21.8096.01000
Sixty-seventh
Legislative Assembly SENATE BILL NO. 2103
of North Dakota
Introduced by
Industry, Business and Labor Committee
(At the request of the Department of Financial Institutions)
1 A BILL for an Act to create and enact section 13-04.1-09.3 of the North Dakota Century Code,
2 relating to money broker charges; to amend and reenact sections 13-04.1-02.1, 13-05-02.3, and
3 13-08-12 of the North Dakota Century Code, relating to money broker exemptions, collection
4 agency exemptions, and deferred presentment service transaction procedures; to repeal
5 section 13-04.1-09.2 of the North Dakota Century Code, relating to money broker charges; and
6 to provide a penalty.
7 BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
8 SECTION 1. AMENDMENT. Section 13-04.1-02.1 of the North Dakota Century Code is
9 amended and reenacted as follows:
10 13-04.1-02.1. Entities exempted from licensing requirements.
11 This chapter does not apply to:
12 1. Banks;
13 2. Credit unions;
14 3. Savings and loan associations;
15 4. Insurance companies;
16 5. Individuals licensed under chapter 13-10;
17 6. State or federal agencies and their employees of state or federal agencies solely
18 pursuant to the individual's official duties as an employee of the state or federal
19 agency;
20 7. Institutions chartered by the farm credit administration;
21 8. Trust companies;
22 9. Any other person or business regulated and licensed to lend money by the state of
23 North Dakota;
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1 10. A real estate broker, broker, or a real estate salesperson as defined in section
2 43-23-06.1 in the brokering of loans to assist a person in obtaining financing for real
3 estate sold by the real estate broker, broker, or real estate salesperson; or
4 11. Any person, retail seller, or manufacturer providing lease financing for its own property
5 or inventory held as a normal course of business, or to leases on any real property;
6 12. A certified development corporation that qualifies as a nonprofit entity under section
7 501(c)(3) of the federal Internal Revenue Code [26 U.S.C 501(c)(3)] in the offers of:
8 a. Loan products primarily limited to the small business administration, United
9 States department of agriculture, or other government loan products; or
10 b. Nongovernmental loan products that are limited to loans to promote community
11 development or home ownership, and these loans are offered with favorable
12 terms including an interest rate at or below the wall street journal prime rate and
13 loan fees of less than a quarter percent of the loan origination balance; or
14 13. A nonprofit corporation that qualifies as a nonprofit entity under section 501(c)(3) of
15 the Internal Revenue Code[26 U.S.C. 501(c)(3)] which is not primarily in the business
16 of soliciting or brokering loans, if the nonprofit corporation makes five or fewer loans in
17 a given calendar year, makes these loans to promote community development or
18 home ownership, and offers these loans on favorable terms, including an interest rate
19 at or below the wall street journal prime rate and loan fees of less than a quarter
20 percent of the loan origination balance.
21 SECTION 2. Section 13-04.1-09.3 of the North Dakota Century Code is created and
22 enacted as follows:
23 13-04.1-09.3. Maximum charges permitted for loans - Installment payments -
24 Permitted charges.
25 1. Interest charges and other fees must be set at rates, amounts, and terms as agreed to
26 by the parties within the loan contract. However a licensee may not contract for or
27 receive finance charges pursuant to a loan in excess of an annual rate of thirty-six
28 percent, including all charges for any ancillary product or service and any other charge
29 or fee incident to the extension of credit.
30 2. Additional charges may be assessed for nonpayment or late payment as agreed to by
31 the parties within the loan contract. However, a licensee may not contract for or
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1 receive charges in excess of five percent of the installment payment, not to exceed
2 twenty dollars for each nonpayment or late payment. The charge may be collected at
3 the time of the default or any time after default. However, if the charge is taken out of
4 any payment received after a default occurs and if the deduction results in the default
5 of a subsequent payment, a charge may not be made for the subsequent default. This
6 restriction does not apply to court costs, lawful fees for the filing, recording, or
7 releasing in any public office of any instrument securing a loan, and the identifiable
8 charge or premium for insurance provided for by rule.
9 3. Additional restrictions for small loans originated for less than two thousand dollars
10 include the following:
11 a. Installment loans must be paid in equal installments as agreed to by the parties
12 within the loan contract. However the maximum term for installment loans may
13 not exceed thirty-six months, and a balloon payment is prohibited.
14 b. Outstanding balances of existing loans may be refinanced into a new small loan
15 of less than two thousand dollars, but the combination of any refinance fees
16 along with any fees collected as part of the original loans may not exceed one
17 hundred dollars per calendar year.
18 c. Additional charges may be assessed as part of a loan extension or deferment of
19 payment agreed to by the parties within the agreement. However, a licensee may
20 not contract for or receive charges in excess of one hundred dollars for these
21 loan extensions or deferments per calendar year.
22 SECTION 3. AMENDMENT. Section 13-05-02.3 of the North Dakota Century Code is
23 amended and reenacted as follows:
24 13-05-02.3. Entities exempt from licensing requirements.
25 This chapter does not apply to:
26 1. Attorneys at law who are licensed to practice in the state of North Dakota. This
27 exemption is limited to the actions of the licensed attorney and does not extend to
28 persons either employed by the attorney or acting on behalf of the attorney;
29 2. Licensed real estate brokers if the engaged activity is regulated as part of that
30 individual's professional license;
31 3. Banks;
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1 4. Trust companies;
2 5. Building and loan associations;
3 6. Credit unions;
4 7. Agencies of a state or of the federal government and employees of state or federal
5 agencies solely pursuant to the individual's official duties as an employee of the state
6 or federal agency;
7 8. Abstract companies doing an escrow business;
8 9. Creditors collecting their own debts;
9 10. Mortgage servicing company;
10 11. Individuals or firms who purchase or take accounts receivable for collateral purposes;
11 12. Individuals employed in the capacity of creditmen upon the staff of an employer not
12 engaged in the business of a collection agency; or
13 13. A public officer, receiver, or trustee acting under the order of a court.
14 SECTION 4. AMENDMENT. Section 13-08-12 of the North Dakota Century Code is
15 amended and reenacted as follows:
16 13-08-12. Fees for service - Deferred presentment service transaction procedures -
17 Penalty.
18 1. Before disbursing funds under a deferred presentment service transaction, a licensee
19 shall provide to the customer a clear and conspicuous printed notice indicating:
20 a. That a deferred presentment service transaction is not intended to meet
21 long-term financial needs.
22 b. That the customer should use a deferred presentment service transaction only to
23 meet short-term cash needs.
24 c. That the customer will be required to pay additional fees if the deferred
25 presentment service transaction is renewed rather than paid in full when due. If
26 the transaction is renewed, any amount paid in excess of the fee applies to the
27 payoff amount.
28 d. A schedule of fees charged for deferred presentment service.
29 e. Any information required under federal law.
30 f. No property, titles to any property, or mortgages may be received or held directly
31 or indirectly by the licensee as a condition of a deferred presentment service
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1 transaction or as a method of collection on a defaulted deferred presentment
2 service transaction without proper civil process.
3 2. A licensee may charge a fee for the deferred presentment service, not to exceed
4 twenty percent of the amount paid to the customer by the licensee. This fee may not
5 be deemed interest for any purpose of law. No other fee or charge may be charged for
6 the deferred presentment service, except that a fee, not to exceed the cost to the
7 licensee, may be charged for registering a transaction on a database administered or
8 authorized by the commissioner. No property, titles to any property, or mortgages may
9 be received or held directly or indirectly by the licensee as a condition of a deferred
10 presentment service transaction or as a method of collection on a defaulted deferred
11 presentment service transaction without proper civil process.
12 3. A licensee may not disburse more than five hundred dollars to the customer in a
13 deferred presentment service transaction.
14 4. A licensee may not engage in a deferred presentment service transaction with a
15 customer who has an aggregate value of all outstanding obligations from any one
16 customer exceeding six hundred dollars which is payable to the same or any other
17 licensee. A licensee may not enter a new deferred presentment service transaction
18 with a customer within three business days of that customer's completion of a previous
19 deferred presentment service transaction. A licensee may rely on a written or
20 electronic representation of a customer regarding the existence of any outstanding
21 obligations for deferred presentment held by a licensee other than the licensee
22 receiving the representation until the database provided for under this subsection is in
23 operation, and after that time may not rely on a customer's representation but must
24 verify the fact using the database. However, if a licensee has multiple locations, that
25 licensee may not rely on the representation of a customer regarding the existence of
26 any outstanding obligation for deferred presentment held by that licensee, or one of
27 the licensee's multiple locations, unless the licensee and the licensee's multiple
28 locations use a point of sale registry or some other accounting system to attempt to
29 prevent violations of this subsection. The commissioner shall administer or authorize
30 the development of a database in which each transaction must be recorded for the
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1 purpose of preventing violations of this section. The commissioner shall adopt rules
2 governing the creation, structure, and use of the database.
3 5. Before a licensee may negotiate or present a check for payment, the check must be
4 endorsed with the actual name under which the licensee is doing business.
5 6. Each deferred presentment service transaction, including a renewal, must be
6 documented by a written agreement signed or similarly authenticated by the customer.
7 The original agreement must contain the name of the licensee; the transaction date;
8 the amount of the obligation; a statement of the total amount of fees charged,
9 expressed as a dollar amount and as an annual percentage rate; the name and
10 signature of the individual who signs the agreement on behalf of the licensee; the
11 name and address of the check maker; the transaction number assigned by the
12 database; the date of negotiation of the check; the signature of the check maker; a
13 statement that a licensee may not renew a transaction more than once; a statement
14 that the renewal fee may not exceed twenty percent of the amount being renewed; a
15 statement that the maximum term of the transaction, including the renewal, may not
16 exceed sixty calendar days; a statement that the term of the renewal period may not
17 be less than fifteen calendar days; and a statement containing the right of rescission
18 printed immediately above the signature line of the written agreement in a minimum of
19 ten-point font and providing a space for the check maker to initial that the notice to the
20 right of rescission was received. The original agreement may not include a hold
21 harmless clause; a confession of judgment clause; any assignment of or order for
22 payment of wages or other compensation for services; a provision in which the check
23 maker agrees not to assert any claim or defense arising out of the agreement; a
24 waiver of any provision of this chapter; any representation from the check maker as to
25 the sufficiency of funds regarding any past deferred presentment service transactions;
26 or any statement regarding criminal prosecution with respect to the agreement. A
27 renewal agreement must be contained in a separate section, as part of the original
28 written agreement or in other form as approved by the commissioner. The renewal
29 agreement must restate the original transaction date, the renewal transaction date, the
30 amount of the check paid to the check maker, the fee charged in dollars, and the
31 maturity date. The agreement must authorize the licensee to defer presentment or
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1 negotiation of the check, or electronic debit of the customer's account, until a specified
2 date. The maker of a check may redeem the check from the licensee at any time
3 before the negotiation or presentment of the check by making payment to the licensee.
4 A customer agreeing to an electronic deferred presentment service transaction may
5 repay the obligation at any time before the agreed-upon date. A customer may rescind
6 any transaction by the close of the business day following the day on which the
7 customer receives payment from the licensee at no cost. If a customer agreeing to an
8 electronic deferred presentment service transaction rescinds the transaction, the
9 licensee must facilitate the repayment of the funds through the same electronic means
10 the licensee used to deliver the funds to the customer.
11 7. If a check or electronic debit is returned to the licensee from a payer financial
12 institution due to insufficient funds, closed account, or a stop payment order, the
13 licensee has the right to all civil remedies available to collect the obligation. The
14 licensee may contract for and collect a returned check or electronic debit charge not to
15 exceed the collection fees and costs authorized in subdivision c of subsection 2 of
16 section 6-08-16. No other fee or charge may be collected as a result of a returned
17 check or electronic debit or as a result of default by the customer in timely payment to
18 the licensee.
19 8. A customer who has authority to make a check or authorize an electronic debit and
20 enters a deferred presentment service agreement is not subject to a criminal penalty
21 relating to the check, electronic debit, or the deferred presentment service agreement
22 unless the customer's account was closed on the original date of the transaction. At
23 the time of entering a transaction involving a written check, a licensee shall verify that
24 the account on which the check is written is open. A licensee may not pursue or
25 threaten to pursue criminal penalties against a customer for criminal penalties
26 prohibited by this subsection.
27 9. A licensee may not engage in unfair or deceptive acts, practices, or advertising in the
28 conduct of a deferred presentment service business.
29 10. The amount paid to the customer by the license