On April 5, the Minnesota Department of Commerce issued guidance to the motor vehicle sales finance industry intended to clarify the types of entities that meet the definition of “sales finance company” under Minnesota law. The guidance solidified the Commerce Department’s stance that companies that purchase motor vehicle retail installment contracts must obtain a motor vehicle sales finance company license from the state. 

Minnesota Statutes § 53C.01, subdivision 12, defines a “sales finance company” as: 

[A] person engaged, in whole or in part, in the business of purchasing retail installment contracts in this state from one or more retail sellers. The term includes a bank, trust company, or industrial loan and thrift company, if so engaged. The term also includes a retail seller engaged, in whole or in part, in the business of creating and holding retail installment contracts. The term does not include the pledges of an aggregate number of the contracts to secure a bona fide loan thereon. 

The Department of Commerce’s guidance interprets the statutory definition to apply to any company who purchases motor vehicle retail installment contracts from retail sellers located in Minnesota, and applies a finance charge, regardless of whether the company has any presence in the state. This represents a change in the state’s interpretation of the statute as, historically, those sales finance companies that did not have a physical presence in Minnesota have not been required to obtain a license. Section 53C.02, however, provides that licenses are not necessary for banks, trust companies, savings banks, savings associations, or credit unions, whether state or federally chartered, industrial loan and thrift companies, or regulated lenders already authorized to do business in Minnesota.   

The guidance further states that all companies that purchase motor vehicle retail installment contracts must file a “materially completed” application with the Department of Commerce by July 1, 2019, with the license application requirement applying to any contract entered into after that date. The Department of Commerce warns that any activity conducted without a license after July 1, 2019 may be subject to enforcement action. 

A copy of the Minnesota Department of Commerce’s guidance is available here.