Consumer small and short-term loans include an earned wage access payday loan clarification

A bill for an act

relating to commerce; clarifying that consumer small and short-term loans include

an earned wage access payday loan; amending Minnesota Statutes 2024, sections

47.60, subdivisions 1, 3; 47.601, subdivision 1.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 47.60, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

For purposes of this section, the terms defined have the

meanings given them:

(a) "Consumer small loan" is a loan transaction
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, whether recourse or nonrecourse,
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in

which cash is advanced to a borrower for the borrower's own personal, family, or household

purpose. A consumer small loan is a short-term, unsecured loan to be repaid in a single

installment. The cash advance of a consumer small loan is equal to or less than $350. A

consumer small loan includes an indebtedness evidenced by but not limited to a promissory

note
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or
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,
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agreement to defer the presentation of a personal check
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for a fee
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, or authorization

or preauthorization of an account transfer
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.

(b) "Consumer small loan lender" is a financial institution as defined in section
47.59

or a business entity registered with the commissioner and engaged in the business of
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offering,

soliciting, arranging,
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making
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, or facilitating
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consumer small loans.
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Consumer small loan

lender business activity includes but is not limited to any substantial involvement to market,

generate leads for, underwrite, service, or collect a consumer small loan. A consumer small

loan lender includes an entity without a physical location in Minnesota that makes a consumer

small loan to a resident of Minnesota electronically via the Internet or through a mobile

application.
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(c) "Annual percentage rate" means a measure of the cost of credit, expressed as a yearly

rate, that relates the amount and timing of value received by the consumer to the amount

and timing of payments made. Annual percentage rate includes all interest, finance charges,

and fees. The annual percentage rate must be determined in accordance with either the

actuarial method or the United States Rule method.

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(d) "Fee" means an amount, other than interest or a finance charge, in addition to the

loan principal that is charged, demanded, solicited, requested, or paid by the borrower to

the consumer small loan lender in connection with the transaction. Fee includes but is not

limited to a membership, subscription, participation, convenience, or expediting fee, or a

tip, contribution, or donation.

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Sec. 2.

Minnesota Statutes 2024, section 47.60, subdivision 3, is amended to read:

Subd. 3.

Filing.

Before a business entity other than a financial institution as defined by

section
47.59
engages in the business of making consumer small loans to Minnesota residents,

the business entity shall file with the commissioner as a consumer small loan lender. The

filing must be on a form prescribed by the commissioner together with a fee of $250 for

each place of business and contain the following information in addition to the information

required by the commissioner:

(1) evidence that the filer has available for the operation of the business at the location

specified, liquid assets of at least $50,000; and

(2) a biographical statement on the principal person responsible for the operation and

management of the business to be certified.

Revocation of the filing is the same as in the case of a regulated lender license in section

56.09
.

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For purposes of this subdivision, "business entity" includes one that does not have a

physical location in Minnesota that makes a consumer small loan electronically via the

Internet.

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Sec. 3.

Minnesota Statutes 2024, section 47.601, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For the purposes of this section, the terms defined in this

subdivision have the meanings given.

(b) "Annual percentage rate" has the meaning given in section
47.60, subdivision 1
.

(c) "Borrower" means an individual who obtains a consumer short-term loan primarily

for personal, family, or household purposes.

(d) "Commissioner" means the commissioner of commerce.

(e) "Consumer short-term loan" means a loan
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, whether recourse or nonrecourse,
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to a

borrower which has a principal amount, or an advance on a credit limit, of $1,300 or less

and requires
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, schedules, or sets a default expectation through authorization, preauthorization,

or otherwise of
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a minimum payment within 60 days of loan origination or credit advance

of more than 25 percent of the principal balance or credit advance. For the purposes of this

section, each new advance of money to a borrower under a consumer short-term loan

agreement constitutes a new consumer short-term loan. A "consumer short-term loan" does

not include any transaction made under chapter
325J
or a loan made by a consumer short-term

lender where, in the event of default on the loan, the sole recourse for recovery of the amount

owed, other than a lawsuit for damages for the debt, is to proceed against physical goods

pledged by the borrower as collateral for the loan.

(f) "Consumer short-term lender" means an individual or entity engaged in the business

of
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offering, soliciting, facilitating,
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making
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,
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or arranging consumer short-term loans, other

than a state or federally chartered bank, savings bank, or credit union.
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For the purposes of

this paragraph, arranging consumer short-term loans
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Consumer short-term lender business

activity
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includes but is not limited to any substantial involvement in
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facilitating,
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marketing,

lead-generating, underwriting, servicing, or collecting consumer short-term loans.
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A

consumer short-term lender includes an entity without a physical location in Minnesota that

makes a consumer short-term loan to a resident of Minnesota electronically via the Internet

or through a mobile application.
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(g) "Fee" means an amount, other than interest or a finance charge, in addition to the

loan principal that is charged, demanded, solicited, requested, or paid by the borrower to

the consumer short-term lender in connection with the transaction. Fee includes but is not

limited to a membership, subscription, participation, convenience, or expediting fee, or a

tip, contribution, or donation.

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