 52.24 (b) "Annual percentage rate" has the meaning given the term 52.25 in the Code of Federal Regulations, title 12, part 226, but 52.26 using the definition of "finance charge" used in this section. 52.27 (c) "Borrower" means a debtor under a loan or a purchaser 52.28 or debtor under a credit sale contract. 52.29 (d) "Business purpose" means a purpose other than personal, 52.30 family, household, or agricultural purpose. 52.31 (e) "Cardholder" means a person to whom a credit card is 52.32 issued or who has agreed with the financial institution to pay 52.33 obligations arising from the issuance to or use of the card by 52.34 another person. 52.35 (f) "Consumer loan" means a loan made by a financial 52.36 institution in which: 53.1 (1) the debtor is a person other than an organization; 53.2 (2) the debt is incurred primarily for a personal, family, 53.3 or household purpose; and 53.4 (3) the debt is payable in installments or a finance charge 53.5 is made. 53.6 (g) "Credit" means the right granted by a financial 53.7 institution to a borrower to defer payment of a debt, to incur 53.8 debt and defer its payment, or to purchase property or services 53.9 and defer payment. 53.10 (h) "Credit card" means a card or device issued under an 53.11 arrangement pursuant to which a financial institution gives to a 53.12 cardholder the privilege of obtaining credit from the financial 53.13 institution or other person in purchasing or leasing property or 53.14 services, obtaining loans, or otherwise. A transaction is 53.15 "pursuant to a credit card" only if credit is obtained according 53.16 to the terms of the arrangement by transmitting mechanical or 53.17 electronic methods, or in any other manner. A transaction is 53.18 not "pursuant to a credit card" if the card or device is used 53.19 solely in that transaction to: 53.20 (1) identify the cardholder or evidence the cardholder's 53.21 creditworthiness and credit is not obtained according to the 53.22 terms of the arrangement; 53.23 (2) obtain a guarantee of payment from the cardholder's 53.24 deposit account, whether or not the payment results in a credit 53.25 extension to the cardholder by the financial institution; or 53.26 (3) effect an immediate transfer of funds from the 53.27 cardholder's deposit account by electronic or other means, 53.28 whether or not the transfer results in a credit extension to the 53.29 cardholder by the financial institution. 53.30 (i) "Credit sale contract" means a contract evidencing a 53.31 credit sale. "Credit sale" means a sale of goods or services, 53.32 or an interest in land, in which: 53.33 (1) credit is granted by a seller who regularly engages as 53.34 a seller in credit transactions of the same kind; and 53.35 (2) the debt is payable in installments or a finance charge 53.36 is made. 54.1 (j) "Finance charge" has the meaning set forth in this 54.2 section. 54.3 (k) "Financial institution" means state and federally 54.4 chartered banks, state and federally chartered banks and trusts, 54.5 trust companies with banking powers, state and federally 54.6 chartered savings banks, state and federally chartered savings 54.7 associations, industrial loan and thrift companies, and 54.8 regulated lenders. 54.9 (l) "Loan" means: 54.10 (1) the creation of debt by the financial institution's 54.11 payment of money to the borrower or a third person for the 54.12 account of the borrower; 54.13 (2) the creation of debt pursuant to a credit card in any 54.14 manner, including a cash advance or the financial institution's 54.15 honoring a draft or similar order for the payment of money drawn 54.16 or accepted by the borrower, paying or agreeing to pay the 54.17 borrower's obligation, or purchasing or otherwise acquiring the 54.18 borrower's obligation from the obligee or the borrower's 54.19 assignee; 54.20 (3) the creation of debt by a cash advance to a borrower 54.21 pursuant to an overdraft line of credit arrangement; 54.22 (4) the creation of debt by a credit to an account with the 54.23 financial institution upon which the borrower is entitled to 54.24 draw immediately; 54.25 (5) the forbearance of debt arising from a loan; and 54.26 (6) the creation of debt pursuant to open-end credit. 54.27 "Loan" does not include the forbearance of debt arising 54.28 from a sale or lease, a credit sale contract, or an overdraft 54.29 from a person's deposit account with a financial institution 54.30 which is not pursuant to a written agreement to pay overdrafts 54.31 with the right to defer repayment thereof. 54.32 (m) "Official fees" means: 54.33 (1) fees and charges which actually are or will be paid to 54.34 public officials for determining the existence of or for 54.35 perfecting, releasing, terminating, or satisfying a security 54.36 interest or mortgage relating to a loan or credit sale, and any 55.1 separate fees or charges which actually are or will be paid to 55.2 public officials for recording a notice described in section 55.3 580.032, subdivision 1; and 55.4 (2) premiums payable for insurance in lieu of perfecting a 55.5 security interest or mortgage otherwise required by a financial 55.6 institution in connection with a loan or credit sale, if the 55.7 premium does not exceed the fees and charges described in clause 55.8 (1), which would otherwise be payable. 55.9 (n) "Organization" means a corporation, government, or 55.10 government subdivision or agency, trust, estate, partnership, 55.11 joint venture, cooperative, limited liability company, limited 55.12 liability partnership, or association. 55.13 (o) "Person" means a natural person or an organization. 55.14 (p) "Principal" means the total of: 55.15 (1) the amount paid to, received by or paid or repayable 55.16 for the account of the borrower; and 55.17 (2) to the extent that payment is deferred: 55.18 (i) the amount actually paid or to be paid by the financial 55.19 institution for additional charges permitted under this section; 55.20 and 55.21 (ii) prepaid finance charges. 55.22 Subd. 2. [APPLICATION.] This section does not apply to 55.23 loans and other direct advances of credit made by financial 55.24 institutions as lender or creditor under sections 47.20, 47.21, 55.25 47.201, 47.204, 47.58, 47.60, 48.185, 48.195, 59A.01, 334.01, 55.26 334.011, 334.012, 334.06, and 334.061 to 334.19. 55.27 Subd. 3. [FINANCE CHARGE FOR LOANS.] (a) With respect to a 55.28 loan, including a loan pursuant to open-end credit but excluding 55.29 open-end credit pursuant to a credit card, a financial 55.30 institution may contract for and receive a finance charge on the 55.31 unpaid balance of the principal amount not to exceed the greater 55.32 of: 55.33 (1) an annual percentage rate not exceeding 21.75 percent; 55.34 or 55.35 (2) the total of: 55.36 (i) 33 percent per year on that part of the unpaid balance 56.1 of the principal amount not exceeding $750; and 56.2 (ii) 19 percent per year on that part of the unpaid balance 56.3 of the principal amount exceeding $750. 56.4 With respect to open-end credit pursuant to a credit card, 56.5 the financial institution may contract for and receive a finance 56.6 charge on the unpaid balance of the principal amount at an 56.7 annual percentage rate not exceeding 18 percent per year. 56.8 (b) On a loan where the finance charge is calculated 56.9 according to the method provided for in paragraph (a), clause 56.10 (2), the finance charge must be contracted for and earned as 56.11 provided in that provision or at the single annual percentage 56.12 rate computed to the nearest .001 of one percent that would earn 56.13 the same total finance charge at maturity of the contract as 56.14 would be earned by the application of the graduated rates 56.15 provided in paragraph (a), clause (2), when the debt is paid 56.16 according to the agreed terms and the calculations are made 56.17 according to the actuarial method. 56.18 (c) With respect to a loan, the finance charge must be 56.19 considered not to exceed the maximum annual percentage rate 56.20 permitted under this section if the finance charge contracted 56.21 for and received does not exceed the equivalent of the maximum 56.22 annual percentage rate calculated in accordance with Code of 56.23 Federal Regulations, title 12, part 226, except that the 56.24 following will not in any event be considered a finance charge: 56.25 (1) a charge as a result of default or delinquency under 56.26 subdivision 6 if made for actual unanticipated late payment, 56.27 delinquency, default, or other similar occurrence, and a charge 56.28 made for an extension or deferment under subdivision 5, unless 56.29 the parties agree that these charges are finance charges; 56.30 (2) an additional charge under subdivision 6; or 56.31 (3) a discount, if a financial institution purchases a loan 56.32 at less than the face amount of the obligation or purchases or 56.33 satisfies obligations of a cardholder pursuant to a credit card 56.34 and the purchase or satisfaction is made at less than the face 56.35 amount of the obligation. 56.36 (d) This subdivision does not limit or restrict the manner 57.1 of calculating the finance charge, whether by way of add-on, 57.2 discount, discount points, precomputed charges, single annual 57.3 percentage rate, variable rate, interest in advance, 57.4 compounding, average daily balance method, or otherwise, if the 57.5 annual percentage rate does not exceed that permitted by this 57.6 section. 57.7 (e) With respect to a loan secured by real estate, if a 57.8 finance charge is calculated or collected in advance, or 57.9 included in the principal amount of the loan, and the borrower 57.10 prepays the loan in full, the financial institution shall credit 57.11 the borrower with a refund of the charge to the extent that the 57.12 annual percentage rate yield on the loan would exceed the 57.13 maximum rate permitted under paragraph (a), taking into account 57.14 the prepayment. 57.15 (f) With respect to all other loans, if the finance charge 57.16 is calculated or collected in advance, or included in the 57.17 principal amount of the loan, and the borrower prepays the loan 57.18 in full, the financial institution shall credit the borrower 57.19 with a refund of the charge to the extent the annual percentage 57.20 rate yield on the loan would exceed the annual percentage rate 57.21 on the loan as originally determined under paragraph (a) and 57.22 taking into account the prepayment. 57.23 (g) For the purpose of calculating the refund under this 57.24 subdivision, the financial institution may assume that the 57.25 contract was paid before the date of prepayment according to the 57.26 schedule of payments under the loan and that all payments were 57.27 paid on their due dates. 57.28 (h) For loans repayable in substantially equal successive 57.29 monthly installments, the financial institution may calculate 57.30 the refund under paragraph (f) as the portion of the finance 57.31 charge allocable on an actuarial basis to all wholly unexpired 57.32 payment periods following the date of prepayment, based on the 57.33 annual percentage rate on the loan as originally determined 57.34 under paragraph (a), and for the purpose of calculating the 57.35 refund may assume that all payments are made on the due date. 57.36 (i) The dollar amounts in this subdivision and subdivision 58.1 (6), clause (4), shall change periodically, as provided in this 58.2 section, according to and to the extent of changes in the 58.3 implicit price deflator for the gross domestic product, 1987 = 58.4 100, compiled by the United States Department of Commerce, and 58.5 hereafter referred to as the index. The index for December 1991 58.6 is the reference base index for adjustments of dollar amounts. 58.7 (j) The designated dollar amounts shall change on July 1 of 58.8 each even-numbered year if the percentage of change, calculated 58.9 to the nearest whole percentage point, between the index for 58.10 December of the preceding year and the reference base index is 58.11 ten percent or more; but 58.12 (1) the portion of the percentage change in the index in 58.13 excess of a multiple of ten percent shall be disregarded and the 58.14 dollar amounts shall change only in multiples of ten percent of 58.15 the amounts appearing in this act, on the date of enactment; and 58.16 (2) the dollar amounts shall not change if the amounts 58.17 required by this section are those currently in effect pursuant 58.18 to this act, as a result of earlier application of this section. 58.19 (k) If the index is revised, the percentage of change 58.20 pursuant to this section shall be calculated on the basis of the 58.21 revised index. If a revision of the index changes the reference 58.22 base index, a revised reference base index shall be determined 58.23 by multiplying the reference base index then applicable by the 58.24 rebasing factor furnished by the department of commerce. If the 58.25 index is superseded, the index referred to in this section is 58.26 the one represented by the department of commerce as reflecting 58.27 most accurately changes in the purchasing power of the dollar 58.28 for consumers. 58.29 (l) The commissioner shall announce and publish: 58.30 (1) on or before April 30 of each year in which dollar 58.31 amounts are to change, the changes in dollar amounts required by 58.32 paragraph (j); and 58.33 (2) promptly after the changes occur, changes in the index 58.34 required by paragraph (k) including, if applicable, the 58.35 numerical equivalent of the reference base index under a revised 58.36 reference base index and the designation or title of any index 59.1 superseding the index. 59.2 (m) A person does not violate this chapter with respect to 59.3 a transaction otherwise complying with this chapter if that 59.4 person relies on dollar amounts either determined according to 59.5 paragraph (j), clause (2), or appearing in the last publication 59.6 of the commissioner announcing the then current dollar amounts. 59.7 (n) The adjustments provided in this section shall not be 59.8 affected unless explicitly provided otherwise by law. 59.9 Subd. 4. [FINANCE CHARGE FOR CREDIT SALES MADE BY A THIRD 59.10 PARTY.] (a) A person may enter into a credit sale contract for 59.11 sale to a financial institution and a financial institution may 59.12 purchase and enforce the contract, if the annual percentage rate 59.13 provided for in the contract does not exceed that permitted in 59.14 this section, or, in the case of contracts governed by sections 59.15 168.66 to 168.77, the rates permitted by those sections. 59.16 (b) The annual percentage rate may not exceed the 59.17 equivalent of the greater of either of the following: 59.18 (1) the total of: 59.19 (i) 36 percent per year on that part of the unpaid balances 59.20 of the amount financed that is $300 or less; 59.21 (ii) 21 percent per year on that part of the unpaid 59.22 balances of the amount financed which exceeds $300 but does not 59.23 exceed $1,000; and 59.24 (iii) 15 percent per year on that part of the unpaid 59.25 balances of the amount financed which exceeds $1,000; or 59.26 (2) 19 percent per year on the unpaid balances of the 59.27 amount financed. 59.28 (c) This subdivision does not limit or restrict the manner 59.29 of calculating the finance charge whether by way of add-on, 59.30 discount, discount points, single annual percentage rate, 59.31 precomputed charges, variable rate, interest in advance, 59.32 compounding, or otherwise, if the annual percentage rate 59.33 calculated under paragraph (d) does not exceed that permitted by 59.34 this section. The finance charge may be contracted for and 59.35 earned at the single annual percentage rate that would earn the 59.36 same finance charge as the graduated rates when the debt is paid 60.1 according to the agreed terms and the finance charge is 60.2 calculated under paragraph (d). If the finance charge is 60.3 calculated and collected in advance, or included in the 60.4 principal amount of the contract, and the borrower prepays the 60.5 contract in full, the financial institution shall credit the 60.6 borrower with a refund of the charge to the extent the annual 60.7 percentage rate yield on the contract would exceed the annual 60.8 percentage rate on the contract as originally determined under 60.9 paragraph (d) and taking into account the prepayment. For the 60.10 purpose of calculating the refund under this subdivision, the 60.11 financial institution may assume that the contract was paid 60.12 before the date of prepayment according to the schedule of 60.13 payments under the contract and that all payments were paid on 60.14 their due dates. For contracts repayable in substantially equal 60.15 successive monthly installments, the financial institution may 60.16 calculate the refund as the portion of the finance charge 60.17 allocable on an actuarial basis to all wholly unexpired payment 60.18 periods following the date of prepayment, based on the annual 60.19 percentage rate on the contract as originally determined under 60.20 paragraph (d), and for the purpose of calculating the refund may 60.21 assume that all payments are made on the due date. 60.22 (d) The annual percentage rate must be calculated in 60.23 accordance with Code of Federal Regulations, title 12, part 226, 60.24 except that the following will not in any event be considered a 60.25 finance charge: 60.26 (1) a charge as a result of delinquency or default under 60.27 subdivision 6 if made for actual unanticipated late payment, 60.28 delinquency, default, or other similar occurrence, and a charge 60.29 made for an extension or deferment under subdivision 5, unless 60.30 the parties agree that these charges are finance charges; 60.31 (2) an additional charge under subdivision 6; or 60.32 (3) a discount, if a financial institution purchases a 60.33 contract evidencing a credit sale at less than the face amount 60.34 of the obligation or purchases or satisfies obligations of a 60.35 cardholder according to a credit card and the purchase or 60.36 satisfaction is made at less than the face amount of the 61.1 obligation. 61.2 Subd. 5. [EXTENSIONS AND DEFERMENTS.] The parties may 61.3 agree in writing, either in the loan contract or credit sale 61.4 contract or in a subsequent agreement, to a deferment of wholly 61.5 unpaid installments. For precomputed loans and credit sale 61.6 contracts, the manner of deferment charge shall be determined as 61.7 provided for in this section. A deferment postpones the 61.8 scheduled due date of the earliest unpaid installment and all 61.9 subsequent installments as originally scheduled, or as 61.10 previously deferred, for a period equal to the deferment 61.11 period. The deferment period is that period during which no 61.12 installment is scheduled to be paid by reason of the deferment. 61.13 The deferment charge for a one-month period may not exceed the 61.14 applicable charge for the installment period immediately 61.15 following the due date of the last undeferred payment. A 61.16 proportionate charge may be made for deferment periods of more 61.17 or less than one month. A deferment charge is earned pro rata 61.18 during the deferment period and is fully earned on the last day 61.19 of the deferment period. If a loan or credit sale is prepaid in 61.20 full during a deferment period, the financial institution shall 61.21 make or credit to the borrower a refund of the unearned 61.22 deferment charge in addition to any other refund or credit made 61.23 for prepayment of the loan or credit sale in full. 61.24 For the purpose of this subdivision, "applicable charge" 61.25 means the amount of finance charge attributable to each monthly 61.26 installment period for the loan or credit sale contract. The 61.27 applicable charge is computed as if each installment period were 61.28 one month and any charge for extending the first installment 61.29 period beyond the one month, or reduction in charge for a first 61.30 installment less than one month, is ignored. The applicable 61.31 charge for any installment period is that which would have been 61.32 made for the period had the loan been made on an 61.33 interest-bearing basis at the single annual percentage rate 61.34 provided for in the contract based upon the assumption that all 61.35 payments were made according to schedule. For convenience in 61.36 computation, the financial institution may round the single 62.1 annual rate to the nearest one quarter of one percent. 62.2 Subd. 6. [ADDITIONAL CHARGES.] (a) In addition to the 62.3 finance charges permitted by this section, a financial 62.4 institution may contract for and receive the following 62.5 additional charges that may be included in the amount financed: 62.6 (1) official fees and taxes; 62.7 (2) charges for insurance as described in paragraph (b); 62.8 (3) with respect to a loan or credit sale contract secured 62.9 by real estate, the following "closing costs," if they are bona 62.10 fide, reasonable in amount, and not for the purpose of 62.11 circumvention or evasion of this section: 62.12 (i) fees or premiums for title examination, abstract of 62.13 title, title insurance, surveys, or similar purposes; 62.14 (ii) fees for preparation of a deed, mortgage, settlement 62.15 statement, or other documents, if not paid to the financial 62.16 institution; 62.17 (iii) escrows for future payments of taxes, including 62.18 assessments for improvements, insurance, and water, sewer, and 62.19 land rents; 62.20 (iv) fees for notarizing deeds and other documents; and 62.21 (v) appraisal and credit report fees; 62.22 (4) a delinquency charge on a payment, including the 62.23 minimum payment due in connection with the open-end credit, not 62.24 paid in full on or before the tenth day after its due date in an 62.25 amount not to exceed five percent of the amount of the payment 62.26 or $5.20, whichever is greater; 62.27 (5) for a returned check or returned automatic payment 62.28 withdrawal request, an amount not in excess of the service 62.29 charge limitation in section 332.50; and 62.30 (6) charges for other benefits, including insurance, 62.31 conferred on the borrower that are of a type that is not for 62.32 credit. 62.33 (b) An additional charge may be made for insurance written 62.34 in connection with the loan or credit sale contract, which may 62.35 be included in the amount financed: 62.36 (1) with respect to insurance against loss of or damage to 63.1 property, or against liability arising out of the ownership or 63.2 use of property, if the financial institution furnishes a clear, 63.3 conspicuous, and specific statement in writing to the borrower 63.4 setting forth the cost of the insurance if obtained from or 63.5 through the financial institution and stating that the borrower 63.6 may choose the person through whom the insurance is to be 63.7 obtained; 63.8 (2) with respect to credit insurance providing life, 63.9 accident, health, or unemployment coverage, if the insurance 63.10 coverage is not required by the financial institution, and this 63.11 fact is clearly and conspicuously disclosed in writing to the 63.12 borrower, and the borrower gives specific, dated, and separately 63.13 signed affirmative written indication of the borrower's desire 63.14 to do so after written disclosure to the borrower of the cost of 63.15 the insurance; and 63.16 (3) with respect to the vendor's single interest insurance, 63.17 but only (i) to the extent that the insurer has no right of 63.18 subrogation against the borrower; and (ii) to the extent that 63.19 the insurance does not duplicate the coverage of other insurance 63.20 under which loss is payable to the financial institution as its 63.21 interest may appear, against loss of or damage to property for 63.22 which a separate charge is made to the borrower according to 63.23 clause (1); and (iii) if a clear, conspicuous, and specific 63.24 statement in writing is furnished by the financial institution 63.25 to the borrower setting forth the cost of the insurance if 63.26 obtained from or through the financial institution and stating 63.27 that the borrower may choose the person through whom the 63.28 insurance is to be obtained. 63.29 (c) In addition to the finance charges and other additional 63.30 charges permitted by this section, a financial institution may 63.31 contract for and receive the following additional charges in 63.32 connection with open-end credit, which may be included in the 63.33 amount financed or balance upon which the finance charge is 63.34 computed: 63.35 (1) annual charges, not to exceed $50 per annum, payable in 63.36 advance, for the privilege of opening and maintaining open-end 64.1 credit; 64.2 (2) charges for the use of an automated teller machine; 64.3 (3) charges for any monthly or other periodic payment 64.4 period in which the borrower has exceeded or, except for the 64.5 financial institution's dishonor would have exceeded, the 64.6 maximum approved credit limit, in an amount not in excess of the 64.7 service charge permitted in section 332.50; 64.8 (4) charges for obtaining a cash advance in an amount not 64.9 to exceed the service charge permitted in section 332.50; and 64.10 (5) charges for check and draft copies and for the 64.11 replacement of lost or stolen credit cards. 64.12 (d) In addition to the finance charges and other additional 64.13 charges permitted by this section, a financial institution may 64.14 contract for and receive a one-time loan administrative fee not 64.15 exceeding $25 in connection with closed-end credit, which may be 64.16 included in the amount financed or principal balance upon which 64.17 the finance charge is computed. This paragraph applies only to 64.18 closed-end credit in an original principal amount of $4,320 or 64.19 less. 64.20 Subd. 7. [ADVANCES TO PERFORM COVENANTS OF BORROWER OR 64.21 PURCHASER.] (a) If the agreement with respect to a loan or 64.22 credit sale contract contains covenants by the borrower or 64.23 purchaser to perform certain duties pertaining to insuring or 64.24 preserving collateral and the financial institution according to 64.25 the agreement pays for performance of the duties on behalf of 64.26 the borrower or purchaser, the financial institution may add to 64.27 the debt or contract balance the amounts so advanced. Before or 64.28 within a reasonable time not less than 30 days after advancing 64.29 any sums, the financial institution shall state to the borrower 64.30 or purchaser in writing the amount of sums advanced or to be 64.31 advanced, any charges with respect to this amount, and any 64.32 revised payment schedule and, if the duties of the borrower or 64.33 purchaser performed by the financial institution pertain to 64.34 insurance, a brief description of the insurance paid for or to 64.35 be paid for by the financial institution including the type and 64.36 amount of coverages. Additional information need not be given. 65.1 The actions of the financial institution pursuant to this 65.2 subdivision shall not be deemed to cure the borrower's failure 65.3 to perform covenants in the loan or credit sale contract, unless 65.4 the loan or credit sale contract expressly provides otherwise. 65.5 (b) A finance charge equal to that specified in the loan 65.6 agreement or credit sale contract may be made for sums advanced 65.7 under paragraph (a). 65.8 Subd. 8. [ATTORNEY'S FEES.] With respect to a loan or 65.9 credit sale, the agreement may provide for payment by the 65.10 borrower of the attorney's fees and court costs incurred in 65.11 connection with collection or foreclosure. This subdivision is 65.12 not a limitation on attorney's fees that may be charged to an 65.13 organization. 65.14 Subd. 9. [RIGHT TO PREPAY.] The borrower or purchaser may 65.15 prepay in full the unpaid balance of a consumer loan or credit 65.16 sale contract, at any time without penalty. 65.17 Subd. 10. [CREDIT INSURANCE.] (a) The sale of credit 65.18 insurance is subject to chapter 62B and the rules adopted under 65.19 that chapter, but the term of the insurance may exceed 60 months 65.20 if the loan or credit sale contract exceeds 60 months and the 65.21 insurance will nevertheless be subject to chapter 62B and the 65.22 rules adopted under that chapter. In case there are multiple 65.23 consumers obligated under a transaction subject to this chapter, 65.24 no policy or certificate or insurance providing credit life 65.25 insurance may be procured by or through a financial institution 65.26 or person described in subdivision 2 upon more than two of the 65.27 consumers, in which case they may be insured jointly. 65.28 (b) A financial institution that provides credit insurance 65.29 in relation to open-end credit may calculate the charge to the 65.30 borrower in each billing cycle by applying the current premium 65.31 rate to the balance in the manner permitted with respect to 65.32 finance charges by the provisions on finance charge in this 65.33 section. 65.34 (c) Upon prepayment in full of a consumer loan or credit 65.35 sale contract by the proceeds of credit insurance, the consumer 65.36 or the consumer's estate is entitled to a refund of any portion 66.1 of a separate charge for insurance that by reason of prepayment 66.2 is retained by the financial institution or returned to it by 66.3 the insurer, unless the charge was computed from time to time on 66.4 the basis of the balances of the consumer's loan or credit sale 66.5 contract. 66.6 (d) This section does not require a financial institution 66.7 to grant a refund to the consumer if all refunds due to the 66.8 consumer under paragraph (c) amount to less than $5 and, except 66.9 as provided in paragraph (c), does not require the financial 66.10 institution to account to the consumer for any portion of a 66.11 separate charge for insurance because: 66.12 (1) the insurance is terminated by performance of the 66.13 insurer's obligation; 66.14 (2) the financial institution pays or accounts for premiums 66.15 to the insurer in amounts and at times determined by the 66.16 agreement between them; or 66.17 (3) the financial institution receives directly or 66.18 indirectly under a policy of insurance a gain or advantage not 66.19 prohibited by law. 66.20 (e) Except as provided in paragraph (d), the financial 66.21 institution shall promptly make or cause to be made an 66.22 appropriate refund to the consumer with respect to a separate 66.23 charge made to the consumer for insurance if: 66.24 (1) the insurance is not provided or is provided for a 66.25 shorter term than for which the charge to the borrower for 66.26 insurance was computed; or 66.27 (2) the insurance terminates before the end of the term for 66.28 which it was written because of prepayment in full or otherwise. 66.29 (f) If a financial institution requires insurance, upon 66.30 notice to the borrower, the borrower has the option of providing 66.31 the required insurance through an existing policy of insurance 66.32 owned or controlled by the borrower, or through a policy to be 66.33 obtained and paid for by the borrower, but the financial 66.34 institution for reasonable cause may decline the insurance 66.35 provided by the borrower. 66.36 Subd. 11. [PROPERTY AND LIABILITY INSURANCE.] (a) Except 67.1 as otherwise provided in this section and subject to the 67.2 provisions on additional charges and maximum finance charges in 67.3 this section, a financial institution may agree to sell, as an 67.4 agent, property and liability insurance, and may contract for 67.5 and receive a charge for this insurance separate from and in 67.6 addition to other charges. A financial institution need not 67.7 make a separate charge for the insurance provided or required by 67.8 it. This section does not authorize the issuance of the 67.9 insurance prohibited under any statute or rule governing the 67.10 business of insurance nor does it authorize a financial 67.11 institution to underwrite insurance. 67.12 (b) This section does not apply to an insurance premium 67.13 loan. A financial institution may request cancellation of a 67.14 policy of property or liability insurance only after the 67.15 borrower's default or in accordance with a written authorization 67.16 by the borrower. In either case, the cancellation does not take 67.17 effect until written notice is delivered to the borrower or 67.18 mailed to the borrower at the borrower's address as stated by 67.19 the borrower. The notice must state that the policy may be 67.20 canceled on a date not less than ten days after the notice is 67.21 delivered, or, if the notice is mailed, not less than 13 days 67.22 after it is mailed. A cancellation may not take effect until 67.23 those notice periods expire. 67.24 Subd. 12. [CONSUMER PROTECTIONS.] (a) Financial 67.25 institutions shall comply with the requirements of the federal 67.26 Truth in Lending Act, United States Code, title 15, sections 67.27 1601 to 1693, in connection with a consumer loan or credit sale 67.28 for a consumer purpose where the federal Truth in Lending Act is 67.29 applicable. 67.30 (b) Financial institutions shall comply with the following 67.31 consumer protection provisions in connection with a consumer 67.32 loan or credit sale for a consumer purpose: sections 325G.02 to 67.33 325G.05; 325G.06 to 325G.11; 325G.15 to 325G.22; and 325G.29 to 67.34 325G.36, and Code of Federal Regulations, title 12, part 535, 67.35 where those statutes or regulations are applicable. 67.36 (c) An assignment of a consumer's earnings by the consumer 68.1 to a financial institution as payment or as security for payment 68.2 of a debt arising out of a consumer loan or consumer credit sale 68.3 is unenforceable by the financial institution and revocable by 68.4 the consumer. 68.5 Subd. 13. [LOANS AND CONTRACTS OTHER THAN CONSUMER LOANS 68.6 AND CONTRACTS.] Loans and credit sale contracts other than 68.7 consumer loans and consumer credit sale contracts are not 68.8 subject to the provisions and limitations of subdivisions 9, 10, 68.9 11, paragraph (b), and 12, and this section. 68.10 Subd. 14. [EFFECT OF VIOLATIONS ON RIGHTS OF PARTIES.] (a) 68.11 If a financial institution has violated any provision of this 68.12 section applying to collection of finance or other charges, the 68.13 borrower or purchaser under a credit sale contract may recover 68.14 damages and a penalty from the financial institution in an 68.15 amount determined by the court but not less than $100 nor more 68.16 than $1,000. With respect to violations arising from other than 68.17 open-end credit transactions, no action may be brought according 68.18 to this paragraph and no set-off or recoupment may be asserted 68.19 according to this paragraph more than one year after the making 68.20 of the debt. 68.21 (b) A borrower or purchaser under a credit sale contract is 68.22 not obligated to pay a charge in excess of that allowed by this 68.23 section and has a right of refund of any excess charge paid. A 68.24 refund may not be made by reducing the borrower's or purchaser's 68.25 obligation by the amount of the excess charge, unless the 68.26 financial institution has notified the borrower or purchaser 68.27 that the borrower or purchaser may request a refund and the 68.28 borrower or purchaser has not so requested within 30 days 68.29 thereafter. If the borrower or purchaser has paid an amount in 68.30 excess of the lawful obligation under the agreement, the 68.31 borrower or purchaser may recover the excess amount from the 68.32 financial institution who made the excess charge or from an 68.33 assignee of the financial institution's rights who undertakes 68.34 direct collection of payments from or enforcement of rights 68.35 against borrowers or purchasers arising from the debt. 68.36 (c) If a financial institution has contracted for or 69.1 received a charge in excess of that allowed by this section, or 69.2 if a borrower or purchaser under a credit sale contract is 69.3 entitled to a refund and a person liable to the borrower or 69.4 purchaser refuses to make a refund within a reasonable time 69.5 after demand, the borrower or purchaser may recover from the 69.6 financial institution or the person liable in an action other 69.7 than a class action a penalty in an amount determined by the 69.8 court but not less than $100 nor more than $1,000. With respect 69.9 to excess charges arising from other than open-end credit 69.10 transactions, no action according to this paragraph may be 69.11 brought more than one year after the making of the debt. For 69.12 purposes of this paragraph, a reasonable time is presumed to be 69.13 30 days. 69.14 (d) A violation of this section does not impair rights on a 69.15 debt. 69.16 (e) A financial institution is not liable for a penalty 69.17 under paragraph (a) or (c) if it notifies the borrower or 69.18 purchaser under a credit sale contract of a violation before the 69.19 financial institution receives from the borrower or purchaser 69.20 written notice of the violation or the borrower or purchaser has 69.21 brought an action under this section, and the financial 69.22 institution corrects the violation within 45 days after 69.23 notifying the borrower or purchaser. If the violation consists 69.24 of a prohibited agreement, giving the borrower or purchaser a 69.25 corrected copy of the writing containing the violation is 69.26 sufficient notification and correction. If the violation 69.27 consists of an excess charge, correction must be made by an 69.28 adjustment or refund. 69.29 (f) A financial institution may not be held liable in an 69.30 action brought under this section for a violation of this 69.31 section if the financial institution shows by a preponderance of 69.32 evidence that the violation was not intentional and resulted 69.33 from a bona fide error notwithstanding the maintenance of 69.34 procedures reasonably adopted to avoid the error. 69.35 (g) In an action in which it is found that a financial 69.36 institution has violated this section, the court shall award to 70.1 the borrower or the purchaser under a credit sale contract the 70.2 costs of the action and to the borrower's or purchaser's 70.3 attorneys their reasonable fees. 70.4 Sec. 2. [47.60] [CONSUMER SMALL LOANS.] 70.5 Subdivision 1. [DEFINITIONS.] For purposes of this 70.6 section, the terms defined have the meanings given them: 70.7 (a) "Consumer small loan" is a loan transaction in which 70.8 cash is advanced to a borrower for the borrower's own personal, 70.9 family, or household purpose. A consumer small loan is a 70.10 short-term, unsecured loan to be repaid in a single 70.11 installment. The cash advance of a consumer small loan is equal 70.12 to or less than $350. A consumer small loan includes an 70.13 indebtedness evidenced by but not limited to a promissory note 70.14 or agreement to defer the presentation of a personal check for a 70.15 fee. 70.16 (b) "Consumer small loan lender" is a financial institution 70.17 as defined in section 47.59 or a person registered with the 70.18 commissioner and engaged in the business of making consumer 70.19 small loans. 70.20 Subd. 2. [AUTHORIZATION, TERMS, CONDITIONS, AND 70.21 PROHIBITIONS.] (a) In lieu of the interest, finance charges, or 70.22 fees in any other law, a consumer small loan lender may charge 70.23 the following: 70.24 (i) on any amount up to and including $50, a charge of 70.25 $5.50 may be added; 70.26 (ii) on amounts in excess of $50, but not more than $100, a 70.27 charge may be added equal to ten percent of the loan proceeds 70.28 plus a $5 administrative fee; 70.29 (iii) on amounts in excess of $100, but not more than $250, 70.30 a charge may be added equal to seven percent of the loan 70.31 proceeds with a minimum of $10 plus a $5 administrative fee; 70.32 (iv) for amounts in excess of $250 and not greater than the 70.33 maximum in subdivision 1, paragraph (a), a charge may be added 70.34 equal to six percent of the loan proceeds with a minimum of 70.35 $17.50 plus a $5 administrative fee. 70.36 (b) The term of a loan made under this section shall be 30 71.1 days. 71.2 (c) After maturity, the contract rate must not exceed 2.75 71.3 percent per month of the remaining loan proceeds after the 71.4 maturity date calculated at a rate of 1/30 of the monthly rate 71.5 in the contract for each calendar day the balance is outstanding. 71.6 (d) No insurance charges or other charges must be permitted 71.7 to be charged, collected, or imposed on a consumer small loan 71.8 except as authorized in this section. 71.9 (e) On a loan transaction in which cash is advanced in 71.10 exchange for a personal check, a return check charge may be 71.11 charged as authorized by section 332.50, subdivision 2, 71.12 paragraph (d). 71.13 (f) A loan made under this section must not be repaid by 71.14 the proceeds of another loan made under this section by the same 71.15 lender or related interest. The proceeds from a loan made under 71.16 this section must not be applied to another loan from the same 71.17 lender or related interest. No loan to a single borrower made 71.18 pursuant to this section shall be split or divided and no single 71.19 borrower shall have outstanding more than one loan with the 71.20 result of collecting a higher charge than permitted by this 71.21 section or in an aggregate amount of principal exceed at any one 71.22 time the maximum of $350. 71.23 Subd. 3. [FILING.] Before a person other than a financial 71.24 institution as defined by section 47.59 engages in the business 71.25 of making consumer small loans, the person shall file with the 71.26 commissioner as a consumer small loan lender. The filing must 71.27 be on a form prescribed by the commissioner together with a fee 71.28 of $150 for each place of business and contain the following 71.29 information in addition to the information required by the 71.30 commissioner: 71.31 (1) evidence that the filer has available for the operation 71.32 of the business at the location specified, liquid assets of at 71.33 least $50,000; and 71.34 (2) a biographical statement on the principal person 71.35 responsible for the operation and management of the business to 71.36 be certified. 72.1 Revocation of the filing and the right to engage in the 72.2 business of a consumer small loan lender is the same as in the 72.3 case of a regulated lender license in section 56.09. 72.4 Subd. 4. [BOOKS OF ACCOUNT; ANNUAL REPORT; SCHEDULE OF 72.5 CHARGES; DISCLOSURES.] (a) A lender filing under subdivision 3 72.6 shall keep and use in the business books, accounts, and records 72.7 as will enable the commissioner to determine whether the filer 72.8 is complying with this section. 72.9 (b) A lender filing under subdivision 3 shall annually on 72.10 or before March 15 file a report to the commissioner giving the 72.11 information the commissioner reasonably requires concerning the 72.12 business and operations during the preceding calendar year. 72.13 (c) A lender filing under subdivision 3 shall display 72.14 prominently in each place of business a full and accurate 72.15 schedule, to be approved by the commissioner, of the charges to 72.16 be made and the method of computing those charges; furnish a 72.17 copy of the contract of loan to a person obligated on it or who 72.18 may become obligated on it at any time upon the request of that 72.19 person. This is in addition to any disclosures required by the 72.20 federal Truth in Lending Act, United States Code, title 15. 72.21 (d) Upon repayment of the loan in full, mark indelibly 72.22 every obligation signed by the borrower with the word "Paid" or 72.23 "Canceled" within 20 days after repayment. 72.24 Subd. 5. [COMPLAINTS ALLEGING VIOLATION.] A person 72.25 obligated to or having been obligated to a consumer small loan 72.26 lender filing under subdivision 3 and having reason to believe 72.27 that this section has been violated may file with the 72.28 commissioner a written complaint setting forth the details of 72.29 the alleged violation. The commissioner, upon receipt of the 72.30 complaint, may inspect the pertinent books, records, letters, 72.31 and contracts of the lender and borrower involved. The 72.32 commissioner may assess against the lender a fee covering the 72.33 necessary costs of an investigation under this section. The 72.34 commissioner may maintain an action for the recovery of the 72.35 costs in a court of competent jurisdiction. 72.36 Subd. 6. [PENALTIES FOR VIOLATION.] A person or the 73.1 person's members, officers, directors, agents, and employees who 73.2 violate or participate in the violation of any of the provisions 73.3 of this section may be liable in the same manner as in section 73.4 56.19. 73.5 Sec. 3. Minnesota Statutes 1994, section 48.194, is 73.6 amended to read: 73.7 48.194 [INSTALLMENT SALES CONTRACTS; LOANS.] 73.8 A person may enter into a credit sale or service contract 73.9 for sale to a state or national bank doing business in this 73.10 state, and a bank may purchase and enforce the contract under 73.11 the terms and conditions set forth insection 51A.385,73.12subdivisions 2 and 5 to 13sections 47.59, subdivisions 2 and 4 73.13 to 14; and 51A.386, subdivision 4. A state bank or national 73.14 bank may extend credit pursuant to the terms and conditions set 73.15 forth insection 51A.385sections 47.59, 47.60, and 51A.386, 73.16 subdivision 4. 73.17 Sec. 4. Minnesota Statutes 1994, section 51A.02, 73.18 subdivision 6, is amended to read: 73.19 Subd. 6. [ANNUAL PERCENTAGE RATE.] "Annual percentage 73.20 rate" has the meaning given the term in the Code of Federal 73.21 Regulations, title 12, part 226, but using the definition of 73.22 "finance charge" used in this section. 73.23 Sec. 5. Minnesota Statutes 1994, section 51A.02, 73.24 subdivision 26, is amended to read: 73.25 Subd. 26. [FINANCE CHARGE.] "Finance charge" has the 73.26 meaning given the term in the Code of Federal Regulations, title 73.27 12, part 226, except that the following will not in any event be 73.28 considered a finance charge: 73.29 (1) a charge as a result of default or delinquency under 73.30 section51A.38547.59 if made for actual unanticipated late 73.31 payment, delinquency, default, or other similar occurrence, and 73.32 a charge for an extension or deferment under section 47.59, 73.33 unless the parties agree that these charges are finance charges; 73.34 (2) any additional charge under section51A.38547.59, 73.35 subdivision56; or 73.36 (3) a discount, if an association purchases a contract 74.1 evidencing a contract sale or loan at less than the face amount 74.2 of the obligation or purchases or satisfies obligations of a 74.3 cardholder pursuant to a credit card and the purchase or 74.4 satisfaction is made at less than the face amount of the 74.5 obligation. 74.6 Sec. 6. Minnesota Statutes 1994, section 51A.02, 74.7 subdivision 40, is amended to read: 74.8 Subd. 40. [OFFICIAL FEES.] "Official fees" means: 74.9 (1) fees and charges which actually are or will be paid to 74.10 public officials for determining the existence of or for 74.11 perfecting, releasing, terminating, or satisfying a security 74.12 interest or mortgage related to a loan or credit sale, and any 74.13 separate fees or charges which actually are or will be paid to 74.14 public officials for recording a notice described in section 74.15 580.032, subdivision 1; and 74.16 (2) premiums payable for insurance in lieu of perfecting a 74.17 security interest or mortgage otherwise required by an 74.18 association in connection with a loan or credit sale, if the 74.19 premium does not exceed the fees and charges described in clause 74.20 (1) which would otherwise be payable. 74.21 Sec. 7. Minnesota Statutes 1994, section 51A.19, 74.22 subdivision 9, is amended to read: 74.23 Subd. 9. [MAINTENANCE OF LOAN AND INVESTMENT RECORDS.] 74.24 Every association shall maintain complete loan and investment 74.25 records, and shall do so in a manner satisfactory to the 74.26 commissioner. Detailed records necessary to make determinations 74.27 of compliance by an association with the requirements of 74.28 sections 47.59 and 51A.35 to51A.38551A.386, and other 74.29 provisions of sections 51A.01 to 51A.57 shall be maintained 74.30 consistently and at all times, the record of each real estate 74.31 loan or other secured loan or investment containing 74.32 documentation to the satisfaction of the commissioner of the 74.33 type, adequacy, and complexion of the security. 74.34 Sec. 8. [51A.386] [TERMS AND CONDITIONS OF LOANS, 74.35 CONTRACTS, AND EXTENSIONS OF CREDIT.] 74.36 Subdivision 1. [APPLICATION.] Except as otherwise provided 75.1 in this section, this section applies to loans made and 75.2 contracts purchased by federal and state associations, and 75.3 "association" as used in this section applies to federal and 75.4 state associations. 75.5 Subd. 2. [FINANCE CHARGE FOR CREDIT SALES MADE BY A THIRD 75.6 PARTY.] A person may enter into a credit sale contract for sale 75.7 to an association and an association may purchase and enforce a 75.8 contract evidencing the sale, if the annual percentage rate 75.9 provided for in the contract does not exceed that permitted in 75.10 section 47.59 or, in the case of contracts governed by sections 75.11 168.66 to 168.77, the rates permitted by those sections. 75.12 Subd. 3. [FINANCE CHARGE FOR LOANS.] An association may 75.13 make loans and extend credit at the rates and on the terms 75.14 provided for in section 47.59. 75.15 Subd. 4. [ADDITIONAL AUTHORITY.] Extensions of credit, and 75.16 purchases of extensions of credit, authorized by sections 47.20, 75.17 subdivision 1, 3, or 4a; 47.204; 47.21; 47.58; 47.60; 47.69; 75.18 48.153; 48.185; 48.195; 59A.01 to 59A.15; 168.66 to 168.77; 75.19 334.01; 334.011; and 334.012 may, but need not, be made 75.20 according to those sections in lieu of the authority set forth 75.21 in subdivisions 1 to 3, and if so, are subject to those 75.22 sections, and not this section, except this subdivision. An 75.23 association may also charge an organization a rate of interest 75.24 and any charges agreed to by the organization and may calculate 75.25 and collect finance and other charges in any manner agreed to by 75.26 that organization. Except for extensions of credit the 75.27 association elects to make under section 334.01; 334.011; or 75.28 334.012, the provisions of chapter 334 do not apply to 75.29 extensions of credit made according to this section or the 75.30 sections mentioned in this subdivision. 75.31 Subd. 5. [ADDITIONAL CHARGES.] In addition to the finance 75.32 charges permitted by this section, an association, or a person 75.33 described in subdivision 2, to the extent not otherwise 75.34 prohibited by law, may contract for and receive the additional 75.35 charges that may be included in the amount financed provided for 75.36 in section 47.59. 76.1 Sec. 9. Minnesota Statutes 1994, section 51A.50, is 76.2 amended to read: 76.3 51A.50 [FEDERAL ASSOCIATIONS.] 76.4 The following sections apply to federal associations, 76.5 except to the extent they are inconsistent with federal law or 76.6 regulations: sections 47.59; 51A.01; 51A.02; 51A.065; 51A.15, 76.7 subdivision 6; 51A.21, subdivisions 6a, 15, 16, 22, 25, 27, and 76.8 28; 51A.23, subdivision 1; 51A.24; 51A.251; 51A.261; 51A.262; 76.9 51A.27; 51A.28; 51A.29; 51A.30; 51A.31; 51A.37, subdivisions 1, 76.10 2, 3, paragraphs (a), (c), (d), 4, 5, 6, 7, 8, 9, 10, 11, and 76.11 12; 51A.38;51A.38551A.386; 51A.40; 51A.50; 51A.52; 51A.56; and 76.12 51A.57. 76.13 Sec. 10. Minnesota Statutes 1994, section 52.04, 76.14 subdivision 2a, is amended to read: 76.15 Subd. 2a. A person may enter into a credit sale or service 76.16 contract for sale to a state or federal credit union doing 76.17 business in this state, and a credit union may purchase and 76.18 enforce the contract under the terms and conditions set forth in 76.19 section51A.38547.59, subdivisions24 and56 to 76.201314. 76.21 Sec. 11. Minnesota Statutes 1994, section 53.04, 76.22 subdivision 3a, is amended to read: 76.23 Subd. 3a. (a) The right to make loans, secured or 76.24 unsecured, at the rates and on the terms and other conditions 76.25 permittedlicensees under chapter 56. Loans made under the76.26authority of section 56.125in section 47.59. Loans made under 76.27 this authority must be in amounts in compliance with section 76.28 53.05, clause (7).All other loans made under the authority of76.29chapter 56 must be in amounts in compliance with section 53.05,76.30clause (7), or 56.131, subdivision 1, paragraph (a), whichever76.31is less.The right to extend credit or lend money and to 76.32 collect and receive charges therefor as provided by chapter 334,76.33or in lieu thereof to charge, collect, and receive interest at76.34the rate of 21.75 percent per annum, including the right to76.35contract for, charge, and collect all other charges including76.36discount points, fees, late payment charges, and insurance77.1premiums on the loans to the same extent permitted on loans made77.2under the authority of chapter 56, regardless of the amount of77.3the loan. The provisions of sections 47.20 and 47.21 do not 77.4 apply to loans made under this subdivision, except as 77.5 specifically provided in this subdivision. Nothing in this 77.6 subdivision is deemed to supersede, repeal, or amend any 77.7 provision of section 53.05. A licensee making a loan under this 77.8 chapter secured by a lien on real estate shall comply with the 77.9 requirements of section 47.20, subdivision 8. 77.10 (b) Loans made under this subdivision at a rate of interest 77.11 not in excess of that provided for in paragraph (a) may be 77.12 secured by real or personal property, or both. If the proceeds 77.13 of a loan secured by a first lien on the borrower's primary 77.14 residence are used to finance the purchase of the borrower's 77.15 primary residence, the loan must comply with the provisions of 77.16 section 47.20. 77.17 (c) A loan made under this subdivision that is secured by 77.18 real estate and that is in a principal amount of $7,500 or more 77.19 and a maturity of 60 months or more may contain a provision 77.20 permitting discount points, if the loan does not provide a loan 77.21 yield in excess of the maximum rate of interest permitted by 77.22 this subdivision.Loan yield means the annual rate of return77.23obtained by a licensee computed as the annual percentage rate is77.24computed under Federal Regulation Z. If the loan is prepaid in77.25full, the licensee must make a refund to the borrower to the77.26extent that the loan yield will exceed the maximum rate of77.27interest provided by this subdivision when the prepayment is77.28taken into account.77.29 (d) An agency or instrumentality of the United States 77.30 government or a corporation otherwise created by an act of the 77.31 United States Congress or a lender approved or certified by the 77.32 secretary of housing and urban development, or approved or 77.33 certified by the administrator of veterans affairs, or approved 77.34 or certified by the administrator of the farmers home 77.35 administration, or approved or certified by the federal home 77.36 loan mortgage corporation, or approved or certified by the 78.1 federal national mortgage association, that engages in the 78.2 business of purchasing or taking assignments of mortgage loans 78.3 and undertakes direct collection of payments from or enforcement 78.4 of rights against borrowers arising from mortgage loans, is not 78.5 required to obtain a certificate of authorization under this 78.6 chapter in order to purchase or take assignments of mortgage 78.7 loans from persons holding a certificate of authorization under 78.8 this chapter. 78.9 Sec. 12. Minnesota Statutes 1994, section 53.04, 78.10 subdivision 3c, is amended to read: 78.11 Subd. 3c. The right to extend credit and make loans under 78.12chapter 51Asections 47.59 and 47.60 on the same terms and 78.13 subject to the same conditions as apply to other lenders under 78.14that chapterthose sections. This subdivision does not 78.15 authorize an industrial loan and thrift company to make loans 78.16 undera credit card oran overdraft checking plan. 78.17 Sec. 13. Minnesota Statutes 1994, section 53.04, 78.18 subdivision 4a, is amended to read: 78.19 Subd. 4a. [DISCLOSURE, AUTHORIZED INTEREST, AND OTHER 78.20 CHARGES.] The documentation of loans made pursuant to this 78.21 section must include in the promissory note clear reference to 78.22 the provisions of Minnesota Statutes under which the rate of 78.23 interest and other charges are authorized. The references must 78.24 be to thechapter number in the case of this chapter or chapter78.2556, or to theparticular section or sectionsin the case of78.26chapter 47 or 334.On loans made under the authority of78.27subdivision 3a and not under the authority of chapter 334, other78.28charges including discount points, fees, late payment charges,78.29and insurance premiums not specifically authorized by this78.30chapter or any other state statute are controlled by chapter 56.78.31 Sec. 14. Minnesota Statutes 1994, section 53.04, 78.32 subdivision 5a, is amended to read: 78.33 Subd. 5a. A person may enter into a credit sale or service 78.34 contract for sale to an industrial loan and thrift company 78.35 operating under this chapter in this state, and an industrial 78.36 loan and thrift company may purchase and enforce the contract 79.1 under the terms and conditions set forth in section51A.385,79.2subdivisions 2 and 5 to 1347.59, subdivisions 2 and 4 to 14. 79.3 Sec. 15. Minnesota Statutes 1994, section 56.125, 79.4 subdivision 1, is amended to read: 79.5 Subdivision 1. [AUTHORIZATION.] A licensee may make 79.6 open-end loans under this chapter other than loans undera79.7credit card oran overdraft checking plan and may charge a 79.8 daily, monthly, or other periodic rate of finance charge on 79.9 unpaid balances not in excess of the maximum rate of interest 79.10 permitted by section 56.131, subdivision 1, paragraph 79.11 (a),clause (2)under section 47.59, subdivision 3, paragraph 79.12 (a), clause (1). For purposes of this section "open-end loan" 79.13 means an agreement whereby: (1) the licensee pursuant to 79.14 written agreement permits the borrower to obtain advances of 79.15 money from the licensee from time to time or the licensee 79.16 advances money on behalf of the borrower from time to time as 79.17 directed by the borrower; (2) the borrower has the option of 79.18 paying the balance in full at any time without penalty; (3) the 79.19 amount of each advance and permitted charges and costs are 79.20 debited to the borrower's account and payments and other credits 79.21 are credited to the same account; and (4) the charges are 79.22 computed on the unpaid principal balance of the account from 79.23 time to time. A finance charge imposed on a transaction subject 79.24 to this section must be computed on: (1) the previous balance 79.25 after deducting all payments on accounts received by the 79.26 licensee during the cycle and all credits to the account during 79.27 the cycle applicable to any transaction reflected in the 79.28 previous balance; (2) the average daily balance determined by 79.29 adding the daily balances on the account for each day in the 79.30 billing cycle and dividing the total by the number of days in 79.31 the billing cycle; or (3) daily balances. The daily balance is 79.32 figured by taking the beginning balance of the account each day, 79.33 adding any new advances, subtracting any principal payments or 79.34 credits, and any unpaid interest. The average daily balance is 79.35 calculated by adding together all of the daily balances for the 79.36 billing cycle, and the sum is then divided by the total number 80.1 of days in the billing cycle. A billing cycle is considered to 80.2 be monthly if the billing dates are on the same day of each 80.3 month or do not vary by more than four days from that day. If a 80.4 licensee makes loans under a credit card plan, it may do so only 80.5 on the same terms and subject to the same conditions as apply to 80.6 lenders under section 47.59. 80.7 Sec. 16. Minnesota Statutes 1994, section 56.125, 80.8 subdivision 3, is amended to read: 80.9 Subd. 3. [CHARGES.] In addition to the charges authorized 80.10 in subdivision 1, a licensee may contract for and receive in 80.11 connection with an open-end loan agreement the additional 80.12 charges, fees, costs, and expenses with respect to the line of 80.13 credit limit permitted by sections 47.59, subdivisions 5 and 6, 80.14 paragraph (a), clause (4); 56.131, subdivisions1, paragraph80.15(f), clauses (4) and (5),2, 5, and 6; and 56.155 with respect 80.16 to other loans, with the following variations: 80.17 (1) If credit life, disability, or involuntary unemployment 80.18 insurance is provided and if the insured dies, becomes disabled, 80.19 or becomes involuntarily unemployed when there is an outstanding 80.20 open-end loan indebtedness, the amount of the insurance may not 80.21 exceed the total balance of the loan due on the date of the 80.22 borrower's death or on the date of the last billing statement in 80.23 the case of credit life insurance, or all minimum payments which 80.24 become due on the loan during the covered period of disability 80.25 in the case of credit disability insurance, or during the 80.26 covered period of involuntary unemployment in the case of credit 80.27 involuntary unemployment insurance. The additional charge for 80.28 credit life insurance, credit disability insurance, or credit 80.29 involuntary unemployment insurance must be calculated in each 80.30 billing cycle by applying the current monthly premium rate for 80.31 the insurance to the unpaid balances in the borrower's account. 80.32 (2) The amount, terms, and conditions of any credit 80.33 insurance against loss or damage to property must be reasonable 80.34 in relation to the character and value of the property insured. 80.35 Sec. 17. Minnesota Statutes 1994, section 56.131, 80.36 subdivision 1, is amended to read: 81.1 Subdivision 1. [INTEREST RATES AND CHARGES.] (a) On any 81.2 loan in a principal amount not exceeding$35,000$56,000 or 15 81.3 percent of a Minnesota corporate licensee's capital stock and 81.4 surplus as defined in section 53.015, if greater, a licensee may 81.5 contract for and receive interest,calculated according to the81.6actuarial method, not exceeding the equivalent of the greater of81.7any of the following:81.8(1) the total of: (i) 33 percent per year on that part of81.9the unpaid balance of the principal amount not exceeding $750;81.10and (ii) 19 percent per year on that part of the unpaid balance81.11of the principal amount exceeding $750; or81.12(2) 21.75 percent per year on the unpaid balance of the81.13principal amountfinance charges, and other charges as provided 81.14 in section 47.59. 81.15(b) On any loan where interest has been calculated81.16according to the method provided for in paragraph (a), clause81.17(1), interest must be contracted for and earned as provided in81.18that provision or at the single annual percentage rate computed81.19to the nearest 1/100 of one percent that would earn the same81.20total interest at maturity of the contract as would be earned by81.21the application of the graduated rates provided in paragraph81.22(a), clause (1), when the debt is paid according to the agreed81.23terms and the calculations are made according to the actuarial81.24method.81.25(c)(b) Loans may be interest-bearing or precomputed. 81.26(d)(c) Notwithstanding section 47.59 to the contrary, to 81.27 compute time on interest-bearing and precomputed loans, 81.28 including, but not limited to the calculation of interest, a day 81.29 is considered 1/30 of a month when calculation is made for a 81.30 fraction of a calendar month. A year is 12 calendar months. A 81.31 calendar month is that period from a given date in one month to 81.32 the same numbered date in the following month, and if there is 81.33 no same numbered date, to the last day of the following month. 81.34 When a period of time includes a whole month and a fraction of a 81.35 month, the fraction of a month is considered to follow the whole 81.36 month. 82.1 In the alternative, for interest-bearing loans, a licensee 82.2 may charge interest at the rate of 1/365 of the agreed annual 82.3 rate for each actual day elapsed. 82.4(e)(d) With respect to interest-bearing loans and 82.5 notwithstanding section 47.59: 82.6 (1) Interest must be computed on unpaid principal balances 82.7 outstanding from time to time, for the time outstanding. Each 82.8 payment must be applied first to the accumulated interest and 82.9 the remainder of the payment applied to the unpaid principal 82.10 balance; provided however, that if the amount of the payment is 82.11 insufficient to pay the accumulated interest, the unpaid 82.12 interest continues to accumulate to be paid from the proceeds of 82.13 subsequent payments and is not added to the principal balance. 82.14 (2) Interest must not be payable in advance or compounded. 82.15 However, if part or all of the consideration for a new loan 82.16 contract is the unpaid principal balance of a prior loan, then 82.17 the principal amount payable under the new loan contract may 82.18 include any unpaid interest which has accrued. The unpaid 82.19 principal balance of a precomputed loan is the balance due after 82.20 refund or credit of unearned interest as provided in paragraph 82.21(f)(e), clause (3). The resulting loan contract is deemed a 82.22 new and separate loan transaction for all purposes. 82.23(f)(e) With respect to precomputed loans and 82.24 notwithstanding section 47.59 to the contrary: 82.25 (1) Loans must be repayable in substantially equal and 82.26 consecutive monthly installments of principal and interest 82.27 combined, except that the first installment period may be more 82.28 or less than one month by not more than 15 days, and the first 82.29 installment payment amount may be larger than the remaining 82.30 payments by the amount of interest charged for the extra days 82.31 and must be reduced by the amount of interest for the number of 82.32 days less than one month to the first installment payment; and 82.33 monthly installment payment dates may be omitted to accommodate 82.34 borrowers with seasonal income. 82.35 (2) Payments may be applied to the combined total of 82.36 principal and precomputed interest until the loan is fully 83.1 paid. Payments must be applied in the order in which they 83.2 become due. 83.3 (3)When any loan contract is paid in full by cash, renewal83.4or refinancing, or a new loan, one month or more before the83.5final installment due date, a licensee shall refund or credit83.6the borrower with the total of the applicable charges for all83.7fully unexpired installment periods, as originally scheduled or83.8as deferred, which follow the day of prepayment; if the83.9prepayment is made other than on a scheduled payment date, the83.10nearest scheduled installment payment date must be used in the83.11computation; provided further, if the prepayment occurs prior to83.12the first installment due date, the licensee may retain 1/30 of83.13the applicable charge for a first installment period of one83.14month for each day from the date of the loan to the date of83.15prepayment, and shall refund or credit the borrower with the83.16balance of the total interest contracted for.If the maturity 83.17 of the loan is accelerated for any reason and judgment is 83.18 entered, the licensee shall credit the borrower with the same 83.19 refund as if prepayment in full had been made on the date the 83.20 judgment is entered. 83.21(4) If an installment, other than the final installment, is83.22not paid in full within ten days of its scheduled due date, a83.23licensee may contract for and receive a default charge not83.24exceeding five percent of the amount of the installment, but not83.25less than $4.83.26A default charge under this subdivision may not be83.27collected on an installment paid in full within ten days of its83.28scheduled due date, or deferred installment due date with83.29respect to deferred installments, even though a default or83.30deferral charge on an earlier installment has not been paid in83.31full. A default charge may be collected at the time it accrues83.32or at any time thereafter.83.33(5) If the parties agree in writing, either in the loan83.34contract or in a subsequent agreement, to a deferment of wholly83.35unpaid installments, a licensee may grant a deferment and may83.36collect a deferment charge as provided in this section. A84.1deferment postpones the scheduled due date of the earliest84.2unpaid installment and all subsequent installments as originally84.3scheduled, or as previously deferred, for a period equal to the84.4deferment period. The deferment period is that period during84.5which no installment is scheduled to be paid by reason of the84.6deferment. The deferment charge for a one-month period may not84.7exceed the applicable charge for the installment period84.8immediately following the due date of the last undeferred84.9payment. A proportionate charge may be made for deferment for84.10periods of more or less than one month. A deferment charge is84.11earned pro rata during the deferment period and is fully earned84.12on the last day of the deferment period. Should a loan be84.13prepaid in full during a deferment period, the licensee shall84.14make or credit to the borrower a refund of the unearned84.15deferment charge in addition to any other refund or credit made84.16for prepayment of the loan in full.84.17(6)(4) If two or more installments are delinquent one full 84.18 month or more on any due date, and if the contract so provides, 84.19 the licensee may reduce the unpaid balance by the refund credit 84.20 which would be required for prepayment in full on the due date 84.21 of the most recent maturing installment in default. Thereafter, 84.22 and in lieu of any other default or deferment charges, the 84.23 single annual percentage rate permitted by this subdivision may 84.24 be charged on the unpaid balance until fully paid. 84.25(7)(5) Following the final installment as originally 84.26 scheduled or deferred, the licensee, for any loan contract which 84.27 has not previously been converted to interest-bearing under 84.28 clause(6)(4), may charge interest on any balance remaining 84.29 unpaid, including unpaid default or deferment charges, at the 84.30 single annual percentage rate permitted by this subdivision 84.31 until fully paid. 84.32(8)(6) With respect to a loan secured by an interest in 84.33 real estate, and having a maturity of more than 60 months, the 84.34 original schedule of installment payments must fully amortize 84.35 the principal and interest on the loan. The original schedule 84.36 of installment payments for any other loan secured by an 85.1 interest in real estate must provide for payment amounts that 85.2 are sufficient to pay all interest scheduled to be due on the 85.3 loan. 85.4 Sec. 18. Minnesota Statutes 1994, section 56.131, 85.5 subdivision 2, is amended to read: 85.6 Subd. 2. [ADDITIONAL CHARGES.] In addition to the charges 85.7 provided for by this section and section 56.155, and 85.8 notwithstanding section 47.59, subdivision 5, to the contrary, 85.9 no further or other amount whatsoever, shall be directly or 85.10 indirectly charged, contracted for, or received for the loan 85.11 made, except actual out of pocket expenses of the licensee to 85.12 realize on a security after default, and except for the 85.13 following additional charges which may be included in the 85.14 principal amount of the loan: 85.15 (a) lawful fees and taxes paid to any public officer to 85.16 record, file, or release security; 85.17 (b) with respect to a loan secured by an interest in real 85.18 estate, the following closing costs, if they are bona fide, 85.19 reasonable in amount, and not for the purpose of circumvention 85.20 or evasion of this section; provided the costs do not exceed one 85.21 percent of the principal amount or$250$400, whichever is 85.22 greater: 85.23 (1) fees or premiums for title examination, abstract of 85.24 title, title insurance, surveys, or similar purposes; 85.25 (2) fees, if not paid to the licensee, an employee of the 85.26 licensee, or a person related to the licensee, for preparation 85.27 of a mortgage, settlement statement, or other documents, fees 85.28 for notarizing mortgages and other documents, and appraisal 85.29 fees; 85.30 (c) the premium for insurance in lieu of perfecting and 85.31 releasing a security interest to the extent that the premium 85.32 does not exceed the fees described in paragraph (a); 85.33 (d) discount points and appraisal fees may not be included 85.34 in the principal amount of a loan secured by an interest in real 85.35 estate when the loan is a refinancing for the purpose of 85.36 bringing the refinanced loan current and is made within 24 86.1 months of the original date of the refinanced loan. For 86.2 purposes of this paragraph, a refinancing is not considered to 86.3 be for the purpose of bringing the refinanced loan current if 86.4 new funds advanced to the customer, not including closing costs 86.5 or delinquent installments, exceed $1,000. 86.6 Sec. 19. Minnesota Statutes 1994, section 56.132, is 86.7 amended to read: 86.8 56.132 [INSTALLMENT SALES CONTRACTS.] 86.9 A person may enter into a credit sale or service contract 86.10 for sale to a licensee under this chapter doing business in this 86.11 state, and a licensee may purchase and enforce the contract 86.12 under the terms and conditions set forth in section51A.385,86.13subdivisions 2 and 5 to 1347.59, subdivisions 2 and 4 to 14. 86.14 Sec. 20. Minnesota Statutes 1994, section 56.155, 86.15 subdivision 1, is amended to read: 86.16 Subdivision 1. [AUTHORIZATION.] Notwithstanding section 86.17 47.59 to the contrary, no licensee shall, directly or 86.18 indirectly, sell or offer for sale any insurance in connection 86.19 with any loan made under this chapter except as and to the 86.20 extent authorized by this section. The sale of credit life, 86.21 credit accident and health, and credit involuntary unemployment 86.22 insurance is subject to the provisions of chapter 62B, except 86.23 that the term of the insurance may exceed 60 months if the term 86.24 of the loan exceeds 60 months. Life, accident, health, and 86.25 involuntary unemployment insurance, or any of them, may be 86.26 written upon or in connection with any loan but must not be 86.27 required as additional security for the indebtedness. If the 86.28 debtor chooses to procure credit life insurance, credit accident 86.29 and health insurance, or credit involuntary unemployment 86.30 insurance as security for the indebtedness, the debtor shall 86.31 have the option of furnishing this security through existing 86.32 policies of insurance that the debtor owns or controls, or of 86.33 furnishing the coverage through any insurer authorized to 86.34 transact business in this state. A statement in substantially 86.35 the following form must be made orally, except for loans by mail 86.36 pursuant to section 56.12, and provided in writing in bold face 87.1 type of a minimum size of 12 points to the borrower before the 87.2 transaction is completed for each credit life, accident and 87.3 health, and involuntary unemployment insurance coverage sold: 87.4 CREDIT LIFE INSURANCE, CREDIT DISABILITY INSURANCE, AND 87.5 CREDIT INVOLUNTARY UNEMPLOYMENT INSURANCE ARE NOT REQUIRED 87.6 TO OBTAIN CREDIT. YOU MAY BUY ANY INSURANCE FROM ANYONE 87.7 YOU CHOOSE OR YOU MAY USE EXISTING INSURANCE. 87.8 The licensee shall disclose whether or not the benefits 87.9 commence as of the first day of disability or involuntary 87.10 unemployment and shall further disclose the number of days that 87.11 an insured obligor must be disabled or involuntarily unemployed, 87.12 as defined in the policy, before benefits, whether retroactive 87.13 or nonretroactive, commence. In case there are multiple 87.14 obligors under a transaction subject to this chapter, no policy 87.15 or certificate of insurance providing credit unemployment 87.16 benefits may be procured by or through a licensee upon more than 87.17 one of the obligors. In case there are multiple obligors under 87.18 a transaction subject to this chapter, no policy or certificate 87.19 of insurance providing credit accident and health or credit life 87.20 insurance may be procured by or through a licensee upon more 87.21 than two of the obligors in which case they shall be insured 87.22 jointly. The premium or identifiable charge for the insurance 87.23 must not exceed that filed by the insurer with the department of 87.24 commerce. The charge, computed at the time the loan is made for 87.25 a period not to exceed the full term of the loan contract on an 87.26 amount not to exceed the total amount required to pay principal 87.27 and charges, may be deducted from the proceeds or may be 87.28 included as part of the principal of any loan. If a borrower 87.29 procures insurance by or through a licensee, the statement 87.30 required by section 56.14 must disclose the cost to the borrower 87.31 and the type of insurance, and the licensee shall cause to be 87.32 delivered to the borrower a copy of the policy, certificate, or 87.33 other evidence thereof, within a reasonable time. No licensee 87.34 shall decline new or existing insurance which meets the 87.35 standards set out in this section nor prevent any obligor from 87.36 obtaining this insurance coverage from other sources. 88.1 Notwithstanding any other provision of this chapter, any gain or 88.2 advantage to the licensee or to any employee, affiliate, or 88.3 associate of the licensee from this insurance or the sale or 88.4 provision thereof is not an additional or further charge in 88.5 connection with the loan; nor are any of the provisions 88.6 pertaining to insurance contained in this section prohibited by 88.7 any other provision of this chapter. 88.8 Sec. 21. Minnesota Statutes 1994, section 61A.09, 88.9 subdivision 3, is amended to read: 88.10 Subd. 3. Group life insurance policies may be issued to 88.11 cover groups of not less than ten debtors of a creditor written 88.12 under a master policy issued to a creditor to insure its debtors 88.13 in connection with real estate mortgage loans, in an amount not 88.14 to exceed the actual or scheduled amount of their 88.15 indebtedness except that section 62B.04, subdivision 1, clause 88.16 (2), may be applied. Each application for group mortgage 88.17 insurance offered prior to or at the time of loan closing shall 88.18 contain a clear and conspicuous notice that the insurance is 88.19 optional and is not a condition for obtaining the loan. Each 88.20 person insured under a group insurance policy issued under this 88.21 subdivision shall be furnished a certificate of insurance which 88.22 conforms to the requirements of section 62B.06, subdivision 2, 88.23 and which includes a conversion privilege permitting an insured 88.24 debtor to convert, without evidence of insurability, to an 88.25 individual policy of decreasing term insurance within 30 days of 88.26 the date the insured debtor's group coverage is terminated for 88.27 any reason other than the nonpayment of premiums. The initial 88.28 amount of coverage under the individual policy shall be an 88.29 amount equal to the amount of coverage terminated under the 88.30 group policy and shall decrease over a term not to exceed the 88.31 term that corresponds with the scheduled term of the insured 88.32 debtor's mortgage loan. The premium for the individual policy 88.33 shall be the same premium the insured debtor was paying under 88.34 the group policy. If the mortgage loan provides for a variable 88.35 rate of finance charge or interest, the initial rate shall be 88.36 used in determining the scheduled amount of indebtedness. 89.1 Sec. 22. Minnesota Statutes 1994, section 325F.91, 89.2 subdivision 2, is amended to read: 89.3 Subd. 2. [CASH PRICELIMITS RULES, DECEPTIVE TRADE 89.4 PRACTICE.]The commissioner of commerce shall adopt rules89.5governing cash price limits for rental-purchase agreements.89.6Notwithstanding section 14.18, the rules are effective 4589.7working days after the notice of adoption is published in the89.8State Register.(a) It is an unlawful and deceptive trade 89.9 practice for a lessor to disclose as the "cash price" of the 89.10 merchandise under section 325F.86, paragraph (k), an amount that 89.11 is 150 percent or more of the fair market value of the goods. 89.12 Disclosure of the cash price stated in a rental-purchase 89.13 agreement materially fails to be the equivalent of the fair 89.14 market value of the goods offered and is considered to be a 89.15 deceptive trade practice if: 89.16 (1) the personal property that is the subject of a 89.17 rental-purchase agreement with terms providing for the 89.18 acquisition of ownership of the property by the lessee is 89.19 available for retail sale on a cash basis at locations within 50 89.20 miles of the lessor location at which the agreement was entered 89.21 into; 89.22 (2) the personal property available for retail sale under 89.23 clause (1) is substantially the same in terms of model equipment 89.24 and the same manufacturer at the date of the agreement or no 89.25 more than 60 days after that date; and 89.26 (3) the personal property was generally advertised to the 89.27 public at retail cash price of less than 50 percent of the cash 89.28 price in the agreement. 89.29 (b) A person violating this subdivision is subject to the 89.30 penalties and remedies in section 325F.97 and the 60 days 89.31 prescribed in paragraph (a), clause (2), do not limit the time 89.32 within which a claim or action may be brought to an agreement 89.33 under generally applicable law. 89.34 Sec. 23. [334.171] [OPEN END CREDIT PLANS; DELINQUENCIES 89.35 AND COLLECTION CHARGES.] 89.36 If an open end credit plan, agreement, or arrangement 90.1 between the buyer and seller so provides, a seller or holder may 90.2 collect a delinquency and collection charge on each installment 90.3 in arrears for a period of not less than ten days in an amount 90.4 not in excess of any such charge which may be imposed on 90.5 residents of this state by any institution defined in subsection 90.6 (c)(2)(F) of section 101(a) of the Competitive Equality 90.7 Amendments of 1987 and the Bank Holding Company Act of 1956, 90.8 United States Code, title 12, section 1841(c)(2)(F), by any 90.9 national banking association under section 85 of the National 90.10 Bank Act of 1864, United States Code, title 12, section 85, or 90.11 by any state chartered insured depository institution under 90.12 section 521 of the Depository Institutions Deregulation and 90.13 Monetary Control Act of 1980, United States Code, title 12, 90.14 section 1813d(a). 90.15 Sec. 24. [REPEALER.] 90.16 Minnesota Statutes 1994, section 51A.385, is repealed. 90.17 ARTICLE 4 90.18 INTERSTATE MARKET DEVELOPMENT AND FEDERALIZATION 90.19 OF INTERSTATE BANKING 90.20 Section 1. Minnesota Statutes 1994, section 46.048, 90.21 subdivision 1, is amended to read: 90.22 Subdivision 1. [REQUIREMENT.] Whenever a change in the 90.23 outstanding voting stock of a banking institution will result in 90.24 control or in a change in the control of the banking 90.25 institution, the person acquiring control of the banking 90.26 institution, including an out-of-state bank holding company, 90.27 shall file notice of the proposed acquisition of control with 90.28 the commissioner of commerce at least 60 days before the actual 90.29 effective date of the change, except that the commissioner may 90.30 extend the 60-day period an additional 30 days if in the 90.31 commissioner's judgment any material information submitted is 90.32 substantially inaccurate or the acquiring party has not 90.33 furnished all the information required. As used in this 90.34 section, the term "control" means the power to directly or 90.35 indirectly direct or cause the direction of the management or 90.36 policies of the banking institution. A change in ownership of 91.1 capital stock that would result in direct or indirect ownership 91.2 by a stockholder or an affiliated group of stockholders of less 91.3 than 25 percent of the outstanding capital stock is not 91.4 considered a change of control. If there is any doubt as to 91.5 whether a change in the outstanding voting stock is sufficient 91.6 to result in control or to effect a change in the control, the 91.7 doubt shall be resolved in favor of reporting the facts to the 91.8 commissioner. The commissioner shall use the criteria 91.9 established by the Financial Institution Regulatory and Interest 91.10 Rate Control Act of 1978, United States Code, title 12, section 91.11 1817(j), and the regulations adopted under it, when reviewing 91.12 the acquisition and determining if the acquisition should or 91.13 should not be disapproved. Within three days after making the 91.14 decision to disapprove a proposed acquisition, the commissioner 91.15 shall notify the acquiring party in writing of the disapproval. 91.16 The notice must provide a statement of the basis for the 91.17 disapproval. 91.18 Sec. 2. Minnesota Statutes 1994, section 46.048, is 91.19 amended by adding a subdivision to read: 91.20 Subd. 2a. [CONTENTS.] The notice required by subdivision 1 91.21 must contain the following information to the extent that it is 91.22 known by the person making the notice: 91.23 (1) the identity, personal history, business background, 91.24 and experience of each person by whom or on whose behalf the 91.25 acquisition is to be made, including the person's material 91.26 business activities and affiliations during the past five years, 91.27 and a description of any material pending legal or 91.28 administrative proceedings in which the person is a party and 91.29 any criminal indictment or conviction of that person by a state 91.30 or federal court; 91.31 (2) a statement of the assets and liabilities of each 91.32 person by whom or on whose behalf the acquisition is to be made, 91.33 as of the end of the fiscal year for each of the five years 91.34 immediately preceding the date of the notice, together with 91.35 related statements of income, sources, and application of funds 91.36 for each of the fiscal years then concluded, all prepared in 92.1 accordance with generally accepted accounting principles 92.2 consistently applied, and an interim statement of the assets and 92.3 liabilities for each person, together with related statements of 92.4 income, source, and application of funds as of a date not more 92.5 than 90 days before the date of the filing of the notice; 92.6 (3) the terms and conditions of the proposed acquisition 92.7 and the manner in which the acquisition is to be made; 92.8 (4) the identity, source, and amount of the funds or other 92.9 consideration to be used in making the acquisition, and if any 92.10 part of these funds or other consideration has been or is to be 92.11 borrowed or otherwise obtained for the purpose of making the 92.12 acquisition, a description of the transaction, the names of the 92.13 parties, and any arrangements, agreements, or understandings 92.14 with those persons; 92.15 (5) any plans or proposals that an acquiring party making 92.16 the acquisition may have to liquidate the bank, to sell its 92.17 assets or merge it, or make any other major change in its 92.18 business or corporate structure or management; 92.19 (6) the identification of any person employed, retained, or 92.20 to be compensated by the acquiring party, or by any person on 92.21 the acquiring party's behalf, to make solicitations or 92.22 recommendations to stockholders for the purpose of assisting in 92.23 the acquisition, and a brief description of the terms of the 92.24 employment, retainer, or arrangement for compensation; 92.25 (7) copies of all invitations, tenders, or advertisements 92.26 making tender offers to stockholders for purchase of their stock 92.27 to be used in connection with the proposed acquisition; and 92.28 (8) any additional relevant information in the form the 92.29 commissioner requires by rule or by specific request in 92.30 connection with any particular notice. 92.31 Sec. 3. Minnesota Statutes 1994, section 46.048, is 92.32 amended by adding a subdivision to read: 92.33 Subd. 2b. [NOTICE.] Upon the filing of an application: 92.34 (1) an applicant shall publish in a newspaper of general 92.35 circulation notice of the proposed acquisition in a form 92.36 acceptable to the commissioner; and 93.1 (2) the commissioner shall accept public comment on an 93.2 application for a period of not less than 30 days from the date 93.3 of the final publication required by clause (1). 93.4 Sec. 4. Minnesota Statutes 1994, section 46.048, is 93.5 amended by adding a subdivision to read: 93.6 Subd. 4. [HEARINGS.] Within ten days of receipt of notice 93.7 of disapproval according to subdivision 1, the acquiring party 93.8 may request an agency hearing on the proposed acquisition. At 93.9 the hearing, all issues must be determined on the record 93.10 according to chapter 14 and the rules issued by the department. 93.11 At the conclusion of the hearing, the commissioner shall by 93.12 order approve or disapprove the proposed acquisition on the 93.13 basis of the record made at the hearing. 93.14 Sec. 5. Minnesota Statutes 1994, section 47.52, is amended 93.15 to read: 93.16 47.52 [AUTHORIZATION.] 93.17 (a) With the prior approval of the commissioner, any bank 93.18 doing business in this state may establish and maintain not more 93.19 than five detached facilities provided the facilities are 93.20 located within the municipality in which the principal office of 93.21 the applicant bank is located; or within 5,000 feet of its 93.22 principal office measured in a straight line from the closest 93.23 points of the closest structures involved; or within 100 miles 93.24 of its principal office measured in a straight line from the 93.25 closest points of the closest structures involved, if the 93.26 detached facility is within any municipality in which no bank is 93.27 located at the time of application or if the detached facility 93.28 is in a municipality having a population of more than 10,000, or 93.29 if the detached facility is located in a municipality having a 93.30 population of 10,000 or less, as determined by the commissioner 93.31 from the latest available data from the state demographer, or 93.32 for municipalities located in the seven-county metropolitan area 93.33 from the metropolitan council, and all the banks having a 93.34 principal office in the municipality have consented in writing 93.35 to the establishment of the facility. 93.36 (b) A detached facility shall not be closer than 50 feet to 94.1 a detached facility operated by any other bank and shall not be 94.2 closer than 100 feet to the principal office of any other bank, 94.3 the measurement to be made in the same manner as provided 94.4 above. This paragraph shall not be applicable if the proximity 94.5 to the facility or the bank is waived in writing by the other 94.6 bank and filed with the application to establish a detached 94.7 facility. 94.8 (c) Any bank is allowed, in addition to other facilities, 94.9 one drive-in or walk-up facility located between 150 to 1,500 94.10 feet of the main banking house or within 1,500 feet from a 94.11 detached facility. The drive-in or walk-up facility permitted 94.12 by this clause is subject to paragraph (b) and section 47.53. 94.13 (d) A bank whose home state is Minnesota as defined in 94.14 section 48.92 is allowed, in addition to other facilities, to 94.15 establish and operate a de novo detached facility in a location 94.16 in the host states of Iowa, North Dakota, South Dakota, and 94.17 Wisconsin not more than 30 miles from its principal office 94.18 measured in a straight line from the closest points of the 94.19 closest structures involved and subject to requirements of 94.20 sections 47.54 and 47.561 and the following additional 94.21 requirements and conditions: 94.22 (1) there is in effect in the host state a law, rule, or 94.23 ruling that permits Minnesota home state banks to establish de 94.24 novo branches in the host state under conditions substantially 94.25 similar to those imposed by the laws of Minnesota as determined 94.26 by the commissioner; and 94.27 (2) there is in effect a cooperative agreement between the 94.28 home and host state banking regulators to facilitate their 94.29 respective regulation and supervision of the bank including the 94.30 coordination of examinations. 94.31 Sec. 6. Minnesota Statutes 1994, section 47.78, is amended 94.32 to read: 94.33 47.78 [CONTRACTS TO ACCEPT AND RECEIVE DEPOSITS-HONOR AND 94.34 PAY WITHDRAWALS.] 94.35 (a) Notwithstanding any other law to the contrary, a 94.36 financial institution, the "customer institution," may contract 95.1 with another financial institution, the "service institution," 95.2 to grant the service institution the authority to render 95.3 services to the customer institution's depositors, borrowers or 95.4 other customers, provided notice of the proposed contract is 95.5 given to the commissioner and the commissioner does not object 95.6 to the contract within 30 days of the notice. 95.7 (b) For purposes of this section: "Financial institution" 95.8 means a national banking association, federal savingsand loan95.9 association, or federal credit union having its main office in 95.10 this state, or a bank, savings bank, savingsand loan95.11 association or credit union established and operating under the 95.12 laws of this state; and "services" means accepting and receiving 95.13 deposits, honoring and paying withdrawals, issuing money orders, 95.14 cashiers' checks, and travelers' checks or similar instruments, 95.15 cashing checks or drafts, receiving loan payments, receiving or 95.16 delivering cash and instruments and securities, disbursing loan 95.17 proceeds by machine, and any other transactions authorized by 95.18 section 47.63. 95.19 The term also includes a bank subsidiary of a bank holding 95.20 company or affiliated savings association to the extent agency 95.21 activities are permitted under section 18 of the Federal Deposit 95.22 Insurance Act, United States Code, title 12, section 1828, as 95.23 amended, effective September 29, 1995, and title I, Riegle-Neal 95.24 Interstate Banking and Branching Efficiency Act of 1994. 95.25 (c) A contract entered into pursuant to this section may 95.26 include authority to conduct transactions at or through any 95.27 principal office, branch, or detached facility of either 95.28 financial institution which is a party to the contract, and the 95.29 service institution is not considered a branch of the customer 95.30 institution for purposes of section 48.34. 95.31 Sec. 7. Minnesota Statutes 1994, section 48.90, 95.32 subdivision 1, is amended to read: 95.33 Subdivision 1. [SEVERABILITY.] It is the express intention 95.34 of the Minnesota legislature to act pursuant to the United 95.35 States Code, title 12, section 1842(d)to provide an orderly95.36transition to interstate banking by initially permitting limited96.1interstate banking on a regional basisas amended by title I of 96.2 the Riegle-Neal Interstate Banking and Branching Efficiency Act 96.3 of 1994 to provide for interstate banking on a nationwide basis 96.4 and to preserve certain state law, policy, and practices. 96.5 Therefore, notwithstanding the provisions of section 645.20, if 96.6 any provision ofLaws 1986, chapter 339, other than Laws 1986,96.7chapter 339, sections 1 to 3, and 14,this act providing for the 96.8 supervisory powers of the commissioner or limiting expansion 96.9 into this statetoby bank holding companies located in other 96.10 statesdefined as "reciprocating states"is determined by final, 96.11 nonappealable order of any Minnesota or federal court of 96.12 competent jurisdiction to be invalid or unconstitutional,Laws96.131986, chapter 339,this act is null and void and of no further 96.14 force and effect from the effective date of the final 96.15 determination. 96.16 Sec. 8. Minnesota Statutes 1994, section 48.91, is amended 96.17 to read: 96.18 48.91 [TITLE.] 96.19Laws 1986, chapter 339Section 48.90 may be cited as the 96.20 "reciprocalinterstate banking act." 96.21 Sec. 9. Minnesota Statutes 1994, section 48.92, 96.22 subdivision 2, is amended to read: 96.23 Subd. 2. [CONTROL.] "Control,"means,with respect to a 96.24 bank holding company, bank, or bank to be organized pursuant to 96.25 chapters 46, 47, 48, and 300,(1) the ownership, directly or96.26indirectly or acting through one or more other persons, control96.27of or the power to vote 25 percent or more of any class of96.28voting securities; (2) control in any manner over the election96.29of a majority of the directors; or (3) the power to exercise,96.30directly or indirectly, a controlling influence over management96.31and policiesis defined in section 46.048, subdivision 1. 96.32 Sec. 10. Minnesota Statutes 1994, section 48.92, 96.33 subdivision 6, is amended to read: 96.34 Subd. 6. [LOCATED IN THISHOME STATE.] "Located in96.35thisHome state" means: (1)a bank whose organizational96.36certificate identifies an address in this state as the principal97.1place of conducting the business of banking; or (2) a bank97.2holding company as defined in the Bank Holding Company Act of97.31956, as amended, with banking subsidiaries, the majority of97.4whose deposits are in Minnesota.with respect to a national 97.5 bank, the state in which the main office of the bank is located; 97.6 (2) with respect to a state bank, the state by which the bank is 97.7 chartered; and (3) with respect to a bank holding company, the 97.8 state in which the total deposits of all banking subsidiaries of 97.9 the company are the largest on the later of (i) July 1, 1996, or 97.10 (ii) the date on which the company becomes a bank holding 97.11 company under the Bank Holding Company Act of 1956, as amended, 97.12 United States Code, title 12, section 1842. 97.13 Sec. 11. Minnesota Statutes 1994, section 48.92, 97.14 subdivision 7, is amended to read: 97.15 Subd. 7. [RECIPROCATINGHOST STATE.] "ReciprocatingHost 97.16 state" is a statethat authorizes the acquisition, directly or97.17indirectly, or control of, banks in that state by a bank or bank97.18holding company located in this state under conditions97.19substantially similar to those imposed by the laws of Minnesota97.20as determined by the commissioner.other than the home state of 97.21 the bank holding company, in which the company controls, or 97.22 seeks to control, a bank subsidiary. 97.23 Sec. 12. Minnesota Statutes 1994, section 48.92, 97.24 subdivision 8, is amended to read: 97.25 Subd. 8. [RECIPROCATING STATEOUT-OF-STATE BANK HOLDING 97.26 COMPANY.] "Reciprocating stateOut-of-state bank holding 97.27 company" means a bank holding company as defined in the Bank 97.28 Holding Company Act of 1956, as amended, whose operations are 97.29 principally conducted in areciprocatinghome state other than 97.30 Minnesotaand is that state in which the operations of its97.31banking subsidiaries are the largest in terms of total deposits. 97.32 Sec. 13. Minnesota Statutes 1994, section 48.92, 97.33 subdivision 9, is amended to read: 97.34 Subd. 9. [INTERSTATE BANK HOLDING COMPANY.] "Interstate 97.35 bank holding company" means (a) a bank holding companylocated97.36in this state,whose home state is Minnesota and is engaging in 98.1 interstate bankingunder reciprocal legislation, and (b)a98.2reciprocating statean out-of-state bank holding company engaged 98.3 in banking in this state, and (c) other out-of-state bank98.4holding companies operating an institution located in this state98.5having deposits insured by the Federal Deposit Insurance98.6Corporation. 98.7 Sec. 14. Minnesota Statutes 1994, section 48.92, is 98.8 amended by adding a subdivision to read: 98.9 Subd. 11. [OUT-OF-STATE BANK.] "Out-of-state bank" means a 98.10 bank whose home state is other than Minnesota. 98.11 Sec. 15. Minnesota Statutes 1994, section 48.93, 98.12 subdivision 1, is amended to read: 98.13 Subdivision 1. [APPLICATION.]A reciprocating stateAn 98.14 out-of-state bank holding company may, through a purchase of 98.15 stock or assets of a bank, or through a purchase of stock or 98.16 assets of or merger with a bank holding company, acquirean98.17interestcontrol in an existing bank or bankslocated in this98.18 whose home state is Minnesota if it meets the conditions in this 98.19 section, sections 46.047 and 46.048 and, if the interest will98.20result in control of the bank or banks,it files an application 98.21 in writing with the commissioner on forms provided by the 98.22 department. The commissioner, upon receipt of the application, 98.23 shall act upon itwithin 30 days of the end of the public98.24comment period provided by section 48.98, and, unless the98.25proposed acquisition is disapproved within that period of time,98.26it becomes effective without approvalin the manner provided for 98.27 in sections 46.047 and 46.048, except that the commissioner may 98.28 extend the30-day60-day period an additional 30 days if in the 98.29 commissioner's judgment any material information submitted is 98.30 substantially inaccurate or the acquiring party has not 98.31 furnished all the information required bysubdivision 3law, 98.32 rule, or the commissioner.No application for approval required98.33by this section is complete unless accompanied by an application98.34fee of $5,000 payable to the state treasurer. Compliance with98.35the requirements of this section satisfies the requirements of98.36section 48.03, subdivision 4.Within three days after making 99.1 the decision to disapprove any proposed acquisition, the 99.2 commissioner shall notify the acquiring party in writing of the 99.3 disapproval. The notice must provide a statement of the basis 99.4 for the disapproval. 99.5 Sec. 16. Minnesota Statutes 1994, section 48.93, 99.6 subdivision 3, is amended to read: 99.7 Subd. 3. [CRITERIA FOR APPROVAL.] Except as otherwise 99.8 provided by rule of the department, an application filed 99.9 pursuant to subdivision 1 must contain thefollowing99.10 information:required by sections 46.047 and 46.048. 99.11(1) the identity, personal history, business background,99.12and experience of each person by whom or on whose behalf the99.13acquisition is to be made, including the person's material99.14business activities and affiliations during the past five years,99.15and a description of any material pending legal or99.16administrative proceedings in which the person is a party and99.17any criminal indictment or conviction of that person by a state99.18or federal court;99.19(2) a statement of the assets and liabilities of each99.20person by whom or on whose behalf the acquisition is to be made,99.21as of the end of the fiscal year for each of the five years99.22immediately preceding the date of the notice, together with99.23related statements of income, sources, and application of funds99.24for each of the fiscal years then concluded, all prepared in99.25accordance with generally accepted accounting principles99.26consistently applied, and an interim statement of the assets and99.27liabilities for each person, together with related statements of99.28income, source, and application of funds as of a date not more99.29than 90 days prior to the date of the filing of the notice;99.30(3) the terms and conditions of the proposed acquisition99.31and the manner in which the acquisition is to be made;99.32(4) the identity, source, and amount of the funds or other99.33consideration to be used in making the acquisition, and if any99.34part of these funds or other consideration has been or is to be99.35borrowed or otherwise obtained for the purpose of making the99.36acquisition, a description of the transaction, the names of the