Minnesota Legislation

BANKING

Payday loans Effective April 3, 1996, a new banking law alters regulations for "payday loans."

The 1995 Legislature passed a law permitting such small, tightly regulated, short-term consumer loans. That law capped interest rates and other charges for "payday loans," named for the paycheck-to-paycheck consumers they were crafted to benefit. Previously, the loans could be for no more than $350 and required a 30-day term. But the loans have attracted little interest among lenders.

The new law aims to change that by giving lenders more flexibility. It allows such loans to be offered for terms of less than 30 days.

The following information was found at gopher://gopher.revisor.leg.state.mn.us/00/.revisor/slaws/Chapter.414.Hf2369%09%09%2B:
Chapter 414 -
Sec. 7. Minnesota Statutes 1995 Supplement, section 47.60, subdivision 2, is amended to read:
Subd. 2. [AUTHORIZATION, TERMS, CONDITIONS, AND PROHIBITIONS.] (a) In lieu of the interest, finance charges, or fees in any other law, a consumer small loan lender may charge the following: (i) (1) on any amount up to and including $50, a charge of $5.50 may be added; (ii) (2) on amounts in excess of $50, but not more than $100, a charge may be added equal to ten percent of the loan proceeds plus a $5 administrative fee; (iii) (3) on amounts in excess of $100, but not more than $250, a charge may be added equal to seven percent of the loan proceeds with a minimum of $10 plus a $5 administrative fee; (iv) (4) for amounts in excess of $250 and not greater than the maximum in subdivision 1, paragraph (a), a charge may be added equal to six percent of the loan proceeds with a minimum of $17.50 plus a $5 administrative fee. (b) The term of a loan made under this section shall be for no more than 30 calendar days. (c) After maturity, the contract rate must not exceed 2.75 percent per month of the remaining loan proceeds after the maturity date calculated at a rate of 1/30 of the monthly rate in the contract for each calendar day the balance is outstanding. (d) No insurance charges or other charges must be permitted to be charged, collected, or imposed on a consumer small loan except as authorized in this section. (e) On a loan transaction in which cash is advanced in exchange for a personal check, a return check charge may be charged as authorized by section 332.50, subdivision 2, paragraph (d). (f) A loan made under this section must not be repaid by the proceeds of another loan made under this section by the same lender or related interest. The proceeds from a loan made under this section must not be applied to another loan from the same lender or related interest. No loan to a single borrower made pursuant to this section shall be split or divided and no single borrower shall have outstanding more than one loan with the result of collecting a higher charge than permitted by this section or in an aggregate amount of principal exceed at any one time the maximum of $350.