HF3448

Purpose

This bill updates Minnesota law to clearly include earned wage access (EWA) payday loans as consumer small loans and consumer short-term loans, and it sets rules for who can offer these loans, how they are defined, and what information they must file with the state.

Main Provisions

• Includes earned wage access payday loans in the definitions of consumer small loans and consumer short-term loans.
• Clarifies key terms used to regulate these loans:
  • Consumer small loan: a short, unsecured loan of up to $350 repaid in one installment; can involve a promissory note or a deferral of presenting a personal check; may include various fees.
  • Fee: any charge beyond interest or a finance charge, such as membership, convenience, expediting, or tip/donation fees.
  • Annual percentage rate (APR): the yearly cost of credit, including interest, fees, and other charges, calculated by standard methods.
• Licensing, filing, and oversight:
  • Non-bank entities that want to offer consumer small loans to Minnesotans must file with the commissioner of commerce before operating, pay a $250 filing fee per place of business, show at least $50,000 in liquid assets at the operation location, and provide a biographical statement about the principal leader.
  • Filing revocation is handled the same way as for regulated lender licenses.
  • Online lenders with no Minnesota physical location are covered.
• Consumer short-term loans:
  • Defines a consumer short-term loan as up to $1,300 with an arrangement that requires a minimum payment within 60 days or that sets a default payment schedule, and where each new loan advance counts as a new loan.
  • Clarifies what is not included (for example, certain types of loans or loans secured solely by collateral with recourse limited to collateral).
  • Defines a consumer short-term lender similarly to the small loan lender, including online lending via Internet or mobile apps.
• Scope of activities:
  • Lenders may operate without a physical MN location if they offer loans electronically (Internet or mobile app) to Minnesota residents, but they remain subject to the definitions and filing requirements.

Significant Changes to Existing Law

• Expands the regulatory scope to explicitly cover earned wage access (EWA) payday loans as both consumer small loans and consumer short-term loans.
• Adds explicit filing and asset-availability requirements for non-bank lenders and online lenders.
• Updates definitions to reflect modern lending methods, including online and mobile app platforms.
• Sets clear criteria for loan amounts, repayment timelines, and how new advances are treated (each new advance is a new loan).

Practical Implications

• For consumers: loans that fall under these categories will be regulated under Minnesota law, with defined loan amounts, repayment expectations, and fee considerations.
• For lenders: online and offline lenders must meet filing, asset, and licensing requirements; they must adhere to the defined loan terms and APR methods.

Relevant Changes to Compliance

• Must file with the commissioner before starting to offer these loans (if not a traditional financial institution).
• Must maintain specified liquid assets and provide leadership information.
• If operating online, still subject to Minnesota rules and registration.

What the bill aims to accomplish

• Create a clear, consistent framework that recognizes earned wage access products as regulated consumer loans.
• Align online and offline lending practices under Minnesota’s commerce rules.
• Provide oversight to protect borrowers through defined loan amounts, fees, and repayment structures.

Relevant Terms earned wage access, EWA, payday loan, consumer small loan, consumer short-term loan, annual percentage rate (APR), fee, promissory note, deferral of presentation of a personal check, liquid assets, filing, Minnesota commissioner of commerce, filing fee, online lender, Internet lending, mobile application, non-bank lender, lender license, revocation, repayment schedule, new advance, collateral, Chapter 325J (excluded treatments), recourse, unsecured loan, terms of repayment.