13-01-01. Definitions of creditor and debtor.

In this chapter, unless the context or subject matter otherwise requires:

1. “Creditor” means one in whose favor an obligation exists by reason of which the person is or may become entitled to the payment of money.
2. “Debtor” means one who, by reason of an existing obligation, is or may become liable to pay money to another, whether such liability is certain or contingent.

Source: Civ. C. 1877, §§ 2018, 2019; R.C. 1895, §§ 5047, 5048; R.C. 1899, §§ 5047, 5048; R.C. 1905, §§ 6632, 6633; C.L. 1913, §§ 7215, 7216; R.C. 1943, § 13-0101.

Cross-References.

Assignment for benefit of creditors, see N.D.C.C. ch. 32-26.

Credit insurance chapter definitions, see N.D.C.C. § 26.1-37-02.

“Debtor” and “creditor” defined, see N.D.C.C. § 1-01-19.

Fraudulent conveyances chapter definitions, see N.D.C.C. § 13-02.1-01.

Revolving charge accounts, see N.D.C.C. ch. 51-14.

Uniform Commercial Code general definition of “creditor”, see N.D.C.C. § 41-01-09.

Uniform Commercial Code, secured transactions, definition of “debtor”, see N.D.C.C. § 41-09-02.

13-01-02. Debtor’s contract valid in absence of fraud.

In the absence of fraud, every contract of a debtor is valid against all of the debtor’s creditors, existing or subsequent, who have not acquired a lien on the property affected by the contract.

Source: Civ. C. 1877, § 2020; R.C. 1895, § 5049; R.C. 1899, § 5049; R.C. 1905, § 6634; C.L. 1913, § 7217; R.C. 1943, § 13-0102.

13-01-03. Creditors may be preferred.

Except as otherwise provided in section 13-02.1-05, a debtor may pay one creditor in preference to another, or may give to one creditor security for the payment of that creditor’s demand in preference to another.

Source: Civ. C. 1877, § 2021; R.C. 1895, § 5050; R.C. 1899, § 5050; R.C. 1905, § 6635; C.L. 1913, § 7218; R.C. 1943, § 13-0103; S.L. 1985, ch. 186, § 11.

13-01-04. Marshalling funds — Rights of creditors.

When a creditor is entitled to resort to each of several funds for the satisfaction of the creditor’s claim and another person has an interest in, or is entitled as a creditor to resort to, some but not all of them, the latter may require the former to seek satisfaction from those funds to which the latter has no such claim so far as it can be done without impairing the right of the former to complete satisfaction and without doing injustice to third persons. This section does not apply to execution sales of real estate mortgage foreclosures.

Source: Civ. C. 1877, § 2022; R.C. 1895, § 5051; R.C. 1899, § 5051; R.C. 1905, § 6636; C.L. 1913, § 7219; R.C. 1943, § 13-0104; S.L. 1991, ch. 137, § 1.

Cross-References.

Marshaling of securities among lienholders, see N.D.C.C. § 35-01-15.

13-01-05. Transfers with intent to defraud or delay creditors are void. [Repealed]

Repealed by S.L. 1985, ch. 186, § 12.

13-01-06. Transfer of personalty without changing of possession or filing of instrument presumed fraudulent. [Repealed]

Repealed by S.L. 1985, ch. 186, § 12.

13-01-07. Instruments affecting realty void when made with intent to defraud — Good-faith purchaser protected. [Repealed]

Repealed by S.L. 1985, ch. 186, § 12.

13-01-08. When act of debtor void for fraud. [Repealed]

Repealed by S.L. 1985, ch. 186, § 12.

13-01-09. Preference by special partnership or by member thereof — When void. [Repealed]

Repealed by S.L. 1985, ch. 186, § 12.

13-01-10. Fraudulent intent a question of fact.

In all cases arising under the provisions of this chapter, the question of fraudulent intent is one of fact and not of law. No transfer or charge may be adjudged fraudulent solely on the ground that it was not made for a valuable consideration.

Source: Civ. C. 1877, § 2026; R.C. 1895, § 5055; R.C. 1899, § 5055; R.C. 1905, § 6640; C.L. 1913, § 7223; R.C. 1943, § 13-0110.

13-01-11. Fraudulent conveyance — Penalty.

Any person who is a party to any conveyance or assignment of any interest in real or personal property entered into with intent to defraud prior or subsequent purchasers, creditors, or other persons except those with security interest in the property involved, who knowingly participates in such a conveyance or assignment, is guilty of a class A misdemeanor.

Source: Pen. C. 1877, § 635; R.C. 1895, § 7511; R.C. 1899, § 7511; R.C. 1905, § 9270; C.L. 1913, § 9999; R.C. 1943, § 13-0111; S.L. 1975, ch. 106, § 105.

13-01-12. Removing or disposing of property to defraud creditors — Penalty.

Every person who removes any of the person’s property from a county with intent to prevent a levy thereon under execution or attachment, or who secretes, assigns, conveys, or otherwise disposes of any of the person’s property with intent to defraud any creditor or to prevent the property from being made liable for the payment of the person’s debts, and every person who receives any property with such intent, is guilty of a class A misdemeanor.

Source: Pen. C. 1877, § 636; R.C. 1895, § 7512; R.C. 1899, § 7512; R.C. 1905, § 9271; C.L. 1913, § 10000; R.C. 1943, § 13-0112; S.L. 1975, ch. 106, § 106.

Cross-References.

Defrauding secured creditor as misdemeanor, see N.D.C.C. § 12.1-23-08.

13-01-13. Unlawfully preferring creditors — Penalty.

Every person who, knowing that the person’s property is insufficient for the payment of all of the person’s lawful debts, shall assign, transfer, or deliver any property for the benefit of any creditor or creditors upon any trust or condition that any creditor shall receive a preference or priority over any other creditor, or with intent to create such a preference or priority, is guilty of a class A misdemeanor. This section does not apply to the giving or creating of preferences expressly allowed by law.

Source: Pen. C. 1877, § 637; R.C. 1895, § 7513; R.C. 1899, § 7513; R.C. 1905, § 9272; C.L. 1913, § 10001; R.C. 1943, § 13-0113; S.L. 1975, ch. 106, § 107.

13-01-14. Late payment charge on accounts receivable — Exceptions.

1. A creditor may charge, receive, and collect a late payment charge on all money due on account from thirty days after the obligation of the debtor to pay has been incurred. A creditor may assign an account receivable that is subject to this section. An assignee of an account receivable has the same right to charge a late payment charge as does an original creditor for the assigned account receivable.
2. The late payment charge allowed under this section may not exceed one and three-fourths percent per month.
3. The late payment charge allowed under this section may not be charged unless, when the obligation was incurred, the creditor did not intend to extend any credit beyond thirty days and any late payment of the obligation was unanticipated.
4. This section does not apply to:
   1. Money due on retail installment contracts, as defined in chapter 51-13.
   2. Money due on revolving charge accounts, as defined in chapter 51-14.
   3. Money due a medical services provider on accounts receivable for medical bills.

Source: S.L. 1981, ch. 161, § 1; 1983, ch. 171, § 1; 1985, ch. 184, § 1; 2003, ch. 115, § 1; 2005, ch. 124, § 1; 2007, ch. 139, § 1; 2007, ch. 140, § 1.

13-01-14.1. Late payment charge on accounts receivable for medical services — Limitations on extensions of credit by medical providers.

1. This section applies to a creditor that is a medical services provider for debts incurred in providing medical services.
2. A creditor that is a medical services provider may not charge, receive, or collect a late payment charge on money due on an account receivable for medical services except as provided under this section. For purposes of late charges on accounts receivable under this section:
   1. An account for medical services, except an account for medical services of a licensed nursing facility or basic care facility, does not become delinquent until ninety days have passed following receipt of the billed medical services; and
   2. An account for medical services of a licensed nursing facility or basic care facility does not become delinquent until forty-five days have passed following billing of the medical services.
3. The account receivable late payment charge allowed under this section may not be charged unless, when the obligation was incurred, the creditor did not intend to extend any credit and late payment of the obligation was unanticipated.
4. A creditor that is not a hospital may charge, receive, and collect an account receivable late payment charge under this section at a rate that does not exceed one percent per month. A creditor that is a hospital may charge, receive, and collect an account receivable late payment charge under this section at a rate that does not exceed one percent per month, not to exceed twenty-five dollars per month.
5. Notwithstanding a higher rate or amount that may be allowed under any other law or agreed to in any written or verbal agreement, the finance charge, credit service charge, or rate of interest for an extension of credit for medical services which is charged by:
   1. A medical services provider that is not a hospital may not exceed one percent per month.
   2. A hospital may not exceed one percent per month, not to exceed twenty-five dollars per month.

Source: S.L. 2007, ch. 139, § 2.

13-01-15. Late payment on accounts receivable — Periodic statement to be furnished to debtor.

1. A creditor may not charge the account receivable late payment charge provided for under section 13-01-14 or 13-01-14.1  unless the creditor promptly supplies the debtor with a statement as of the end of each monthly period, or other regular period agreed upon by the creditor and the debtor, in which there is any unpaid balance.
2. Such statement must state, in any order, the following:
   1. The percentage amount of the late payment charge which will be charged beginning thirty days after the obligation is incurred for purposes of section 13-01-14, or beginning after the billed medical services become delinquent for purposes of section 13-01-14.1.
   2. The unpaid balance at the end of the period.
   3. An identification of any amount debited to the debtor’s account during the period.
   4. The payments made by or for the debtor to the creditor during the period.
   5. The amount of the late payment charge.
3. Additional items may be included in the statement to explain the computations made in determining the amount to be paid by the debtor.

Source: S.L. 1981, ch. 161, § 2; 1991, ch. 138, § 1; 2007, ch. 139, § 3.

13-01.1-01. Prompt payment required.

Every state agency, political subdivision, or school district, which acquires property or services pursuant to a contract with a business shall pay for each complete delivered item of property or service on the date required by contract between such business and agency or, if no date for payment is specified by contract, within forty-five days after receipt of the invoice covering the delivered items or services. The acquisition of property includes the rental of real or personal property.

Source: S.L. 1985, ch. 185, § 1.

13-01.1-02. When interest payment required.

Interest must accrue and be made on payments overdue under section 13-01.1-01 at the rate of one and three-fourths percent per month, unless a different rate is specified within the contract upon which the claim is based. Interest must accrue beginning on the day after payment is due, if payment due date is specified by contract, or on the day of receipt of the invoice covering the delivered goods or services, if payment is not made within forty-five days. Interest ceases to accrue on the date payment is made.

Source: S.L. 1985, ch. 185, § 2.

13-01.1-03. Interest must compound.

Any interest which remains unpaid at the end of any forty-five-day period or which remains unpaid at the end of any specified period provided by contract must be added to the principal amount of the debt and must thereafter accumulate interest.

Source: S.L. 1985, ch. 185, § 3.

13-01.1-04. Additional appropriation prohibited.

An agency of the state is prohibited from seeking additional appropriations to pay interest which accrues as a result of the agency’s failure to make payments as required by section 13-01.1-01.

Source: S.L. 1985, ch. 185, § 4.

13-01.1-05. When this chapter is inapplicable.

If the agency or business fails to timely pay interest as required by sections 13-01.1-02 and 13-01.1-06 and the failure is the result of a dispute between the agency and the business, or a dispute between the business and a subcontractor or supplier, over the amount due or over compliance with the contract, the provisions of this chapter are inapplicable. If the settlement of a dispute is found in favor of the business, or the subcontractor or supplier, interest must accrue and be paid as provided in section 13-01.1-03.

Source: S.L. 1985, ch. 185, § 5.

13-01.1-06. Subcontractor prompt payment required.

Upon payment by a state agency, political subdivision, school district, or agency of the United States, a business which has acquired under contract, property or services in connection with its contract with such agency, political subdivision, or school district, from a subcontractor or supplier, shall pay such subcontractor or supplier within forty-five days after payment from such agency. Interest at the rate specified in section 13-01.1-02 accrues and is due any subcontractor or supplier who is not paid within forty-five days after the business receives payment from the agency, political subdivision, or school district, unless otherwise provided by contract between the business and the subcontractor or supplier.

Source: S.L. 1985, ch. 185, § 6.

13-02.1-01. Definitions.

As used in this chapter:

1. “Affiliate” means:
   1. A person that directly or indirectly owns, controls, or holds with power to vote, twenty percent or more of the outstanding voting securities of the debtor, other than a person that holds the securities;
      1. As a fiduciary or agent without sole discretionary power to vote the securities; or
      2. Solely to secure a debt, if the person has not in fact exercised the power to vote;
   2. A corporation or a limited liability company twenty percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the debtor, or by a person that directly or indirectly owns, controls, or holds with power to vote, twenty percent or more of the outstanding voting securities of the debtor, other than a person that holds the securities:
      1. As a fiduciary or agent without sole discretionary power to vote the securities; or
      2. Solely to secure a debt, if the person has not in fact exercised the power to vote;
   3. A person whose business is operated by the debtor under a lease or other agreement, or a person substantially all of whose assets are controlled by the debtor; or
   4. A person that operates the debtor’s business under a lease or other agreement or controls substantially all of the debtor’s assets.
2. “Asset” means property of a debtor, excluding property to the extent it is encumbered by a valid lien, property to the extent it is generally exempt under nonbankruptcy law, or an interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant.
3. “Claim”, except as used in “claim for relief”, means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.
4. “Creditor” means a person that has a claim.
5. “Debt” means liability on a claim.
6. “Debtor” means a person that is liable on a claim.
7. “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
8. “Insider” includes:
   1. If the debtor is an individual:
      1. A relative of the debtor or of a general partner of the debtor;
      2. A partnership in which the debtor is a general partner;
      3. A general partner in a partnership described in paragraph 2; or
      4. A corporation of which the debtor is a director, officer, or person in control, or a limited liability company of which the debtor is a governor, manager, or person in control;
   2. If the debtor is a corporation:
      1. A director of the debtor;
      2. An officer of the debtor;
      3. A person in control of the debtor;
      4. A partnership in which the debtor is a general partner;
      5. A general partner in a partnership described in paragraph 4; or
      6. A relative of a general partner, director, officer, or person in control of the debtor;
   3. If the debtor is a partnership:
      1. A general partner in the debtor;
      2. A relative of a general partner in, of a general partner of, or of a person in control of the debtor;
      3. Another partnership in which the debtor is a general partner;
      4. A general partner in a partnership described in paragraph 3; or
      5. A person in control of the debtor;
   4. If the debtor is a limited liability company:
      1. A governor of the debtor;
      2. A manager of the debtor;
      3. A person in control of the debtor;
      4. A partnership in which the debtor is a general partner;
      5. A general partner described in paragraph 4; or
      6. A relative of a general partner, governor, manager, or person in control of the debtor; and
   5. An “insider” also includes an affiliate, or an insider of an affiliate as if the affiliate were the debtor, and a managing agent of the debtor.
9. “Lien” means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien, a common-law lien, or a statutory lien.
10. “Organization” means a person other than an individual.
11. “Person” means an individual, estate, business or nonprofit entity, public corporation, government or governmental subdivision , agency, or instrumentality, or other legal entity.
12. “Property” means anything that may be the subject of ownership.
13. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
14. “Relative” means an individual related by consanguinity within the third degree as determined by the common law, a spouse, or an individual related to a spouse within the third degree as so determined, and includes an individual in an adoptive relationship within the third degree.
15. “Sign” means, with present intent to authenticate or adopt a record:
    1. To execute or adopt a tangible symbol; or
    2. To attach to or logically associate with the record an electronic symbol, sound, or process.
16. “Transfer” means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, license, and creation of a lien or other encumbrance.
17. “Valid lien” means a lien that is effective against the holder of a judicial lien subsequently obtained by legal process or proceedings.

Source: S.L. 1985, ch. 186, § 1; 1993, ch. 54, § 72; 2015, ch. 119, § 1, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

Cross-References.

Criminal provisions, see N.D.C.C. §§ 12.1-23-08, 13-01-11 to 13-01-13.

13-02.1-02. Insolvency.

1. A debtor is insolvent if, at a fair valuation, the sum of the debtor’s debts is greater than the sum of the debtor’s assets.
2. A debtor that is generally not paying the debtor’s debts as they become due other than as a result of a bona fide dispute is presumed to be insolvent. The presumption imposes on the party against which the presumption is directed the burden of proving that the nonexistence of insolvency is more probable than its existence.
3. Assets under this section do not include property that has been transferred, concealed, or removed with intent to hinder, delay, or defraud creditors or that has been transferred in a manner making the transfer voidable under this chapter.
4. Debts under this section do not include an obligation to the extent it is secured by a valid lien on property of the debtor not included as an asset.

Source: S.L. 1985, ch. 186, § 2; 2015, ch. 119, § 2, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-02.1-03. Value.

1. Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor’s business to furnish support to the debtor or another person.
2. For the purposes of subdivision b of subsection 1 of section 13-02.1-04 and section 13-02.1-05, a person gives a reasonably equivalent value if the person acquires an interest of the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or execution of a power of sale for the acquisition or disposition of the interest of the debtor upon default under a mortgage, deed of trust, or security agreement.
3. A transfer is made for present value if the exchange between the debtor and the transferee is intended by them to be contemporaneous and is in fact substantially contemporaneous.

Source: S.L. 1985, ch. 186, § 3.

13-02.1-04. Transfer or obligation voidable as to present or future creditor.

1. A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
   1. With actual intent to hinder, delay, or defraud any creditor of the debtor; or
   2. Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction or the debtor intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.
2. In determining actual intent under subdivision a of subsection 1, consideration may be given, among other factors, to whether:
   1. The transfer or obligation was to an insider;
   2. The debtor retained possession or control of the property transferred after the transfer;
   3. The transfer or obligation was disclosed or concealed;
   4. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;
   5. The transfer was of substantially all the debtor’s assets;
   6. The debtor absconded;
   7. The debtor removed or concealed assets;
   8. The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
   9. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
   10. The transfer occurred shortly before or shortly after a substantial debt was incurred; and
   11. The debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor.
3. A creditor making a claim for relief under subsection 1 has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

Source: S.L. 1985, ch. 186, § 4; 2015, ch. 119, § 3, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-02.1-05. Transfer or obligation voidable as to present creditor.

1. A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.
2. A transfer made by a debtor is voidable as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.
3. Subject to subsection 2 of section 13-02.1-02, a creditor making a claim for relief under subsection 1 or 2 has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

Source: S.L. 1985, ch. 186, § 5; 2015, ch. 119, § 4, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-02.1-06. When transfer is made or obligation is incurred.

For the purposes of this chapter:

1. A transfer is made with respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good-faith purchaser of the asset from the debtor against which applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee. A transfer is made with respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien otherwise than under this chapter that is superior to the interest of the transferee.
2. If applicable law permits the transfer to be perfected as provided in subsection 1 and the transfer is not so perfected before the commencement of an action for relief under this chapter, the transfer is deemed to have been made immediately before the commencement of the action.
3. If applicable law does not permit the transfer to be perfected as provided in subsection 1, the transfer is made when it becomes effective between the debtor and the transferee.
4. A transfer is not made until the debtor has acquired rights in the asset transferred.
5. An oral obligation is incurred when it becomes effective between the parties. An obligation evidenced by a record is incurred when the record signed by the obligor is delivered to or for the benefit of the obligee.

Source: S.L. 1985, ch. 186, § 6; 2015, ch. 119, § 5, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-02.1-07. Remedies of creditor.

1. In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in section 13-02.1-08, may obtain:
   1. Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim;
   2. Attachment or other provisional remedy against the asset transferred or other property of the transferee if available under applicable law; or
   3. Subject to applicable principles of equity and in accordance with applicable rules of civil procedure:
      1. An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;
      2. Appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or
      3. Any other relief the circumstances may require.
2. If a creditor has obtained a judgment on a claim against the debtor, the creditor, if the court so orders, may levy execution on the asset transferred or its proceeds.

Source: S.L. 1985, ch. 186, § 7; 2015, ch. 119, § 6, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-02.1-08. Defenses — Liability — Protection of transferee or obligee.

1. A transfer or obligation is not voidable under subdivision a of subsection 1 of section 13-02.1-04 against a person that took in good faith and for a reasonably equivalent value given the debtor or against any subsequent transferee or obligee.
2. To the extent a transfer is avoidable in an action by the creditor under subdivision a of subsection 1 of section 13-02.1-07, the following rules apply:
   1. Except as otherwise provided in this section, the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection 3, or the amount necessary to satisfy the creditor’s claim, whichever is less. The judgment may be entered against:
      1. The first transferee of the asset or the person for whose benefit the transfer was made; or
      2. An immediate or mediate transferee of the first transferee, other than:
         1. A good-faith transferee that took for value; or
         2. An immediate or mediate good-faith transferee of a person described in subparagraph a.
   2. Recovery pursuant to subdivision a of subsection 1 of section 13-02.1-07 or subsection 2 of section 13-02.1-07 of or from the asset transferred or its proceeds, by levy or otherwise, is available only against a person described in paragraph 1 or 2 of subdivision a.
3. If the judgment under subsection 2 is based upon the value of the asset transferred, the judgment must be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.
4. Notwithstanding voidability of a transfer or an obligation under this chapter, a good-faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or obligation, to:
   1. A lien on or a right to retain an interest in the asset transferred;
   2. Enforcement of an obligation incurred; or
   3. A reduction in the amount of the liability on the judgment.
5. A transfer is not voidable under subdivision b of subsection 1 of section 13-02.1-04 or section 13-02.1-05 if the transfer results from termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law or enforcement of a security interest in compliance with chapter 41-09, other than acceptance of collateral in full or partial satisfaction of the obligation it secures.
6. A transfer is not voidable under subsection 2 of section 13-02.1-05:
   1. To the extent the insider gave new value to or for the benefit of the debtor after the transfer was made, except to the extent the new value was secured by a valid lien;
   2. If made in the ordinary course of business or financial affairs of the debtor and the insider; or
   3. If made pursuant to a good-faith effort to rehabilitate the debtor and the transfer secured present value given for that purpose as well as an antecedent debt of the debtor.
7. The following rules determine the burden of proving matters referred to in this section:
   1. A party that seeks to invoke subsection 1, 4, 5, or 6 has the burden of proving the applicability of that subsection.
   2. Except as otherwise provided in subdivision c or d, the creditor has the burden of proving each applicable element of subsection 2 or 3.
   3. The transferee has the burden of proving the applicability to the transferee of subparagraph a or b of paragraph 2 of subdivision a of subsection 2.
   4. A party that seeks adjustment under subsection 3 has the burden of proving the adjustment.
8. The standard of proof required to establish matters referred to in this section is preponderance of the evidence.

Source: S.L. 1985, ch. 186, § 8; 2015, ch. 119, § 7, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-02.1-09. Extinguishment of claim for relief.

A claim for relief with respect to a transfer or obligation under this chapter is extinguished unless action is brought:

1. Under subdivision a of subsection 1 of section 13-02.1-04, not later than four years after the transfer was made or the obligation was incurred or, if later, not later than one year after the transfer or obligation was or could reasonably have been discovered by the claimant;
2. Under subdivision b of subsection 1 of section 13-02.1-04 or subsection 1 of section 13-02.1-05, not later than four years after the transfer was made or the obligation was incurred; or
3. Under subsection 2 of section 13-02.1-05, not later than one year after the transfer was made.

Source: S.L. 1985, ch. 186, § 9; 2015, ch. 119, § 8, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-02.1-10. Supplementary provisions.

Unless displaced by the provisions of this chapter, the principles of law and equity, including the law merchant and the law relating to principal and agent, estoppel, laches, fraud, misrepresentation, duress, coercion, mistake, insolvency, or other validating or invalidating cause, supplement their provisions.

Source: S.L. 1985, ch. 186, § 10.

13-02.1-11. Governing law.

1. In this section, the following rules determine a debtor’s location:
   1. A debtor who is an individual is located at the individual’s principal residence.
   2. A debtor that is an organization and has only one place of business is located at its place of business.
   3. A debtor that is an organization and has more than one place of business is located at its chief executive office.
2. A claim for relief in the nature of a claim for relief under this chapter is governed by the local law of the jurisdiction in which the debtor is located when the transfer is made or the obligation is incurred.

History. S.L. 2015, ch. 119, § 9, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-02.1-12. Application to series organization.

1. In this section:
   1. “Protected series” means an arrangement, however denominated, created by a series organization that, pursuant to the law under which the series organization is organized, has the characteristics set forth in subdivision b.
   2. “Series organization” means an organization that, pursuant to the law under which it is organized, has the following characteristics:
      1. The organic record of the organization provides for creation by the organization of one or more protected series, however denominated, with respect to specified property of the organization, and for records to be maintained for each protected series that identify the property of or associated with the protected series.
      2. Debt incurred or existing with respect to the activities of, or property of or associated with, a particular protected series is enforceable against the property of or associated with the protected series only, and not against the property of or associated with the organization or other protected series of the organization.
      3. Debt incurred or existing with respect to the activities or property of the organization is enforceable against the property of the organization only, and not against the property of or associated with a protected series of the organization.
2. A series organization and each protected series of the organization is a separate person for purposes of this chapter, even if for other purposes a protected series is not a person separate from the organization or other protected series of the organization.

History. S.L. 2015, ch. 119, § 10, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-02.1-13. Relation to Electronic Signatures in Global and National Commerce Act.

This chapter modified, limits, or supersedes the federal Electronic Signatures in Global and National Commerce Act [Pub. L. 106-229; 114 Stat. 464; 15 U.S.C. 7001 et seq.], but does not modify, limit, or supersede section 101(c) of that Act [15 U.S.C. 7001(c)], or authorize electronic delivery of any of the notices described in section 103(b) of that Act [15 U.S.C. 7003(b)].

History. S.L. 2015, ch. 119, § 11, effective August 1, 2015.

Note.

Section 12 of chapter 119, S.L. 2013 provides, “APPLICATION. This Act applies to a transfer made or obligation incurred on or after the effective date of this Act (August 1, 2015). This Act does not apply to a transfer made or obligation incurred before the effective date of this Act (August 1, 2015). This Act does not apply to a right of action that has accrued before the effective date of this Act (August 1, 2015). For the foregoing purposes a transfer is made and an obligation is incurred at the time provided in section 5 of this Act (13-02.1-06).”

13-03.1-01. Definitions. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-02. Administration and exemptions. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-03. Scope. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-04. Procedure and judicial review. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-05. Application and fees. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-06. Investigation of application — Requirements for issuance of license — Denial of license — Public record. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-07. Posting of license — Continuing license — Annual fee. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-07.1. Expiration and renewal of license. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-08. Place of business — Removal — Residence of borrower. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-09. Revocation or suspension of license. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-09.1. Suspension and removal of consumer finance officers or employees. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-10. Records — Annual reports — Biennial report. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-11. Examinations and investigations. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-11.1. Response to department requests. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-12. Regulations and orders — Certified copies of official documents. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-13. Advertising. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-14. Other business in the same office — Business confined to licensed office. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-15. Maximum charges permitted — Installment payments — Other charges. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-15.1. Maximum charges permitted for loans not in excess of one thousand dollars — Refund — Installment payments — Permitted charges. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-16. Requirements for making and payments of loans — Confessions of judgment — Incomplete instruments. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-17. Insurance — Insurance policies — Existing insurance. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-18. Penalty. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-19. Short title. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-20. Fraudulent practices. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-21. Advance fees prohibited — Exception. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-03.1-22. Orders and injunctions. [Repealed]

Repealed by S.L. 2009, ch. 141, § 10.

13-04.1-01. Administration.

The department of financial institutions shall use its facilities to administer and enforce this chapter. Any person or persons delegated to administer this chapter may not have financial interests directly or indirectly in any business which is subject to this chapter. The department has the power to promulgate rules and regulations having the force and effect of law, reasonably necessary to carry out the provisions of this chapter, in accordance with chapter 28-32. Any hearing held and any orders issued pursuant to this chapter must be in accordance with chapter 28-32. In addition to those powers set forth in chapter 28-32, the department has additional powers as set forth in this chapter.

Source: S.L. 1979, ch. 189, § 1; 2001, ch. 88, § 71.

13-04.1-01.1. Definitions.

As used in this chapter, unless the context or subject matter otherwise requires:

1. “Borrower” means a person or entity that seeks out, or is solicited by a money broker for the purpose of money brokering.
2. “Commissioner” means the commissioner of financial institutions.
3. “Money broker” means a person or entity who, in the ordinary course of business, engages in money brokering.
4. “Money brokering” means the act of arranging or providing loans or leases as a form of financing, or advertising or soliciting either in print, by letter, in person, or otherwise, the right to find lenders or provide loans or leases for persons or businesses desirous of obtaining funds for any purposes.
5. “Net branch” means an office at which a licensed money broker allows a separate person that does not hold a valid North Dakota money brokers license to originate loans under the license of the money broker.
6. “Net branch arrangement” means an arrangement under which a licensed money broker enters an agreement whereby its designated branch manager has the appearance of ownership of the licensee by, among other things, sharing in the profits or losses, establishing, leasing, or renting the branch premises, entering other contractual relationships with vendors such as for telephones, utilities, and advertising, having control of a corporate checkbook, or exercising control of personnel through the power to hire or fire such individuals. A person may be considered to be utilizing a net branch if the net branch agreement requires the branch manager to indemnify the licensee for damages from any apparent, express, or implied agency representation by or through the branch’s actions or if the agreement requires the branch manager to issue a personal check to cover operating expenses whether or not funds are available from an operating account of the licensee.
7. “Precomputed loan” means a loan that is expressed as a sum comprising the principal and the amount of the loan finance charge computed in advance.

Source: S.L. 2007, ch. 141, § 4; 2011, ch. 105, § 1; 2015, ch. 120, § 1, effective July 1, 2015.

13-04.1-02. Money broker license required.

Except as otherwise provided, a person other than a money broker licensed and authorized under this chapter may not engage in money brokering in the state of North Dakota without a money broker license issued by the commissioner. A person engages in money brokering in North Dakota if the borrower resides in North Dakota.

Source: S.L. 1979, ch. 189, § 2; 1995, ch. 410, § 1; 1999, ch. 132, § 1; 2001, ch. 142, § 1; 2007, ch. 141, § 5.

13-04.1-02.1. Entities exempted from licensing requirements.

This chapter does not apply to:

1. Banks;
2. Credit unions;
3. Savings and loan associations;
4. Insurance companies;
5. Individuals licensed under chapter 13-10;
6. State or federal agencies and employees of state or federal agencies solely pursuant to the individual’s official duties as an employee of the state or federal agency;
7. Institutions chartered by the farm credit administration;
8. Trust companies;
9. Any other person or business regulated and licensed to lend money by the state of North Dakota;
10. A real estate broker, broker, or a real estate salesperson as defined in section 43-23-06.1 in the brokering of loans to assist a person in obtaining financing for real estate sold by the real estate broker, broker, or real estate salesperson;
11. Any person, retail seller, or manufacturer providing financing for its own property or inventory held as a normal course of business, or to leases on any real property;
12. A certified development corporation that qualifies as a nonprofit entity under section 501(c)(3) of the federal Internal Revenue Code [26 U.S.C. 501(c)(3)] in the offers of:
    1. Loan products primarily limited to the small business administration, United States department of agriculture, or other government loan products; or
    2. Nongovernmental loan products that are limited to loans to promote community development or home ownership, and these loans are offered with favorable terms including an interest rate at or below the wall street journal prime rate and loan fees of less than a quarter percent of the loan origination balance; or
13. A nonprofit corporation that qualifies as a nonprofit entity under section 501(c)(3) of the Internal Revenue Code [26 U.S.C. 501(c)(3)] which is not primarily in the business of soliciting or brokering loans, if the nonprofit corporation makes five or fewer loans in a given calendar year, makes these loans to promote community development or home ownership, and offers these loans on favorable terms, including an interest rate at or below the wall street journal prime rate and loan fees of less than a quarter percent of the loan origination balance.

Source: S.L. 2007, ch. 141, § 6; 2009, ch. 141, § 2; 2015, ch. 120, § 2, effective July 1, 2015; 2021, ch. 112, § 1, effective August 1, 2021.

13-04.1-03. Application for money broker license.

Every application for a money broker license or branch registration, or for a renewal thereof, must be made upon forms designed and furnished by the department of financial institutions and must contain any information which the department shall deem necessary and proper. A branch registration that constitutes a net branch or net branching arrangement is prohibited. The department may further require any application to provide additional information which is not requested on the application form. The applicant must register with the North Dakota secretary of state if so required.

Source: S.L. 1979, ch. 189, § 3; 2001, ch. 88, § 72; 2005, ch. 125, § 4; 2011, ch. 105, § 2.

13-04.1-04. Fee to accompany application for money broker license.

The application for license must be in writing, under oath, and in the form prescribed by the commissioner. The application must give the location where the business is to be conducted and must contain any further information the commissioner requires, including the names and addresses of the partners, officers, directors, trustees, and the principal owners or members, as will provide the basis for the investigation and findings contemplated by section 13-04.1-03. At the time of making such application, the applicant shall include payment in the sum of four hundred dollars, which is not subject to refund, as a fee for investigating the application, and the sum of four hundred dollars for the annual license fee. In addition, the applicant must pay a fifty dollar annual fee for each branch location registered to engage in money brokering in this state. Fees must be deposited in the financial institutions regulatory fund.

Source: S.L. 1979, ch. 189, § 4; 1985, ch. 189, § 1; 1989, ch. 96, § 14; 2003, ch. 116, § 2; 2005, ch. 125, § 5; 2009, ch. 141, § 3; 2011, ch. 105, § 3; 2015, ch. 120, § 3, effective July 1, 2015.

13-04.1-04.1. Surety bond required.

1. Each licensee shall maintain a surety bond in an amount not less than fifty thousand dollars. The surety bond must be in a form prescribed by the commissioner.
2. When an action is commenced on a licensee’s bond, the commissioner may require the filing of a new bond.
3. Immediately upon recovery upon any action on the bond, the licensee shall file a new bond.

Source: S.L. 2011, ch. 105, § 4; 2019, ch. 123, § 5, effective July 1, 2019.

13-04.1-04.2. Minimum net worth required.

A minimum net worth must be continuously maintained by every licensee in accordance with this section.

1. Minimum net worth must be maintained in the amount of twenty-five thousand dollars.
2. If the net worth of a licensee falls below the minimum net worth set forth in subsection 1, the licensee shall provide a plan, subject to the approval of the commissioner, to increase the licensee’s net worth to an amount in conformance with this section. Submission of a plan under this section must be made within twenty business days of a notice from the commissioner which states the licensee is not in compliance with subsection 1. If the licensee does not submit a plan under this section, fails to comply with an approved plan, or has repeated violations of subsection 1, the commissioner may revoke the license.

Source: S.L. 2011, ch. 105, § 5.

13-04.1-05. Expiration and renewal of license.

All licenses required herein expire on December thirty-first of each year and may be renewed. Renewals are effective the succeeding January first. Applications for renewal must be submitted thirty days before the expiration of the license and must be accompanied by the required annual fees, which are not subject to refund. The form and content of renewal applications must be determined by the department of financial institutions, and a renewal application may be denied upon the same grounds as would justify denial of an initial application. When a licensee has been delinquent in renewing the licensee’s license, the department may charge an additional fee of fifty dollars for the renewal of such license. A money broker license is not transferable. If the commissioner determines that an ownership change has occurred in a sole proprietorship, partnership, limited liability partnership, corporation, or limited liability corporation that was previously granted a money broker license, the commissioner may require a new application from the purchaser. The application must be filed within forty-five days from the date change of ownership is consummated. The department shall act on the application within sixty days from the date the application is received but may extend the review period for good cause. The money broker license granted to the previous owner continues in effect to the new purchaser until the application is either granted or denied.

Source: S.L. 1979, ch. 189, § 5; 1999, ch. 133, § 1; 2001, ch. 88, § 73; 2003, ch. 118, § 2; 2005, ch. 125, § 6; 2009, ch. 141, § 4.

13-04.1-05.1. Automatic six-month extension of license during 2009 calendar year. [Repealed]

Source: S.L. 2009, ch. 141, § 6; repealed by 2019, ch. 123, § 10, effective July 1, 2019.

13-04.1-06. Powers of the department of financial institutions.

Insofar as consistent with the provisions of law, the department of financial institutions has the power to:

1. Determine the qualifications of all applicants based on financial responsibility, financial condition, business experience, character, and general fitness which must reasonably warrant the belief that the applicant’s business will be conducted lawfully and fairly. In determining whether this qualification is met, and for the purpose of investigating compliance with the chapter, the commissioner may review and consider the relevant business records and capital adequacy of the applicant and the competence, experience, integrity, and financial ability of a person who is a member, partner, director, officer, or twenty-five percent or more shareholder of the applicant.
2. Establish codes of ethical conduct for licensees.

Source: S.L. 1979, ch. 189, § 6; 2001, ch. 88, § 74; 2003, ch. 117, § 6.

13-04.1-07. Manner in which records to be kept.

Every money broker licensed under this chapter shall keep a record of all sums collected by them and of all loans and leases completed as a result of their efforts for a period of six years from the date of last entry thereon. The records of a licensee may be maintained electronically provided they can be reproduced upon request by the department of financial institutions and within the required statutory time period provided in this section. When a licensee ceases operations for any reason, the licensee shall inform the department of the location of the records. In addition, the licensee shall provide the name of the individual responsible for maintenance of the records. The licensee shall notify the department within ten business days of the change of the location of the records or the change of the individual responsible for maintenance of the records.

Source: S.L. 1979, ch. 189, § 7; 1999, ch. 132, § 2; 2003, ch. 117, § 8; 2011, ch. 105, § 6.

13-04.1-08. Revocation of license — Suspension of license — Surrender of license.

1. The commissioner may issue and serve upon any licensee an order suspending or revoking a licensee’s license if the commissioner finds that:
   1. The licensee has failed to pay the annual license fee under this chapter or any examination fee imposed by the commissioner under the authority of this chapter.
   2. The licensee, either knowingly or without the exercise of due care to prevent the same, has violated any provision of this chapter or any regulation or order lawfully made pursuant to and within the authority of this chapter.
   3. Any fact or condition existing at the time of the original application for such license which clearly would have warranted the department of financial institutions in refusing originally to issue such license.
   4. The licensee has failed to maintain the required bond.
   5. The licensee has failed to maintain registration with the secretary of state if so required.
2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32.
3. If no hearing is requested within twenty days of the date the order is served upon the licensee, or if a hearing is held and the commissioner finds that the record so warrants, the commissioner may enter a final order suspending or revoking the license.
4. If the commissioner finds that probable cause for revocation of any license exists and that enforcement of the chapter requires immediate suspension of such license pending investigation, it may, upon written notice, enter an order suspending such license for a period not exceeding sixty days, pending the holding of a hearing as prescribed in this chapter.
5. Any licensee may surrender the licensee’s license by delivering it to the department of financial institutions with written notice of its surrender, but such surrender does not affect the licensee’s civil or criminal liability for acts committed prior thereto.

Source: S.L. 1979, ch. 189, § 8; 2001, ch. 88, § 75; 2011, ch. 105, § 7.

13-04.1-08.1. Suspension and removal of money broker officers and employees.

1. The commissioner of financial institutions may issue and serve upon a current or former money broker officer or employee and upon the licensee involved an order stating:
   1. That the current or former officer or employee is willfully engaging or has willfully engaged in any of the following conduct:
      1. Violating a law, rule, order, or written agreement with the commissioner.
      2. Engaging in harassment or abuse, the making of false or misleading representations, or engaging in unfair practices involving lending activity.
      3. Performing an act of commission or omission or practice which is a breach of trust or a breach of fiduciary duty.
   2. The term of the suspension or removal from employment and participation within the conduct or the affairs of a money broker.
2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32.
3. If a hearing is not requested within twenty days of the date the order is served, or if a hearing is held and the commissioner finds that the record so warrants, the commissioner may enter a final order suspending or removing the current or former employee. The current or former officer or employee may request a termination of the final order after a period of no less than three years.
4. A contested or default suspension or removal order is effective immediately upon service of the final order on the current or former officer or employee and upon the licensee. A consent order is effective as agreed. Any current or former officer or employee suspended or removed from employment and participation within the conduct or the affairs of a money broker pursuant to this section is not eligible, while under suspension or removal, to be employed or otherwise participate in the affairs of any financial corporation, financial institution, credit union, or any other entity licensed by the department of financial institutions.
5. When any current or former officer or employee, or other person participating in the conduct of the affairs of a licensee is charged with a felony in state or federal court which involves dishonesty or breach of trust, the commissioner may immediately suspend the person from office or prohibit the person from further participation in the affairs of the money broker, or both. The order is effective immediately upon service of the order on the licensee and the person charged and remains in effect until the criminal charge is finally disposed of or until modified by the commissioner. If a judgment of conviction, federal pretrial diversion, or similar state order or judgment is entered, the commissioner may order that the suspension or prohibition be made permanent. A finding of not guilty or other disposition of the charge does not preclude the commissioner from pursuing administrative or civil remedies.
6. Under this section, a person engages in conduct “willfully” if the person acted intentionally in the sense that the person was aware of what the person was doing.

Source: S.L. 2003, ch. 117, § 7; 2011, ch. 105, § 8.

13-04.1-09. Prohibited acts and practices.

It is a violation of this chapter for a person subject to this chapter to knowingly:

1. Make or cause to be made any material false statement or representation in any application or other document or statement required to be filed under any provision of this chapter, or to omit to state any material statement or fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading.
2. Directly or indirectly, employ any device, scheme, or artifice to defraud or mislead borrowers or lenders to defraud any person.
3. Directly or indirectly, make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading in connection with the procurement or promise of procurement of any lender or loan funds.
4. Engage in any unfair or deceptive practice toward any person.
5. Obtain property by fraud or misrepresentation.
6. Solicit, advertise, or enter into a contract for specific interest rates, points, or other financing terms unless the terms are actually available at the time of soliciting, advertising, or contracting.
7. Conduct any business covered by this chapter without holding a valid license as required under this chapter, or assist or aid and abet any person in the conduct of business under this chapter without a valid license as required under this chapter.
8. Fail to make disclosures as required by this chapter and any other applicable state or federal law and regulations.
9. Fail to comply with this chapter or rules adopted under this chapter, or fail to comply with any other state or federal law, including the rules and regulations thereunder, applicable to any business authorized or conducted under this chapter.
10. Make, in any manner, any false or deceptive statement or representation, including, with regard to the rates, points, or other financing terms or conditions for a residential mortgage loan or engage in bait and switch advertising.
11. Negligently make any false statement or knowingly and willfully make any omission of material fact in connection with any information or reports filed with a governmental agency or the nationwide mortgage licensing system and registry or in connection with any investigation conducted by the commissioner or another governmental agency.
12. Make any payment, threat, or promise, directly or indirectly, to any person for the purposes of influencing the independent judgment of the person in connection with a loan or make any payment, threat, or promise, directly or indirectly, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property.
13. Collect, charge, attempt to collect or charge, or use or propose any agreement purporting to collect or charge any fee prohibited by this chapter.
14. Cause or require a borrower to obtain property insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer.
15. Fail to truthfully account for moneys belonging to a party to a loan transaction.
16. Conduct another business within the same office, suite, room, or place of business at which the licensee engages in money broker business unless the commissioner provides written authorization after a determination the other business is not contrary to the best interests of any borrower or potential borrower.
17. Enter any agreement that constitutes a precomputed loan.

Source: S.L. 1979, ch. 189, § 9; 2011, ch. 105, § 9; 2015, ch. 120, § 4, effective July 1, 2015.

13-04.1-09.1. Advance fees prohibited — Exception.

A money broker may not take any type of fee in advance before the funding of the loan or lease, unless the money broker is licensed under this chapter.

Source: S.L. 1993, ch. 136, § 1; 1999, ch. 132, § 3.

13-04.1-09.2. Maximum charges permitted for loans not in excess of one thousand dollars — Refund — Installment payments — Permitted charges. [Repealed]

Source: S.L. 2009, ch. 141, § 5; repealed by 2021, ch. 112, § 5, effective August 1, 2021.

13-04.1-09.3. Maximum charges permitted for loans — Installment payments — Permitted charges.

1. Interest charges and other fees must be set at rates, amounts, and terms as agreed to by the parties within the loan contract. However, a licensee may not contract for or receive finance charges pursuant to a loan in excess of an annual rate of thirty-six percent, including all charges and fees necessary for the extension of credit incurred at the time of origination.
2. Additional charges may be assessed for nonpayment or late payment as agreed to by the parties within the loan contract. However, a licensee may not contract for or receive charges in excess of five percent of the payment. For loans originated for fifty thousand dollars or less, these charges may not exceed twenty dollars for each nonpayment or late payment. The charge may be collected at the time of the default or any time after default. However, if the charge is taken out of any payment received after a default occurs and if the deduction results in the default of a subsequent payment, a charge may not be made for the subsequent default. This restriction does not apply to court costs; lawful fees for the filing, recording, or releasing in any public office of any instrument securing a loan; and the identifiable charge or premium for insurance provided for by rule.
3. Additional restrictions for small loans originated for less than two thousand dollars include the following:
   1. Installment loans must be paid in equal installments as agreed to by the parties within the loan contract. However, the maximum term for installment loans may not exceed thirty-six months, and a balloon payment is prohibited.
   2. Outstanding balances of existing loans may be refinanced into a new small loan of less than two thousand dollars, but the combination of any refinance fees along with any fees collected as part of the original loans may not exceed one hundred dollars per calendar year.
   3. Additional charges may be assessed as part of a loan extension or deferment of payment agreed to by the parties within the agreement. However, a licensee may not contract for or receive charges in excess of one hundred dollars for these loan extensions or deferments per calendar year.

Source: S.L. 2021, ch. 112, § 2, effective August 1, 2021.

13-04.1-10. Orders and injunctions.

Whenever it appears to the department of financial institutions either upon complaint or otherwise, that any person has engaged in, is engaging in, or is about to engage in any act or practice or transaction which is prohibited by this chapter, or by any order of the department issued pursuant to any section of this chapter or which is declared to be illegal in this chapter, the department may, in its discretion:

1. Issue any order, including cease and desist, stop, and suspension orders, which it deems necessary or appropriate in the public interest or for the protection of the public; provided, however, that any person aggrieved by an order issued pursuant to this subsection may request a hearing before the department if such request is made within ten days after receipt of the order. Such hearing must be held in accordance with chapter 28-32 as must any appeal therefrom.
2. Apply to the district court of any county in this state for an injunction restraining such person and the agents, employees, partners, officers, and directors of such person from continuing such act, practice, or transaction of engaging therein or doing any acts in furtherance thereof, and for such other and further relief as the facts may warrant. In any proceeding for an injunction, the department may apply for and on due showing be entitled to have issued the court’s subpoena requiring the appearance forthwith of any defendants and their agents, employees, partners, officers, or directors, and the production of such documents, books, and records as may appear necessary for the hearing upon the petition for an injunction. Upon proof of any of the offenses described in this section, the court may grant such injunction as the facts may warrant. The court may not require the department to post a bond.

Source: S.L. 1979, ch. 189, § 10; 2001, ch. 88, § 76.

13-04.1-11. Investigations, subpoenas, and examination authority.

In addition to any authority allowed under this chapter, the commissioner may conduct investigations and examinations as follows:

1. The department of financial institutions in its discretion:
   1. May make such public or private investigation or examination within or outside this state as it deems necessary to determine whether any person has violated or is about to violate any provision of this chapter or any rule or order hereunder, or to aid in the enforcement of this chapter or in the prescribing of rules and forms hereunder. The licensee shall pay an investigation or examination fee and must be charged by the department of financial institutions at an hourly rate to be set by the commissioner, sufficient to cover all reasonable expenses of the department associated with the visitation provided for by this section. Fees must be deposited in the financial institutions regulatory fund.
   2. May require or permit any person to file a statement in writing, under oath or otherwise as the department determines, as to all the facts and circumstances concerning the matter to be investigated or examined.
   3. May publish information concerning any violation of this chapter or any rule or order hereunder.
2. For the purpose of any investigation, examination, or proceeding under this chapter, the department of financial institutions may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the department deems relevant or material to the inquiry.
3. In case of contumacy by, or refusal to obey a subpoena issued to, any person, the district court, upon application by the department of financial institutions, may issue to the person an order requiring such person to appear before the department, there to produce documentary evidence if so ordered or to give evidence touching the matter in question under investigation or examination. Failure to obey the order of the court may be punished by the court as a contempt of court.
4. No person is excused from attending and testifying or from producing any document or record before the department of financial institutions, or in obedience to the subpoena of the department, or in any proceeding instituted by the department, on the grounds that the testimony or evidence, documentary or otherwise, required of such person may tend to incriminate such person or subject such person to a penalty forfeiture; but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which such person is compelled, after claiming the privilege against self-incrimination, to testify or produce evidence, documentary or otherwise, except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
5. For purposes of initial licensing, license renewal, license suspension, license conditioning, license revocation or termination, or general or specific inquiry or investigation to determine compliance with this chapter, the commissioner may access, receive, and use any books, accounts, records, files, documents, information, or evidence, including:
   1. Criminal, civil, and administrative history information, including nonconviction data;
   2. Personal history and experience information, including independent credit reports obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act; and
   3. Any other documents, information, or evidence the commissioner deems relevant to the inquiry or investigation regardless of the location, possession, control, or custody of such documents, information, or evidence.
6. For purposes of investigating violations or complaints arising under this chapter, or for purposes of examination, the commissioner may review, investigate, or examine any licensee or person subject to this chapter, as often as necessary in order to carry out the purposes of this chapter.
7. Each licensee or person subject to this chapter shall make available to the commissioner upon request the books and records relating to the operations of such licensee or person subject to this chapter. The commissioner shall have access to such books and records and interview the officers, principals, mortgage loan originators, employees, independent contractors, agents, and customers of the licensee or person subject to this chapter concerning their business.
8. Each licensee or person subject to this chapter shall make or compile reports or prepare other information as directed by the commissioner in order to carry out the purposes of this section, including:
   1. Accounting compilations;
   2. Information lists and data concerning loan transactions in a format prescribed by the commissioner; or
   3. Such other information deemed necessary to carry out the purposes of this section.
9. In making any investigation or examination authorized by this chapter, the commissioner may control access to any documents and records of the licensee or person under investigation or examination. The commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, a person may not remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the commissioner. Unless the commissioner has reasonable grounds to believe the documents or records of the licensee have been, or are at risk of being altered or destroyed for purposes of concealing a violation of this chapter, the licensee or owner of the documents and records may have access to the documents or records as necessary to conduct its ordinary business affairs.
10. In order to carry out the purposes of this section, the commissioner may:
    1. Retain accountants, or other professionals and specialists as examiners, auditors, or investigators to conduct or assist in the conduct of examinations or investigations;
    2. Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information, or evidence obtained under this section;
    3. Use, hire, contract, or employ publicly or privately available analytical systems, methods, or software to examine or investigate the licensee, individual, or person subject to this chapter;
    4. Accept and rely on examination or investigation reports made by other government officials, within or without this state; and
    5. Accept audit reports made by an independent certified public accountant for the licensee or person subject to this chapter in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of the examination, report of investigation, or other writing of the commissioner.
11. The authority of this section remains in effect, whether such a licensee or person subject to this chapter acts or claims to act under any licensing or registration law of this state or claims to act without such authority.
12. A licensee or person subject to investigation or examination under this section may not knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, computer records, or other information.

Source: S.L. 1979, ch. 189, § 11; 1989, ch. 96, § 15; 2001, ch. 88, § 77; 2011, ch. 75, § 2; 2011, ch. 105, § 10.

13-04.1-11.1. Response to department requests.

An applicant, licensee, or other person subject to the provisions of this chapter shall comply with requests for information, documents, or other requests from the department of financial institutions within the time specified in the request, which must be a minimum of ten days, or, if no time is specified, within thirty days of the mailing of the request by the department of financial institutions. If the request for information is in regard to a new application or renewal of an existing application and is not received within the time specified in the request, or within thirty days of the mailing of the request, the department may deny the application.

Source: S.L. 2003, ch. 117, § 9.

13-04.1-12. Remedies not exclusive.

The remedies provided for in this chapter are in addition to and not exclusive of any other remedies provided by law.

Source: S.L. 1979, ch. 189, § 12.

13-04.1-13. Penalty.

Any person violating any of the provisions of this chapter or any rule or order of the department of financial institutions made pursuant to the provisions of this chapter or who engages in any act, practice, or transaction declared by any provision of this chapter to be unlawful is guilty of a class C felony. The commissioner may impose a civil money penalty not to exceed five thousand dollars per violation upon a person or agency who willfully violates a law, rule, written agreement, or order under this chapter. An interested party may appeal the assessment of a civil money penalty under the provisions of chapter 28-32 by filing a written notice of appeal within twenty days after service of the assessment of civil money penalties. A civil money penalty collected under this section must be paid to the state treasurer and deposited in the financial institutions regulatory fund.

Source: S.L. 1979, ch. 189, § 13; 2001, ch. 88, § 78; 2003, ch. 117, § 10; 2009, ch. 140, § 1.

13-04.1-14. Confidentiality.

To promote more effective regulation and reduce regulatory burden through supervisory information sharing:

1. Except as otherwise provided in Public Law 110-289, section 1512, the requirements under any federal law, chapter 44-04, or section 6-01-07.1, regarding the privacy or confidentiality of any information or material provided to the nationwide mortgage licensing system and registry, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, continue to apply to such information or material after the information or material has been disclosed to the nationwide mortgage licensing system and registry. Such information and material may be shared with all state and federal regulatory officials with mortgage industry oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal law, chapter 44-04, or section 6-01-07.1.
2. For these purposes, the commissioner may enter agreements or sharing arrangements with other governmental agencies, the conference of state bank supervisors, the American association of residential mortgage regulators, or other associations representing governmental agencies.
3. Information or material that is subject to a privilege or confidentiality under subsection 1 is not subject to:
   1. Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the respective state; or
   2. Subpoena or discovery, or admission into evidence, in any administrative process, unless with respect to any privilege held by the nationwide mortgage licensing system and registry with respect to such information or material, the person to whom such information or material pertains waives, in whole or in part, in the discretion of such person, that privilege.
4. The commissioner shall take all necessary steps, under any applicable law or rule, to protect the disclosure of information or material that is subject to a privilege or confidentiality under subsection 1. Records subject to a privilege or confidentiality under subsection 1 may be required to be disclosed only pursuant to an order of the court. The court ordering the disclosure shall issue a protective order to protect the confidential nature of the records.
5. Application of chapter 44-04 or section 6-01-07.1, relating to the disclosure of confidential supervisory information or any information or material described in subsection 1 which is inconsistent with subsection 1, is superseded by the requirements of this section.

Source: S.L. 2011, ch. 105, § 11.

13-04.1-15. Change of name or address.

A licensee is required to submit within twenty business days of the date of change notification of a change of name or change of address. The notification must be in the form prescribed by the commissioner.

Source: S.L. 2011, ch. 105, § 12; 2015, ch. 120, § 5, effective July 1, 2015.

13-04.1-16. Call reports.

Each licensee shall submit to the nationwide mortgage licensing system and registry reports of condition which must be in such form and must contain such information as the nationwide mortgage licensing system and registry may require.

Source: S.L. 2011, ch. 105, § 13.

13-04.1-17. Report to nationwide mortgage licensing system and registry.

Notwithstanding state privacy law, the commissioner shall report regularly violations of this chapter, as well as enforcement actions and other relevant information, to the nationwide mortgage licensing system and registry subject to the provisions contained in section 13-10-15.

Source: S.L. 2011, ch. 105, § 14.

13-04.1-18. Disclosure of customer information.

Except for provisions of chapter 6-08.1 which are inconsistent with this chapter, chapter 6-08.1 applies to all money brokers licensed under this chapter.

History. S.L. 2015, ch. 120, § 6, effective July 1, 2015.

13-05-01. Administration.

The department of financial institutions shall use its facilities to administer and enforce this chapter. Any person or persons delegated to administer this chapter may not have financial interests directly or indirectly in any business which is subject to this chapter.

Source: S.L. 1969, ch. 149, § 1; 2001, ch. 88, § 79.

Collateral References.

Regulation and licensing of collection and commercial agencies or representative thereof, 54 A.L.R.2d 881, 885.

Operations of collection agency as unauthorized practice of law, 27 A.L.R.3d 1152.

Use of criminal process to collect debt as abuse of process, 27 A.L.R.3d 1202.

Emotional distress, debtor’s recovery under tort of intentional or reckless infliction of emotional distress, for damages resulting from debt collection methods, 87 A.L.R.3d 201.

13-05-01.1. Definitions.

As used in this chapter, unless the context or subject matter otherwise requires:

1. “Collection agency” means a person that, in the ordinary course of business, engages in debt collection.
2. “Commissioner” means the commissioner of financial institutions.
3. “Communication” means the conveyance or receipt of information regarding or facilitating the collection of a debt, directly or indirectly, to or from any person through any medium.
4. “Credit card payment” means a payment made by a payment card which incurs a credit card interchange fee to the collection agency, regardless of the type of payment card used.
5. “Creditor” means a person that offers or extends credit creating a debt or to which a debt is owed. The term does not include a person to the extent that person receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of that debt.
6. “Debt” means an obligation or alleged obligation to pay money arising out of a transaction, regardless of whether the obligation has been reduced to a judgment.
7. “Debt collection” means the act of collecting or attempting to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. The term also includes solicitation of debts for the purpose of collection and accepting assignment of debts for the purpose of collection.
8. “Insolvent” means the point at which a licensed entity’s liabilities exceed the entity’s tangible assets, which only include assets that have a physical existence and are capable of being assigned a value.
9. “Mortgage servicing company” means a company performing the required duties of a mortgage seller, such as collecting payments, releasing the lien on full payment, and confirming taxes are paid and insurance is in force.

Source: S.L. 2007, ch. 141, § 7; 2011, ch. 106, § 2; 2019, ch. 124, § 1, effective August 1, 2019.

13-05-02. Collection agency license required.

Except as otherwise provided in this chapter, no person, other than a collection agency licensed and authorized under this chapter, may engage in debt collection in the state of North Dakota without a collection agency license issued by the commissioner. A person engages in debt collection in North Dakota if the debtor resides in North Dakota.

Source: S.L. 1969, ch. 149, § 2; 1993, ch. 137, § 1; 2005, ch. 126, § 1; 2007, ch. 141, § 8.

13-05-02.1. Branch offices.

The commissioner may grant approval for each branch office which must be submitted by an application. When used in this chapter, “branch office” means a physical location where collection activity is carried out, other than the location where the collection agency license was granted, but does not include a virtual office. As used in this chapter, “virtual office” means a remote location from which employees can work under the full control and monitoring of the collection agency through telecommunications and computer links. Records may not be maintained at a virtual office and a virtual office may not be held open to the public as a place of business.

Source: S.L. 1991, ch. 140, § 1; 2011, ch. 106, § 3.

13-05-02.2. Child support collection agencies. [Effective through August 31, 2022]

1. Notwithstanding sections 13-05-02 and 13-05-02.3, a collection agency attempting in any manner to collect child support as defined in section 14-09-09.10 must be licensed under this chapter if either the child support debtor or creditor reside within this state, if the child support debt arises under an order issued by a court of this state, or if a record of the child support debt is being maintained on the statewide automated data processing system under section 50-09-02.1.
2. A collection agency licensed under this section may not:
   1. Impose a fee or charge for any child support collected primarily through the efforts of a governmental agency;
   2. Impose a fee or charge for collection of a current child support payment; or
   3. Designate a current child support payment as past-due support or other amount owed.
3. If the child support debt arises under an order issued by a court of this state, or if a record of the child support debt is being maintained on the statewide automated data processing system under section 50-09-02.1, all child support payments collected by a collection agency must be paid to the department of human services within five business days for disbursement under section 14-09-25. Child support payments disbursed under section 14-09-25 may not be redirected to a collection agency unless specifically permitted by rules adopted by the department of human services.
4. A collection agency failing to pay child support payments to the department of human services as required in this section is liable to the obligor for three times the amount improperly withheld by the collection agency or five hundred dollars, whichever is greater, in addition to any other remedy or damages permitted by law. The department of human services is not required to give credit for payments withheld by a collection agency in violation of this section.
5. Any person contracting for services with a collection agency for the collection of child support may cancel the contract without a fee or charge upon thirty days’ written notice.

Source: S.L. 2005, ch. 415, § 1; 2007, ch. 141, § 9.

13-05-02.2. Child support collection agencies. [Effective September 1, 2022]

1. Notwithstanding sections 13-05-02 and 13-05-02.3, a collection agency attempting in any manner to collect child support as defined in section 14-09-09.10 must be licensed under this chapter if either the child support debtor or creditor reside within this state, if the child support debt arises under an order issued by a court of this state, or if a record of the child support debt is being maintained on the statewide automated data processing system under section 50-09-02.1.
2. A collection agency licensed under this section may not:
   1. Impose a fee or charge for any child support collected primarily through the efforts of a governmental agency;
   2. Impose a fee or charge for collection of a current child support payment; or
   3. Designate a current child support payment as past-due support or other amount owed.
3. If the child support debt arises under an order issued by a court of this state, or if a record of the child support debt is being maintained on the statewide automated data processing system under section 50-09-02.1, all child support payments collected by a collection agency must be paid to the department of health and human services within five business days for disbursement under section 14-09-25. Child support payments disbursed under section 14-09-25 may not be redirected to a collection agency unless specifically permitted by rules adopted by the department of health and human services.
4. A collection agency failing to pay child support payments to the department of health and human services as required in this section is liable to the obligor for three times the amount improperly withheld by the collection agency or five hundred dollars, whichever is greater, in addition to any other remedy or damages permitted by law. The department of health and human services is not required to give credit for payments withheld by a collection agency in violation of this section.
5. Any person contracting for services with a collection agency for the collection of child support may cancel the contract without a fee or charge upon thirty days’ written notice.

Source: S.L. 2005, ch. 415, § 1; 2007, ch. 141, § 9; 2021, ch. 352, § 24, effective September 1, 2022.

13-05-02.3. Entities exempt from licensing requirements.

This chapter does not apply to:

1. Attorneys at law who are licensed to practice in the state of North Dakota. This exemption is limited to the actions of the licensed attorney and does not extend to persons either employed by the attorney or acting on behalf of the attorney;
2. Licensed real estate brokers if the engaged activity is regulated as part of that individual’s professional license;
3. Banks;
4. Trust companies;
5. Building and loan associations;
6. Credit unions;
7. Agencies of a state or of the federal government and employees of state or federal agencies solely pursuant to the individual’s official duties as an employee of the state or federal agency;
8. Abstract companies doing an escrow business;
9. Creditors collecting their own debts;
10. Mortgage servicing company;
11. Individuals or firms who purchase or take accounts receivable for collateral purposes;
12. Individuals employed in the capacity of creditmen upon the staff of an employer not engaged in the business of a collection agency; or
13. A public officer, receiver, or trustee acting under the order of a court.

Source: S.L. 2007, ch. 141, § 10; 2011, ch. 106, § 4; 2021, ch. 112, § 3, effective August 1, 2021.

13-05-03. Application for a collection agency license.

1. Each application for a collection agency license, or for a renewal thereof, must be in the form prescribed by the commissioner and must contain the following information:
   1. The full name and proposed business name of the applicant.
   2. The address where the business is to be conducted.
   3. The names and addresses of the applicant and those associated with the applicant. If the applicant is a corporation, the application must contain the names of the officers of the corporation. If the applicant is a limited liability company, the application must contain the names of the managers of the limited liability company. The applicant must register with the North Dakota secretary of state if so required.
   4. Such additional information which the department of financial institutions shall require.
2. To fulfill the purposes of this chapter, the commissioner may establish relationships or contracts with a nationwide multistate licensing system and registry or other entities designated by a nationwide multistate licensing system and registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to the chapter. The applicant shall pay directly to such nationwide multistate licensing system any additional fee relating to participation in such nationwide multistate licensing system.
3. In connection with an application for licensing as a collection agency, or any license renewals, the applicant shall furnish to the nationwide multistate licensing system information concerning the applicant’s identity, which may include:
   1. Fingerprints for submission to the federal bureau of investigation, and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check;
   2. Personal history and experience in a form prescribed by the nationwide multistate licensing system, including the submission of authorization for the nationwide multistate licensing system and the commissioner to obtain:
      1. An independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act; and
      2. Information related to any administrative, civil, or criminal findings by any governmental jurisdiction; and
   3. Any other documents, information, or evidence the commissioner deems relevant to the application regardless of the location, possession, control, or custody of such documents, information, or evidence.
4. For the purposes of this section and in order to reduce the points of contact which the federal bureau of investigation may have to maintain for purposes of subsection 3, the commissioner may use the nationwide multistate licensing system and registry as a channeling agent for requesting information from and distributing information to the department of justice or any governmental agency.
5. For the purposes of this section and in order to reduce the points of contact which the commissioner may have to maintain for purposes of subsection 3, the commissioner may use the nationwide multistate licensing system and registry as a channeling agent for requesting and distributing information to and from any source so directed by the commissioner.

Source: S.L. 1969, ch. 149, § 3; 1993, ch. 54, § 75; 2001, ch. 88, § 80; 2005, ch. 125, § 7; 2011, ch. 106, § 5; 2013, ch. 115, § 2.

13-05-04. Application requirements — Fee to accompany application for collection agency license.

The application for a collection agency license must be in writing, under oath, and in the form prescribed by the commissioner. The application must give the location where the business is to be conducted and must contain any further information the commissioner requires, including the names and addresses of the partners, officers, directors, trustees, and the principal owners or members as will provide the basis for the investigation and findings contemplated by section 13-05-03. At the time of making such application, the applicant shall include payment in the sum of four hundred dollars, which is not subject to refund, as a fee for investigating the application, and the sum of four hundred dollars for the annual license. In addition, the applicant shall pay a fifty dollar annual fee for each branch location. Fees must be deposited in the financial institutions regulatory fund.

Source: S.L. 1969, ch. 149, § 4; 1979, ch. 190, § 1; 1989, ch. 96, § 16; 1991, ch. 140, § 2; 2003, ch. 116, § 3; 2011, ch. 106, § 6; 2015, ch. 120, § 7, effective July 1, 2015.

13-05-04.1. Surety bond required.

1. Each licensee shall maintain a surety bond in the amount of fifty thousand dollars.
2. The surety bond must be in a form as prescribed by the commissioner.
3. When an action is commenced on a licensee’s bond, the commissioner may require the filing of a new bond.
4. Immediately upon recovery upon any action on the bond, the licensee shall file a new bond.

Source: S.L. 2011, ch. 106, § 7; 2019, ch. 123, § 6, effective July 1, 2019.

13-05-04.2. Minimum net worth required.

A minimum net worth must be continuously maintained by every licensee in accordance with this section.

1. Minimum net worth must be maintained in the amount of twenty-five thousand dollars.
2. If the net worth of a licensee falls below the minimum net worth as set forth in subsection 1, the licensee shall provide a plan, subject to the approval of the commissioner, to increase the licensee’s net worth to an amount in conformance with this section. Submission of a plan under this section must be made within twenty business days of a notice from the commissioner that the licensee is not in compliance with subsection 1. If the licensee does not submit a plan under this section, fails to comply with an approved plan, or has repeated violations of subsection 1, the commissioner may revoke the license.

Source: S.L. 2011, ch. 106, § 8.

13-05-05. Expiration and renewal of license.

All licenses required herein expire on December thirty-first of each year and may be renewed. Applications for renewal must be submitted thirty days before the expiration of the license and must be accompanied by the required annual fees, which are not subject to refund. The form and content of renewal applications must be determined by the department of financial institutions and a renewal application may be denied upon the same grounds as would justify denial of an initial application. When a licensee has been delinquent in renewing the licensee’s license, the department may charge an additional fee of fifty dollars for the renewal of the license. A collection agency license is not transferable. If the commissioner determines that an ownership change has occurred in a sole proprietorship, partnership, limited liability partnership, corporation, or limited liability corporation that was previously granted a collection agency license, the commissioner may require a new application from the purchaser. The application must be filed within forty-five days from the date change of ownership is consummated. The department shall act on the application within sixty days from the date the application is received but may extend the review period for good cause. The collection agency license granted to the previous owner continues in effect to the new purchaser until the application is either granted or denied.

Source: S.L. 1969, ch. 149, § 5; 1995, ch. 143, § 1; 1999, ch. 133, § 2; 2001, ch. 88, § 81; 2003, ch. 118, § 3; 2005, ch. 125, § 8; 2013, ch. 115, § 3.

13-05-05.1. Change of name or address.

A licensee is required to submit within twenty business days of the date of change, notification of a change of name or change of address. The notification must be in the form prescribed by the commissioner.

Source: S.L. 2011, ch. 106, § 9; 2015, ch. 120, § 8, effective July 1, 2015.

13-05-05.2. Automatic six-month extension of license during 2014 calendar year. [Repealed]

Source: S.L. 2013, ch. 115, § 4; repealed by 2019, ch. 123, § 10, effective July 1, 2019.

13-05-06. Powers of the department of financial institutions.

Insofar as consistent with other provisions of law, the department of financial institutions has the power to:

1. Determine the qualifications of all applicants based on financial responsibility, financial condition, business experience, character, and general fitness which must reasonably warrant the belief that the applicant’s business will be conducted lawfully and fairly. In determining whether this qualification is met, and for the purpose of investigating compliance with this chapter, the commissioner may review and consider the relevant business records and capital adequacy of the applicant and the competence, experience, integrity, and financial ability of a person who is a member, partner, director, officer, or twenty-five percent or more shareholder of the applicant.
2. Conduct investigations and make an examination of any licensee or licensee’s place of business, including all records of such business, and to subpoena witnesses anytime it has reason to believe such is necessary to ensure and enforce compliance with state and federal rules and regulations. The licensee shall pay an examination or visitation fee and must be charged by the department of financial institutions at an hourly rate to be set by the commissioner, sufficient to cover all reasonable expenses of the department associated with the examination or visitation provided for by this section. Fees must be paid to the state treasurer and deposited in the financial institutions regulatory fund.
3. Establish codes of ethical conduct for licensees.
4. Adopt any and all rules and regulations necessary to carry out the purpose of this chapter.
5. Issue and serve upon any person or licensed collection agency an order to cease and desist to take corrective action when the department has reason to believe the person or agency is violating, has violated, or is about to violate the provisions of this chapter. An interested party may appeal issuance of a cease and desist order under the provisions of chapter 28-32 by filing written notice of appeal within twenty days after service of the order.
6. If the commissioner determines a licensee is insolvent, or the license has expired or terminated for any reason, the commissioner, on determining such action necessary to protect the public interest, may apply to the district court for the county in which the main office of such licensee is located for appointment of a receiver to receive the assets of the licensee for the purpose of liquidating its business or for such other relief as the nature of the case and the interest of the claimants may require. The reasonable and necessary expenses of the receivership shall constitute the first claim on the bond.

Source: S.L. 1969, ch. 149, § 6; 1989, ch. 96, § 17; 1993, ch. 138, § 1; 2001, ch. 88, § 82; 2003, ch. 117, § 11; 2011, ch. 106, § 10.

13-05-06.1. Suspension and removal of collection agency officers or employees.

1. The commissioner of financial institutions may issue and serve upon any current or former collection agency officer or employee and upon the collection agency involved an order stating:
   1. That the current or former officer or employee is willfully engaging or has willfully engaged in any of the following conduct:
      1. Violating any law, rule, order, or written agreement with the commissioner.
      2. Engaging in any harassment or abuse, the making of false or misleading representations, or engaging in unfair practices involving collection activity.
      3. Performing any act of commission or omission or practice which is a breach of trust or a breach of fiduciary duty.
   2. The term of the suspension or removal from employment and participation within the conduct or the affairs of a collection agency.
2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32.
3. If no hearing is requested within twenty business days of the date the order is served, or if a hearing is held and the commissioner finds that the record so warrants, the commissioner may enter a final order suspending or removing the current or former officer or employee. The current or former officer or employee shall have the opportunity to request a termination of the final order after a period of no less than three years.
4. A contested or default suspension or removal order is effective immediately upon service of the final order on the current or former officer or employee and upon the collection agency. A consent order is effective as agreed. Any current or former officer or employee suspended or removed from employment and participation within the conduct or the affairs of a collection agency pursuant to this section is not eligible, while under suspension or removal, to be employed or otherwise participate in the affairs of any financial corporation, financial institution, credit union, or any other entity licensed by the department of financial institutions.
5. When any current or former officer or employee, or other person participating in the conduct of the affairs of a collection agency is charged with a felony in state or federal court which involves dishonesty or breach of trust, the commissioner may immediately suspend the person from office or prohibit the person from any further participation in the collection agency’s affairs, or both. The order is effective immediately upon service of the order on the collection agency and the person charged and remains in effect until the criminal charge is finally disposed of or until modified by the commissioner. If a judgment of conviction, federal pretrial diversion, or similar state order or judgment is entered, the commissioner may order that the suspension or prohibition be made permanent. A finding of not guilty or other disposition of the charge does not preclude the commissioner from pursuing administrative or civil remedies.
6. Under this section, a person engages in conduct “willfully” if the person acted intentionally in the sense that the person was aware of what the person was doing.

Source: S.L. 1997, ch. 142, § 1; 2001, ch. 88, § 83; 2011, ch. 106, § 11.

13-05-06.2. Investigations and subpoenas.

1. The department of financial institutions may:
   1. Make such public or private investigation within or outside this state as it deems necessary to determine whether a person has violated or is about to violate a provision of this chapter or a rule or order under this chapter, or to aid in the enforcement of this chapter or in the adopting of rules and forms under this chapter.
   2. Require or permit a person to file a statement in writing, under oath or otherwise as the department determines, as to all the facts and circumstances concerning the matter to be investigated.
   3. Publish information concerning a violation of this chapter or a rule or order under this chapter.
2. For the purpose of an investigation or proceeding under this chapter, the department of financial institutions may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of books, papers, correspondence, memoranda, agreements, or other documents or records which the department deems relevant or material to the inquiry.
3. In case of contumacy by, or refusal to obey a subpoena issued to, a person, the district court, upon application by the department of financial institutions, may issue to the person an order requiring the person to appear before the department, there to produce documentary evidence if so ordered or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt of court.
4. A person is not excused from attending and testifying or from producing a document or record before the department of financial institutions, or in obedience of the subpoena of the department or in a proceeding instituted by the department, on the grounds that the testimony or evidence, documentary or otherwise, required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture; but an individual may not be prosecuted or subjected to a penalty or forfeiture for or on account of a transaction, matter, or thing concerning which the person is compelled, after claiming the privilege against self-incrimination, to testify or produce evidence, documentary or otherwise, except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
5. In making any examination or investigation authorized by this chapter, the commissioner may control access to any documents and records of the licensee or person under examination or investigation. The commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, no individual or person shall remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the commissioner. Unless the commissioner has reasonable grounds to believe any of the documents and records of the licensee have been, or are at risk of being altered or destroyed for purposes of concealing a violation of this chapter, the licensee or owner of the documents and records shall have access to the documents and records as necessary to conduct its ordinary business affairs. All records controlled by the commissioner under the authority of this subsection shall be exempt under the open records law.
6. In order to carry out the purposes of this section, the commissioner may:
   1. Retain accountants or other professionals and specialists as examiners, auditors, or investigators to conduct or assist in the conduct of examinations or investigations; and
   2. Use, hire, contract, or employ publicly or privately available analytical systems, methods, or software to examine or investigate the licensee, individual, or person subject to this chapter.
7. The authority of this section remains in effect, whether such a licensee, individual, or person subject to this chapter acts or claims to act under any licensing or registration law of this state or claims to act without such authority.

Source: S.L. 2003, ch. 118, § 4; 2011, ch. 106, § 12.

13-05-06.3. Prohibited acts and practices.

It is a violation of this chapter for a person or individual subject to this chapter to:

1. Negligently make any false statement or knowingly make any omission of material fact in connection with any information, reports, or applications filed with the department or another governmental agency.
2. Collect, charge, attempt to collect or charge, or use or propose any agreement purporting to collect or charge any fee prohibited by this chapter.
3. Fail to truthfully account for moneys belonging to or collected from another.

Source: S.L. 2011, ch. 106, § 13.

13-05-06.4. Confidentiality.

To promote more effective regulation and reduce regulatory burden through supervisory information sharing, the commissioner or commissioner’s designee may furnish information to or receive information from a nationwide multistate licensing system for the purpose of regulation of the financial services industry. Information furnished by the commissioner to any third party which is confidential or privileged in the commissioner’s possession remains confidential or privileged in the possession of the third party. Information received by the commissioner from any third party which is confidential or privileged in the third-party’s possession remains confidential or privileged in the commissioner’s possession.

Source: S.L. 2013, ch. 115, § 5.

13-05-06.5 Credit card payment.

A collection agency may collect or attempt to collect, in addition to the principal amount of a claim, a transaction fee for processing a credit card payment in an amount that does not exceed two and one-half percent of the payment amount if:

1. The transaction fee is not prohibited under section 13-05-02.2;
2. A no-cost payment option is available to the debtor; and
3. The collection agency discloses the no-cost option to the debtor at the same time and in the same manner as the debtor’s credit card information is taken.

Source: S.L. 2019, ch. 124, § 2, effective August 1, 2019.

13-05-07. Manner in which records and funds to be kept by collection agency.

1. Every collection agency licensed under this chapter shall keep a record of all sums collected by it and of all disbursements made by it for a period of six years from the date of last entry thereon. The records of a licensee may be maintained electronically provided they can be reproduced upon request of the department of financial institutions and within the required statutory time period provided in this section.
2. When a licensee ceases operations for any reason, the licensee shall be required to inform the department of the location of the records required to be maintained in accordance with section 13-05-07. In addition, the licensee shall provide the name of the individual responsible for maintenance of the records. The licensee shall notify the department within ten business days of the change of the location of the records or the change of the individual responsible for maintenance of the records.
3. No licensee, individual, or person subject to investigation or examination under this section may intentionally make any false entry in any such collection agency record or knowingly withhold, abstract, secrete, remove, mutilate, destroy, or otherwise dispose of any books, records, computer records, or other information within the time limit provided in this section.
4. No licensee under this chapter may commingle the money of collection agency customers with other than collection funds and shall maintain a separate bank account for such customer’s funds and shall keep such funds in the bank account until disbursed to the customer.

Source: S.L. 1969, ch. 149, § 7; 2003, ch. 117, § 12; 2011, ch. 106, § 14.

13-05-07.1. Response to department requests.

An applicant, licensee, or other person subject to the provisions of this chapter shall comply with requests for information, documents, or other requests from the department of financial institutions within the time specified in the request, which must be a minimum of ten days, or, if no time is specified, within thirty days of the mailing of the request by the department of financial institutions. If the request for information is in regard to a new application or renewal of an existing application and is not received within the time specified in the request, or within thirty days of the mailing of the request, the department may deny the application.

Source: S.L. 2003, ch. 117, § 13.

13-05-08. Revocation of license — Suspension of license — Surrender of license — Preexisting contracts.

1. The commissioner may issue and serve upon any licensee an order suspending or revoking a licensee’s license if the commissioner finds that:
   1. The licensee has failed to pay the annual license fee under this chapter or any examination fee imposed by the commissioner under the authority of this chapter.
   2. The licensee, either knowingly or without the exercise of due care to prevent the same, has violated any provision of this chapter or any regulation or order lawfully made pursuant to and within the authority of this chapter.
   3. Any fact or condition existing at the time of the original application for such license which clearly would have warranted the department of financial institutions in refusing originally to issue such license.
   4. The licensee has failed to maintain the required bond.
   5. The licensee has failed to maintain registration with the North Dakota secretary of state if so required.
2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32.
3. If no hearing is requested within twenty business days of the date the order is served upon the licensee, or if a hearing is held and the commissioner finds that the record so warrants, the commissioner may enter a final order suspending or revoking the license.
4. If the commissioner finds that probable cause for revocation of any license exists and that enforcement of the chapter requires immediate suspension of such license pending investigation, it may, upon written notice, enter an order suspending such license for a period not exceeding sixty days, pending the holding of a hearing as prescribed in this chapter.
5. Any licensee may surrender the licensee’s license by delivering it to the department of financial institutions with written notice of its surrender, but such surrender does not affect the licensee’s civil or criminal liability for acts committed prior thereto.

Source: S.L. 1969, ch. 149, § 8; 2001, ch. 88, § 84; 2011, ch. 106, § 15.

13-05-08.1. Biennial report.

The commissioner of financial institutions shall submit a biennial report to the governor and the secretary of state in accordance with section 54-06-04.

Source: S.L. 1979, ch. 118, § 5; 1995, ch. 350, § 8; 2001, ch. 88, § 85.

13-05-09. Remedies not exclusive.

The remedies provided for in this chapter are in addition to and not exclusive of any other remedies provided by law.

Source: S.L. 1969, ch. 149, § 9.

13-05-10. Penalty.

Any person violating any of the provisions of this chapter is guilty of a class C felony. The commissioner may impose a civil money penalty not to exceed five thousand dollars per violation upon a person or agency who willfully violates a law, rule, written agreement, or order under this chapter. An interested party may appeal the assessment of a civil money penalty under the provisions of chapter 28-32 by filing a written notice of appeal within twenty days after service of the assessment of civil money penalties. A civil money penalty collected under this section must be paid to the state treasurer and deposited in the financial institutions regulatory fund.

Source: S.L. 1969, ch. 149, § 10; 1975, ch. 106, § 108; 2003, ch. 117, § 14; 2009, ch. 140, § 2.

13-06-01. Definitions. [Repealed]

Repealed by S.L. 2011, ch. 108, § 4.

13-06-02. Penalties. [Repealed]

Repealed by S.L. 2011, ch. 108, § 4.

13-06-03. Exemptions. [Repealed]

Repealed by S.L. 2011, ch. 108, § 4.

13-07-01. Consumer credit counseling service — Definition.

As used in this chapter, “consumer credit counseling service” means a person whose agreements contemplate that a debtor will liquidate the debtor’s debts by structured installments or that a creditor will reduce finance charges or fees for late payments, default, or delinquency.

Source: S.L. 1993, ch. 139, § 1; 2011, ch. 108, § 2; 2013, ch. 389, § 1.

13-07-02. Consumer credit counseling service — Contract requirements.

Any agreement between a consumer credit counseling service and a debtor for counseling and assistance must be in writing and signed by both parties. The consumer credit counseling service shall give the debtor a copy of the signed agreement. The agreement must disclose the total amount that may be retained by the consumer credit counseling service if the contract is fully performed, the terms upon which the debtor may cancel the contract, and all debts that are to be managed by the counseling service, including the name of each creditor and the amount of each debt. A consumer credit counseling service may not enter an agreement with a debtor unless a thorough written budget analysis indicates that the debtor can reasonably meet the requirements of the financial adjustment plan and that the debtor will be benefited by the plan.

Source: S.L. 1993, ch. 139, § 2.

13-07-03. Consumer credit counseling service — Surety bond or other security.

A consumer credit counseling service entering an agreement with a debtor who resides in this state shall file with the attorney general a surety bond or other security in an amount equal to the largest sum accrued in the service’s trust account during the prior year, or five thousand dollars, whichever is greater. The bond or other security must be payable to the state of North Dakota and must be acceptable to the attorney general for the use and benefit of debtors making payments to a consumer credit counseling service and suffering damages caused by the consumer credit counseling service.

Source: S.L. 1993, ch. 139, § 3.

13-07-04. Consumer credit counseling service — Trust accounts.

A consumer credit counseling service shall deposit in a trust account in a financial institution, within one business day of receipt, any payments received from or on behalf of a debtor. A debtor’s payments must be identifiable in the trust account. Funds in the trust account may not be commingled with any other funds. The consumer credit counseling service shall credit any interest accrued as a result of payments deposited in a trust account to debt management education programs.

Source: S.L. 1993, ch. 139, § 4.

13-07-05. Consumer credit counseling service — Accounting records — Availability of statements.

A consumer credit counseling service shall maintain books, records, and accounts in a manner that allows the attorney general to determine compliance with the law. A consumer credit counseling service shall prepare a weekly statement of all receipts and disbursements, including payments received from or on behalf of a debtor, disbursements made on behalf of the debtor, fees collected, and funds held in escrow. The consumer credit counseling service shall make available to each debtor, upon request, a copy of the debtor’s statement of account. All books, records, and accounts must be retained by a consumer credit counseling service for at least six years after the final entry of any recorded transaction.

Source: S.L. 1993, ch. 139, § 5.

13-07-06. Fees — Payments — Cancellation.

A consumer credit counseling service may charge an origination fee of up to fifty dollars, which may be subtracted from the initial amount paid by the debtor to the counseling service. The consumer credit counseling service may withdraw and retain as partial payment of the service’s total fee up to fifteen percent of any sum deposited by the debtor for distribution. The remainder must be disbursed to the listed creditors in accordance with the parties’ agreement. Disbursement must be made within forty-five days after deposit by the debtor. Before an automatic termination, either party may cancel the agreement without cause upon giving to the other party thirty days’ written notice of an intent to cancel. In the event of a cancellation, the consumer credit counseling service shall notify the debtor’s creditors within thirty days.

Source: S.L. 1993, ch. 139, § 6.

13-07-07. Prohibitions — Investigation — Civil penalty.

A consumer credit counseling service may not take a confession of judgment or a power of attorney to confess judgment against the debtor or appear as the debtor in any judicial proceeding. The attorney general may, upon the attorney general’s own motion, and shall, upon receipt of a complaint, investigate any alleged violation of law by a consumer credit counseling service. For that purpose, the attorney general may subpoena witnesses, administer oaths, take testimony, and require the production of books, documents, and other records. The attorney general may institute a civil action in the name of the state in the district court for an injunction prohibiting any practice in violation of this chapter. The court, upon notice to the defendant of not less than five days, and upon proof that the defendant has engaged in a practice in violation of this chapter may enjoin the defendant from engaging in any practice in violation of this chapter. In addition, the court may impose a civil penalty not to exceed five thousand dollars for each violation of this chapter. The attorney general may recover costs and disbursements, including the costs of investigation and reasonable attorney’s fees.

Source: S.L. 1993, ch. 139, § 7.

13-08-01. Definitions.

As used in this chapter, unless the context otherwise requires:

1. “Check” means a personal check signed by the maker and made payable to a licensee.
2. “Commissioner” means the commissioner of financial institutions.
3. “Completed deferred presentment service transaction” means a transaction that is completed when a check is redeemed by the maker by payment in full to the licensee in cash, money order, or certified check or by negotiation or deposit by the licensee, or when an electronic funds transfer or other transfer of money has taken place to repay the contracted debt.
4. “Customer” means a person to which funds are advanced under a deferred presentment service transaction.
5. “Deferred presentment service transaction” means a transaction by which a person:
   1. Pays to a customer the amount of a check, less the fees permitted under this chapter, and accepts a check from the customer dated on the date of the transaction and agrees to hold the check for a period of time before negotiation or presentment;
   2. Accepts a check dated after the date of the transaction and agrees to hold the check for deposit until the date written on the check; or
   3. Pays to the customer an agreed-upon amount, and obtains the customer’s authorization to transfer or withdraw, electronically or otherwise, funds from a customer’s account in repayment at some future, agreed-upon date.
6. “Licensee” means a person licensed under this chapter to provide deferred presentment services.

Source: S.L. 2001, ch. 143, § 1; 2005, ch. 127, § 1.

13-08-02. License requirements.

A person may not engage in the business of deferred presentment service without a license issued under this chapter. A separate license is required for each location from which the business of deferred presentment service is conducted. A person is considered to be engaging in the business of deferred presentment service if the customer is located in this state.

Source: S.L. 2001, ch. 143, § 1; 2011, ch. 107, § 1.

13-08-03. Qualifications for license.

To qualify for a license, an applicant shall satisfy the following requirements:

1. Each applicant shall maintain a net worth of at least twenty-five thousand dollars per licensed location, determined in accordance with generally accepted accounting principles.
2. The financial responsibility, financial condition, business experience, character, and general fitness of the applicant must reasonably warrant the belief that the applicant’s business will be conducted lawfully and fairly. In determining whether this qualification is met and for the purpose of investigating compliance with this chapter, the commissioner may review and consider the relevant business records and the capital adequacy of the applicant and the competence, experience, integrity, and financial ability of any person who is a member, partner, director, officer, or twenty-five percent or more shareholder of the applicant, and whether the applicant has filed the appropriate registration with the North Dakota secretary of state, if so required.
3. Each applicant shall establish that neither the applicant nor any principal of the applicant has been convicted of a felony. A deferred sentence or federal pretrial diversion must be considered a conviction for purposes of this section.
4. Each applicant shall maintain a bond issued by a surety company authorized to do business in this state, in the amount of twenty thousand dollars, and the commissioner may require a larger bond if the commissioner determines the larger bond is necessary based on the volume of the applicant’s business.

Source: S.L. 2001, ch. 143, § 1; 2005, ch. 125, § 9.

13-08-04. Application for license.

1. Each application for a license must be in the form prescribed by the commissioner and must include:
   1. The legal name of the applicant, residence of the applicant, business address of the applicant, and address at which deferred presentment service is provided if different from the business address and, if the applicant is a partnership, association, or corporation, the name and address of every member, officer, and director;
   2. The location at which the registered office of the applicant is located; and
   3. Other data and information the commissioner may require with respect to the applicant and the applicant’s directors, officers, members, and shareholders.
2. To fulfill the purposes of this chapter, the commissioner may establish relationships or contracts with a nationwide multistate licensing system and registry or other entities designated by a nationwide multistate licensing system and registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to the chapter. The applicant shall pay directly to such nationwide multistate licensing system any additional fee relating to participation in such nationwide multistate licensing system.
3. In connection with an application for licensing as a deferred presentment service provider, or any license renewals, the applicant shall furnish to the nationwide multistate licensing system information concerning the applicant’s identity, which may include:
   1. Fingerprints for submission to the federal bureau of investigation and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check;
   2. Personal history and experience in a form prescribed by the nationwide multistate licensing system, including the submission of authorization for the nationwide multistate licensing system and the commissioner to obtain:
      1. An independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act; and
      2. Information related to any administrative, civil, or criminal findings by any governmental jurisdiction; and
   3. Any other documents, information, or evidence the commissioner deems relevant to the application regardless of the location, possession, control, or custody of such documents, information, or evidence.
4. For the purposes of this section and in order to reduce the points of contact which the federal bureau of investigation may have to maintain for purposes of subsection 3, the commissioner may use the nationwide multistate licensing system and registry as a channeling agent for requesting information from and distributing information to the department of justice or any governmental agency.
5. For the purposes of this section and in order to reduce the points of contact which the commissioner may have to maintain for purposes of subsection 3, the commissioner may use the nationwide multistate licensing system and registry as a channeling agent for requesting and distributing information to and from any source so directed by the commissioner.

Source: S.L. 2001, ch. 143, § 1; 2013, ch. 115, § 6.

13-08-05. Application fees — Financial statements — Annual fee — Deposit of fees.

Each applicant for licensure shall include with the application an application and background investigation fee of eight hundred fifty dollars, which is not subject to refund but which, if the license is granted, constitutes the license fee for the first license year or part of the first license year, and each applicant for licensure shall include with the application proof of the required surety bond. The annual license fee is four hundred fifty dollars. Each fee set forth in this section is applicable to each location. The commissioner shall deposit fees and costs collected by the commissioner under this chapter in the department of financial institutions regulatory fund.

Source: S.L. 2001, ch. 143, § 1.

13-08-05.1. Change of name or address.

A licensee shall submit within twenty business days of the date of change, notification of a change of name or change of address. The notification must be in the form prescribed by the commissioner. In addition, the licensee shall submit the original license certificate for reissue.

Source: S.L. 2011, ch. 107, § 2.

13-08-05.2. Automatic six-month extension of license during 2014 calendar year. [Repealed]

Source: S.L. 2013, ch. 115, § 10; repealed by 2019, ch. 123, § 10, effective July 1, 2019.

13-08-06. Issuance of license — Posting.

1. Upon receipt of a complete application, the commissioner shall determine whether the qualifications prescribed under this chapter are satisfied. If the commissioner determines the qualifications are satisfied and approves the documents, the commissioner shall issue to the applicant a license to engage in the deferred presentment service business.
2. A licensee shall keep a notice conspicuously posted in the place of business of the licensee and shall provide the same notice to its customers in this state. This notice must include the license number and instructions for customers to look up the licensee on the nationwide multistate licensing system for license verification.
3. A license issued under this section is effective through the remainder of the fiscal year ending December thirty-first after the license’s date of issuance unless earlier surrendered, suspended, or revoked under this chapter.

Source: S.L. 2001, ch. 143, § 1; 2005, ch. 127, § 2; 2019, ch. 123, § 7, effective July 1, 2019.

13-08-07. Nontransferability — Change in control of license.

A license issued under this chapter is not transferable or assignable. The prior written approval of the commissioner is required for the continued operation of a deferred presentment service business if a change in control of a licensee occurs. Control in the case of a corporation means direct or indirect ownership; the right to control twenty-five percent or more of the voting shares of the corporation; or the ability of any person to elect a majority of the directors or otherwise affect a change in policy. Control in the case of any other entity means the ability to exchange the principals of the organization, whether active or passive. In the case of a change of control request, the commissioner may require information the commissioner deems necessary to determine whether a new application is required. A licensee shall notify the commissioner fifteen days before any proposed change in the licensee’s business location or name.

Source: S.L. 2001, ch. 143, § 1.

13-08-08. Reports of commissioner.

Within fifteen days of the occurrence of any one of the following events, a licensee shall file a written report with the commissioner describing the event and the event’s expected impact on the activities of the licensee in the state:

1. The filing for bankruptcy or reorganization by the licensee;
2. The institution of revocation or suspension proceedings against the licensee by any governmental authority;
3. Any felony charges of the licensee or any of the licensee’s members, directors, officers, or shareholders; and
4. Any other event the commissioner identifies by rule.

Source: S.L. 2001, ch. 143, § 1.

13-08-09. Expiration of license — Renewal.

Licenses issued under this chapter expire as of December thirty-first of each year. A license may be renewed for the ensuing twelve-month period upon application and the payment to the commissioner of the annual license fee, which is not subject to refund, before December first of each year. The form and content of renewal applications must be determined by the department of financial institutions and a renewal application may be denied upon the same grounds as would justify denial of an initial application. When a licensee has been delinquent in renewing the licensee’s license, the department may charge an additional fee of fifty dollars for the renewal of such license.

Source: S.L. 2001, ch. 143, § 1; 2005, ch. 125, § 10; 2013, ch. 115, § 7.

13-08-10. Regulations — Examinations.

The commissioner may adopt rules for the implementation and enforcement of this chapter. A copy of a rule adopted by the commissioner must be mailed to each licensee at least thirty days before the date the rule takes effect. To assure compliance with this chapter, the commissioner may examine the relevant business, books, and records of any licensee. The licensee shall pay an examination or visitation fee, and the commissioner shall charge the licensee for the actual cost of the examination or visitation at an hourly rate set by the commissioner which is sufficient to cover all reasonable expenses associated with the examination or visitation.

Source: S.L. 2001, ch. 143, § 1.

13-08-11. Retention of records.

Each licensee shall keep and use in the licensee’s business any books, accounts, and records the commissioner may require to carry into effect the provisions of this chapter and the rules issued under this chapter. Every licensee shall preserve required books, accounts, and records for at least six years. The records of a licensee may be maintained electronically provided they can be reproduced upon request by the department of financial institutions and within the required statutory time period provided in this section. When a licensee ceases operations for any reason, the licensee shall inform the department of the location of the records. In addition, the licensee shall provide the name of the individual responsible for maintenance of the records. The licensee shall notify the department within ten business days of the change of the location of the records or the change of the individual responsible for maintenance of the records.

Source: S.L. 2001, ch. 143, § 1; 2003, ch. 117, § 15; 2011, ch. 107, § 3.

13-08-11.1. Response to department requests.

An applicant, licensee, or other person subject to the provisions of this chapter shall comply with requests for information, documents, or other requests from the department of financial institutions within the time specified in the request, which must be a minimum of ten days, or, if no time is specified, within thirty days of the mailing of the request by the department of financial institutions. If the request for information is in regard to a new application or renewal of an existing application and is not received within the time specified in the request, or within thirty days of the mailing of the request, the department may deny the application.

Source: S.L. 2003, ch. 117, § 16.

13-08-11.2. Confidentiality.

To promote more effective regulation and reduce regulatory burden through supervisory information sharing, the commissioner or commissioner’s designee may furnish information to or receive information from a nationwide multistate licensing system for the purpose of regulation of the financial services industry. Information furnished by the commissioner to any third party which is confidential or privileged in the commissioner’s possession remains confidential or privileged in the possession of the third party. Information received by the commissioner from any third party which is confidential or privileged in the third-party’s possession remains confidential or privileged in the commissioner’s possession.

Source: S.L. 2013, ch. 115, § 11.

13-08-12. Fees for service — Deferred presentment service transaction procedures — Penalty.

1. Before disbursing funds under a deferred presentment service transaction, a licensee shall provide to the customer a clear and conspicuous printed notice indicating:
   1. That a deferred presentment service transaction is not intended to meet long-term financial needs.
   2. That the customer should use a deferred presentment service transaction only to meet short-term cash needs.
   3. That the customer will be required to pay additional fees if the deferred presentment service transaction is renewed rather than paid in full when due. If the transaction is renewed, any amount paid in excess of the fee applies to the payoff amount.
   4. A schedule of fees charged for deferred presentment service.
   5. Any information required under federal law.
   6. No property, titles to any property, or mortgages may be received or held directly or indirectly by the licensee as a condition of a deferred presentment service transaction or as a method of collection on a defaulted deferred presentment service transaction without proper civil process.
2. A licensee may charge a fee for the deferred presentment service, not to exceed twenty percent of the amount paid to the customer by the licensee. This fee may not be deemed interest for any purpose of law. No other fee or charge may be charged for the deferred presentment service, except that a fee, not to exceed the cost to the licensee, may be charged for registering a transaction on a database administered or authorized by the commissioner. No property, titles to any property, or mortgages may be received or held directly or indirectly by the licensee as a condition of a deferred presentment service transaction or as a method of collection on a defaulted deferred presentment service transaction without proper civil process.
3. A licensee may not disburse more than five hundred dollars to the customer in a deferred presentment service transaction.
4. A licensee may not engage in a deferred presentment service transaction with a customer who has an aggregate value of all outstanding obligations from any one customer exceeding six hundred dollars which is payable to the same or any other licensee. A licensee may not enter a new deferred presentment service transaction with a customer within three business days of that customer’s completion of a previous deferred presentment service transaction. A licensee may rely on a written or electronic representation of a customer regarding the existence of any outstanding obligations for deferred presentment held by a licensee other than the licensee receiving the representation until the database provided for under this subsection is in operation, and after that time may not rely on a customer’s representation but must verify the fact using the database. However, if a licensee has multiple locations, that licensee may not rely on the representation of a customer regarding the existence of any outstanding obligation for deferred presentment held by that licensee, or one of the licensee’s multiple locations, unless the licensee and the licensee’s multiple locations use a point of sale registry or some other accounting system to attempt to prevent violations of this subsection. The commissioner shall administer or authorize the development of a database in which each transaction must be recorded for the purpose of preventing violations of this section. The commissioner shall adopt rules governing the creation, structure, and use of the database.
5. Before a licensee may negotiate or present a check for payment, the check must be endorsed with the actual name under which the licensee is doing business.
6. Each deferred presentment service transaction, including a renewal, must be documented by a written agreement signed or similarly authenticated by the customer. The original agreement must contain the name of the licensee; the transaction date; the amount of the obligation; a statement of the total amount of fees charged, expressed as a dollar amount and as an annual percentage rate; the name and signature of the individual who signs the agreement on behalf of the licensee; the name and address of the check maker; the transaction number assigned by the database; the date of negotiation of the check; the signature of the check maker; a statement that a licensee may not renew a transaction more than once; a statement that the renewal fee may not exceed twenty percent of the amount being renewed; a statement that the maximum term of the transaction, including the renewal, may not exceed sixty calendar days; a statement that the term of the renewal period may not be less than fifteen calendar days; and a statement containing the right of rescission printed immediately above the signature line of the written agreement in a minimum of ten-point font and providing a space for the check maker to initial that the notice to the right of rescission was received. The original agreement may not include a hold harmless clause; a confession of judgment clause; any assignment of or order for payment of wages or other compensation for services; a provision in which the check maker agrees not to assert any claim or defense arising out of the agreement; a waiver of any provision of this chapter; any representation from the check maker as to the sufficiency of funds regarding any past deferred presentment service transactions; or any statement regarding criminal prosecution with respect to the agreement. A renewal agreement must be contained in a separate section, as part of the original written agreement or in other form as approved by the commissioner. The renewal agreement must restate the original transaction date, the renewal transaction date, the amount of the check paid to the check maker, the fee charged in dollars, and the maturity date. The agreement must authorize the licensee to defer presentment or negotiation of the check, or electronic debit of the customer’s account, until a specified date. The maker of a check may redeem the check from the licensee at any time before the negotiation or presentment of the check by making payment to the licensee. A customer agreeing to an electronic deferred presentment service transaction may repay the obligation at any time before the agreed-upon date. A customer may rescind any transaction by the close of the business day following the day on which the customer receives payment from the licensee at no cost. If a customer agreeing to an electronic deferred presentment service transaction rescinds the transaction, the licensee must facilitate the repayment of the funds through the same electronic means the licensee used to deliver the funds to the customer.
7. If a check or electronic debit is returned to the licensee from a payer financial institution due to insufficient funds, closed account, or a stop payment order, the licensee has the right to all civil remedies available to collect the obligation. The licensee may contract for and collect a returned check or electronic debit charge not to exceed the collection fees and costs authorized in subdivision c of subsection 2 of section 6-08-16. No other fee or charge may be collected as a result of a returned check or electronic debit or as a result of default by the customer in timely payment to the licensee.
8. A customer who has authority to make a check or authorize an electronic debit and enters a deferred presentment service agreement is not subject to a criminal penalty relating to the check, electronic debit, or the deferred presentment service agreement unless the customer’s account was closed on the original date of the transaction. At the time of entering a transaction involving a written check, a licensee shall verify that the account on which the check is written is open. A licensee may not pursue or threaten to pursue criminal penalties against a customer for criminal penalties prohibited by this subsection.
9. A licensee may not engage in unfair or deceptive acts, practices, or advertising in the conduct of a deferred presentment service business.
10. The amount paid to the customer by the licensee in a deferred presentment service transaction must be paid in the form of cash, check, or an electronic credit to the customer’s account.
11. Each licensee must conspicuously post in the licensee’s licensed location a notice of the fees imposed for the deferred presentment service. A licensee that engages in a deferred presentment service transaction via the internet shall require its customers to acknowledge the fees imposed using a click-through or other method that prevents customers from completing the transaction without reviewing the licensee’s fees.
12. Except as provided under subsection 13, a licensee may not renew a deferred presentment service transaction more than once. A licensee’s renewal fee may not exceed twenty percent of the amount being renewed. The renewal fee must be paid in cash, money order, or cashier’s check. The total period of deferral, including the initial deferral and one renewal, may not exceed sixty days. An individual renewal period may not be less than fifteen days. After sixty days the renewed deferred presentment service transaction must be paid off in cash, money order, electronic payment, or cashier’s check by the customer or, if a check is used, the check must be deposited by the licensee.
13. A licensee may enter a workout agreement with the borrower if the borrower believes financial hardship prevents the borrower from paying off the deferred presentment service transaction at the end of the original agreement or following any renewal. The workout agreement must outline the repayment terms in writing and must require weekly, biweekly, or monthly even installments not to exceed twelve months. An additional interest or fee may not be charged as part of this workout, the deferred presentment service provider shall continue to report the transaction as an outstanding deferred presentment service transaction on any database administered by the commissioner, and entering a workout agreement is voluntary on the part of the deferred presentment service provider and the borrower.
14. A licensee may not renew, repay, refinance, or consolidate a deferred presentment service transaction with the proceeds of another deferred presentment service transaction with that licensee by the same maker or customer. It is presumed that a deferred presentment service transaction initiated within three business days before completion of a deferred presentment service transaction is a violation of this subsection.
15. A licensee may not conduct another business, other than a bona fide pawnbroking business, within the same office, suite, room, or place of business at which the licensee engages in deferred presentment service transactions unless the commissioner provides written authorization after a determination the other business is not contrary to the best interests of consumers.
16. A licensee shall provide a notice in a prominent place on each deferred presentment service agreement in no less than ten-point type in substantially the following form:
17. A licensee or any agent of a licensee who willfully violates this section is guilty of a class A misdemeanor.

State law prohibits this business from allowing customers to have outstanding at any one time, deferred presentment service transactions totaling more than six hundred dollars.

Source: S.L. 2001, ch. 143, § 1; 2005, ch. 125, § 11; 2005, ch. 127, § 3; 2011, ch. 107, § 4; 2013, ch. 115, §§ 8, 9; 2021, ch. 112, § 4, effective August 1, 2021.

13-08-13. Denial of license — Hearing.

If the commissioner determines an applicant is not qualified to receive a license, the commissioner shall notify the applicant in writing stating that the application is denied and stating the basis for denial. If the commissioner denies an application, or if the commissioner fails to act on an application within thirty days after the filing of a properly completed application, the applicant may make written demand to the commissioner for a hearing before the commissioner on the question of whether the license should be granted. The hearing must be held within thirty days after receipt of the written demand by the applicant. In the event of a hearing, the commissioner shall reconsider the application and, after hearing, issue a written order granting or denying the application. If an applicant who is denied a license requests a hearing and the commissioner’s denial is upheld, the commissioner may assess the applicant for the commissioner’s costs incurred for the hearing, in an amount not exceeding two thousand dollars.

Source: S.L. 2001, ch. 143, § 1.

13-08-14. Suspension — Revocation.

1. The commissioner may issue and serve upon any licensee an order suspending or revoking a license if the commissioner finds that the licensee or any principal of the licensee has been convicted of a felony or that the licensee knowingly or through lack of due care:
   1. Failed to pay the annual license fee imposed under this chapter or any examination fee imposed by the commissioner under the authority of this chapter;
   2. Committed any fraud, engaged in any dishonest activities, or made any misrepresentations;
   3. Violated this chapter or any rule adopted under this chapter or violated any other law in the course of the licensee’s business activities as a licensee;
   4. Made false statements in the application for the license;
   5. Engaged in any unfair or deceptive acts, practices, or advertising in the conduct of a deferred presentment service business;
   6. Failed to maintain the required bond; or
   7. Failed to maintain registration with the secretary of state if so required.
2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32.
3. If a hearing is not requested within twenty business days of the date the order is served upon the licensee or if a hearing is held and the commissioner finds that the record so warrants, the commissioner may enter a final order suspending or revoking the license.
4. If the commissioner finds that probable cause for revocation of any license exists and that enforcement of the chapter requires immediate suspension of such license pending investigation, it may upon written notice enter an order temporarily suspending such license for a period not exceeding sixty days, pending the holding of a hearing as prescribed in this chapter.

Source: S.L. 2001, ch. 143, § 1; 2011, ch. 107, § 5.

13-08-14.1. Suspension and removal of deferred presentment service provider officers and employees.

1. The commissioner of financial institutions may issue and serve upon any current or former deferred presentment service provider officer or employee and upon the licensee involved an order stating:
   1. That the current or former officer or employee is willfully engaging or has willfully engaged in any of the following conduct:
      1. Violating a law, rule, order, or written agreement with the commissioner.
      2. Engaging in harassment or abuse, the making of false or misleading representations, or engaging in unfair practices involving lending activity.
      3. Performing an act of commission or omission or practice, which is a breach of trust or a breach of fiduciary duty.
   2. The term of suspension or removal from employment and participation within the conduct or the affairs of a deferred presentment service provider.
2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32.
3. If a hearing is not requested within twenty business days of the date the order is served, or if a hearing is held and the commissioner finds that the record so warrants, the commissioner may enter a final order suspending or removing the current or former employee or officer from office. The current or former officer or employee may request a termination of the final order after a period of no less than three years.
4. A contested or default suspension or removal order is effective immediately upon service of the final order on the current or former officer or employee and upon the licensee. A consent order is effective as agreed. Any current or former officer or employee suspended or removed from employment and participation within the conduct or the affairs of a deferred presentment service provider pursuant to this section is not eligible, while under suspension or removal, to be employed or otherwise participate in the affairs of any financial corporation, financial institution, credit union, or any other entity licensed by the department of financial institutions.
5. When any current or former officer or employee or other person participating in the conduct of the affairs of a licensee is charged with a felony in state or federal court which involves dishonesty or breach of trust, the commissioner may immediately suspend the person from office or prohibit the person from further participation in the deferred presentment service provider affairs, or both. The order is effective immediately upon service of the order on the licensee and the person charged and remains in effect until the criminal charge is finally disposed of or until modified by the commissioner. If a judgment of conviction, federal pretrial diversion, or similar state order or judgment is entered, the commissioner may order that the suspension or prohibition be made permanent. A finding of not guilty or other disposition of the charge does not preclude the commissioner from pursuing administrative or civil remedies.
6. Under this section, a person engages in conduct “willfully” if the person acted intentionally in the sense that the person was aware of what the person was doing.

Source: S.L. 2003, ch. 117, § 17; 2011, ch. 107, § 6.

13-08-15. Violations — Cease and desist orders — Penalties.

Except as otherwise provided in this chapter, any person who willfully provides deferred presentment services without a license is guilty of a class C felony and any person who violates any other provisions of this chapter or any rule adopted to implement this chapter is guilty of an infraction. If the commissioner finds, whether without a hearing or after a hearing if a hearing is requested within twenty days of notice of an action by the commissioner under this section, that a person violated this chapter or any rule adopted to implement this chapter, the commissioner may do any one or more of the following:

1. Order the person to cease and desist violating this chapter or the rule.
2. Require the refund of any fees collected by the person in violation of this chapter.
3. Impose a civil penalty not to exceed five thousand dollars per violation upon a person or agency who willfully violates a law, rule, written agreement, or order under this chapter. An interested party may appeal the assessment of a civil money penalty under the provisions of chapter 28-32 by filing a written notice of appeal within twenty days after service of the assessment of civil money penalties. A civil money penalty collected under this section must be paid to the state treasurer and deposited in the financial institutions regulatory fund.

Source: S.L. 2001, ch. 143, § 1; 2003, ch. 117, § 18; 2009, ch. 140, § 3.

13-08-16. Disclosure of customer information.

Except for provisions of chapter 6-08.1 which are inconsistent with this chapter, chapter 6-08.1 applies to all persons licensed under this chapter.

History. S.L. 2015, ch. 120, § 9, effective July 1, 2015.

13-09-01. License required.

1. On or after January 2, 2006, a person, except a person that is exempt pursuant to section 13-09-03, may not engage in the business of money transmission without a license as provided in this chapter.
2. A person not licensed under this chapter or not an authorized delegate of a licensee is engaged in providing money transmission if the person provides those services to residents of this state, even if that person has no physical presence in this state.
3. If a licensee has a physical presence in this state, the licensee may conduct its business at one or more locations, directly or indirectly owned, or through one or more authorized delegates, or both, pursuant to the single license granted to the licensee.

Source: S.L. 2005, ch. 128, § 2.

13-09-02. Definitions.

In this chapter, unless the context otherwise requires:

1. “Applicant” means a person filing an application for a license under this chapter.
2. “Authorized delegate” means an entity designated by the licensee under the provisions of this chapter to sell or issue payment instruments or engage in the business of transmitting money on behalf of a licensee.
3. “Commissioner” means the commissioner of the department of financial institutions.
4. “Control” means ownership of, or the power to vote, twenty-five percent or more of the outstanding voting securities of a licensee or controlling person. For purposes of determining the percentage of a licensee controlled by any person, there must be aggregated with the person’s interest the interest of any other person controlled by that person or by any spouse, parent, or child of that person.
5. “Controlling person” means any person in control of a licensee.
6. “Department” means the department of financial institutions.
7. “Electronic instrument” means a card or other tangible object for the transmission or payment of money that contains a microprocessor chip, magnetic strip, or other means for the storage of information, that is prefunded and for which the value is decremented upon each use, but does not include a card or other tangible object that is redeemable by the issuer in goods or services provided by the issuer or its affiliates.
8. “Executive officer” means the licensee’s president, chairman of the executive committee, senior officer responsible for the licensee’s business, chief financial officer, and any other person who performs similar functions.
9. “Key shareholder” means any person or group of persons acting in concert who is or are the owner of twenty-five percent or more of any voting class of an applicant’s stock.
10. “Licensee” means a person licensed under this chapter.
11. “Material litigation” means any litigation that, according to generally accepted accounting principles, is deemed significant to an applicant’s or licensee’s financial health and would be required to be referenced in that entity’s annual audited financial statements, report to shareholders, or similar documents.
12. “Monetary value” means a medium of exchange, whether or not redeemable in money.
13. “Money transmission” means to engage in the business of the sale or issuance of payment instruments, stored value, or of receiving money or monetary value for transmission to a location within or outside the United States by any and all means, including wire, facsimile, or electronic transfer. Notwithstanding any other provision of law, “money transmission” also includes bill payment services not limited to the right to receive payment of any claim for another, but does not include payment processing activities conducted for a merchant under an agency relationship.
14. “Outstanding payment instrument” means any payment instrument issued by the licensee which has been sold in the United States directly by the licensee or any payment instrument issued by the licensee which has been sold by an authorized delegate of the licensee in the United States, which has been reported to the licensee as having been sold, and which has not yet been paid by or for the licensee.
15. “Payment instrument” means any electronic or written check, draft, money order, traveler’s check, or other electronic or written instrument or order for the transmission or payment of money, sold or issued to one or more persons, whether or not such instrument is negotiable. The term “payment instrument” does not include any credit card voucher, any letter of credit, or any instrument that is redeemable by the issuer in goods or services.
16. “Permissible investments” means:
    1. Cash;
    2. Certificates of deposit or other debt obligations of a financial institution, either domestic or foreign;
    3. Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers’ acceptances, which are eligible for purchase by member banks of the federal reserve system;
    4. Any investment bearing a rating of one of the three highest grades as defined by a nationally recognized organization that rates such securities;
    5. Investment securities that are obligations of the United States, its agencies or instrumentalities, or obligations that are guaranteed fully as to principal and interest of the United States, or any obligations of any state, municipality, or any political subdivision thereof;
    6. Shares in a money market mutual fund, interest-bearing bills or notes or bonds, debentures or stock traded on any national securities exchange or on a national over-the-counter market, or mutual funds primarily composed of such securities or a fund composed of one or more permissible investments as set forth herein;
    7. Any demand borrowing agreement or agreements made to a corporation or a subsidiary of a corporation whose capital stock is listed on a national exchange;
    8. Receivables that are due to a licensee from its authorized delegates pursuant to a contract described in section 13-09-15, which are not past-due or doubtful of collection; or
    9. Any other investments or security device approved by the commissioner.
17. “Remit” means either to make direct payment of the funds to the licensee or its representatives authorized to receive those funds, or to deposit the funds in a bank, credit union, or savings and loan association or other similar financial institution in an account specified by the licensee.
18. “Stored value” means monetary value that is evidenced by an electronic record.

Source: S.L. 2005, ch. 128, § 2; 2011, ch. 107, § 7; 2015, ch. 120, § 10, effective July 1, 2015.

13-09-03. Exclusions.

This chapter does not apply to:

1. The United States or any department, agency, or instrumentality thereof;
2. The United States post office;
3. The state or any political subdivisions thereof;
4. Banks, bank holding companies, credit unions, building and loan associations, savings and loan associations, or savings banks or mutual banks organized under the laws of any state or the United States, but this exemption does not extend to any other person acting on behalf of any such excluded entity;
5. The provision of electronic transfer of government benefits for any federal, state, or county governmental agency as defined in federal reserve board regulation E, by a contractor for and on behalf of the United States or any department, agency, or instrumentality thereof, or any state or any political subdivisions thereof; and
6. Authorized delegates of a licensee, acting within the scope of authority conferred by a written contract as described in section 13-09-15.

Source: S.L. 2005, ch. 128, § 2; 2015, ch. 120, § 11, effective July 1, 2015.

Note.

Federal reserve board regulation E referenced above is found at 12 CFR §§ 205.1 et seq.

13-09-04. Licensed qualifications.

To qualify for a license each applicant must satisfy the following requirements:

1. Each licensee under this chapter must at all times have a net worth of not less than one hundred thousand dollars, calculated in accordance with generally accepted accounting principles.
2. The financial condition and responsibility, financial and business experience, and character and general fitness of the applicant must reasonably warrant the belief that the applicant’s business will be conducted honestly, fairly, and in a manner commanding the confidence and trust of the community. In determining whether this qualification is met and for purposes of investigating compliance with this chapter, the commissioner may review and consider the relevant business records and capital adequacy of the applicant.
3. Every corporate applicant, at the time of filing of an application for a license under this chapter and at all times after a license is issued, must be in good standing in the state of its incorporation. At the time of the filing of an application for a license under this chapter and at all times after a license is issued, all noncorporate applicants must be registered or qualified to do business in the state.

Source: S.L. 2005, ch. 128, § 2.

13-09-05. Bond or other security device.

1. Each application must be accompanied by a surety bond, irrevocable letter of credit, or such other similar security device, hereinafter “security device”, acceptable to the commissioner in the amount of one hundred fifty thousand dollars. The commissioner may increase the amount of the bond or security device to a maximum of five hundred thousand dollars for good cause. The security device must be in a form satisfactory to the commissioner and must run to the state for the benefit of any claimants against the licensee to secure the faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission, and payment of money in connection with the sale and issuance of payment instruments and transmission of money. In the case of a bond, the aggregate liability of the surety may not exceed the principal sum of the bond. Claimants against the licensee may themselves bring suit directly on the security device or the commissioner may bring suit on behalf of such claimants, either in one action or in successive actions.
2. In lieu of a security device or of any portion of the principal thereof, as required by this section, the licensee may deposit with the commissioner, or with banks in this state as the licensee may designate and the commissioner may approve, cash, interest-bearing stocks and bonds, notes, debentures, or other obligations of the United States or any agency or instrumentality thereof, or guaranteed by the United States, or of this state, or of a city, county, school district, or instrumentality of this state, or guaranteed by this state, to an aggregate amount, based upon principal amount or market value, whichever is lower, of not less than the amount of the security device or portion thereof. The securities and cash must be deposited as aforesaid and held to secure the same obligations as would the security device, but the depositor is entitled to receive all interest and dividends thereon, with the approval of the commissioner may substitute other securities for those deposited, and must be required so to do on written order of the commissioner made for good cause shown.
3. The security device must remain in effect until cancellation, which may occur only after thirty days’ written notice to the commissioner. Cancellation does not affect any liability incurred or accrued during the period.
4. The security device must remain in place for at least five years after the licensee ceases money transmission operations in the state. However, notwithstanding this provision, the commissioner may permit the security device to be reduced or eliminated before that time to the extent that the amount of the licensee’s payment instruments outstanding in this state are reduced. The commissioner may also permit a licensee to substitute a letter of credit or such other form of security device acceptable to the commissioner for the security device in place at the time the licensee ceases money transmission operations in the state.

Source: S.L. 2005, ch. 128, § 2.

13-09-06. Permissible investments and statutory trust.

1. Each licensee under this chapter must at all times possess permissible investments having an aggregate market value, calculated in accordance with generally accepted accounting principles, of not less than the aggregate face amount of all outstanding payment instruments and stored value issued or sold by the licensee in the United States. This requirement may be waived by the commissioner if the dollar volume of a licensee’s outstanding payment instruments and stored value does not exceed the bond or other security devices posted by the licensee pursuant to section 13-09-05.
2. Permissible investments, even if commingled with other assets of the licensee, are deemed by operation of law to be held in trust for the benefit of the purchasers and holders of the licensee’s outstanding payment instruments in the event of the bankruptcy of the licensee.

Source: S.L. 2005, ch. 128, § 2.

13-09-07. Application for license.

1. Each application for a license under this chapter must be in the form prescribed by the commissioner. Each application must state or contain:
   1. For all applicants:
      1. The exact name of the applicant, the applicant’s principal address, any fictitious or trade name used by the applicant in the conduct of its business, and the location of the applicant’s business records.
      2. The history of the applicant’s criminal convictions and material litigation for the five-year period before the date of the application.
      3. A description of the activities conducted by the applicant and a history of operations.
      4. A description of the business activities in which the applicant seeks to be engaged in the state.
      5. A list identifying the applicant’s proposed authorized delegates in the state, if any, at the time of the filing of the license application.
      6. A sample authorized delegate contract, if applicable.
      7. A sample form of payment instrument, if applicable.
      8. The locations at which the applicant and its authorized delegates, if any, propose to conduct the licensed activities in the state.
      9. The name and address of the clearing bank or banks on which the applicant’s payment instruments will be drawn or through which the payment instruments will be payable.
   2. If the applicant is a corporation, the applicant must also provide:
      1. The date of the applicant’s incorporation and state of incorporation.
      2. A certificate of good standing from the state in which the applicant was incorporated.
      3. A description of the corporate structure of the applicant, including the identity of any parent or subsidiary of the applicant, and the disclosure of whether any parent or subsidiary is publicly traded on any stock exchange.
      4. The name, business and residence address, and employment history for the past five years of the applicant’s executive officers and the officers or managers who will be in charge of the applicant’s activities to be licensed hereunder.
      5. The name, business and residence address, and employment history for the period five years prior to the date of the application of any key shareholder of the applicant.
      6. The history of criminal convictions and material litigation for the five-year period before the date of the application of every executive officer or key shareholder of the applicant.
      7. A copy of the applicant’s most recent audited financial statement including balance sheet, statement of income or loss, statement of changes in shareholder equity, and statement of changes in financial position and, if available, the applicant’s audited financial statements for the immediately preceding two-year period. However, if the applicant is a wholly owned subsidiary of another corporation, the applicant may submit either the parent corporation’s consolidated audited financial statements for the current year and for the immediately preceding two-year period or the parent corporation’s form 10K reports filed with the United States securities and exchange commission for the prior three years in lieu of the applicant’s financial statements. If the applicant is a wholly owned subsidiary of a corporation having its principal place of business outside the United States, similar documentation filed with the parent corporation’s non-United States regulator may be submitted to satisfy this provision.
      8. Copies of all filings, if any, made by the applicant with the United States securities and exchange commission, or with a similar regulator in a country other than the United States, within the year preceding the date of filing of the application.
   3. If the applicant is not a corporation, the applicant must also provide:
      1. The name, business and residence address, personal financial statement, and employment history, for the past five years, of each principal of the applicant and the name, business and residence address, and employment history for the past five years of any other person or persons who will be in charge of the applicant’s activities to be licensed under this chapter;
      2. The place and date of the applicant’s registration or qualification to do business in this state;
      3. The history of criminal convictions and material litigation for the five-year period before the date of the application for each individual having any ownership interest in the applicant and each individual who exercises supervisory responsibility with respect to the applicant’s activities; and
      4. Copies of the applicant’s audited financial statements including balance sheet, statement of income or loss, and statement of changes in financial position for the current year and, if available, for the immediately preceding two-year period.
   4. For good cause shown, the commissioner may waive any requirement of this section with respect to any license application or to permit a license applicant to submit substituted information in its license application in lieu of the information required by this section.
2. To fulfill the purposes of this chapter, the commissioner may establish relationships or contracts with a nationwide multistate licensing system and registry or other entities designated by a nationwide multistate licensing system and registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to the chapter. The applicant shall pay directly to such nationwide multistate licensing system any additional fee relating to participation in such nationwide multistate licensing system.
3. In connection with an application for licensing as a money transmitter, or any license renewals, the applicant shall furnish to the nationwide multistate licensing system information concerning the applicant’s identity, which may include:
   1. Fingerprints for submission to the federal bureau of investigation, and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check, except that officers and directors of a publicly traded company and subsidiaries of the publicly traded company may not be required to submit fingerprints under this section;
   2. Personal history and experience in a form prescribed by the nationwide multistate licensing system, including the submission of authorization for the nationwide multistate licensing system and the commissioner to obtain:
      1. An independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act; and
      2. Information related to any administrative, civil, or criminal findings by any governmental jurisdiction; and
   3. Any other documents, information, or evidence the commissioner deems relevant to the application regardless of the location, possession, control, or custody of such documents, information, or evidence.
4. For the purposes of this section and in order to reduce the points of contact which the federal bureau of investigation may have to maintain for purposes of subsection 3, the commissioner may use the nationwide multistate licensing system and registry as a channeling agent for requesting information from and distributing information to the department of justice or any governmental agency.
5. For the purposes of this section and in order to reduce the points of contact which the commissioner may have to maintain for purposes of subsection 3, the commissioner may use the nationwide multistate licensing system and registry as a channeling agent for requesting and distributing information to and from any source so directed by the commissioner.

Source: S.L. 2005, ch. 128, § 2; 2013, ch. 115, § 12.

13-09-07.1. Change of name or address.

A licensee is required to submit within twenty business days of the date of change notification of a change of name or change of address. The notification must be in the form prescribed by the commissioner.

Source: S.L. 2011, ch. 107, § 10; 2015, ch. 120, § 12, effective July 1, 2015.

13-09-08. Application fee.

Each application must be accompanied by a nonrefundable investigation fee in the amount of four hundred fifty dollars and license fee of four hundred dollars. The license fee must be refunded if the application is denied. The commissioner shall deposit fees and costs collected by the department under this chapter in the department of financial institutions regulatory fund.

Source: S.L. 2005, ch. 128, § 2.

13-09-09. Issuance of license.

1. Upon the filing of a complete application, the commissioner shall investigate the financial condition and responsibility, financial and business experience, character, and general fitness of the applicant. The commissioner may conduct an onsite investigation of the applicant, the reasonable cost of which must be borne by the applicant. If the commissioner finds that the applicant’s business will be conducted honestly, fairly, and in a manner commanding the confidence and trust of the community and that the applicant has fulfilled the requirements imposed by this chapter and has paid the required license fee, the commissioner shall issue a license to the applicant authorizing the applicant to engage in the licensed activities in this state. If these requirements have not been met, the commissioner shall deny the application in writing, setting forth the reasons for the denial.
2. The commissioner shall approve or deny every application for an original license within one hundred twenty days from the date a complete application is submitted, which period may be extended by the written consent of the applicant. The commissioner shall notify the applicant of the date when the application is deemed complete.
3. Any applicant aggrieved by a denial issued by the commissioner under this chapter may at any time within thirty days from the date of receipt of written notice of the denial request a hearing before the commissioner.

Source: S.L. 2005, ch. 128, § 2.

13-09-10. Renewal of license and annual report.

1. A licensee under this chapter shall pay an annual renewal fee, which is not subject to refund. The fee must equal five hundred dollars or one-fourth of one percent of the money transmission dollar volume in North Dakota for the twelve months ending June thirtieth, whichever is greater. The fee may not exceed two thousand five hundred dollars.
2. The renewal fee must be accompanied by a report, in a form prescribed by the commissioner, which must include:
   1. A copy of its most recent audited consolidated annual financial statement including balance sheet, statement of income or loss, statement of changes in shareholder’s equity, and statement of changes in financial position, or, in the case of a licensee that is a wholly owned subsidiary of another corporation, the consolidated audited annual financial statement of the parent corporation may be filed in lieu of the licensee’s audited annual financial statement;
   2. For the most recent quarter for which data is available before the date of the filing of the renewal application, but in no event more than one hundred twenty days before the renewal date, the licensee must provide the number of payment instruments sold by the licensee in the state, the dollar amount of those instruments, and the dollar amount of those instruments currently outstanding;
   3. Any material changes to any of the information submitted by the licensee on its original application which have not previously been reported to the commissioner on any other report required to be filed under this chapter;
   4. A list of the licensee’s permissible investments; and
   5. A list of the locations, if any, within this state at which business regulated by this chapter is being conducted by either the licensee or its authorized delegates.
3. All licenses issued pursuant to this chapter expire on December thirty-first of each year. Applications for renewal must be submitted thirty days before expiration of the license. A licensee that has not filed a renewal report or paid its renewal fee by December thirty-first and has not been granted an extension of time to do so by the commissioner must have its license suspended. The licensee in such case has thirty days after its license is suspended in which to file a renewal report and pay the renewal fee, plus fifty dollars for each business day after suspension that the commissioner does not receive the renewal report and the renewal fee. For good cause, the commissioner may grant an extension of the renewal date or reduce or suspend the fifty dollars per day late filing fee.

Source: S.L. 2005, ch. 128, § 2; 2013, ch. 115, § 13; 2019, ch. 123, § 8, effective July 1, 2019.

13-09-10.1. Automatic six-month extension of license during 2014 calendar year. [Repealed]

Source: S.L. 2013, ch. 115, § 14; repealed by 2019, ch. 123, § 10, effective July 1, 2019.

13-09-11. Extraordinary reporting requirements.

Within fifteen business days of the occurrence of any one of the events listed below, a licensee shall file a written report with the commissioner describing such event and its expected impact on the licensee’s activities in the state:

1. Any material changes in information provided in a licensee’s application or renewal report;
2. The filing for bankruptcy or reorganization by the licensee;
3. The institution of revocation or suspension proceedings against the licensee by any state or governmental authority with regard to the licensee’s money transmission activities;
4. Any felony indictment of the licensee or any of its key officers or directors related to money transmission activities; and
5. Any felony conviction of the licensee or any of its key officers or directors related to money transmission activities.

Source: S.L. 2005, ch. 128, § 2.

13-09-12. Changes in control of a licensee.

1. A licensee shall give the commissioner written notice of a proposed change of control within fifteen days after learning of the proposed change of control and request approval of the acquisition.
2. After review of a request for approval under subsection 1, the commissioner may require the licensee to provide additional information concerning the proposed persons in control of the licensee. The additional information must be limited to the same types required of the licensee or persons in control of the licensee as part of its original license or renewal application.
3. The commissioner shall approve a request for change of control under subsection 1 if, after investigation, the commissioner determines that the person or group of persons requesting approval has the competence, experience, character, and general fitness to operate the licensee or person in control of the licensee in a lawful and proper manner and that the interests of the public will not be jeopardized by the change of control.
4. The following persons are exempt from the requirements of subsection 1, but the licensee shall notify the commissioner of a change of control:
   1. A person that acts as a proxy for the sole purpose of voting at a designated meeting of the securityholders or holders of voting interests of a licensee or person in control of a licensee;
   2. A person that acquires control as a personal representative, custodian, guardian, conservator, or trustee, or as an officer appointed by a court of competent jurisdiction or by operation of law; and
   3. A person that the commissioner by rule or order exempts in the public interest.
5. Before filing a request for approval to acquire control, a person may request in writing a determination from the commissioner as to whether the person would be considered a person in control of a licensee upon consummation of a proposed transaction.

Source: S.L. 2005, ch. 128, § 2.

13-09-13. Examinations.

1. The commissioner may conduct an annual onsite examination of a licensee upon reasonable written notice to the licensee. The commissioner may examine a licensee without prior notice if the commissioner has a reasonable basis to believe that the licensee is in noncompliance with this chapter. Should the commissioner conclude that an onsite examination of a licensee is necessary, the licensee shall pay an examination or visitation fee and the commissioner shall charge for the actual cost of the examination or visitation at an hourly rate set by the commissioner which is sufficient to cover all reasonable expenses associated with the examination or visitation. The onsite examination may be conducted in conjunction with examinations to be performed by representatives of agencies of another state or states. The commissioner, in lieu of an onsite examination, may accept the examination report of an agency of another state, or a report prepared by an independent accounting firm, and reports so accepted are considered for all purposes as an official report of the commissioner. The reasonable expenses incurred by the department, agencies of another state, or an independent licensed or certified public accountant in making the examination or report must be borne by the licensee.
2. The commissioner may request financial data from a licensee in addition to that required under section 13-09-10, or conduct an onsite examination of any authorized delegate or location of a licensee within this state without prior notice to the authorized delegate or licensee only if the commissioner has a reasonable basis to believe that the licensee or authorized delegate is in noncompliance with this chapter. When the commissioner examines an authorized delegate’s operations, the authorized delegate shall pay all reasonably incurred costs of such examination. When the commissioner examines a licensee’s location within the state, the licensee shall pay all reasonably incurred costs of such examination.

Source: S.L. 2005, ch. 128, § 2.

13-09-14. Maintenance of records.

1. Each licensee shall make, keep, and preserve the following books, accounts, and other records for a period of five years and which are open to inspection by the commissioner:
   1. A record or records of each payment instrument and stored value sold;
   2. A general ledger containing all assets, liability, capital, income, and expense accounts, which general ledger must be posted at least monthly;
   3. Bank statements and bank reconciliation records;
   4. Records of outstanding payment instruments and stored value;
   5. Records of each payment instrument and stored value paid within the five-year period;
   6. A list of the names and addresses of all of the licensee’s authorized delegates; and
   7. Any other records the commissioner reasonably requires by rule.
2. Maintenance of such documents as are required by this section in a photographic, electronic, or other similar form constitutes compliance with this section.
3. Records may be maintained at a location other than within this state so long as the records are made accessible to the commissioner on seven business days’ written notice. When a licensee ceases operations for any reason, the licensee shall inform the department of the location of the records. In addition, the licensee shall provide the name of the individual responsible for maintenance of the records. The licensee shall notify the department within ten business days of the change of the location of the records or the change of the individual responsible for maintenance of the records.

Source: S.L. 2005, ch. 128, § 2; 2011, ch. 107, § 8.

13-09-15. Authorized delegate contracts.

Licensees desiring to conduct licensed activities through authorized delegates shall authorize each delegate to operate pursuant to an express written contract, which, for contracts entered into after July 1, 2005, must provide the following:

1. That the licensee appoints the person as its delegate with authority to engage in money transmission on behalf of the licensee;
2. That neither a licensee nor an authorized delegate may authorize subdelegates without the written consent of the commissioner; and
3. That licensees are subject to supervision and regulation by the commissioner.

Source: S.L. 2005, ch. 128, § 2.

13-09-16. Authorized delegate conduct.

1. An authorized delegate may not make a fraudulent or false statement or misrepresentation to a licensee or to the commissioner.
2. All money transmission or sale or issuance of payment instrument activities conducted by authorized delegates must be strictly in accordance with the licensee’s written procedures provided to the authorized delegate.
3. An authorized delegate must remit all money owing to the licensee in accordance with the terms of the contract between the licensee and the authorized delegate.
4. An authorized delegate is deemed to consent to the commissioner’s inspection, with or without prior notice to the licensee or authorized delegates.
5. An authorized delegate is under a duty to act only as authorized under the contract with the licensee and this chapter and an authorized delegate who exceeds its authority is subject to cancellation of its contract and further disciplinary action by the commissioner.
6. All funds, less fees, received by an authorized delegate of a licensee from the sale or delivery of a payment instrument issued by a licensee or received by an authorized delegate for transmission must, from the time such funds are received by such authorized delegate until such time when the funds or an equivalent amount are remitted by the authorized delegate to the licensee, constitute trust funds owned by and belonging to the licensee. If an authorized delegate commingles any such funds with any other funds or property owned or controlled by the authorized delegate, all commingled proceeds and other property is impressed with a trust in favor of the licensee in an amount equal to the amount of the proceeds due the licensee.

Source: S.L. 2005, ch. 128, § 2.

13-09-17. Suspension or revocation of licenses.

1. The commissioner may issue and serve upon any licensee an order suspending or revoking a licensee’s license if the commissioner finds that:
   1. Any fact or condition exists that, if it had existed at the time when the licensee applied for its license, would have been grounds for denying such application;
   2. The licensee’s net worth becomes inadequate and the licensee, after ten days’ written notice from the commissioner, fails to take such steps as the commissioner deems necessary to remedy such deficiency;
   3. The licensee knowingly violates any material provision of this chapter or any rule or order validly adopted by the commissioner under authority of this title;
   4. The licensee is conducting its business in an unsafe or unsound manner;
   5. The licensee is insolvent;
   6. The licensee has suspended payment of its obligations, made an assignment for the benefit of its creditors, or admitted in writing its inability to pay its debts as they become due;
   7. The licensee has applied for an adjudication of bankruptcy, reorganization, arrangement, or other relief under any bankruptcy;
   8. The licensee refuses to permit the commissioner to make any examination authorized by this chapter;
   9. The licensee willfully fails to make any report required by this chapter;
   10. The licensee has failed to pay the annual license fee imposed under this chapter or any examination fee imposed by the commissioner under the authority of this chapter;
   11. The licensee has failed to maintain the required bond or other security device; or
   12. The licensee has failed to maintain registration with the secretary of state if so required.
2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32.
3. If a hearing is not requested within twenty business days of the date the order is served upon the licensee or if a hearing is held and the commissioner finds that the record so warrants, the commissioner may enter a final order suspending or revoking the license.
4. If the commissioner finds that probable cause for revocation of any license exists and that enforcement of the chapter requires immediate suspension of such license pending investigation, it may upon written notice enter an order temporarily suspending such license for a period not exceeding sixty days, pending the holding of a hearing as prescribed in this chapter.

Source: S.L. 2005, ch. 128, § 2; 2011, ch. 107, § 9.

13-09-18. Suspension or revocation of authorized delegates.

1. The commissioner may issue an order suspending or revoking the designation of an authorized delegate, if the commissioner finds that:
   1. The authorized delegate violates this chapter or a rule adopted or an order issued under this chapter;
   2. The authorized delegate does not cooperate with an examination or investigation by the commissioner;
   3. The authorized delegate engages in fraud, intentional misrepresentation, or gross negligence;
   4. The authorized delegate is convicted of a violation of a state or federal antimoney laundering statute;
   5. The competence, experience, character, or general fitness of the authorized delegate or a person in control of the authorized delegate indicates that it is not in the public interest to permit the authorized delegate to provide money services; or
   6. The authorized delegate is engaging in an unsafe or unsound practice.
2. In determining whether an authorized delegate is engaging in an unsafe or unsound practice, the commissioner may consider the size and condition of the authorized delegate’s provision of money services, the magnitude of the loss, if any, the gravity of the violation of this chapter, and the previous conduct of the authorized delegate.
3. An authorized delegate may appeal from a suspension or revocation of designation as an authorized delegate by filing a written appeal with the commissioner within twenty days of the issuance of the order.

Source: S.L. 2005, ch. 128, § 2.

13-09-19. Orders to cease and desist.

1. If the commissioner determines that an unlicensed person, a licensee, or an authorized delegate has committed a violation of this chapter or of a rule adopted or an order issued under this chapter, the commissioner may issue an order to cease and desist from the violation. The order becomes effective upon service.
2. The commissioner may issue an order against a licensee to cease and desist from providing money transmission services through an authorized delegate that is the subject of a separate order pursuant to section 13-09-18.
3. An order to cease and desist remains effective and enforceable pending the completion of any administrative proceeding.
4. The entity against which a cease and desist order has been issued may appeal the issuance of the cease and desist order by filing a written appeal with the commissioner within twenty days of the date the order is served on the licensee or delegate.
5. The commissioner may apply to the district court for an appropriate order to protect the public interest, including a temporary restraining order.

Source: S.L. 2005, ch. 128, § 2.

13-09-20. Consent orders.

The commissioner may enter into a consent order at any time with a person to resolve a matter arising under this chapter. A consent order must be signed by the person to whom it is issued or by the person’s authorized representative, and must indicate agreement with the terms contained in the order. A consent order may provide that it does not constitute an admission by a person that this chapter or a rule adopted or an order issued under this chapter has been violated.

Source: S.L. 2005, ch. 128, § 2.

13-09-21. Civil penalties.

The commissioner may impose a civil money penalty not to exceed five thousand dollars per violation upon a person or agency who willfully violates a law, rule, written agreement, or order under this chapter. An interested party may appeal the assessment of a civil money penalty by filing a written notice of appeal within twenty days after service of the assessment of civil money penalties. A civil money penalty collected under this section must be paid to the state treasurer and deposited in the financial institutions regulatory fund.

Source: S.L. 2005, ch. 128, § 2; 2009, ch. 140, § 4.

13-09-22. Criminal penalties.

1. A person who intentionally makes a false statement, misrepresentation, or false certification in a record filed or required to be maintained under this chapter, or that intentionally makes a false entry or omits a material entry in such a record, is guilty of a class C felony.
2. Any person violating any of the provisions of this chapter or any rule or order of the department of financial institutions made pursuant to the provisions of this chapter or who engages in any act, practice, or transaction declared by any provision of this chapter to be unlawful is guilty of a class C felony.
3. An individual who knowingly engages in any activity for which a license is required under this chapter without being licensed under this chapter is guilty of a class C felony.

Source: S.L. 2005, ch. 128, § 2.

13-09-23. Administrative procedures.

All administrative proceedings under this chapter must be conducted in accordance with chapter 28-32.

Source: S.L. 2005, ch. 128, § 2.

13-09-24. Savings and transitional provisions.

A license issued under the provisions of chapter 51-17 that is in effect immediately before July 1, 2005, remains in force as a license under this chapter until the license’s expiration date. Thereafter, the licensee must be treated as if the licensee had applied for and had received a license under this chapter and is required to comply with the renewal requirements set forth in this chapter.

Source: S.L. 2005, ch. 128, § 2.

13-09-25. Prohibited acts and practices.

It is a violation of this chapter for a person or individual subject to this chapter to knowingly:

1. Subscribe to, or make or cause to be made, any material false statement or representation in any application or other document or statement required to be filed under any provision of this chapter, or to omit to state any material statement or fact necessary in order to make the statements made, in light of the circumstances under which the statements are made, not misleading.
2. Directly or indirectly, employ any device, scheme, or artifice to defraud or mislead any person.
3. Directly or indirectly, make any untrue statement of a material fact or to omit to state a material fact.
4. Engage in any unfair or deceptive practice toward any person.
5. Conduct or solicit any business covered by this chapter without holding a valid license as required under this chapter or assist or aid and abet any person in the conduct of business under this chapter without a valid license as required under this chapter.
6. Fail to make disclosures as required by this chapter and any other applicable state or federal law and regulations.
7. Fail to comply with this chapter or rules adopted under this chapter or fail to comply with any other state or federal law, including the rules and regulations thereunder, applicable to any business authorized or conducted under this chapter.
8. Make, in any manner, any false or deceptive statement or representation.
9. Negligently make any false statement or knowingly and willfully make any omission of material fact in connection with any information or reports filed with a governmental agency or in connection with any investigation conducted by the commissioner or another governmental agency.
10. Collect, charge, attempt to collect or charge, or use or propose any agreement purporting to collect or charge any fee prohibited by this chapter.
11. Fail to truthfully account for moneys belonging to or collected from another.

Source: S.L. 2011, ch. 107, § 11.

13-09-26. Confidentiality.

To promote more effective regulation and reduce regulatory burden through supervisory information sharing, the commissioner or commissioner’s designee may furnish information to or receive information from a nationwide multistate licensing system for the purpose of regulation of the financial services industry. Information furnished by the commissioner to any third party which is confidential or privileged in the commissioner’s possession remains confidential or privileged in the possession of the third party. Information received by the commissioner from any third party which is confidential or privileged in the third-party’s possession remains confidential or privileged in the commissioner’s possession.

Source: S.L. 2013, ch. 115, § 15.

13-10-01. Purpose.

The purpose of this chapter is to protect consumers seeking mortgage loans and to ensure that the mortgage lending industry is operating without unfair, deceptive, and fraudulent practices on the part of mortgage loan originators.

Source: S.L. 2009, ch. 141, § 7.

13-10-02. Definitions.

For purposes of this chapter:

1. “Depository institution” has the same meaning as is currently defined under section 3 of the Federal Deposit Insurance Act and includes any credit union.
2. “Federal banking agencies” means the board of governors of the federal reserve system, the comptroller of the currency, the director of the office of thrift supervision, the national credit union administration, and the federal deposit insurance corporation.
3. “Immediate family member” means a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships.
4. “Individual” means a natural person.
5. “Loan processor or underwriter” means an individual who performs clerical or support duties as an employee at the direction of and subject to the supervision and instruction of a person licensed, or exempt from licensing, under this chapter.
   1. For purposes of this subsection, “clerical or support duties” may include subsequent to the receipt of an application:
      1. The receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; and
      2. Communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.
   2. An individual engaging solely in loan processor or underwriter activities shall not represent to the public, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that such individual can or will perform any of the activities of a mortgage loan originator.
6. “Mortgage loan originator”:
   1. Means 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;
   2. Does not include an individual engaged solely as a loan processor or underwriter except as otherwise provided in subsection 4 of section 13-10-03;
   3. Does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with North Dakota law, unless the person or entity is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator; and
   4. Does not include a person or entity solely involved in extensions of credit relating to timeshare plans, as that term is defined in 11 U.S.C. 101(53D).
7. “Nationwide mortgage licensing system and registry” means a mortgage licensing system developed and maintained by the conference of state bank supervisors and the American association of residential mortgage regulators for the licensing and registration of licensed mortgage loan originators.
8. “Nontraditional mortgage product” means any mortgage product other than a thirty-year fixed rate mortgage.
9. “Person” means a natural person, corporation, company, limited liability company, partnership, or association.
10. “Real estate brokerage activity” means any activity that involves offering or providing real estate brokerage services to the public, including:
    1. Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
    2. Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property;
    3. Negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing with respect to any such transaction;
    4. Engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law; and
    5. Offering to engage in any activity, or act in any capacity, described in this subsection.
11. “Registered mortgage loan originator” means any individual who:
    1. Meets the definition of mortgage loan originator and is an employee of:
       1. A depository institution;
       2. A subsidiary that is:
          1. Owned and controlled by a depository institution; and
          2. Regulated by a federal banking agency; or
       3. An institution regulated by the farm credit administration; and
    2. Is registered with, and maintains a unique identifier through, the nationwide mortgage licensing system and registry.
12. “Residential mortgage loan” means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling, as defined in section 103(v) of the Truth in Lending Act, or residential real estate upon which is constructed or intended to be constructed such a dwelling.
13. “Residential real estate” means any real property located in North Dakota, upon which is constructed or intended to be constructed a dwelling.
14. “Unique identifier” means a number or other identifier assigned by protocols established by the nationwide mortgage licensing system and registry.

Source: S.L. 2009, ch. 141, § 7.

Note.

Section 3 of the Federal Deposit Insurance Act referenced herein is compiled at 12 USCS § 1813. Section 103(v) of the Truth in Lending Act referenced herein is compiled at 15 USCS § 1602.

13-10-03. License and registration required.

1. An individual, unless specifically exempted from this chapter under subsection 2, shall not engage in the business of a mortgage loan originator with respect to any dwelling located in this state without first obtaining and maintaining annually a license under this chapter. Each licensed mortgage loan originator must register with and maintain a valid unique identifier issued by the nationwide mortgage licensing system and registry.
2. The following are exempt from this chapter:
   1. Registered mortgage loan originators, when acting for an entity described in subdivision a of subsection 11 of section 13-10-02 are exempt from this chapter.
   2. Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual.
   3. Any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence.
   4. A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator.
   5. An individual who is an employee of a federal, state, or local government agency or housing finance agency and who acts as a loan originator solely pursuant to that individual’s official duties as an employee of the federal, state, or local government agency or housing finance agency in compliance with title 12, Code of Federal Regulations, part 1008, section 1008.103(e)(6).
   6. An individual who is an employee of a bona fide nonprofit organization who acts as a loan originator solely with respect to that individual’s work duties to the bona fide nonprofit organization, and who acts as a loan originator solely with respect to residential mortgage loans with terms that are favorable to the borrower in compliance with title 12, Code of Federal Regulations, part 1008, section 1008.103(e)(7).
3. A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless such independent contractor loan processor or underwriter obtains and maintains a license under subsection 1. Each independent contractor loan processor or underwriter licensed as a mortgage loan originator must have and maintain a valid unique identifier issued by the nationwide mortgage licensing system and registry.
4. To implement an orderly and efficient licensing process, the commissioner may establish licensing rules or regulations and interim procedures for licensing and acceptance of applications. For previously registered or licensed individuals, the commissioner may establish expedited review and licensing procedures.

Source: S.L. 2009, ch. 141, § 7; 2011, ch. 105, § 15; 2015, ch. 120, § 13, effective April 9, 2015.

Note.

Public Law 110-289, Section 1508(a) referenced herein is compiled at 12 USCS § 5107(a).

13-10-04. State license and registration application and issuance.

1. Applicants for a license shall apply in a form as prescribed by the commissioner. Each such form must contain content as set forth by rule, regulation, instruction, or procedure of the commissioner and may be changed or updated as necessary by the commissioner in order to carry out the purposes of this chapter.
2. To fulfill the purposes of this chapter, the commissioner may establish relationships or contracts with the nationwide mortgage licensing system and registry or other entities designated by the nationwide mortgage licensing system and registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to this chapter.
3. In connection with an application for licensing as a mortgage loan originator, the applicant shall, at a minimum, furnish to the nationwide mortgage licensing system and registry information concerning the applicant’s identity, including:
   1. Fingerprints for submission to the federal bureau of investigation and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check; and
   2. Personal history and experience in a form prescribed by the nationwide mortgage licensing system and registry, including the submission of authorization for the nationwide mortgage licensing system and registry and the commissioner to obtain:
      1. An independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act; and
      2. Information related to any administrative, civil, or criminal findings by any governmental jurisdiction.
4. For the purposes of this section and in order to reduce the points of contact which the federal bureau of investigation may have to maintain for purposes of subsection 3, the commissioner may use the nationwide mortgage licensing system and registry as a channeling agent for requesting information from and distributing information to the department of justice or any governmental agency.
5. For the purposes of this section and in order to reduce the points of contact which the commissioner may have to maintain for purposes of subsection 3, the commissioner may use the nationwide mortgage licensing system and registry as a channeling agent for requesting and distributing information to and from any source so directed by the commissioner.

Source: S.L. 2009, ch. 141, § 7.

Note.

Section 603(p) of the Fair Credit Reporting Act referenced herein is compiled at 15 USCS § 1681a.

13-10-05. Issuance of license.

The commissioner shall not issue a mortgage loan originator license unless the commissioner makes at a minimum the following findings:

1. The applicant has never had a mortgage loan originator license revoked in any governmental jurisdiction, except that a subsequent formal vacation of such revocation shall not be deemed a revocation.
2. The applicant has not been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court:
   1. During the seven-year period preceding the date of the application for licensing and registration; or
   2. At any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering;
   3. Provided that any pardon of a conviction shall not be a conviction for purposes of this subsection.
3. 1. The applicant has demonstrated financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly, and efficiently within the purposes of this chapter.
   2. For purposes of this subsection, a person has shown that that person is not financially responsible when that person has shown a disregard in the management of that person’s own financial condition. A determination that an individual has not shown financial responsibility may include:
      1. Current outstanding judgments, except judgments solely as a result of medical expenses;
      2. Current outstanding tax liens or other government liens and filings;
      3. Foreclosures within the past three years; and
      4. A pattern of seriously delinquent accounts within the past three years.
4. The applicant has completed the prelicensing education requirement described in section 13-10-06.
5. The applicant has passed a written test that meets the test requirement described in section 13-10-07.
6. The applicant has met the net worth and surety bond requirements under section 13-10-13.

Source: S.L. 2009, ch. 141, § 7.

13-10-06. Prelicensing and relicensing education of loan originators.

1. To meet the prelicensing education requirement referred to in subsection 4 of section 13-10-05, a person shall complete at least twenty hours of education approved in accordance with subsection 2, which must include at least:
   1. Three hours of federal law and regulations;
   2. Three hours of ethics, which shall include 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.
2. For purposes of subsection 1, prelicensing education courses must be reviewed and approved by the nationwide mortgage licensing system and registry based upon reasonable standards. Review and approval of a prelicensing education course must include review and approval of the course provider.
3. Nothing in this section precludes any prelicensing education course, as approved by the nationwide mortgage licensing system and registry, which is provided by the employer of the applicant or an entity that is affiliated with the applicant by an agency contract or any subsidiary or affiliate of such employer or entity.
4. Prelicensing education may be offered in a classroom, online, or by any other means approved by the nationwide mortgage licensing system and registry.
5. The prelicensing education requirements approved by the nationwide mortgage licensing system and registry in subsection 1 for any state shall be accepted as credit toward completion of prelicensing education requirements in North Dakota.
6. A person previously licensed under this chapter after the effective date of this chapter applying to be licensed again must prove that that person has completed all of the continuing education requirements for the year in which the license was last held.

Source: S.L. 2009, ch. 141, § 7.

13-10-07. Testing of loan originators.

1. In order to meet the written test requirement referred to in subsection 5 of section 13-10-05, an individual must pass, in accordance with the standards established under this subsection, a qualified written test developed by the nationwide mortgage licensing system and registry and administered by a test provider approved by the nationwide mortgage licensing system and registry based upon reasonable standards.
2. A written test shall not be treated as a qualified written test for purposes of subsection 1 unless the test adequately measures the applicant’s knowledge and comprehension in appropriate subject areas, including:
   1. Ethics;
   2. Federal law and regulation pertaining to mortgage origination;
   3. State law and regulation pertaining to mortgage origination; and
   4. Federal and state law and regulation, including instruction on fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues.
3. Nothing in this section prohibits a test provider approved by the nationwide mortgage licensing system and registry from providing a test at the location of the employer of the applicant or the location of any subsidiary or affiliate of the employer of the applicant or the location of any entity with which the applicant holds an exclusive arrangement to conduct the business of a mortgage loan originator.
4. 1. An individual shall not be considered to have passed a qualified written test unless the individual achieves a test score of not less than seventy-five percent correct answers to questions.
   2. An individual may retake a test three consecutive times, with each consecutive taking occurring at least thirty days after the preceding test.
   3. After failing three consecutive tests, an individual shall wait at least six months before taking the test again.
   4. A licensed mortgage loan originator who fails to maintain a valid license for a period of five years or longer shall retake the test, not taking into account any time during which individual is a registered mortgage loan originator.

Source: S.L. 2009, ch. 141, § 7.

13-10-08. Standards for license renewal.

1. The minimum standards for license renewal for mortgage loan originators include the following:
   1. The mortgage loan originator continues to meet the minimum standards for license issuance under section 13-10-05.
   2. The mortgage loan originator has satisfied the annual continuing education requirements described in section 13-10-09.
   3. The mortgage loan originator has paid all required fees for renewal of the license.
2. The license of a mortgage loan originator failing to satisfy the minimum standards for license renewal shall expire. The commissioner may adopt procedures for the reinstatement of expired licenses consistent with the standards established by the nationwide mortgage licensing system and registry.

Source: S.L. 2009, ch. 141, § 7.

13-10-09. Continuing education for mortgage loan originators.

1. To meet the annual continuing education requirements referred to in section 13-10-08, a licensed mortgage loan originator shall complete at least eight hours of education approved in accordance with subsection 2, which must include at least:
   1. Three hours of federal law and regulations;
   2. Two hours of ethics, which shall include 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.
2. For purposes of subsection 1, continuing education courses shall be reviewed and approved by the nationwide mortgage licensing system and registry based upon reasonable standards. Review and approval of a continuing education course must include review and approval of the course provider.
3. Nothing in this section precludes any education course, as approved by the nationwide mortgage licensing system and registry, which is provided by the employer of the mortgage loan originator or an entity that is affiliated with the mortgage loan originator by an agency contract or any subsidiary or affiliate of such employer or entity.
4. Continuing education may be offered in a classroom, online, or by any other means approved by the nationwide mortgage licensing system and registry.
5. For a licensed mortgage loan originator:
   1. Except as allowed by subsection 2 of section 13-10-08 and subsection 9 of this section, an individual may only receive credit for a continuing education course in the year in which the course is taken; and
   2. An individual may not take the same approved course in the same or successive years to meet the annual requirements for continuing education.
6. A licensed mortgage loan originator who is an approved instructor of an approved continuing education course may receive credit for the licensed mortgage loan originator’s own annual continuing education requirement at the rate of two hours credit for every one hour taught.
7. A person having successfully completed the education requirements approved by the nationwide mortgage licensing system and registry in subsection 1 for any state shall be accepted as credit toward completion of continuing education requirements in North Dakota.
8. A licensed mortgage loan originator who subsequently becomes unlicensed must complete the continuing education requirements for the last year in which the license was held prior to issuance of a new or renewed license.
9. A person meeting the requirements of subdivisions a and c of subsection 1 of section 13-10-08 may make up any deficiency in continuing education as established by rule or regulation of the commissioner.

Source: S.L. 2009, ch. 141, § 7.

13-10-10. Authority to require license.

In addition to any other duties imposed upon the commissioner by law, the commissioner shall require mortgage loan originators to be licensed and registered through the nationwide mortgage licensing system and registry. To carry out this requirement, the commissioner may participate in the nationwide mortgage licensing system and registry. For this purpose, the commissioner may establish by rule requirements as necessary, including:

1. Background checks for:
   1. Criminal history through fingerprint or other databases;
   2. Civil or administrative records;
   3. Credit history; or
   4. Any other information as deemed necessary by the nationwide mortgage licensing system and registry;
2. The payment of fees to apply for or renew licenses through the nationwide mortgage licensing system and registry;
3. The setting or resetting as necessary of renewal or reporting dates; and
4. Requirements for amending or surrendering a license or any other such activities as the commissioner deems necessary for participation in the nationwide mortgage licensing system and registry.

Source: S.L. 2009, ch. 141, § 7.

13-10-11. Nationwide mortgage licensing system and registry information challenge process.

The commissioner shall establish a process by which mortgage loan originators may challenge information entered into the nationwide mortgage licensing system and registry by the commissioner.

Source: S.L. 2009, ch. 141, § 7.

13-10-12. Enforcement authorities, violations, and penalties.

1. To ensure the effective supervision and enforcement of this chapter the commissioner may:
   1. Deny, suspend, revoke, condition, or decline to renew a license for a violation of this chapter, rules or regulations issued under this chapter or order or directive entered under this chapter.
   2. Deny, suspend, revoke, condition, or decline to renew a license if an applicant or licensee fails at any time to meet the requirements of section 13-10-05 or 13-10-08, or withholds information or makes a material misstatement in an application for a license or renewal of a license.
   3. Order restitution against persons subject to this chapter for violations of this chapter.
   4. Impose fines on persons subject to this chapter pursuant to subsections 2, 3, and 4.
   5. Issue orders or directives under this chapter as follows:
      1. Order or direct persons subject to this chapter to cease and desist from conducting business, including immediate temporary orders to cease and desist.
      2. Order or direct persons subject to this chapter to cease any harmful activities or violations of this chapter, including immediate temporary orders to cease and desist.
      3. Enter immediate temporary orders to cease business under a license or interim license issued pursuant to the authority granted under subsection 5 of section 13-10-03 if the commissioner determines that such license was erroneously granted or the licensee is currently in violation of this chapter.
      4. Order or direct such other affirmative action as the commissioner deems necessary.
2. The commissioner may impose a civil penalty on a mortgage loan originator or person subject to this chapter, if the commissioner finds, on the record after notice and opportunity for hearing, that such mortgage loan originator or person subject to this chapter has violated or failed to comply with any requirement of this chapter or any regulation prescribed by the commissioner under this chapter or order issued under authority of this chapter.
3. The maximum amount of penalty for each act or omission described in subsection 2 is twenty-five thousand dollars.
4. Each violation or failure to comply with any directive or order of the commissioner is a separate and distinct violation or failure.

Source: S.L. 2009, ch. 141, § 7.

13-10-13. Surety bond and minimum net worth requirements — Surety bond required.

1. Each mortgage loan originator must be covered by a surety bond in accordance with this section. If the mortgage loan originator is an employee or exclusive agent of a person subject to this chapter, the surety bond of such person subject to this chapter may be used in lieu of the mortgage loan originator’s surety bond requirement.
   1. The surety bond shall provide coverage for each mortgage loan originator in an amount as prescribed in subsection 2.
   2. The surety bond must be in a form as prescribed by the commissioner.
   3. The commissioner may promulgate rules or regulations with respect to the requirements for such surety bonds as are necessary to accomplish the purposes of this chapter.
2. The licensee shall maintain a surety bond in the amount as determined by the commissioner by rule. The amount must be reflective of the dollar amount of loans originated as of the previous yearend. However, the commissioner may increase the amount of the surety bond if the commissioner determines that such an increase is necessary to protect the public interests.
3. When an action is commenced on a licensee’s bond, the commissioner may require the filing of a new bond.
4. Immediately upon recovery upon any action on the bond, the licensee shall file a new bond.

Source: S.L. 2009, ch. 141, § 7.

13-10-14. Minimum net worth required.

A minimum net worth must be continuously maintained for mortgage loan originators in accordance with this section. If the mortgage loan originator is an employee or exclusive agent of a person subject to this chapter, the net worth of such person subject to this chapter may be used in lieu of the mortgage loan originator’s minimum net worth requirement.

1. Minimum net worth must be maintained in the amount of twenty-five thousand dollars. However, the commissioner may increase the amount of minimum net worth if the commissioner determines that such an increase is necessary to protect the public interest.
2. The commissioner may promulgate rules or regulations with respect to the requirements for minimum net worth as are necessary to accomplish the purposes of this chapter.

Source: S.L. 2009, ch. 141, § 7.

13-10-15. Confidentiality.

To promote more effective regulation and reduce regulatory burden through supervisory information sharing:

1. Except as otherwise provided in Public Law 110-289, section 1512, the requirements under any federal law or chapter 44-04 regarding the privacy or confidentiality of any information or material provided to the nationwide mortgage licensing system and registry, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, continue to apply to such information or material after the information or material has been disclosed to the nationwide mortgage licensing system and registry. Such information and material may be shared with all state and federal regulatory officials with mortgage industry oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal law or chapter 44-04.
2. For these purposes, the commissioner may enter agreements or sharing arrangements with other governmental agencies, the conference of state bank supervisors, the American association of residential mortgage regulators, or other associations representing governmental agencies as established by rule, regulation, or order of the commissioner.
3. Information or material that is subject to a privilege or confidentiality under subsection 1 is not subject to:
   1. Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the respective state; or
   2. Subpoena or discovery, or admission into evidence, in any private civil action or administrative process, unless with respect to any privilege held by the nationwide mortgage licensing system and registry with respect to such information or material, the person to whom such information or material pertains waives, in whole or in part, in the discretion of such person, that privilege.
4. Application of chapter 44-04 relating to the disclosure of confidential supervisory information or any information or material described in subsection 1 which is inconsistent with subsection 1 shall be superseded by the requirements of this section.
5. This section does not apply with respect to the information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions against, mortgage loan originators that is included in the nationwide mortgage licensing system and registry for access by the public.

Source: S.L. 2009, ch. 141, § 7.

Note.

Public Law 110-289, section 1512 referenced herein is compiled at 12 USCS § 5111.

13-10-16. Investigation and examination authority.

In addition to any authority allowed under this chapter, the commissioner may conduct investigations and examinations as follows:

1. For purposes of initial licensing, license renewal, license suspension, license conditioning, license revocation or termination, or general or specific inquiry or investigation to determine compliance with this chapter, the commissioner may access, receive, and use any books, accounts, records, files, documents, information, or evidence, including:
   1. Criminal, civil, and administrative history information, including nonconviction data;
   2. Personal history and experience information, including independent credit reports obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act; and
   3. Any other documents, information, or evidence the commissioner deems relevant to the inquiry or investigation regardless of the location, possession, control, or custody of such documents, information, or evidence.
2. For the purposes of investigating violations or complaints arising under this chapter, or for the purposes of examination, the commissioner may review, investigate, or examine any licensee, individual, or person subject to this chapter, as often as necessary in order to carry out the purposes of this chapter. The commissioner may direct, subpoena, or order the attendance of and examine under oath all persons whose testimony may be required about the loans or the business or subject matter of any such examination or investigation, and may direct, subpoena, or order such person to produce books, accounts, records, files, and any other documents the commissioner deems relevant to the inquiry.
3. Each licensee, individual, or person subject to this chapter shall make available to the commissioner upon request the books and records relating to the operations of such licensee, individual, or person subject to this chapter. The commissioner shall have access to such books and records and interview the officers, principals, mortgage loan originators, employees, independent contractors, agents, and customers of the licensee, individual, or person subject to this chapter concerning their business.
4. Each licensee, individual, or person subject to this chapter shall make or compile reports or prepare other information as directed by the commissioner in order to carry out the purposes of this section, including:
   1. Accounting compilations;
   2. Information lists and data concerning loan transactions in a format prescribed by the commissioner; or
   3. Such other information deemed necessary to carry out the purposes of this section.
5. In making any examination or investigation authorized by this chapter, the commissioner may control access to any documents and records of the licensee or person under examination or investigation. The commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, no individual or person shall remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the commissioner. Unless the commissioner has reasonable grounds to believe the documents or records of the licensee have been, or are at risk of being altered or destroyed for purposes of concealing a violation of this chapter, the licensee or owner of the documents and records shall have access to the documents or records as necessary to conduct its ordinary business affairs.
6. In order to carry out the purposes of this section, the commissioner may:
   1. Retain accountants or other professionals and specialists as examiners, auditors, or investigators to conduct or assist in the conduct of examinations or investigations;
   2. Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information, or evidence obtained under this section;
   3. Use, hire, contract, or employ publicly or privately available analytical systems, methods, or software to examine or investigate the licensee, individual, or person subject to this chapter;
   4. Accept and rely on examination or investigation reports made by other government officials, within or without this state; or
   5. Accept audit reports made by an independent certified public accountant for the licensee, individual, or person subject to this chapter in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of the examination, report of investigation, or other writing of the commissioner.
7. The authority of this section remains in effect, whether such a licensee, individual, or person subject to this chapter acts or claims to act under any licensing or registration law of this state or claims to act without such authority.
8. No licensee, individual, or person subject to investigation or examination under this section may knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, computer records, or other information.

Source: S.L. 2009, ch. 141, § 7; 2011, ch. 105, § 16.

Note.

Section 603(p) of the Fair Credit Reporting Act referenced herein is compiled at 15 USCS § 1681a.

13-10-17. Prohibited acts and practices.

It is a violation of this chapter for a person or individual subject to this chapter to:

1. Directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person;
2. Engage in any unfair or deceptive practice toward any person;
3. Obtain property by fraud or misrepresentation;
4. Solicit or enter into a contract with a borrower that provides in substance that the person or individual subject to this chapter may earn a fee or commission through best efforts to obtain a loan even though no loan is actually obtained for the borrower;
5. Solicit, advertise, or enter into a contract for specific interest rates, points, or other financing terms unless the terms are actually available at the time of soliciting, advertising, or contracting;
6. Conduct any business covered by this chapter without holding a valid license as required under this chapter, or assist or aid and abet any person in the conduct of business under this chapter without a valid license as required under this chapter;
7. Fail to make disclosures as required by this chapter and any other applicable state or federal law and regulations;
8. Fail to comply with this chapter or rules or regulations promulgated under this chapter, or fail to comply with any other state or federal law, including the rules and regulations thereunder, applicable to any business authorized or conducted under this chapter;
9. Make, in any manner, any false or deceptive statement or representation, including, with regard to the rates, points, or other financing terms or conditions for a residential mortgage loan or engage in bait and switch advertising;
10. Negligently make any false statement or knowingly and willfully make any omission of material fact in connection with any information or reports filed with a governmental agency or the nationwide mortgage licensing system and registry or in connection with any investigation conducted by the commissioner or another governmental agency;
11. Make any payment, threat, or promise, directly or indirectly, to any person for the purposes of influencing the independent judgment of the person in connection with a residential mortgage loan or make any payment, threat, or promise, directly or indirectly, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property;
12. Collect, charge, attempt to collect or charge, or use or propose any agreement purporting to collect or charge any fee prohibited by this chapter;
13. Cause or require a borrower to obtain property insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer; or
14. Fail to truthfully account for moneys belonging to a party to a residential mortgage loan transaction.

Source: S.L. 2009, ch. 141, § 7.

13-10-18. Mortgage call reports.

Each mortgage licensee shall submit to the nationwide mortgage licensing system and registry reports of condition, which shall be in such form and shall contain such information as the nationwide mortgage licensing system and registry may require.

Source: S.L. 2009, ch. 141, § 7.

13-10-19. Report to nationwide mortgage licensing system and registry.

Notwithstanding state privacy law, the commissioner is required to report regularly violations of this chapter, as well as enforcement actions and other relevant information, to the nationwide mortgage licensing system and registry subject to the provisions contained in section 13-10-15.

Source: S.L. 2009, ch. 141, § 7.

13-10-20. Privately insured credit unions.

Nonfederally insured credit unions which employ loan originators, as defined in Public Law 110-289, title V, the S.A.F.E. Act, shall register such employees with the nationwide mortgage licensing system and registry by furnishing the information concerning the employees’ identity set forth in section 1507(a)(2) of Public Law 110-289, title V.

Source: S.L. 2009, ch. 141, § 7.

Note.

Public Law 110-289, title V, the S.A.F.E. Act referenced herein is compiled at 12 USCS §§ 5101 et seq. Section 1507(a)(2) of this act is compiled at 12 USCS § 5106(a)(2).

13-10-21. Unique identifier shown.

The unique identifier of any person originating a residential mortgage loan shall be clearly shown on all residential mortgage loan application forms, solicitations, or advertisements, including business cards or websites, and any other documents as established by rule, regulation, or order of the commissioner.

Source: S.L. 2009, ch. 141, § 7.

13-11-01. Definitions.

For the purposes of this chapter:

1. “Affiliate”:
   1. With respect to an individual, means:
      1. The spouse of the individual;
      2. A sibling of the individual or the spouse of a sibling;
      3. An individual or the spouse of an individual who is a lineal ancestor or lineal descendant of the individual or the individual’s spouse;
      4. An aunt, uncle, great aunt, great uncle, first cousin, niece, nephew, grandniece, or grandnephew, whether related by the whole or the half blood or adoption, or the spouse of any of them; or
      5. Any other individual occupying the residence of the individual; and
   2. With respect to an entity, means:
      1. A person that directly or indirectly controls, is controlled by, or is under common control with the entity;
      2. An officer of, or an individual who performs similar functions with respect to, the entity;
      3. A director of, or an individual who performs similar functions with respect to, the entity;
      4. A person that receives or received more than twenty-five thousand dollars from the entity in either the current year or the preceding year or a person that owns more than ten percent of, or an individual who is employed by or is a director of, a person that receives or received more than twenty-five thousand dollars from the entity in either the current year or the preceding year;
      5. An officer or director of, or an individual performing similar functions with respect to, a person described in paragraph 1;
      6. The spouse of, or an individual occupying the residence of, an individual described in paragraphs 1 through 5; or
      7. An individual who has the relationship specified in paragraph 4 of subdivision a to an individual or the spouse of an individual described in paragraphs 1 through 5.
2. “Commissioner” means the commissioner of the department of financial institutions.
3. “Consumer” means any person who purchases or contracts for the purchase of debt-settlement services.
4. “Consumer settlement account” means any account or other means or device in which payments, deposits, or other transfers from a consumer are arranged, held, or transferred by or to a debt-settlement provider for the accumulation of the consumer’s funds in anticipation of proffering an adjustment or settlement of a debt or obligation of the consumer to a creditor on behalf of the consumer.
5. “Contract” means a contract or other legally binding agreement between a provider and an individual for the performance of debt-management services.
6. “Debt-settlement provider” means any person engaging in, or holding itself out as engaging in, the business of providing debt-settlement service in exchange for any fee or compensation, or any person who solicits for or acts on behalf of any person engaging in, or holding itself out as engaging in, the business of providing debt-settlement service in exchange for any fee or compensation. “Debt-settlement provider” does not include:
   1. An attorney licensed or otherwise authorized to practice in this state who is engaged in the practice of law;
   2. An escrow agent, accountant, broker-dealer in securities, or investment advisor in securities, when acting in the ordinary practice of the person’s profession and through the entity used in the ordinary practice of the person’s profession;
   3. Any bank, agent of a bank, operating subsidiary of a bank, affiliate of a bank, trust company, savings and loan association, savings bank, credit union, farm credit system institution, crop credit association, development credit corporation, industrial development corporation, title insurance company, title insurance agent, independent escrowee or insurance company operating or organized under the laws of a state or the United States, or any other person authorized to make loans under state law while acting in the ordinary practice of that business;
   4. Any person who performs credit services for that person’s employer while receiving a regular salary or wage when the employer is not engaged in the business of offering or providing debt-settlement service;
   5. A collection agency licensed pursuant to chapter 13-05 which is collecting a debt on the collection agency’s own behalf or on behalf of a third party;
   6. A public officer while acting in the officer’s official capacity and any person acting under court order;
   7. Any person while performing services incidental to the dissolution, winding up, or liquidating of a partnership, corporation, or other business enterprise; or
   8. Any person currently licensed under any chapter administered by the department of financial institutions or registered with the attorney general’s office when acting in the ordinary practice of that person’s profession and not holding oneself out as a debt-settlement provider.
7. 1. “Debt-settlement service” means:
      1. Offering to provide advice or service, or acting as an intermediary between or on behalf of a consumer and one or more of a consumer’s creditors, where the primary purpose of the advice, service, or action is to obtain a settlement, adjustment, or satisfaction of the consumer’s unsecured debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt;
      2. Offering to provide services related to or providing services advising, encouraging, assisting, or counseling a consumer to accumulate funds for the primary purpose of proposing or obtaining or seeking to obtain a settlement, adjustment, or satisfaction of the consumer’s unsecured debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt; or
      3. Offering to provide advice or service, or acting as an intermediary between or on behalf of a person and a state or federal government agency where the primary purpose of the advice, service, or action is to obtain a settlement, adjustment, or satisfaction of the person’s tax obligation to the government agency in an amount less than the current outstanding balance of the tax obligation.
   2. “Debt-settlement service” does not include:
      1. Legal services provided in an attorney-client relationship by an attorney licensed or otherwise authorized to practice law in this state;
      2. Accounting services provided in an accountant-client relationship by a certified public accountant licensed to provide accounting services in this state;
      3. Financial planning services provided in a financial planner-client relationship by a member of a financial planning profession whose members the commissioner, by rule, determines are:
         1. Licensed by this state;
         2. Subject to a disciplinary mechanism;
         3. Subject to a code of professional responsibility; and
         4. Subject to a continuing education requirement; or
      4. A person engaged in consumer credit counseling services under chapter 13-07.
8. “Enrollment or setup fee” means any fee, obligation, or compensation paid or to be paid by the consumer to a debt-settlement provider in consideration of or in connection with establishing a contract or other agreement with a consumer related to the provision of debt-settlement service.
9. “Maintenance fee” means any fee, obligation, or compensation paid or to be paid by the consumer on a periodic basis to a debt-settlement provider in consideration of maintaining the relationship and services to be provided by a debt-settlement provider in accordance with a contract with a consumer related to the provision of debt-settlement service.
10. “Person” means an individual, corporation, limited liability company, partnership, trust, firm, association, or other legal entity. The term does not include a public corporation, government, or governmental subdivision, agency, or instrumentality.
11. “Principal amount of the debt” means the total amount or outstanding balance owed by a consumer to one or more creditors for a debt that is included in a contract for debt-settlement service at the time when the consumer enters a contract for debt-settlement service.
12. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
13. “Savings” means the difference between the principal amount of the debt and the amount paid by the debt-settlement provider to the creditor or negotiated by the debt-settlement provider and paid by the consumer to the creditor pursuant to a settlement negotiated by the debt-settlement provider on behalf of the consumer as full and complete satisfaction of the creditor’s claim with regard to that debt.
14. “Settlement fee” means any fee, obligation, or compensation paid or to be paid by the consumer to a debt-settlement provider in consideration of or in connection with a completed agreement or other arrangement on the part of a creditor to accept less than the principal amount of the debt as satisfaction of the creditor’s claim against the consumer.
15. “Willfully” means the person acted intentionally in the sense that the person was aware of what the person was doing.

Source: S.L. 2011, ch. 108, § 3; 2013, ch. 389, § 2.

13-11-02. License required.

It is unlawful for any person to act as a debt-settlement provider except as authorized by this chapter and without first having obtained a license under this chapter. A person that engages in debt settlement is deemed to engage in debt settlement in this state if the debtor resides in this state.

Source: S.L. 2011, ch. 108, § 3.

Law Reviews.

Note: A False Light In The Darkness: Protecting Consumers And Creditors From The Debt Settlement Industry, 87 N.D. L. Rev. 273 (2011).

13-11-03. Application for license.

1. Every application for a debt-settlement provider license, or for a renewal thereof, must be made in the form prescribed by the commissioner and must contain any information which the commissioner determines necessary and proper. The commissioner may require any applicant to provide additional information that is not requested on the application form. The applicant must register with the secretary of state if so required.
2. To fulfill the purposes of this chapter, the commissioner may establish relationships or contracts with a nationwide multistate licensing system and registry or other entities designated by a nationwide multistate licensing system and registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to the chapter. The applicant shall pay directly to such nationwide multistate licensing system any additional fee relating to participation in such nationwide multistate licensing system.
3. In connection with an application for licensing as a debt-settlement provider, or any license renewals, the applicant shall furnish to the nationwide multistate licensing system information concerning the applicant’s identity, which may include:
   1. Fingerprints for submission to the federal bureau of investigation, and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check;
   2. Personal history and experience in a form prescribed by the nationwide multistate licensing system, including the submission of authorization for the nationwide multistate licensing system and the commissioner to obtain:
      1. An independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act; and
      2. Information related to any administrative, civil, or criminal findings by any governmental jurisdiction; and
   3. Any other documents, information, or evidence the commissioner deems relevant to the application regardless of the location, possession, control, or custody of such documents, information, or evidence.
4. For the purposes of this section and in order to reduce the points of contact which the federal bureau of investigation may have to maintain for purposes of subsection 3, the commissioner may use the nationwide multistate licensing system and registry as a channeling agent for requesting information from and distributing information to the department of justice or any governmental agency.
5. For the purposes of this section and in order to reduce the points of contact which the commissioner may have to maintain for purposes of subsection 3, the commissioner may use the nationwide multistate licensing system and registry as a channeling agent for requesting and distributing information to and from any source so directed by the commissioner.

Source: S.L. 2011, ch. 108, § 3; 2013, ch. 115, § 16.

13-11-04. Fee and bond to accompany application for debt-settlement license.

The application for license must be in writing, under oath, and in the form prescribed by the commissioner. The application must give the location where the business is to be conducted and must contain any further information the commissioner requires, including the names and addresses of the partners, officers, directors, trustees, and the principal owners or members, as will provide the basis for the investigation and findings contemplated by section 13-11-03. At the time of making the application, the applicant shall include payment in the sum of four hundred dollars, which is not subject to refund, as a fee for investigating the application; the sum of four hundred dollars for the annual license fee; and provide a surety bond in the sum of fifty thousand dollars or an additional amount as required by the commissioner by rule. In addition, the applicant shall pay a fifty dollar annual fee for each branch location. Fees must be deposited in the financial institutions regulatory fund as provided under section 6-01-01.1.

Source: S.L. 2011, ch. 108, § 3.

13-11-05. Qualifications for license.

1. Upon the filing of the application, the approval of the bond, and the payment of the specified fees, the commissioner may issue a license if the commissioner finds all of the following:
   1. The financial responsibility, experience, character, and general fitness of the applicant, managers, partners, officers, and directors are such as to command the confidence of the community and to warrant belief that the business will be operated fairly, honestly, and efficiently within the purposes of this chapter.
   2. The applicant, managers, partners, officers, and directors:
      1. Have not been convicted of a felony;
      2. Have not been convicted of a misdemeanor involving dishonesty or untrustworthiness; or
      3. Have not been the subject of an adverse finding or adjudication in a license disciplinary or other administrative proceeding concerning allegations involving dishonesty or untrustworthiness.
   3. The applicant, managers, partners, officers, and directors have not had a record of having defaulted in the payment of money collected for others, including the discharge of those debts through bankruptcy proceedings.
   4. The applicant or any managers, partners, officers, and directors previously have not violated any provision of this chapter or any rule adopted by the commissioner unless the commissioner determines the violation is not material.
   5. The applicant has not made any false statement or representation to the commissioner in applying for a license under this chapter.
2. The commissioner shall deliver a license to the applicant to operate as a debt-settlement provider in accordance with this chapter at the location specified in the application. The license remains in full force and effect until it is surrendered by the debt-settlement provider or revoked by the commissioner as provided in this chapter; provided, however, that each license expires by its terms on December thirty-first next following its issuance unless renewed as provided in this chapter. A license may not be surrendered without the approval of the commissioner.

Source: S.L. 2011, ch. 108, § 3.

13-11-06. Expiration and renewal of license.

All licenses required under this chapter expire on December thirty-first of each year and may be renewed. Renewals are effective the succeeding January first. Applications for renewal must be submitted at least thirty days before the expiration of the license and must be accompanied by the required annual fees, which are not subject to refund. The form and content of renewal applications must be determined by the commissioner, and a renewal application may be denied upon the same grounds as would justify denial of an initial application. If a licensee has been delinquent in renewing the licensee’s license, the commissioner may charge an additional fee of fifty dollars for the renewal of the license. A debt-settlement provider license is not transferable. If the commissioner determines that an ownership change has occurred in a sole proprietorship, partnership, limited liability partnership, corporation, or limited liability corporation that was previously granted a debt-settlement provider license, the commissioner may require a new application from the purchaser. The application must be filed at least thirty days before the date on which the change of ownership is consummated.

Source: S.L. 2011, ch. 108, § 3.

13-11-07. Applicant’s obligation to update information.

An applicant or licensed provider shall notify the commissioner within ten days after a change in the information provided within the application.

Source: S.L. 2011, ch. 108, § 3.

13-11-08. Records — Annual reports.

1. Every licensee shall maintain records in conformity with generally accepted accounting principles and practices in a manner that will enable the commissioner to determine whether the licensee is complying with this chapter. The records of a licensee may be maintained electronically provided all records can be reproduced upon request of the commissioner and within the required statutory time frame outlined in this section.
2. Before January first of each year, the parent company of each licensee shall file with the commissioner a composite annual report in the form prescribed by the commissioner relating to services provided by licensees.

Source: S.L. 2011, ch. 108, § 3; 2019, ch. 123, § 9, effective July 1, 2019.

13-11-09. Approval or denial of a license.

Any complete application for a license must be approved or denied within sixty days after the filing of the complete application with the commissioner.

Source: S.L. 2011, ch. 108, § 3.

13-11-10. Revocation of license — Suspension of license — Surrender of license.

1. If the commissioner has reason to believe that grounds for revocation of a license exist, the commissioner may send by certified mail to the licensee a notice of hearing stating the contemplated action and in general the grounds thereof and setting the time and place for a hearing thereon. Grounds for revocation of a license include:
   1. Any debt-settlement provider has failed to pay the annual license fee or to maintain in effect the bond required under this chapter;
   2. The debt-settlement provider has violated this chapter or any rule lawfully made by the commissioner implementing this chapter;
   3. Any fact or condition exists that, if it had existed at the time of the original application for a license, would have warranted the commissioner in refusing its issuance; or
   4. Any applicant has made any false statement or representation to the commissioner in applying for a license under this chapter.
2. If the commissioner finds that probable cause for revocation of any license exists and that enforcement of the chapter requires immediate suspension of that license pending investigation, the commissioner, upon written notice, may enter an order suspending that license for a period not exceeding thirty days, pending the holding of a hearing as prescribed in this chapter.
3. Any licensee may surrender the licensee’s license by delivering the license to the commissioner with written notice of its surrender; however, surrender of the license does not affect the licensee’s civil or criminal liability for acts committed before the surrender of the license.

Source: S.L. 2011, ch. 108, § 3.

13-11-11. Suspension and removal of debt-settlement provider officers and employees.

1. The commissioner may issue and serve upon a debt-settlement provider officer or employee, and upon the licensee involved, a complaint stating the basis for the commissioner’s belief that the officer or employee is willfully engaging or has willfully engaged in any of the following conduct:
   1. Violating a law, rule, order, or written agreement with the commissioner;
   2. Engaging in harassment or abuse, the making of false or misleading representations, engaging in unfair practices involving debt settlement, or engaging in prohibited acts and practices under section 13-11-23; or
   3. Performing an act of commission or omission or practice that is a breach of trust or a breach of fiduciary duty.
2. The complaint must contain a notice of opportunity for hearing.
3. If a hearing is not requested within twenty days of the date the complaint is served upon the officer or employee, or if a hearing is held and the commissioner finds that the record so warrants, the commissioner may enter an order suspending or temporarily removing the employee or officer from office for a period not exceeding three years from the effective date of the suspension or temporary removal.
4. A contested or default suspension or temporary removal order is effective immediately upon service of the order on the officer or employee and upon the licensee. A consent order is effective as agreed. An officer or employee suspended or temporarily removed from office pursuant to this section is not eligible, while under suspension, for reinstatement to a position with a debt-settlement provider.
5. When an officer or employee, or other person participating in the conduct of the affairs of a licensee, is charged with a felony in state or federal court which involves dishonesty or breach of trust, the commissioner immediately may suspend the person from office or prohibit the person from further participation in the affairs of the debt-settlement provider, or both. The order is effective immediately upon service of the order on the licensee and the person charged and remains in effect until the criminal charge is finally disposed of or until modified by the commissioner. If a judgment of conviction, federal pretrial diversion, or similar state order or judgment is entered, the commissioner may order that the suspension or prohibition be made permanent. A finding of not guilty or other disposition of the charge does not preclude the commissioner from pursuing administrative or civil remedies.

Source: S.L. 2011, ch. 108, § 3.

13-11-12. Advertising and marketing practices.

1. A debt-settlement provider may not represent, expressly or by implication, any results or outcomes of its debt-settlement services in any advertising, marketing, or other communication to consumers unless the debt-settlement provider possesses substantiation for the representation at the time the representation is made.
2. A debt-settlement provider may not make, expressly or by implication, any unfair or deceptive representations, or any omissions of material facts, in any of its advertising or marketing communications concerning debt-settlement services.
3. All advertising and marketing communications concerning debt-settlement services must disclose the following material information clearly and conspicuously: Debt-settlement services are not appropriate for everyone. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors may agree to reduce principal balance, and they may pursue collection, including lawsuits.

Source: S.L. 2011, ch. 108, § 3.

13-11-13. Contracts, books, and records.

1. Upon request, each debt-settlement provider shall furnish to the commissioner a copy of the contract entered between the debt-settlement provider and the debtor. The debt-settlement provider shall furnish the debtor with a copy of the written contract at the time of execution which sets forth the charges, if any, agreed upon for the services of the debt-settlement provider.
2. Each debt-settlement provider shall maintain records and accounts that will enable any debtor contracting with the debt-settlement provider, at any reasonable time, to ascertain the status of all the debtor’s accounts with the debt-settlement service provider, including the amount of any fees paid by the debtor, amount held in trust, if applicable, settlement offers made and received on each of the debtor’s accounts, and legally enforceable settlements reached with the debtor’s creditors. Within seven days after a request for that information by the debtor, the debt-settlement provider shall furnish a statement showing the total amount received and the total disbursements to each creditor to any individual. Each debt-settlement provider shall issue a receipt for each payment made by the debtor at a debt-settlement provider office. Each debt-settlement provider shall prepare and retain in the file of each debtor a written analysis of the debtor’s income and expenses to substantiate that the plan of payment is feasible and practical.

Source: S.L. 2011, ch. 108, § 3.

13-11-14. Trust funds — Requirements and restrictions.

1. All funds received by a debt-settlement provider or the provider’s agent from and for the purpose of paying bills, invoices, or accounts of a debtor constitute trust funds owned by and belonging to the debtor from whom the funds were received. All such funds received by the debt-settlement provider must be separated from the funds of the debt-settlement provider not later than the end of the business day following receipt by the debt-settlement provider. All such funds must be kept separate and apart at all times from funds belonging to the debt-settlement provider or any of its officers, employees, or agents and may be used for no purpose other than paying bills, invoices, or accounts of the debtor. On or before the close of the business day following receipt, all such trust funds received at the main or branch offices of a debt-settlement provider must be deposited in a bank in an account in the name of the debt-settlement provider-designated trust account, or by some other appropriate name indicating that the funds are not the funds of the debt-settlement provider or its officers, employees, or agents.
2. At least once every month, the debt-settlement provider shall render an accounting to the debtor that itemizes the total amount received from the debtor, the total amount paid each creditor, the amount of charges deducted, and any amount held in reserve, if applicable, and the status of each of the debtor’s enrolled accounts. In addition, a debt-settlement provider shall provide such an accounting to a debtor within seven days after written demand, but not more than three times per six-month period.
3. This chapter does not require the establishment of a trust account if no consumer funds other than earned settlement fees are held or controlled by a debt-settlement provider.

Source: S.L. 2011, ch. 108, § 3.

13-11-15. Requirement of good faith.

A provider shall act in good faith in all matters under this chapter.

Source: S.L. 2011, ch. 108, § 3.

13-11-16. Customer service.

A provider that is required to be registered under this chapter shall maintain a toll-free communication system, staffed at a level that reasonably permits an individual to speak to a certified counselor or customer service representative, as appropriate, during ordinary business hours.

Source: S.L. 2011, ch. 108, § 3.

13-11-17. Required presale consumer disclosures and warnings.

1. Before the consumer signs a contract, the debt-settlement provider shall provide an oral and written notice to the consumer that clearly and conspicuously discloses all of the following:
   1. Debt-settlement services may not be suitable for all consumers.
   2. Using a debt-settlement service likely will harm the consumer’s credit history and credit score.
   3. Using a debt-settlement service does not stop creditor collection activity, including creditor lawsuits and garnishments.
   4. Not all creditors may accept a reduction in the balance, interest rate, or fees a consumer owes.
   5. The consumer should inquire about other means of dealing with debt, including nonprofit credit counseling and bankruptcy.
   6. The consumer remains obligated to make periodic or scheduled payments to creditors while participating in a debt-settlement plan, and that the debt-settlement provider will not make any periodic or scheduled payments to creditors on behalf of the consumer.
   7. The failure to make periodic or scheduled payments to a creditor is likely to:
      1. Harm the consumer’s credit history, credit rating, or credit score;
      2. Lead the creditor to increase lawful collection activity, including litigation, garnishment of the consumer’s wages, and judgment liens on the consumer’s property; and
      3. Lead to the imposition by the creditor of interest charges, late fees, and other penalty fees, increasing the principal amount of the debt.
   8. The amount of time estimated to be necessary to achieve the represented results.
   9. The estimated amount of money or the percentage of debt the consumer must accumulate before a settlement offer will be made to each of the consumer’s creditors.
   10. A statement indicating that debt-settlement providers are licensed and regulated by the North Dakota department of financial institutions and any complaints regarding the services of a debt-settlement provider should be directed to the North Dakota department of financial institutions, Bismarck, North Dakota.
2. The consumer shall sign and date an acknowledgment form entitled “Consumer Notice and Rights Form” that states: “I, the debtor, have received from the debt-settlement provider a copy of the form entitled ‘Consumer Notice and Rights Form’.” The debt-settlement provider or its representative also shall sign and date the acknowledgment form, which includes the name and address of the debt-settlement services provider. The acknowledgment form must be in duplicate and incorporated into the “Consumer Notice and Rights Form”. The original acknowledgment form must be retained by the debt-settlement provider, and the duplicate copy must be retained within the form by the consumer. If the acknowledgment form is in electronic form, then the acknowledgment form must contain the consumer disclosures required by section 101(c) of the federal Electronic Signatures in Global and National Commerce Act [15 U.S.C. 7001(c)].
3. The requirements of this section are satisfied if the provider provides the following warning verbatim, both orally and in writing, with the caption “CONSUMER NOTICE AND RIGHTS FORM” in at least twenty-eight-point font and the remaining portion in at least fourteen-point font to a consumer before the consumer signs a contract for the debt-settlement provider’s services:

“CONSUMER NOTICE AND RIGHTS FORM CAUTION We CANNOT GUARANTEE that you successfully will reduce or eliminate your debt. If you stop paying your creditors, there is a strong likelihood some or all of the following may happen: – CREDITORS MAY STILL CONTACT YOU AND TRY TO COLLECT. – CREDITORS MAY STILL SUE YOU FOR THE MONEY YOU OWE. – YOUR WAGES OR BANK ACCOUNTS STILL MAY BE GARNISHED. –YOUR CREDIT RATING AND CREDIT SCORE LIKELY WILL BE HARMED. – NOT ALL CREDITORS MAY AGREE TO ACCEPT A BALANCE REDUCTION. – YOU SHOULD CONSIDER ALL YOUR OPTIONS FOR ADDRESSING YOUR DEBT, SUCH AS CREDIT COUNSELING AND BANKRUPTCY FILING. – THE AMOUNT OF MONEY YOU OWE MAY INCREASE DUE TO CREDITOR IMPOSITION OF INTEREST CHARGES, LATE FEES, AND OTHER PENALTY FEES. – EVEN IF WE DO SETTLE YOUR DEBT, YOU MAY STILL BE REQUIRED TO PAY TAXES ON THE AMOUNT FORGIVEN. YOUR RIGHT TO CANCEL If you sign a contract with a debt-settlement provider, you have the right to cancel at any time and receive a full refund of all unearned fees you have paid to the provider and all funds placed in your settlement fund that have not been paid to any creditors. IF YOU ARE DISSATISFIED OR YOU HAVE QUESTIONS If you are dissatisfied with a debt-settlement provider or have any questions, please bring it to the attention of the North Dakota Department of Financial Institutions, Bismarck, North Dakota. I, the debtor, have received from the debt-settlement provider a copy of the form entitled Consumer Notice and Rights Form. Signed: Printed name: ”

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Source: S.L. 2011, ch. 108, § 3.

Law Reviews.

Note: A False Light In The Darkness: Protecting Consumers And Creditors From The Debt Settlement Industry, 87 N.D. L. Rev. 273 (2011).

13-11-18. Individualized financial analysis.

1. Before entering a written contract with a consumer, a debt-settlement provider shall prepare and provide to the consumer in writing and retain a copy of:
   1. An individualized financial analysis, including the individual’s income, expenses, and debts; and
   2. A statement containing a good-faith estimate of the length of time it will take to complete the debt-settlement program, the total amount of debt owed to each creditor included in the debt-settlement program, the total savings estimated to be necessary to complete the debt-settlement program, and the monthly targeted savings amount estimated to be necessary to complete the debt-settlement program.
2. A debt-settlement provider may not enter a written contract with a consumer unless the debt-settlement provider makes written determinations, supported by the financial analysis, that:
   1. The consumer can reasonably meet the requirements of the proposed debt-settlement program, including the fees and the periodic savings amounts set forth in the savings goals; and
   2. The debt-settlement program is suitable for the consumer at the time the contract is to be signed.

Source: S.L. 2011, ch. 108, § 3.

13-11-19. Debt-settlement contract.

1. A debt-settlement provider may not provide debt-settlement service to a consumer without a written contract signed and dated by both the consumer and the debt-settlement provider.
2. Any contract for the provision of debt-settlement service entered in violation of this section is voidable.
3. A contract between a debt-settlement provider and a consumer for the provision of debt-settlement service must disclose all of the following clearly and conspicuously:
   1. The name and address of the consumer.
   2. The date of execution of the contract.
   3. The legal name of the debt-settlement provider, including any other business names used by the debt-settlement provider.
   4. The corporate address and regular business address, including a street address, of the debt-settlement provider.
   5. The telephone number at which the consumer may speak with a representative of the debt-settlement provider during normal business hours.
   6. A complete list of the consumer’s accounts, debts, and obligations to be included in the provision of debt-settlement service, including the name of each creditor and principal amount of each debt.
   7. A description of the services to be provided by the debt-settlement provider, including the expected time frame for settlement for each account, debt, or obligation included in subdivision f.
   8. An itemized list of all fees to be paid by the consumer to the debt-settlement provider, and the date, approximate date, or circumstances under which each fee will become due.
   9. A good-faith estimate of the total amount of all fees and compensation, not to exceed the amounts specified in section 13-11-21, to be collected by the debt-settlement provider from the consumer for the provision of debt-settlement service contemplated by the contract.
   10. A statement of the proposed savings goals for the consumer, stating the amount to be saved per month or other period, time period over which savings goals extend, and the total amount of the savings expected to be paid by the consumer pursuant to the terms of the contract.
   11. The amount of money or the percentage of debt the consumer must accumulate before a settlement offer will be made to each of the consumer’s creditors.
   12. The written individualized financial analysis required by section 13-11-18.
   13. The contents of the “Consumer Notice and Rights Form” provided in section 13-11-17.
   14. A written notice to the consumer that the consumer may cancel the contract at any time until after the debt-settlement provider has fully performed each service the debt-settlement provider contracted to perform or represented that the debt-settlement provider would perform, and upon that event:
       1. The consumer is entitled to a full refund of all unearned fees and compensation paid by the consumer to the debt-settlement provider, and a full refund of all funds provided by the consumer to the debt-settlement provider for a consumer settlement account, except for funds actually paid to a creditor on behalf of the consumer, under the terms of the contract for debt-settlement service; and
       2. All powers of attorney granted to the debt-settlement provider by the consumer must be considered revoked and voided.
   15. A form the consumer may use to cancel the contract pursuant to the provisions of section 13-11-20. The form must include the name and mailing address of the debt-settlement provider and shall disclose clearly and conspicuously how the consumer can cancel the contract, including applicable addresses, telephone numbers, facsimile numbers, and electronic mail addresses the consumer can use to cancel the contract.
4. If a debt-settlement provider communicates with a consumer primarily in a language other than English, then the debt-settlement provider shall furnish to the consumer a translation of all the disclosures and documents required by this chapter in that other language.

Source: S.L. 2011, ch. 108, § 3.

13-11-20. Cancellation of contract and right to fee and settlement fund refunds.

1. A consumer may cancel a contract with a debt-settlement provider at any time before the debt-settlement provider has performed fully each service the debt-settlement provider contracted to perform or represented that the debt-settlement provider would perform.
2. If a consumer cancels a contract with a debt-settlement provider, or at any time upon a material violation of this chapter on the part of the debt-settlement provider, the debt-settlement provider shall refund all fees and compensation, with the exception of the application fee and any earned settlement fee, as well as all funds paid by the consumer to the debt-settlement provider that have accumulated in a consumer settlement account and that the debt-settlement provider has not disbursed to creditors. Upon cancellation, all powers of attorney and direct debit authorizations granted to the debt-settlement provider by the consumer are considered revoked and voided.
3. A debt-settlement provider shall make any refund required under this section within seven days after the notice of cancellation and shall include with the refund a full statement of account showing fees received, fees refunded, savings held, payments to creditors, settlement fees earned, if any, and savings refunded.
4. Upon the cancellation of a contract under this section, the debt-settlement provider shall provide timely notice of the cancellation of the contract to each of the creditors with whom the debt-settlement provider has had any prior communication on behalf of the consumer in connection with the provision of any debt-settlement service.

Source: S.L. 2011, ch. 108, § 3.

13-11-21. Fees.

1. A debt-settlement provider may not charge fees of any type or receive compensation from a consumer in a type, amount, or timing other than fees or compensation permitted in this section.
2. A debt-settlement provider may not charge or receive from a consumer any enrollment fee, setup fee, upfront fee of any kind, or any maintenance fee.
3. A debt-settlement provider may charge a settlement fee that may not exceed an amount greater than thirty percent of the savings. If the amount paid by the debt-settlement provider to the creditor or negotiated by the debt-settlement provider and paid by the consumer to the creditor pursuant to a settlement negotiated by the debt-settlement provider on behalf of the consumer as full and complete satisfaction of the creditor’s claim with regard to that debt is greater than the principal amount of the debt, the debt-settlement provider is not entitled to any settlement fee.
4. A debt-settlement provider may not collect any settlement fee from a consumer until a creditor enters into a legally enforceable agreement to accept funds in a specific dollar amount as full and complete satisfaction of the creditor’s claim with regard to that debt and those funds are provided by the debt-settlement provider on behalf of the consumer or are provided directly by the consumer to the creditor pursuant to a settlement negotiated by the debt-settlement provider.

Source: S.L. 2011, ch. 108, § 3.

Law Reviews.

Note: A False Light In The Darkness: Protecting Consumers And Creditors From The Debt Settlement Industry, 87 N.D. L. Rev. 273 (2011).

13-11-22. Voluntary contributions.

A provider may not solicit a voluntary contribution from an individual or an affiliate of the individual for any service provided to the individual.

Source: S.L. 2011, ch. 108, § 3.

13-11-23. Prohibited acts and practices.

1. A provider directly or indirectly may not:
   1. Misappropriate or misapply money held in trust;
   2. Settle a debt on behalf of an individual for more than fifty percent of the principal amount of the debt owed a creditor, unless the individual assents to the settlement after the creditor has assented;
   3. Take a power of attorney that authorizes the provider to settle a debt;
   4. Exercise or attempt to exercise a power of attorney after an individual has terminated a contract;
   5. Initiate a transfer from an individual’s account at a bank or with another person unless the transfer is:
      1. A return of money to the individual; or
      2. Before termination of a contract, properly authorized by the contract and this chapter, and for:
         1. Payment to one or more creditors pursuant to a plan; or
         2. Payment of a fee;
   6. Offer a gift or bonus, premium, reward, or other compensation to an individual for executing a contract;
   7. Offer, pay, or give a gift or bonus, premium, reward, or other compensation to a person for referring a prospective customer, if the person making the referral has a financial interest in the outcome of debt-management services provided to the customer, unless neither the provider nor the person making the referral communicates to the prospective customer the identity of the source of the referral;
   8. Receive a bonus, commission, or other benefit for referring an individual to a person;
   9. Structure a plan in a manner that would result in a negative amortization of any of an individual’s debts, unless a creditor that is owed a negatively amortizing debt agrees to refund or waive the finance charge upon payment of the principal amount of the debt;
   10. Compensate the provider’s employees on the basis of a formula that incorporates the number of individuals the employee induces to enter contracts;
   11. Settle a debt or lead an individual to believe that a payment to a creditor is in settlement of a debt to the creditor unless, at the time of settlement, the individual receives a certification by the creditor that the payment is in full settlement of the debt or is part of a payment plan, the terms of which are included in the certification, that upon completion, will lead to full settlement of the debt;
   12. Make a representation that:
       1. The provider will furnish money to pay bills or prevent attachments;
       2. Payment of a certain amount will permit satisfaction of a certain amount or range of indebtedness; or
       3. Participation in a plan will or may prevent litigation, garnishment, attachment, repossession, foreclosure, eviction, or loss of employment;
   13. Misrepresent that the provider is authorized or competent to furnish legal advice or perform legal services;
   14. Represent that it is a not-for-profit entity unless the provider is organized and properly operating as a not-for-profit under the law of the state in which it was formed or that it is a tax-exempt entity unless the provider has received certification of tax-exempt status from the internal revenue service;
   15. Take a confession of judgment or power of attorney to confess judgment against an individual; or
   16. Employ an unfair, unconscionable, or deceptive act or practice, including the knowing omission of any material information.
2. If a provider furnishes debt-management services to an individual, the provider may not, directly or indirectly:
   1. Purchase a debt or obligation of the individual;
   2. Receive from or on behalf of the individual:
      1. A promissory note or other negotiable instrument other than a check or a demand draft; or
      2. A postdated check or demand draft;
   3. Lend money or provide credit to the individual, except as a deferral of a settlement fee at no additional expense to the individual;
   4. Obtain a mortgage or other security interest from any person in connection with the services provided to the individual;
   5. Except as permitted by federal law, disclose the identity or identifying information of the individual or the identity of the individual’s creditors, except to:
      1. The commissioner, upon proper demand;
      2. A creditor of the individual, to the extent necessary to secure the cooperation of the creditor in a plan; or
      3. The extent necessary to administer the plan;
   6. Except as otherwise provided in section 13-11-21, provide the individual less than the full benefit of a compromise of a debt arranged by the provider;
   7. Charge the individual for or provide credit or other insurance, coupons for goods or services, membership in a club, access to computers or the internet, or any other matter not directly related to debt-management services or educational services concerning personal finance; or
   8. Furnish legal advice or perform legal services, unless the person furnishing that advice to or performing those services for the individual is licensed to practice law in this state.
3. This chapter does not authorize any person to engage in the practice of law.
4. A provider may not receive a gift or bonus, premium, reward, or other compensation, directly or indirectly, for advising, arranging, or assisting an individual in connection with obtaining an extension of credit or other service from a lender or service provider, except for educational or counseling services required in connection with a government-sponsored program.
5. Unless a person supplies goods, services, or facilities generally and supplies them to the provider at a cost no greater than the cost the person generally charges to others, a provider may not purchase goods, services, or facilities from the person if an employee or a person that the provider should reasonably know is an affiliate of the provider:
   1. Owns more than ten percent of the person; or
   2. Is an employee or affiliate of the person.

Source: S.L. 2011, ch. 108, § 3.

13-11-24. Notice of litigation.

Within thirty days after a provider has been served with notice of a civil action for violation of this chapter by or on behalf of an individual who resides in this state at either the time of a contract or the time the notice is served, the provider shall notify the commissioner in a record that it has been sued.

Source: S.L. 2011, ch. 108, § 3.

13-11-25. Liability for the conduct of other persons.

If a provider delegates any of its duties or obligations under a contract or this chapter to another person, including an independent contractor, the provider is liable for conduct of the person which, if done by the provider, would violate the contract or this chapter.

Source: S.L. 2011, ch. 108, § 3.

13-11-26. Powers of the commissioner.

Insofar as consistent with other provisions of law, the commissioner may:

1. Determine the qualifications of all applicants based on financial responsibility, financial condition, business experience, character, and general fitness which must reasonably warrant the belief that the applicant’s business will be conducted lawfully and fairly. In determining whether this qualification is met, and for the purpose of investigating compliance with this chapter, the commissioner may review and consider the relevant business records and capital adequacy of the applicant and the competence, experience, integrity, and financial ability of a person who is a member, partner, director, officer, or twenty-five percent or more shareholder of the applicant.
2. Conduct investigations and make an examination of any person, whether licensed or not, who is engaged in the debt-settlement services business, including all records of such business, and to subpoena witnesses anytime the commissioner has reason to believe such is necessary. The licensee shall pay an examination or visitation fee and must be charged by the commissioner at an hourly rate to be set by the commissioner, sufficient to cover all reasonable expenses of the department associated with the examination or visitation provided for by this section. Fees must be deposited in the financial institutions regulatory fund.
3. Issue and serve upon any person or licensed debt-settlement provider an order to cease and desist to take corrective action when the commissioner has reason to believe the person or agency is violating, has violated, or is about to violate the provisions of this chapter. An interested party may appeal issuance of a cease and desist order under chapter 28-32 by filing written notice of appeal within twenty days after service of the order.
4. Deny, suspend, revoke, condition, or decline to renew a license for a violation of this chapter, rules or regulations issued under this chapter, or an order or directive entered under this chapter.
5. Deny, suspend, revoke, condition, or decline to renew a license if an applicant or licensee withholds information or makes a material misstatement in an application for a license or renewal of a license.

Source: S.L. 2011, ch. 108, § 3.

13-11-27. Enforcement authorities, violations, and penalties.

1. Any person that violates this chapter is guilty of a class C felony.
2. The commissioner may impose a civil money penalty not to exceed five thousand dollars per violation upon a person or agency that willfully violates a law, rule, written agreement, or order under this chapter. An interested party may appeal the assessment of a civil money penalty under chapter 28-32 by filing a written notice of appeal within twenty days after service of the assessment of civil money penalties. A civil money penalty collected under this section must be paid to the state treasurer and deposited in the financial institutions regulatory fund.
3. The attorney general also may enforce this chapter. The attorney general, in enforcing this chapter, has all the powers provided in this chapter or chapter 51-15 and may seek all remedies in this chapter or chapter 51-15. A violation of this chapter is deemed a violation of chapter 51-15. The remedies, duties, prohibitions, and penalties of this chapter are not exclusive and are in addition to all other causes of action, remedies, and penalties under chapter 51-15, or otherwise provided by law.

Source: S.L. 2011, ch. 108, § 3.

Law Reviews.

Note: A False Light In The Darkness: Protecting Consumers And Creditors From The Debt Settlement Industry, 87 N.D. L. Rev. 273 (2011).

13-11-28. Void contracts.

1. If a provider imposes a fee or other charge or receives money or other payments not authorized by sections 13-11-21 and 13-11-22, the contract is void and the individual may recover as provided in section 13-11-20.
2. If a provider is not licensed as required by this chapter when an individual assents to a contract, the contract is void.
3. For a void contract under subsection 2, the provider does not have a claim against the individual for breach of contract or for restitution.

Source: S.L. 2011, ch. 108, § 3.

13-11-29. Private enforcement.

Any person that is aggrieved by a violation of this chapter may bring an action to enjoin the violation, or for restitution, or both. The court may award the plaintiff the plaintiff’s actual restitution or a sum up to two thousand dollars, whichever is greater. The court may award the plaintiff costs, expenses, and reasonable attorney’s fees. This section does not limit any other claims the person may have against the debt-settlement provider or any third party subject to this chapter.

Source: S.L. 2011, ch. 108, § 3.

13-11-30. Confidentiality.

To promote more effective regulation and reduce regulatory burden through supervisory information sharing, the commissioner or commissioner’s designee may furnish information to or receive information from a nationwide multistate licensing system for the purpose of regulation of the financial services industry. Information furnished by the commissioner to any third party which is confidential or privileged in the commissioner’s possession remains confidential or privileged in the possession of the third party. Information received by the commissioner from any third party which is confidential or privileged in the third-party’s possession remains confidential or privileged in the commissioner’s possession.

Source: S.L. 2013, ch. 115, § 17.

13-11-31. Disclosure of customer information.

Except for provisions of chapter 6-08.1 which are inconsistent with this chapter, chapter 6-08.1 applies to all debt-settlement providers licensed under this chapter.

History. S.L. 2015, ch. 120, § 14, effective July 1, 2015.