CONSUMER LAW
Prepared by:
Ron Elwood, Staff Attorney
Legal Services Advocacy Project
651-222-3749, ext. 109
relwood@mnlsap.org

I. ADVERTISING BY NONLICENSED CONTRACTORS
Chapter 183, Section 2 (HF 927)
Adds Minn. Stat. § 326B.084, subd. 2
Effective August 1, 2010

Prohibits any person from offering to perform services requiring a DLI license (typically construction trade licenses) unless the person holds an active license.

II. BUSINESS SCREENING SERVICE RECORDS
Chapter 240 (SF 2322)
Amends Minn. Stat. § 332.70, subds. 1 - 4
Effective July 1, 2010

A. Definition of "Business Screening Service"
Deletes "record information" and substitutes "criminal records" in the definition of a "business screening service," so the definition now reads: "a business that routinely collects or disseminates criminal records."
Amends Minn. Stat. § 332.70, subd. 1

B. Accuracy
Limits dissemination of criminal records to only those that are "complete and accurate." Defines a "complete and accurate" record as one that has been updated within 30 days of its receipt or has been verified as current with the source of the data within the previous 90 days. Requires notices disclosing a record collected after July 1, 2010 to include the date of collection.
Amends Minn. Stat. § 332.70, subd. 2 (Requiring complete and accurate records)
Amends Minn. Stat. §332.70, subd. 4 (Requiring disclosure of date of collection)

C. Investigation of Disputed Records
Clarifies that a business screening service must investigate a dispute about the accuracy of a criminal record to determine whether the service's record accurately reflects the content of the official record.
Amends Minn. Stat. § 332.70, subd. 3(a)

D. Expunged Records
Requires a business screening service to promptly delete disputed records found to be expunged, sealed, or the subject of a pardon.
Amends Minn. Stat. § 332.70, subd. 3(b)

III. DEBT COLLECTION AGENCIES
Chapter 384, Section 93 (SF 2839)
Adds Minn. Stat. § 332.3351
Repeals Minn. Stat. §§ 332.31, subd. 7; and 332.335
Effective January 1, 2011

Repeals existing language defining and governing exempt out-of-state collection agencies and replaces it with a new section providing that a collection agency is exempt from the licensing and registration in this state if: (1) the agency's collection activities are limited to collecting debts from Minnesota residents that are not incurred in Minnesota; (2) the agency is located in another state that regulates and licenses collection agencies, but does not require a Minnesota collection agency to obtain a license to collect debts in the other state; and (3) the agency's collection activities in Minnesota are conducted by means of interstate communications.

IV. DECEPTIVE LOCAL TELEPHONE NUMBER LISTING OR ADVERTISING Chapter 235 (HF 3277)
Adds Minn. Stat. § 325D.46, subd. 3
Effective for any telephone directory, directory assistance database, Internet website, or print advertisement provided, published, or posted on or after August 1, 2010

Makes it a deceptive trade practice under Minn. Stat. § 325D.44 to misrepresent the geographic location of a business: (1) in a telephone directory; (2) in any directory assistance database; (3) on the Internet; or (4) in print.

V. FORECLOSURE LAW

A. Equity Stripping Protections
Chapter 375, Section 11 (SF 2430)
Amends Minn. Stat. § 580.06, subd. 1
Adds Minn. Stat. § 580.06, subds. 2 and 3
Effective for sheriff's sales conducted on or after August 1, 2010, and expires on December 31, 2012

1. New Notice to Mortgagor
Requires, with certain exceptions, any person attempting to acquire fee title to the mortgagor's property directly from the mortgagor after the sheriff's sale but before the end of the redemption period to provide a notice to the mortgagor that:

• contains: (i) the date the sale occurred; (ii) the identity of the purchaser and any assignees of the purchaser; and (iii) the sheriff's sale price;
• contains a verbatim statement included in the statute: (i) describing the redemption process; (ii) noting that the property may have been sold (and thus may be redeemed) at less than the amount remaining on the mortgage; and (iii) providing information on where to obtain foreclosure prevention counseling; and
• is personally delivered three days prior to entering into an agreement with the mortgagor to acquire title.
  Adds Minn. Stat. § 580.06, subd. 2

2. Exceptions
Exempts the following transactions and persons from the new requirement: (1) a transaction in which either party is represented by a licensed real estate agent; (2) a transaction in which the sale price is equal to or greater than the sheriff's sale price; (3) a deed in lieu of foreclosure transaction; (4) a nonprofit lender holding a certificate of exemption from the Department of Commerce; or (5) the state or a local government or its agent.
Adds Minn. Stat. § 580.06, subd. 2

3. Private Right of Action
Makes a person who violates the notice requirement liable to an aggrieved mortgagor for the sum of: (1) actual, incidental, and consequential damages; (2) $1,000 statutory damages; and (3) costs, disbursements, and reasonable attorney fees. Establishes a rebuttable presumption of compliance if an affidavit stating that the mortgagor received the required notice has been recorded with the county recorder or registrar of titles.
Adds Minn. Stat. § 580.06, subd. 3

B. Notice of Redemption Rights
Chapter 375, Sections 9 and 10 (SF 2430)
Amends Minn. Stat. §§ 580.03; and 580.041, subd. 2
Adds Minn. Stat. § 580.041, subd. 1c
Effective for foreclosure notices delivered on or after August 1, 2010

Requires that foreclosing parties include a new "Notice of Redemption Rights" along with the notice of foreclosure (currently required under Minn. Stat. §§ 580.03 and 580.04) and the "Foreclosure Advice Notice" (currently required under Minn. Stat. § 580.041). Requires the new notice to be: (1) in 14-point boldface type; and (2) printed on colored paper different from the color of the notice of foreclosure and the foreclosure advice notice. Provides that the Notice of Redemption Rights must: (1) explain what occurs after the foreclosure sale; (2) inform the mortgagor how to obtain information about the results of the sale; (3) warn the mortgagor to be wary of scams; and (4) provide referral information to foreclosure prevention counselors.
Amends Minn. Stat. § 580.041, subd. 2 (Content of notice)
Adds Minn. Stat. § 580.041, subd. 1c (Form of notice)

C. Postponement of Sheriff's Sale
Chapter 237 (SF 2559)
Amends Minn. Stat. § 580.07, subds. 2 and 3
Effective for foreclosure sales scheduled to occur on or after May 15, 2010

Permits mortgagors subject to a 12-month redemption period the right to postpone the sale for 11 months (effectively extending the reinstatement period),
extending the 2009 legislation that permitted homeowners in foreclosure subject to a six-month redemption period the right to postpone the sheriff's sale for five months.

VI. LIVE CHECK SOLICITATION FOR GOODS AND SERVICES
Chapter 192 (SF 2439)
Adds Minn. Stat. § 325F.697
Effective August 1, 2010

A. Behavior Constituting Deceptive Trade Practice
Makes it a deceptive trade practice under Minn. Stat. § 325F.69 to solicit a Minnesota resident for the sale of a good or service by providing a live check payable to the addressee, the presentment or negotiation of which obligates the addressee to purchase a good or service.
Adds Minn. Stat. § 325F.697, subd. 2

B. Exclusion
Provides that a check from a financial institution that may be used by a consumer to activate a loan is not a "live check" for the purposes of the prohibition. (Note: Under Minn. Stat. § 47.605, live checks used to activate loans are regulated and disclosures are required.)
Adds Minn. Stat. § 325F.697, subd. 1

VII. MINNESOTA APPRAISAL MANAGEMENT COMPANY LICENSING AND REGULATION ACT
Chapter 347, Article 6, Sections 9 - 24 (SF 2510)
Adds Chapter 82C, specifically Minn. Stat. §§ 82C.01 - .16
Effective August 1, 2010

Covers third party entities that: (1) arrange appraisal services and; (2) are unrelated to the mortgage transaction, the clients, or the lenders. Creates a regulatory framework that, among other things: (1) requires appraisal management companies to obtain a license from DOC; and (2) prohibits appraisal management company employees, directors, officers, or agents from influencing or attempting to influence the development, reporting, or review of an appraisal through coercion, extortion, collusion, compensation, inducement, intimidation, or bribery.

VIII. MINNESOTA SECURE AND FAIR ENFORCEMENT FOR MORTGAGE LICENSING ACT OF 2010 (MINNESOTA S.A.F.E. ACT)
Chapter 347, Article 4 (SF 2510)
Adds Chapter 58A, specifically Minn. Stat. §§ 58A.01 - .22
Effective July 31, 2010

Two years ago, Congress passed the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (S.A.F.E. Act) as part of the Housing and Economic Recovery Act of 2008. To enhance consumer protection and reduce fraud, the federal S.A.F.E. Act encouraged: (1) states to establish minimum standards for the licensing and registration of state-licensed individual mortgage loan originators; and (2) the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators to establish and maintain a nationwide mortgage licensing system and registry. As a result of enacting this legislation, Minnesota may now participate in the Nationwide Mortgage Licensing System and Registry. Under the new law, DOC (which currently licenses and regulates only firms) will license and regulate residential mortgage industry employees.

A. Definition of "Mortgage Loan Originator"
Defines "mortgage loan originator" to mean an individual who, for compensation or gain or in the expectation of compensation or gain: (1) takes a residential mortgage loan application; or (2) offers or negotiates terms of a residential mortgage loan. Excludes persons who: (1) act solely as a non-independent loan processor or underwriter; or (2) are licensed real estate brokers, unless they are compensated by a lender, a mortgage broker, or other mortgage loan originator, or by an agent of any of those persons or entities.
Adds Minn. Stat. § 58A.02, subd. 7

B. State Licensing
Requires individual mortgage loan originators to be licensed by DOC and establishes grounds and procedures for issuing, denying, suspending, revoking, conditioning, or declining to renew a license. Exempts: (1) employees of depository banks; (2) individuals who negotiate loans for an immediate family member; (3) homeowners negotiating their own loans secured by their own property; (4) attorneys who negotiate the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the representation, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of any of those persons or entities; and (5) an employee of a nonprofit housing finance or housing counseling agency.
Adds Minn. Stat. § 58A.03, subd. 1 (Requirement of license)
Adds Minn. Stat. § 58A.05 (Grounds for issuing license)
Adds Minn. Stat. § 58A.12 (Grounds for denying, suspending, revoking, conditioning, or declining to renew license)
Adds Minn. Stat. § 58A.03, subd. 2 (Exemptions)

C. Federal Licensing and Registration
Authorizes DOC to require mortgage loan originators to also be licensed and registered through the Nationwide Mortgage Licensing System and Registry.
Adds Minn. Stat. § 58A.10

D. Prelicensing and Relicensing Education and Testing
Establishes prelicensing and relicensing education, testing, and continuing education requirements. Requires these curricula to be reviewed and approved by the Nationwide Mortgage Licensing System and Registry. Requires that the curricula that include at least: (1) three hours of federal law and regulations; (2) three hours of ethics, which includes instruction on fraud, consumer protection, and fair lending issues; and (3) two hours of training related to lending standards for the "nontraditional mortgage product marketplace." (Note: A "nontraditional mortgage product" is defined as any product other than a 30-year fixed mortgage.)
Adds Minn. Stat. § 58A.06 (Education requirement)
Adds Minn. Stat. § 58A.02, subd. 9 (Definition of "nontraditional mortgage product")
Adds Minn. Stat. § 58A.07, subd. 1 (Testing requirement)
Adds Minn. Stat. § 58A.07, subd. 2 (Definition of "qualified test")
Adds Minn. Stat. § 58A.09 (Relicensing, continuing education)

E. Bond
Requires each mortgage loan originator to maintain a bond in an amount determined by the DOC reflecting the dollar amount of loans originated.
Adds Minn. Stat. § 58A.13

F. Prohibitions
Prohibits, among others, the following acts and practices: (1) either directly or indirectly perpetrating fraud or misleading borrowers or lenders to defraud or mislead any person; (2) engaging in unfair or deceptive practices; (3) entering into a contract providing that the originator will earn a fee or commission through "best efforts" to obtain a loan even though no loan is actually obtained for the borrower; (4) advertising, making misleading statements about, or entering into a contract specifying rates or financing terms not available; (5) operating without a license; (6) failing to make required disclosures; and (7) either directly or indirectly making a payment, threat, or promise in order to influence the independent judgment of an appraiser in connection with the value of property or another person in connection with a residential mortgage loan.
Adds Minn. Stat. § 58A.16

IX. MORTGAGE LOAN ORIGINATORS
Chapter 347, Article 5, Section 3 (SF 2510)
Adds Minn. Stat. § 58.08, subd. 1a
Effective July 1, 2010

Increases the bond requirement for mortgage loan originators (i.e., the firms, not the individual employees) to a minimum of $100,000 and maximum of $200,000, depending on the total dollar amount of the closed residential mortgage loans originated in this state in the preceding year. Specifies that the bond must: (1) cover all mortgage loan originators who are employees or independent agents of the originator; and (2) be available for: (i) the recovery of expenses, fines, and fees levied by the DOC; and (ii) losses incurred by borrowers resulting from violations.

X. REVERSE MORTGAGES
Chapter 375, Sections 1 - 7 (SF 2430)
Amends Minn. Stat. §§ 47.58, subds. 1, 3, and 8
Adds Minn. Stat. §§ 47.58, subds. 9 - 11; and 58.19
Effective August 1, 2010

A. When Reverse Mortgage is Due
Eliminates the receipt by the borrower of full payment of the principal and as a condition triggering the repayment of the loan.
Amends Minn. Stat. § 47.58, subd. 1 (Definition of reverse mortgage)
Amends Minn. Stat. § 47.58, subd. 3 (Repayment provisions)

B. Counseling

1. Requirements
Modifies, expands, and strengthens the counseling required prior to executing a reverse mortgage loan. Requires a lender, prior to accepting a final and complete application for a reverse mortgage loan or assessing any fees, to:

• Provide the prospective borrower with a list of at least three independent counseling agencies;
• Positively promote the benefits of reverse mortgage counseling to the potential borrower; and
• Receive certification that the borrower received counseling from an "independent counseling agency."
  Amends Minn. Stat. § 47.58, subd. 8

2. Definition of "Independent Counseling Agency"
Defines "independent counseling agency" as an agency, approved by HUD to provide loan counseling, which: (1) is domiciled in Minnesota; (2) has no business relationship with the lender; and (3) neither makes loans nor refers borrowers to any person or entity that makes loans.
Amends Minn. Stat. § 47.58, subd. 8

3. Definition of "Counseling"
"Counseling" is redefined to mean a session that lasts no less than one hour and includes: (1) a review of other options that are or may become available to the borrower; and (2) an explanation: (i) of the financial implication of entering into a reverse mortgage loan, including the costs of the loan; (ii) that a reverse mortgage loan may have tax consequences, affect eligibility for assistance, and have an impact on the estate and heirs of the borrower; and (iii) of the prohibitions against linking loans to the purchase of insurance products.
Amends Minn. Stat. § 47.58, subd. 8

C. Cooling Off and Rescission Periods

1. Cooling Off Period
Provides that a borrower may not be required to close or proceed with a loan within a seven-day cooling off period following the acceptance of a lender's written commitment to make the loan.
Adds Minn. Stat. § 47.58, subd. 10

2. Rescission Period
Expressly references the three-day cooling off period provided for under the Truth in Lending Act, which may not begin until the end of the seven-day cooling off period and is triggered by the execution of the loan.
Adds Minn. Stat. § 47.58, subd. 10

D. Sales of Insurance Products in Connection with Reverse Mortgage Loans
Prohibits lenders, mortgage brokers, or mortgage originators from requiring the purchase of, entering into any agreement to make a reverse mortgage loan that obligates the borrower to purchase, or receiving compensation for providing the borrower with information relating to an annuity, investment, life insurance, or long-term care insurance product.
Adds Minn. Stat. § 47.58, subd. 11

E. Lender Default
Provides that a lender forfeits any right to repayment of the outstanding loan balance if, for a non-federally insured loan, the lender: (1) fails to make contractually required loan payments to the borrower; or (2) fails to cure a default. Provides the court with the authority to declare a non-federally insured mortgage securing a reverse mortgage loan null and void.
Adds Minn. Stat. § 47.58, subd. 9

F. Compliance with Chapter 47
Provides that both exempt and nonexempt mortgage originators or servicers making reverse mortgage loans must comply with Chapter 47.
Adds Minn. Stat. § 58.19