HF 5162

05/13/26   REVISOR  RSI/BH  26-08581
This Document can be made available
in alternative formats upon request  State of Minnesota
  HOUSE OF REPRESENTATIVES
  NINETY-FOURTH SESSION
  H. F. No.   5162
05/17/2026     Authored by Falconer
  The bill was read for the first time and referred to the Committee on Commerce Finance and Policy
1.1A bill for an act
1.2relating to financial institutions; limiting credit card annual percentage rates to ten
1.3percent; amending Minnesota Statutes 2024, sections 47.59, subdivision 3; 48.185,
1.4subdivision 3, by adding a subdivision; 52.14, subdivision 2; proposing coding
1.5for new law in Minnesota Statutes, chapter 52.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7Section 1. Minnesota Statutes 2024, section 47.59, subdivision 3, is amended to read:
1.8Subd. 3. Finance charge for loans. (a) With respect to a loan, including a loan pursuant
1.9to open-end credit but excluding open-end credit pursuant to a credit card, a financial
1.10institution may contract for and receive a finance charge on the unpaid balance of the
1.11principal amount not to exceed the greater of:
1.12(1) an annual percentage rate not exceeding 21.75 percent; or
1.13(2) the total of:
1.14(i) 33 percent per year on that part of the unpaid balance of the principal amount not
1.15exceeding $1,425; and
1.16(ii) 19 percent per year on that part of the unpaid balance of the principal amount
1.17exceeding $1,425.
1.18With respect to open-end credit pursuant to a credit card, the financial institution may
1.19contract for and receive a finance charge on the unpaid balance of the principal amount at
1.20an annual percentage rate not exceeding 18 ten percent per year.
1.21(b) On a loan where the finance charge is calculated according to the method provided
1.22for in paragraph (a), clause (2), the finance charge must be contracted for and earned as
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2.1  provided in that provision or at the single annual percentage rate computed to the nearest
2.2  one-tenth of one percent that would earn the same total finance charge at maturity of the
2.3  contract as would be earned by the application of the graduated rates provided in paragraph
2.4  (a), clause (2), when the debt is paid according to the agreed terms and the calculations are
2.5  made according to the actuarial method.
2.6      (c) With respect to a loan, the finance charge must be considered not to exceed the
2.7  maximum annual percentage rate permitted under this section if the finance charge contracted
2.8  for and received does not exceed the equivalent of the maximum annual percentage rate
2.9  calculated in accordance with Code of Federal Regulations, title 12, part 226, but using the
2.10 definition of finance charge provided in this section.
2.11     (d) This subdivision does not limit or restrict the manner of calculating the finance
2.12 charge, whether by way of add-on, discount, discount points, precomputed charges, single
2.13 annual percentage rate, variable rate, interest in advance, compounding, average daily
2.14 balance method, or otherwise, if the annual percentage rate does not exceed that permitted
2.15 by this section. Discount points permitted by this paragraph and not collected but included
2.16 in the principal amount must not be included in the amount on which credit insurance
2.17 premiums are calculated and charged.
2.18     (e) With respect to a loan secured by real estate, if a finance charge is calculated or
2.19 collected in advance, or included in the principal amount of the loan, and the borrower
2.20 prepays the loan in full, the financial institution shall credit the borrower with a refund of
2.21 the charge to the extent that the annual percentage rate yield on the loan would exceed the
2.22 maximum rate permitted under paragraph (a), taking into account the prepayment. The
2.23 refund need not be made if it would be less than $9.50.
2.24     (f) With respect to all other loans, if the finance charge is calculated or collected in
2.25 advance, or included in the principal amount of the loan, and the borrower prepays the loan
2.26 in full, the financial institution shall credit the borrower with a refund of the charge to the
2.27 extent the annual percentage rate yield on the loan would exceed the annual percentage rate
2.28 on the loan as originally determined under paragraph (a) and taking into account the
2.29 prepayment. The refund need not be made if it would be less than $9.50.
2.30     (g) For the purpose of calculating the refund under this subdivision, the financial
2.31 institution may assume that the contract was paid before the date of prepayment according
2.32 to the schedule of payments under the loan and that all payments were paid on their due
2.33 dates.
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3.1      (h) For loans repayable in substantially equal successive monthly installments, the
3.2  financial institution may calculate the refund under paragraph (f) as the portion of the finance
3.3  charge allocable on an actuarial basis to all wholly unexpired payment periods following
3.4  the date of prepayment, based on the annual percentage rate on the loan as originally
3.5  determined under paragraph (a), and for the purpose of calculating the refund may assume
3.6  that all payments are made on the due date.
3.7      (i) The dollar amounts in this subdivision, subdivision 6, paragraph (a), clause (4), and
3.8  the dollar amount of original principal amount of closed-end credit in subdivision 6,
3.9  paragraph (d), shall change periodically, as provided in this section, according to and to the
3.10 extent of changes in the implicit price deflator for the gross domestic product, 2005 = 100,
3.11 compiled by the United States Department of Commerce, and hereafter referred to as the
3.12 index. The index for December 2011 is the reference base index for adjustments of dollar
3.13 amounts.
3.14     (j) The designated dollar amounts shall change on July 1 of each even-numbered year
3.15 if the percentage of change, calculated to the nearest whole percentage point, between the
3.16 index for December of the preceding year and the reference base index is ten percent or
3.17 more; but
3.18     (1) the portion of the percentage change in the index in excess of a multiple of ten percent
3.19 shall be disregarded and the dollar amounts shall change only in multiples of ten percent
3.20 of the amounts appearing in Laws 1995, chapter 202, on May 24, 1995; and
3.21     (2) the dollar amounts shall not change if the amounts required by this section are those
3.22 currently in effect pursuant to Laws 1995, chapter 202, as a result of earlier application of
3.23 this section.
3.24     (k) If the index is revised, the percentage of change pursuant to this section shall be
3.25 calculated on the basis of the revised index. If a revision of the index changes the reference
3.26 base index, a revised reference base index shall be determined by multiplying the reference
3.27 base index then applicable by the rebasing factor furnished by the Department of Commerce.
3.28 If the index is superseded, the index referred to in this section is the one represented by the
3.29 Department of Commerce as reflecting most accurately changes in the purchasing power
3.30 of the dollar for consumers.
3.31     (l) The commissioner shall:
3.32     (1) announce and publish on or before April 30 of each year in which dollar amounts
3.33 are to change, the changes in dollar amounts required by paragraph (j);
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4.1      (2) announce and publish promptly after the changes occur, changes in the index required
4.2  by paragraph (k) including, if applicable, the numerical equivalent of the reference base
4.3  index under a revised reference base index and the designation or title of any index
4.4  superseding the index; and
4.5      (3) promptly notify the revisor of statutes in writing of the changes announced and
4.6  published by the commissioner pursuant to clauses (1) and (2). The revisor shall publish
4.7  the changes in the next edition of Minnesota Statutes.
4.8      (m) A person does not violate this chapter with respect to a transaction otherwise
4.9  complying with this chapter if that person relies on dollar amounts either determined
4.10 according to paragraph (j), clause (2), or appearing in the last publication of the commissioner
4.11 announcing the then current dollar amounts.
4.12     (n) The adjustments provided in this section shall not be affected unless explicitly
4.13 provided otherwise by law.
4.14     EFFECTIVE DATE. This section is effective upon a change in federal law that requires
4.15 national banking associations, Federal Reserve banks, federal savings associations, and
4.16 federal savings banks doing business in this state to comply with state laws regarding
4.17 maximum finance charges. The commissioner of commerce shall inform the revisor of
4.18 statutes when the change to federal law occurs.
4.19   Sec. 2. Minnesota Statutes 2024, section 48.185, subdivision 3, is amended to read:
4.20     Subd. 3. Maximum finance charge. (a) A financial institution referred to in subdivision
4.21 1, may collect a periodic rate of finance charge in connection with extensions of credit under
4.22 this section, which finance charge does not exceed the equivalent of an annual percentage
4.23 rate of 18 percent computed on a 365-day year and in accordance with the Truth in Lending
4.24 Act, United States Code, title 15, section 1601 et seq., and the Code of Federal Regulations,
4.25 title 12, part 226 (1985).
4.26     (b) If credit is extended pursuant to an overdraft checking plan on the day on which an
4.27 increase in the periodic rate of finance charge is made effective pursuant to this section, the
4.28 rate in effect prior to the increase shall be the maximum lawful rate chargeable on the amount
4.29 of credit so extended until that credit is fully repaid according to the terms of the plan.
4.30     (c) This subdivision does not apply to extensions of credit under a credit card.
4.31     EFFECTIVE DATE. This section is effective upon a change in federal law that requires
4.32 national banking associations doing business in this state and federally chartered savings
4.33 associations to comply with state laws regarding maximum finance charges. The
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5.1  commissioner of commerce shall inform the revisor of statutes when the change to federal
5.2  law occurs.
5.3    Sec. 3. Minnesota Statutes 2024, section 48.185, is amended by adding a subdivision to
5.4  read:
5.5      Subd. 3b. Credit card; maximum finance charge. A financial institution referred to
5.6  in subdivision 1 may collect periodic rates of finance charge in connection with extensions
5.7  of credit under a credit card if the finance charge does not exceed the equivalent of an annual
5.8  percentage rate of ten percent computed on a 365-day year and in accordance with the Truth
5.9  in Lending Act, United States Code, title 15, section 1601 et seq., and Code of Federal
5.10 Regulations, title 12, part 226.
5.11     EFFECTIVE DATE. This section is effective upon a change in federal law that requires
5.12 national banking associations doing business in this state and federally chartered savings
5.13 associations to comply with state laws regarding maximum finance charges. The
5.14 commissioner of commerce shall inform the revisor of statutes when the change to federal
5.15 law occurs.
5.16   Sec. 4. [52.138] INTEREST ON CREDIT CARD LOANS.
5.17     The interest rate on the unpaid balances of loans pursuant to a credit card made by a
5.18 credit union or federal credit union must not exceed the rate of interest authorized under
5.19 section 48.185, subdivision 3b.
5.20     EFFECTIVE DATE. This section is effective upon a change in federal law that requires
5.21 federal credit unions to comply with state laws regarding maximum finance charges. The
5.22 commissioner of commerce shall inform the revisor of statutes when the change to federal
5.23 law occurs.
5.24   Sec. 5. Minnesota Statutes 2024, section 52.14, subdivision 2, is amended to read:
5.25     Subd. 2. Maximum allowable rate. (a) Interest rates on unpaid balances of loans made
5.26 by a credit union shall not exceed one percent a month or the rate of interest authorized by
5.27 section 48.195, whichever is greater at the time the loan is made. If the rate of interest
5.28 charged is permitted by section 48.195 at the time the loan is made, the rate does not later
5.29 become usurious because of a fluctuation in the federal discount rate.
5.30     (b) This subdivision does not apply to extensions of credit under a credit card.
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6.1     EFFECTIVE DATE. This section is effective upon a change in federal law that requires
6.2 federal credit unions to comply with state laws regarding maximum finance charges. The
6.3 commissioner of commerce shall inform the revisor of statutes when the change to federal
6.4 law occurs.
      Sec. 5.  6