23.8089.01000
Sixty-eighth
Legislative Assembly SENATE BILL NO. 2090
of North Dakota
Introduced by
Industry and Business Committee
(At the request of the Department of Financial Institutions)
1 A BILL for an Act to create and enact chapter 13-12 of the North Dakota Century Code, relating
2 to residential mortgage lenders; to amend and reenact sections 13-04.1-01, 13-04.1-02.1,
3 13-04.1-03, 13-04.1-08, 13-04.1-08.1, 13-04.1-09, 13-04.1-09.3, 13-04.1-10, 13-04.1-13,
4 13-04.1-14, and 13-04.1-17 of the North Dakota Century Code, relating to money brokers; to
5 repeal section 13-04.1-16 of the North Dakota Century Code, relating to call reports; to provide
6 a penalty; and to provide for application.
7 BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
8 SECTION 1. AMENDMENT. Section 13-04.1-01 of the North Dakota Century Code is
9 amended and reenacted as follows:
10 13-04.1-01. Administration.
11 The department of financial institutions shall use its facilities to administer and enforce this
12 chapter. Any person or persons delegated to administer this chapter may not have financial
13 interests directly or indirectly in any business which is subject to this chapter. The department
14 has the power to promulgate rules and regulations having the force and effect of law,
15 reasonably necessary to carry out the provisions of this chapter, in accordance with chapter
16 28-32. Any hearing held and any orders issued pursuant to this chapter must be in accordance
17 with chapter 28-32. In addition to those powers set forth in chapter 28-32, the department has
18 additional powers as set forth in this chapter.
19 SECTION 2. AMENDMENT. Section 13-04.1-02.1 of the North Dakota Century Code is
20 amended and reenacted as follows:
21 13-04.1-02.1. Entities exempted from licensing requirements.
22 This chapter does not apply to:
23 1. Banks;
24 2. Credit unions;
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1 3. Savings and loan associations;
2 4. Insurance companies;
3 5. Residential mortgage lenders licensed under chapter 13-12;
4 6. Individuals licensed under chapter 13-10 solely pursuant to the individual's official
5 duties as a mortgage loan originator;
6 6.7. State or federal agencies and employees of state or federal agencies solely pursuant
7 to the individual's official duties as an employee of the state or federal agency;
8 7.8. Institutions chartered by the farm credit administration;
9 8.9. Trust companies;
10 9.10. Any other person or business regulated and licensed to lend money by the state of
11 North Dakota;
12 10.11. A real estate broker, broker, or a real estate salesperson as defined in section
13 43-23-06.1 in the brokering of loans to assist a person in obtaining financing for real
14 estate sold by the real estate broker, broker, or real estate salesperson;
15 11.12. Any person, retail seller, or manufacturer providing or arranging financing for its own
16 property or inventory held as a normal course of business, or to leases on any real
17 property;
18 12.13. A bona fide pawnbrokering transaction made by a pawnbroker licensed by a North
19 Dakota county or municipality;
20 14. A certified development corporation that qualifies as a nonprofit entity under section
21 501(c)(3) of the federal Internal Revenue Code [26 U.S.C. 501(c)(3)] in the offers of:
22 a. Loan products primarily limited to the small business administration, United
23 States department of agriculture, or other government loan products; or
24 b. Nongovernmental loan products that are limited to loans to promote community
25 development or home ownership, and these loans are offered with favorable
26 terms including an interest rate at or below the wall street journal prime rate and
27 loan fees of less than a quarter percent of the loan origination balance; or
28 13.15. A nonprofit corporation that qualifies as a nonprofit entity under section 501(c)(3) of
29 the Internal Revenue Code [26 U.S.C. 501(c)(3)] which is not primarily in the business
30 of soliciting or brokering loans, if the nonprofit corporation makes five or fewer loans in
31 a given calendar year, makes these loans to promote community development or
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1 home ownership, and offers these loans on favorable terms, including an interest rate
2 at or below the wall street journal prime rate and loan fees of less than a quarter
3 percent of the loan origination balance.
4 SECTION 3. AMENDMENT. Section 13-04.1-03 of the North Dakota Century Code is
5 amended and reenacted as follows:
6 13-04.1-03. Application for money broker license.
7 Every application for a money broker license or branch registration, or for a renewal thereof,
8 must be made upon forms designed and furnished by the department of financial institutions
9 and must contain any information which the department shall deem necessary and proper. A
10 branch registration that constitutes a net branch or net branching arrangement is prohibited.
11 The department may further require any applicationapplicant to provide additional information
12 which is not requested on the application form. The applicant must register with the North
13 Dakota secretary of state if so required.
14 SECTION 4. AMENDMENT. Section 13-04.1-08 of the North Dakota Century Code is
15 amended and reenacted as follows:
16 13-04.1-08. Revocation of license - Suspension of license - Surrender of license.
17 1. The commissioner may issue and serve upon any licensee an order suspending or
18 revoking a licensee's license if the commissioner finds that:
19 a. The licensee has failed to pay the annual license fee under this chapter or any
20 examination fee imposed by the commissioner under the authority of this chapter.
21 b. The licensee, either knowingly or without the exercise of due care to prevent the
22 same, has violated any provision of this chapter or any regulation or order
23 lawfully made pursuant to and within the authority of this chapter.
24 c. Any fact or condition existing at the time of the original application for such
25 license which clearly would have warranted the department of financial
26 institutions in refusing originally to issue such license.
27 d. The licensee has failed to maintain the required bond.
28 e. The licensee has failed to maintain registration with the secretary of state if so
29 required.
30 2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32.
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1 3. If no hearing is requested within twenty days of the date the order is served upon the
2 licensee, or if the order is final. If a hearing is held and the commissioner finds that the
3 record so warrants, the commissioner may enter a final order. The final order shall be
4 final suspending or revoking the license.
5 4. If the commissioner finds that probable cause for revocation of any license exists and
6 that enforcement of the chapter requires immediate suspension of such license
7 pending investigation, it may, upon written notice, enter an order suspending such
8 license for a period not exceeding the time required to serve upon the licensee written
9 notice plus sixty days, pending the holding of a hearing as prescribed in this chapter.
10 5. Any licensee may surrender the licensee's license by delivering it toproviding the
11 department of financial institutions with written notice of its surrender, but such
12 surrender does not affect the licensee's civil or criminal liability for acts committed prior
13 thereto.
14 SECTION 5. AMENDMENT. Section 13-04.1-08.1 of the North Dakota Century Code is
15 amended and reenacted as follows:
16 13-04.1-08.1. Suspension and removal of money broker officers and employees.
17 1. The commissioner of financial institutions may issue and serve upon a current or
18 former money broker officer or employee and upon the licensee involved an order
19 stating:
20 a. That the current or former officer or employee is willfully engaging or has willfully
21 engaged in any of the following conduct:
22 (1) Violating a law, rule, order, or written agreement with the commissioner.
23 (2) Engaging in harassment or abuse, the making of false or misleading
24 representations, or engaging in unfair practices involving lending activity.
25 (3) Performing an act of commission or omission or practice which is a breach
26 of trust or a breach of fiduciary duty.
27 b. The term of the suspension or removal from employment and participation within
28 the conduct or the affairs of a money brokerfinancial corporation, financial
29 institution, credit union, or any other entity licensed by the department of financial
30 institutions.
31 2. The order must contain a notice of opportunity for hearing pursuant to chapter 28-32.
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1 3. If a hearing is not requested within twenty days of the date the order is served, or ifthe
2 order shall be final. If a hearing is held and the commissioner finds that the record so
3 warrants, the commissioner may enter a final order. The final order shall be final
4 suspending or removing the current or former employee. The current or former officer
5 or employee may request a termination of the final order after a period of no less than
6 three years.
7 4. A contested or default suspension or removal order is effective immediately upon
8 service of the final orderissuance on the current or former officer or employee and
9 upon the licensee. A consent order is effective as agreed. Any current or former officer
10 or employee suspended or removed from employment and participation within the
11 conduct or the affairs of a money broker pursuant to this section is not eligible, while
12 under suspension or removal, to be employed or otherwise participate in the affairs of
13 any financial corporation, financial institution, credit union, or any other entity licensed
14 by the department of financial institutions.
15 5. When any current or former officer or employee, or other person participating in the
16 conduct of the affairs of a licensee is charged with a felony in state or federal court
17 which involves dishonesty or breach of trust, the commissioner may immediately
18 suspend the person from office or prohibit the person from further participation in the
19 affairs of the money broker, or both. The order is effective immediately upon
20 serviceissuance of the order on the licensee and the person charged and remains in
21 effect until the criminal charge is finally disposed of or until modified by the
22 commissioner. If a judgment of conviction, federal pretrial diversion, conviction or
23 agreement to plea to lesser charges, or similar state order or judgment is entered, the
24 commissioner may order that the suspension or prohibition be made permanent. A
25 finding of not guilty or other disposition of the charge does not preclude the
26 commissioner from pursuing administrative or civil remedies.
27 6. Under this section, a person engages in conduct "willfully" if the person acted
28 intentionally in the sense that the person was aware of what the person was doing.
29 SECTION 6. AMENDMENT. Section 13-04.1-09 of the North Dakota Century Code is
30 amended and reenacted as follows:
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1 13-04.1-09. Prohibited acts and practices.
2 It is a violation of this chapter for a person subject to this chapter to knowingly:
3 1. Make or cause to be made any material false statement or representation in any
4 application or other document or statement required to be filed under any provision of
5 this chapter, or to omit to state any material statement or fact necessary in order to
6 make the statements made, in light of the circumstances under which they are made,
7 not misleading.
8 2. Directly or indirectly, employ any device, scheme, or artifice to defraud or mislead
9 borrowers or lenders to defraud any person.
10 3. Directly or indirectly, make any untrue statement of a material fact or to omit to state a
11 material fact necessary in order to make the statements made, in the light of the
12 circumstances under which they are made, not misleading in connection with the
13 procurement or promise of procurement of any lender or loan funds.
14 4. Engage in any unfair or deceptive practice toward any person.
15 5. Obtain property by fraud or misrepresentation.
16 6. Solicit, advertise, or enter into a contract for specific interest rates, points, or other
17 financing terms unless the terms are actually available at the time of soliciting,
18 advertising, or contracting.
19 7. Conduct any business covered by this chapter without holding a valid license as
20 required under this chapter, or assist or aid and abet any person in the conduct of
21 business under this chapter without a valid license as required under this chapter.
22 8. Fail to make disclosures as required by this chapter and any other applicable state or
23 federal law and regulations.
24 9. Fail to comply with this chapter or rules adopted under this chapter, or fail to comply
25 with any other state or federal law, including the rules and regulations thereunder,
26 applicable to any business authorized or conducted under this chapter.
27 10. Make, in any manner, any false or deceptive statement or representation, including,
28 with regard to the rates, points, or other financing terms or conditions for a residential
29 mortgage loan or engage in bait and switch advertising.
30 11. Negligently make any false statement or knowingly and willfully make any omission of
31 material fact in connection with any information or reports filed with a governmental
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1 agency or the nationwide mortgagemultistate licensing system and registry or in
2 connection with any investigation conducted by the commissioner or another
3 governmental agency.
4 12. Make any payment, threat, or promise, directly or indirectly, to any person for the
5 purposes of influencing the independent judgment of the person in connection with a
6 loan or make any payment, threat, or promise, directly or indirectly, to any appraiser of
7 a property, for the purposes of influencing the independent judgment of the appraiser
8 with respect to the value of the property.
9 13. Collect, charge, attempt to collect or charge, or use or propose any agreement
10 purporting to collect or charge any fee prohibited by this chapter.
11 14. Cause or require a borrower to obtain property insurance coverage in an amount that
12 exceeds the replacement cost of the improvements as established by the property
13 insurer.
14 15. Fail to truthfully account for moneys belonging to a party to a loan transaction.
15 16. Conduct another business within the same office, suite, room, or place of business at
16 which the licensee engages in money broker business unless the commissioner
17 provides written authorization after a determination the other business is not contrary
18 to the best interests of any borrower or potential borrower.
19 17. Enter any agreement that constitutes a precomputed loan.
20 SECTION 7. AMENDMENT. Section 13-04.1-09.3 of the North Dakota Century Code is
21 amended and reenacted as follows:
22 13-04.1-09.3. Maximum charges permitted for loans - Installment payments -
23 Permitted charges.
24 1. Interest charges and other fees must be set at rates, amounts, and terms as agreed to
25 by the parties within the loan contract. However, a licensee may not contract for or
26 receive finance charges pursuant to a loan in excess of an annual rate of thirty-six
27 percent, including all charges and fees necessary for the extension of credit incurred
28 at the time of origination.
29 2. Additional charges may be assessed for nonpayment or late payment as agreed to by
30 the parties within the loan contract. However, a licensee may not contract for or
31 receive charges in excess of five percent of the payment. For loans originate