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HF 5162

Credit card annual percentage rates limited to ten percent.

2025-2026 Regular Session Introduced by Alex Falconer

Sets a 10% APR cap for credit card loans in Minnesota, with other loan types remaining capped (e.g., 18% for non-card loans) and contingent on federal-law changes.

Introduction and first reading, referred to Commerce Finance and Policy
#banksandfinancialinstitutions #creditandcreditservices
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WeVote Research Nonpartisan
Bill Summary · HF 5162

Overview

HF 5162 proposes to cap the annual percentage rate (APR) on credit cards and certain other loan products at 10% in Minnesota, with broader interest-rate rules remaining in place for non-card credit. The bill also aligns (via stated effective dates) with federal-law changes to the interaction between state and federal charters for certain financial institutions, ensuring the state law would apply if and when federal law requires compliance.

Main purpose and intent

  • Establish a statewide limit on the finance charges for credit card loans by setting the maximum APR for credit card debt at 10% per year.
  • Adjust or clarify existing finance charge rules for other loan types (non-card loans) and for credit unions/federal credit unions to ensure consistency with a 10% cap on card loans where applicable.
  • Provide mechanisms for periodic adjustments to dollar amounts tied to inflation (via the implicit price deflator) and specify administrative responsibilities for notifying changes.

Key provisions and changes

  • Section 1 (Open-end credit, credit cards):

    • Reduces the maximum APR for open-end credit under credit cards from 18% (previously) to 10% per year.
    • Retains existing methods of calculating finance charges (including various rate structures such as add-on, prepaid, or actuarial methods) so long as the APR does not exceed the new 10% cap.
    • Includes baseline procedures for calculating refunds if prepayment occurs and the APR yield would exceed the maximum, with minimum refund thresholds ($9.50) preserved for certain cases.
    • Provides inflation-adjustment mechanics for dollar amounts linked to the statute (via the GDP deflator) and sets timing for when those adjustments occur (primarily every two years, in even-numbered years, with thresholds based on index changes).
    • States that the effective date for changes depends on a subsequent federal-law change that would require state compliance; the Commerce Commissioner must inform the Revisor when such federal-law changes occur.

  • Section 2 (Non-card credit, general loans):

    • Sets a maximum periodic rate for non-card extensions of credit at the equivalent of an 18% APR (computed on a 365-day year) for general (non-card) loans.
    • clarifies that the 18% cap does not apply to credit card extensions of credit.
    • Effective date similarly contingent on a federal-law change permitting state maximums.

  • Section 3 (Credit cards, new subdivision 3b):

    • Creates a separate credit-card-specific maximum finance charge: 10% APR (365-day year) for credit card extensions of credit.
    • Effective date contingent on federal-law changes; the commissioner must inform the Revisor accordingly.

  • Section 4 (Credit card interest for credit unions):

    • Requires the interest rate on unpaid balances on credit-card loans by a credit union or federal credit union to not exceed the rate authorized under Section 48.185, Subd. 3b (i.e., the 10% cap for credit cards).

  • Section 5 (Credit unions, non-card loans):

    • Maintains a separate framework for credit-union loans: interest rates on unpaid balances may not exceed 1% per month or the rate authorized under another statute (whichever is greater), with the caveat that this subdivision excludes credit cards.
    • Effective date similarly tied to federal-law changes.

Who/what would be affected

  • Credit card issuers operating in Minnesota (banks, credit unions, and other lenders) would be subject to a maximum 10% APR on credit card loans.
  • Non-card loan products offered by banks and nonbank lenders would continue to be governed by the 18% APR cap (subject to federal-law changes).
  • Credit unions and federal credit unions operating in Minnesota would have to adhere to the 10% card-APR cap for credit-card loans and the established caps for other loan products.
  • Agencies: Minnesota Department of Commerce would administer and enforce these limits, monitor inflation-adjusted dollar amounts, and coordinate with the Revisor of Statutes on changes triggered by federal-law developments.

Procedural and timeline notes

  • The 10% card APR would become effective only upon a change in federal law requiring state-compliant maximum finance charges for national banking associations and certain federal entities; the Department of Commerce must notify the Revisor of Statutes when such federal-law changes occur.
  • Dollar-amount adjustments tied to the implicit price deflator (GDP, 2005=100) are updated on July 1 of each even-numbered year if the index change meets the specified threshold (ten percent or more, with rules for rounding and multiple-of-ten changes).
  • The bill specifies that if federal-law changes do not occur, the sections do not take effect; this creates a conditional, contingent framework dependent on federal preemption or alignment.

Summary in plain terms

HF 5162 aims to dramatically cap credit card costs in Minnesota by setting a 10% cap on APR for credit cards, while maintaining existing caps for non-card loans (18% APR) and other credit arrangements (e.g., for credit unions) with careful alignment to federal law. It adds inflation-based dollar adjustments, outlines refund rules on prepayment, and requires state agencies to monitor and communicate any necessary changes when federal law changes occur. The measure would take effect only if federal law changes permit or require Minnesota to implement such a state-level cap.

Compiled from official sources — confirm details with the bill’s official record.

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