1.1                          A bill for an act
  1.2             relating to insurance; credit; requiring prompt 
  1.3             refunds of unearned premiums by the original creditor 
  1.4             when a loan is repaid early; amending Minnesota 
  1.5             Statutes 1994, section 62B.05. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 1994, section 62B.05, is 
  1.8   amended to read: 
  1.9      62B.05 [TERM OF CREDIT INSURANCE.] 
  1.10     The term of any credit life insurance, credit accident and 
  1.11  health insurance, or credit involuntary unemployment insurance 
  1.12  shall, subject to acceptance by the insurer, commence on the 
  1.13  date when the debtor becomes obligated to the creditor, except 
  1.14  that, where a group policy provides coverage with respect to 
  1.15  existing obligations, the insurance on a debtor with respect to 
  1.16  the indebtedness shall commence on the effective date of the 
  1.17  policy.  Where evidence of insurability is required and the 
  1.18  evidence is furnished more than 30 days after the date when the 
  1.19  debtor becomes obligated to the creditor, the term of the 
  1.20  insurance may commence on the date on which the insurance 
  1.21  company determines the evidence to be satisfactory, and in that 
  1.22  event there shall be an appropriate refund or adjustment of any 
  1.23  charge to the debtor for insurance.  The term of the insurance 
  1.24  shall not extend more than 15 days beyond the scheduled maturity 
  1.25  date of the indebtedness except when extended without additional 
  2.1   cost to the debtor. 
  2.2      If an indebtedness is prepaid in full before its scheduled 
  2.3   maturity, except by performance of the insurer's obligation 
  2.4   under the policy, the insurance shall be deemed canceled and a 
  2.5   refund shall be paid or credited as provided in section 62B.08.  
  2.6   Upon prepayment in full, the creditor shall make the refund of 
  2.7   unearned premium, unless the credit insurance was originated by 
  2.8   a third party, in which case the creditor shall promptly notify 
  2.9   the third party no later than 15 days after receiving prepayment 
  2.10  in full.  The third party who shall make the refund no later 
  2.11  than 15 days after receiving the notification.  When receiving 
  2.12  prepayment in full of a loan originated by a third party, the 
  2.13  creditor shall inform the debtor in writing that a refund of 
  2.14  unearned premium may be available from the third party.  This 
  2.15  written notice requirement may be satisfied by sending or giving 
  2.16  to the debtor a copy of the notification required to be sent to 
  2.17  the third party.  When the third party refunds the unearned 
  2.18  premium, if any, to the debtor, the third party shall provide 
  2.19  the debtor with a simple written explanation of how the amount 
  2.20  of the refund was determined. 
  2.21     Sec. 2.  [EFFECTIVE DATE AND APPLICATION.] 
  2.22     Section 1 is effective January 1, 1996, and applies to all 
  2.23  loans prepaid on or after that date, regardless of when the loan 
  2.24  was made.