N.D. Admin. Code Title 13 — Department of Financial Institutions

Article 13-01.1 Practice and Procedure

Chapter 13-01.1-01 General Provisions

N.D. Admin. Code 13-01.1-01 General Provisions

ARTICLE 13-01.1

PRACTICE AND PROCEDURE

chapter 13-01.1-01General Provisions 13-01.1-02Pleadings 13-01.1-03Prehearing Conferences 13-01.1-04Hearings 13-01.1-05Evidence 13-01.1-06Reopening, Rehearing, Review 13-01.1-07Rules 13-01.1-08Meetings

CHAPTER 13-01.1-01

GENERAL PROVISIONS

Section 13-01.1-01-01Applicability 13-01.1-01-02Address - Sessions [Repealed] 13-01.1-01-03Communications [Repealed] 13-01.1-01-04Case Title 13-01.1-01-05Personal and Representative Appearances [Repealed] 13-01.1-01-06Rules of Conduct 13-01.1-01-07Parties 13-01.1-01-08Investigation on Board's Own Motion 13-01.1-01-09Definitions 13-01.1-01-10Liberal Construction 13-01.1-01-11Suspension of Rules 13-01.1-01-12Facsimile Transmission [Repealed] 13-01.1-01-13Ex Parte Communications 13-01.1-01-14Duplication of Records and Digital Records 13-01.1-01-01. Applicability.

This article shall apply to all practice and procedure before the state banking board and commissioner unless rendered inconsistent by a specific statute or rule, in which instance the more specific statute or rule shall apply. The board will follow title 98 for all practices and procedures not contained under this article. 13-01.1-01-02. Address - Sessions. 13-01.1-01-03. Communications. 13-01.1-01-04. Case title.

Each matter coming formally before the board will be known as a case and shall be given a title descriptive of the subject matter. Such title shall be used on all papers in the case and, as far as possible, any communication to the board in any particular case shall bear or reference the title of the case. 13-01.1-01-05. Personal and representative appearances.

Repealed effective November 1, 1994. 13-01.1-01-06. Rules of conduct.

All persons appearing before the board or a hearing officer must conform to the standards of ethical conduct required of practitioners before the courts of the state of North Dakota. Any member of the bar of another state may be permitted by the commissioner to appear in and conduct a cause or matter while retaining the member's residence in another state. 13-01.1-01-07. Parties.

1.Classification. Parties to proceedings before the board are designated as applicants, complainants, petitioners, intervenors, protestants, or respondents, according to the nature of the proceeding and the relationship of the parties thereto.

2.Applicant. Persons filing formal written requests with the board for some right, privilege, or authorization which the board may give under statutory or other authority granted to it are designated as applicants.

3.Complainant. Persons who complain to the board of acts done or omitted to be done in violation of some law administered by the board, or in violation of some rule, regulation, or order issued by the board, are designated as complainants.

4.Petitioner. Persons seeking relief, not otherwise designated herein, are designated as petitioners.

5.Intervenor. Persons, other than the original parties to a pending proceeding, who voluntarily become parties thereto with leave of the commissioner are designated as intervenors.

Admission as an intervenor shall not be construed as recognition by the board that the intervenor might be aggrieved by any order of the board in the proceeding.

6.Protestant. Persons opposing on grounds of private or public interest the approval of an application, petition, motion, or other matter under consideration by the board are designated as protestants.

7.Respondent. Persons subject to any statute or other delegated authority administered by the board to whom an order or notice is issued by the board instituting a proceeding or investigation on its own initiative and persons subject to any statute or other delegated

authority administered by the board or any rule, order, or regulation issued or promulgated thereunder against whom any complaint is filed are designated as respondents. 13-01.1-01-08. Investigation on board's own motion.

The board may at any time, upon its own motion or upon the complaint of any person, institute investigation proceedings and order hearing in any action or thing done or omitted to be done by any party under the board's jurisdiction which the board may believe is in violation of the law or of any order or rule of the board. It may, through its staff or otherwise, secure and present such evidence as it may consider necessary or desirable in any proceeding in addition to the evidence presented by the parties.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-08 13-01.1-01-09. Definitions.

As used in this article except as otherwise required by the context:

1."Board" and "board member" means the state banking board, and a member thereof, respectively.

2."Board's staff" means and includes the board's experts, employees and attorneys, and the staff of the department of financial institutions.

3."Commissioner" means the commissioner of financial institutions.

4."Hearing officer" means and includes any one or more of the members of the board duly designated, or one or more trial examiners appointed according to law and duly designated to preside at hearings or conferences.

5."Participants" means and includes any party or person admitted by the board or commissioner to participate in a proceeding, including the board's staff.

History: Effective January 1, 1980; amended effective November 1, 1994; June 1, 2002.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-01 13-01.1-01-10. Liberal construction.

This article shall be liberally construed to secure just, speedy, and inexpensive determination of the issues presented. 13-01.1-01-11. Suspension of rules.

The board reserves the right to suspend, either upon its own motion or upon the motion of any party, the operation of or necessity for compliance with any rule of procedure or part thereof, upon due notice to all parties, whenever the public interest or the interest of any party to a proceeding will not be substantially prejudiced thereby. The power to suspend these rules may be exercised by the commissioner. Every such exercise of power by the commissioner is subject to review by the board. 13-01.1-01-12. Facsimile transmission. 13-01.1-01-13. Ex parte communications.

The board may sanction any party or the party's counsel who makes an ex parte communication as prohibited by North Dakota Century Code section 28-32-37 by directing the party or counsel to pay such additional administrative costs that may be attributable to the ex parte communication or may rule adversely on the issue which is the subject of the prohibited communications, or both.

History: Effective November 1, 1994.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-37 13-01.1-01-14. Duplication of records and digital records.

1.Digital copies of facts, reports, or other records created by the commissioner or the department have the same level of confidentiality as physical records outlined in North Dakota Century Code section 6-01-07.1.

2.Facts, reports, or other records created by the commissioner or the department deemed confidential by law may not be copied or otherwise duplicated, including the redistribution of digital records, without the prior approval of the commissioner. This subsection does not apply to examined entity's duplication of the record for their own use or the use by third parties as authorized in North Dakota Century Code section 6-01-07.1.

3.Meetings and conversations involving the commissioner or the department staff discussing examination facts, reports, or other records created by the commissioner or the department may not be recorded without the prior approval of the commissioner, except as allowed by the open meeting laws of this state.

History: Effective April 1, 2022.

General Authority: NDCC 6-01-04, 6-01-07.1

Law Implemented: NDCC 6-01-07.1

Chapter 13-01.1-02 Pleadings

N.D. Admin. Code 13-01.1-02 Pleadings

CHAPTER 13-01.1-02

PLEADINGS

Section 13-01.1-02-01Informal Complaint - Form and Disposition 13-01.1-02-02Formal Complaints 13-01.1-02-03Answers 13-01.1-02-04Application 13-01.1-02-05Protest 13-01.1-02-06Intervention 13-01.1-02-07Extensions of Time 13-01.1-02-08Extensions of Time for Satisfaction of Conditions Subsequent 13-01.1-02-09Amendments and Withdrawal 13-01.1-02-10Motion 13-01.1-02-11Show Cause Orders 13-01.1-02-01. Informal complaint - Form and disposition.

Informal complaints may be made orally or in writing addressed to the board. Letters to the board will be considered as informal complaints. Matters thus presented will be handled by any of the following methods:

1.Correspondence or other informal communications.

2.Conference with the complaining party or parties.

3.Formal investigation instituted by the board upon its own motion.

4.Any other manner as the commissioner believes appropriate and warranted by the facts and the nature of the complaint in an endeavor to bring about satisfaction of the complaint without formal hearing.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-05.1 13-01.1-02-02. Formal complaints.

1.Complaints may be made by the board on its own motion, by the commissioner on the commissioner's own motion, or by any person. Complaints shall be made in writing setting forth any act or thing done or omitted to be done by any party under the board's jurisdiction in violation of or claimed to be in violation of any provision of law, or any order or rule of the board.

2.Form and content. Each formal complaint must show the venue, "Before the State Banking Board of North Dakota" and must contain a heading showing the name of the complainant and the name of the respondent. The complaint must advise the respondent and the board of the facts constituting the ground of the complaint, the provisions of the statutes, rules, and orders relied upon the injury complained of, and a clear, concise statement of the relief sought.

3.Verification. All formal complaints must be verified by the person filing, or by the person's legal representative.

4.Number of copies. At the time when the complainant files the original complaint, the complainant must also file ten copies more than the number of respondents named in the complaint.

5.Service. The board shall serve a copy of the complaint upon the respondent as the commissioner may direct, at least forty-five days before the hearing thereof unless the service of such complaint is waived, in writing, by the respondent, or unless the parties agree upon a definite time and place for hearing thereof with the consent of the commissioner.

6.Satisfaction of complaint. If the respondent desires to satisfy the complaint, the respondent may file with the board and complainant, within five days after the service of the complaint, a statement of the relief which the respondent is willing to give. If the offer of relief is satisfactory to the complainant, the complainant must submit a written request to withdraw the complaint within ten days after the offer was served. If a written request to withdraw is not made within the ten days, the offer is deemed denied and the respondent must answer the complaint.

7.Sufficiency of complaint. Upon the filing of a formal complaint, the commissioner shall examine same to ascertain whether or not it states a prima facie case and conforms to this

article. If the commissioner finds that the complaint does not state a prima facie case or does not conform to this article or does not fall within the board's jurisdiction, the commissioner shall notify the complainant or the complainant's attorney to that effect, and the complainant shall be given an opportunity to amend within a specified time. If the complaint is not so amended within such time, or extension thereof as the commissioner may for good cause grant, it will be deemed dismissed.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-05, 28-32-05.1 13-01.1-02-03. Answers.

1.Content. Each answer filed with the board must contain: (a) the correct title of the proceeding;

(b) the name and address of each answering party; (c) a specific denial of such material allegations of the complaint as are controverted by the respondent; and (d) a statement of any matter which may constitute an affirmative defense. If the respondent lacks information or belief upon which to answer an allegation of the complaint, the respondent may so state in the answer and plead the denial upon that ground.

2.Verification. An answer must be signed and verified by the respondent.

3.Service and number of copies. The original answer must be served within twenty days after the date the complaint was served on each complainant or the complainant's attorney. The respondent must file with the board an original answer and ten copies thereof together with proof of service on each complainant or the complainant's attorney. 13-01.1-02-04. Application.

An application is a proceeding seeking some right, privilege, or authorization which the board may give under statutory or other authority administered by it.

1.Contents. All applications shall be in writing and, under oath, shall: (a) set forth the full name and post-office address of the applicant; (b) state clearly and concisely the authorization or permission sought; (c) cite by appropriate reference the statutory provision or other authority which the board authorization or permission is sought; and (d) comply with the applicable statutory provision or rule specifying form or content.

2.Application forms. When the board requires the application to be submitted on a form specifically designed for the particular application, such application shall be submitted on that form. Forms are available from the board upon request.

3.Additional documents. When the submission of documents is required in addition to an application, all such documents must be submitted to the board in proper form before the application will be accepted for filing.

4.Fees. Application fees must be submitted before the application is accepted for filing.

5.Signature. Every application must be signed by the party filing the same.

6.Number of copies. At the time the original application is filed, ten additional copies thereof must also be filed. 13-01.1-02-05. Protest.

In any formal application proceeding, any person having substantial interest in the application may protest the application upon compliance with the provisions of this section.

1.Notice of intent to protest. Any person intending to protest an application must notify the board and the applicant of that intent.

2.Content. The notice must be in writing and must set forth the grounds of the protest and the position and interest of the protestant.

3.When made. Notice of intent to protest must be made no later than five business days prior to the commencement of the hearing.

4.Number of copies. The protestant shall furnish a copy of the notice of intent to protest to each party to the proceeding and shall furnish the board with the original and ten copies thereof. 13-01.1-02-06. Intervention.

In any formal proceeding, any person having substantial interest in the subject matter of any proceeding may petition the commissioner for leave to intervene in such proceeding and may become a party thereto upon compliance with the provisions of this section. In general such petitions will not be granted unless it shall be found: (1) that such person has a statutory right to be made a party to such proceeding; or (2) that such person has a property or financial interest which may not be adequately represented by existing parties, and such intervention would not unduly broaden the issues or delay the proceeding.

1.Contents of petition to intervene. A petition for leave to intervene shall be in writing and must set forth the grounds of the proposed intervention, the position and interest of the petitioner in the proceeding, and whether the petitioner's position is in support of or in opposition to the relief sought.

2.When filed. A petition for leave to intervene in any proceeding must be filed no later than five business days prior to the commencement of the hearing.

3.Number of copies. The petitioner shall furnish a copy of the petition to each party to the proceeding and shall furnish the board with the original and ten copies thereof.

4.Effect. Admission as an intervenor must not be construed as recognition by the board that the intervenor might be aggrieved by an order of the board in the proceeding.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-08.2 13-01.1-02-07. Extensions of time.

A request for an extension of time in which to perform an act required or allowed to be done at or within a specified time by any rule, regulation, or order of the board shall be by motion in writing timely filed with the board, stating the facts on which the motion rests and conforming to the provisions of

section 13-01.1-02-10. Except as provided in section 13-01.1-02-08, such extensions of time will be granted or denied by the commissioner in the commissioner's discretion.

History: Effective January 1, 1980. 13-01.1-02-08. Extensions of time for satisfaction of conditions subsequent.

A request for an extension of time in which to satisfy any condition subsequent to an order of the board granting an application shall be by motion in writing timely filed with the board.

1.Content of motion. The motion shall specify the particular conditions subsequent which have not been satisfied and upon which an extension of time is requested, and shall state the facts upon which the motion rests.

2.Service. All such motions shall be served by the movant on the other parties to the original application proceeding.

3.Number of copies. At the time the original motion is filed, ten additional copies shall be filed with the board.

4.Argument. The movant or any other party may argue the motion before the board.

5.Disposition. Such motions will be granted or denied by the board in its discretion. 13-01.1-02-09. Amendments and withdrawal.

The commissioner may, after notice to the other parties to a proceeding, allow any pleading to be amended or corrected or any omission to be supplied. If any such amendment so alters or broadens the issues, the commissioner may permit the affected party a reasonable time to reply. A party desiring to withdraw a pleading filed with the board may file a written notice of withdrawal. The notice must state the reason for the withdrawal. A copy of the withdrawal notice must be served upon all other parties to the proceeding and proof of service to that effect filed with the notice of withdrawal. This section shall not be construed as allowing, without express permission of the commissioner, withdrawal of any pleading in any proceeding in which a hearing has been held or convened. 13-01.1-02-10. Motion.

Except as provided in section 13-01.1-02-08, the hearing officer is authorized to rule upon all motions unless the action on the motion involves or constitutes a final determination of the proceeding, in which case the motion shall be ruled upon by the board. The hearing officer may set any motion for oral argument.

General Authority: NDCC 28-32-02

Law Implemented: NDCC 6-01-04, 28-32-05 13-01.1-02-11. Show cause orders.

1.The board or commissioner may, by order, compel any person to whom it has granted

authority to show cause why the authority should not be suspended, changed, or revoked in whole or in part. The term "authority" includes a certificate, license, and permit.

2.The show cause order shall specifically advise the respondent of the alleged violation and of the time and place of the hearing on such order.

3.When the board finds that the respondent has committed, or is committing, the alleged violation, the board may enter a cease and desist order or any order the board deems just and reasonable.

Chapter 13-01.1-03 Prehearing Conferences

N.D. Admin. Code 13-01.1-03 Prehearing Conferences

CHAPTER 13-01.1-03

PREHEARING CONFERENCES

Section 13-01.1-03-01To Adjust or Settle Proceedings 13-01.1-03-02To Expedite Hearings 13-01.1-03-03Initiation of Conferences 13-01.1-03-04Conference Results Stipulated 13-01.1-03-01. To adjust or settle proceedings.

In accordance with section 98-02-02-09 in order to provide an opportunity for a settlement of a proceeding, or any of the issues therein, there may be held at any time prior to or during hearings before the hearing officer such informal conferences of parties for the admission and consideration of facts, arguments, offers of settlement, or proposals of adjustments as time, the nature of the proceeding, and the public interest may permit. Unaccepted proposals of settlement, adjustment, procedure to be followed, or proposed stipulations not agreed to shall be privileged and not admissible in evidence against any party. 13-01.1-03-02. To expedite hearings.

To expedite the orderly conduct and disposition of any hearing, at such prehearing conferences as may be held, there may be considered, in addition to any offer of settlement or proposals of adjustment, the possibility of the following:

1.The simplification of issues.

2.The necessity or desirability of amendments to the pleadings.

3.The exchange and acceptance of service of exhibits proposed to be offered in evidence.

4.The obtaining of admission as to, or stipulations of, facts not remaining in dispute, or the authenticity of documents which may properly shorten the hearing.

5.The limitation of the number of witnesses.

6.The limitation of the time allowed for the testimony of expert witnesses.

7.Any other matter as may aid in expediting the orderly conduct of the proceeding. 13-01.1-03-03. Initiation of conferences.

The board or the commissioner, with or without motion, may direct that a prehearing conference be held upon such terms as the board may provide. Due notice of the time and place of such conference will be given to all parties to the proceeding. 13-01.1-03-04. Conference results stipulated.

Upon conclusion of the prehearing conference, the parties shall, if applicable, provide a written stipulation which recites the matters agreed upon, and the original and ten copies thereof shall be filed with the board. Any stipulation received in evidence at a hearing is binding on the parties with respect to the matters therein stipulated.

Chapter 13-01.1-04 Hearings

N.D. Admin. Code 13-01.1-04 Hearings

CHAPTER 13-01.1-04

HEARINGS

Section 13-01.1-04-01Notice 13-01.1-04-02Appearances 13-01.1-04-03Continuance [Repealed] 13-01.1-04-04Consolidation [Repealed] 13-01.1-04-05Waiver of Hearing - Shortened Procedure [Repealed] 13-01.1-04-06Order of Procedure 13-01.1-04-07Hearing Examiner [Repealed] 13-01.1-04-08Appeal to Board from Ruling of Hearing Examiner [Repealed] 13-01.1-04-09Oral Argument [Repealed] 13-01.1-04-10Briefs - Proposed Findings of Fact and Conclusions of Law [Repealed] 13-01.1-04-11Motions 13-01.1-04-01. Notice.

In those proceedings in which a hearing is to be held, the board shall assign a time and place for hearing, and issue notice of hearing. When the notice procedure is not specified by statute, notice must be given at least twenty days prior to the date of the hearing, except in cases of emergency.

The notice procedures of the board are as follows, unless emergency circumstances require otherwise:

1.Proposed rules. Notice of proposed rules, inviting comments, will be given to all known interested parties by mail. Notice will also be published in the following newspapers:

a.Bismarck Tribune, Bismarck.

b.Devils Lake Daily Journal, Devils Lake.

c.Dickinson Press, Dickinson.

d.The Forum, Fargo.

e.Grand Forks Herald, Grand Forks.

f.Jamestown Sun, Jamestown.

g.Minot Daily News, Minot.

h.Williston Daily Herald, Williston.

i.Valley City Times-Record, Valley City.

j.The Daily News, Wahpeton.

2.Bank applications. Notice of hearing on an application for an organization certificate for a new bank must be issued at least thirty days prior to the hearing on the application. Notice must be mailed to all banks within the same service area as the location of the proposed new bank and published three times in the official newspaper of the county and city where the proposed bank is to be located.

3.Facility applications. Notice of application for a facility must be issued as specified in sections 13-02-05-05 and 13-02-05-08.

4.Electronic funds transfer center applications. Notice of intent to apply for authorization to establish an electronic funds transfer center must be issued as specified in section 13-02-06-12.

5.Move of bank to new location. Notice of hearing on an application to move a bank to some place within the state other than the town in which it is presently located must be issued in the same manner as specified in subsection 2.

6.Savings and loan branch applications. Notice of hearing on an application for a savings and loan branch must be issued at least thirty days prior to the hearing on the application, and must be published three times in the official newspaper of the county and city in which the proposed branch is to be located.

The board may give additional notice where it deems such action appropriate.

The procedures outlined above may be modified by the commissioner or board in cases of an emergency.

History: Effective January 1, 1980; amended effective May 1, 1993; November 1, 1994; May 1, 1996.

Law Implemented: NDCC 6-01-01, 6-01-04, 6-02-05, 6-03-02(8), 6-03-13, 6-03-13.3, 6-03-16, 6-05-01, 7-01-01, 28-32-02 13-01.1-04-02. Appearances.

Interested parties shall enter their appearances at the beginning of the hearing by giving their name and address and briefly state whether they appear in support of or in opposition to the complaint or application. All appearances must be noted on the record with a notation in whose behalf each appearance is made. The names of the members of the board's staff participating in the hearing or investigation must also be noted.

History: Effective January 1, 1980; amended effective May 1, 1996.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-11.1 13-01.1-04-03. Continuance. 13-01.1-04-04. Consolidation. 13-01.1-04-05. Waiver of hearing - Shortened procedure. 13-01.1-04-06. Order of procedure.

In hearings on formal complaints, petitions, and applications, the complainant, petitioner, or applicant must open and close. In all other hearings, the hearing officer may direct who shall open and close. The hearing officer shall designate at which stage an intervenor shall be heard.

History: Effective January 1, 1980; amended effective November 1, 1994; May 1,1996.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-11.1 13-01.1-04-07. Hearing examiner. 13-01.1-04-08. Appeal to board from ruling of hearing examiner. 13-01.1-04-09. Oral argument. 13-01.1-04-10. Briefs - Proposed findings of fact and conclusions of law. 13-01.1-04-11. Motions.

Before a hearing officer has been appointed, the commissioner or board may act on any motion, including a motion for continuance or consolidation.

History: Effective November 1, 1994.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-05

Chapter 13-01.1-05 Evidence

N.D. Admin. Code 13-01.1-05 Evidence

CHAPTER 13-01.1-05

EVIDENCE

Section 13-01.1-05-01Rules [Repealed] 13-01.1-05-02Witnesses [Repealed] 13-01.1-05-03Subpoena [Repealed] 13-01.1-05-04Depositions [Repealed] 13-01.1-05-05Stipulations 13-01.1-05-06Expert Witnesses 13-01.1-05-07Documentary Evidence [Repealed] 13-01.1-05-08Exhibits 13-01.1-05-09Official Notice 13-01.1-05-10Former Employee Participation Prohibited 13-01.1-05-11Interrogatories and Requests for Admission 13-01.1-05-01. Rules. 13-01.1-05-02. Witnesses. 13-01.1-05-03. Subpoena. 13-01.1-05-04. Depositions. 13-01.1-05-05. Stipulations.

The parties to any proceeding or investigation before the board may, by stipulation in writing filed with the board or orally entered in the record, agree upon the facts or any portion thereof involved in the controversy, and such stipulation shall be regarded and used as evidence at the hearings.

History: Effective January 1, 1980. 13-01.1-05-06. Expert witnesses.

1.Notification required. Parties intending to present expert testimony shall notify the board and all parties to the proceeding of that intent. The notification shall indicate the nature of the expert testimony, whether or not one or more exhibits supplementing the testimony are intended, and the name and qualifications of the expert witness.

2.Supplemental exhibits. Within the times specified in this section, the party on whose behalf the testimony is given shall file with the board ten copies of any exhibits supplementing the expert testimony, and shall also provide copies to all parties to the proceeding.

3.Applicants. Applicants under section 13-01.1-02-04 who intend to present expert testimony shall comply with subsection 1 within ten days after receipt of notification that the application has been accepted for filing and shall comply with subsection 2 at least twenty days prior to the hearing on the application.

4.Protestants. Protestants under section 13-01.1-02-05 who intend to present expert testimony shall comply with subsection 1 at least twenty days prior to the date of the hearing on the application and shall comply with subsection 2 at least ten days prior to the hearing on the application.

5.Others. All other parties intending to present expert testimony shall comply with subsection 1 at least twenty days prior to the date set for hearing and may comply with subsection 2 at the time the exhibit is introduced. 13-01.1-05-07. Documentary evidence. 13-01.1-05-08. Exhibits.

Ten copies of each exhibit will be furnished for the use of the board whenever practicable. Copies must also be available for all parties of record in a proceeding. 13-01.1-05-09. Official notice.

The board may take notice of any fact in its orders, rules, examination reports, annual reports, or any statistical data, to which reference is made in the hearing, or any facts which are judicially noticed by the courts of this state. 13-01.1-05-10. Former employee participation prohibited.

Except with the written permission of the commissioner, no former employee of the department, or member of the attorney general's staff assigned to the board, may appear in a representative capacity or as a witness on behalf of any party at any proceeding at any time within twelve months after termination of employment or assignment. 13-01.1-05-11. Interrogatories and requests for admission.

Any party may serve upon any other party written interrogatories or requests for admission to be answered by the party served or, if the party served is a public or private corporation or a partnership or association or governmental agency, by any officer or agent, who shall furnish such information or answer as is available to the party.

Each interrogatory or request for admission must be answered separately and fully in writing under oath, unless it is objected to, in which event the reasons for objection must be stated in lieu of an answer. The party upon whom the interrogatories or requests for admission have been served shall serve a copy of the answers, and objections if any, within fifteen days after service of the interrogatories or requests for admission.

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-09

Chapter 13-01.1-06 Reopening, Rehearing, Review

N.D. Admin. Code 28-32-14 The original and ten copies of all petitions for reconsideration must be filed with the board at the time the petition is served upon the parties. Responses to petitions for reconsideration must be filed with the board within ten days following the service of the petition or objection to the granting of the petition will be deemed waived

History

• History: Effective January 1, 1980; amended effective November 1, 1994.
• General Authority: NDCC 6-01-04, 28-32-02
• Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-14

Chapter 13-01.1-07 Rules

N.D. Admin. Code 13-01.1-07 Rules

CHAPTER 13-01.1-07

RULES

Section 13-01.1-07-01Application 13-01.1-07-01. Application.

An application for the promulgation, amendment, repeal, or adoption of any board rule must state the precise wording of the proposed rule and must state briefly the reasons for the promulgation, amendment, repeal, or adoption. The board may, at any time, propose adoption, amendment, or repeal of any rule.

History: Effective January 1, 1980; amended effective November 1, 1994.

General Authority: NDCC 6-01-04, 28-32-02

Law Implemented: NDCC 6-01-01, 6-01-04, 28-32-05

Chapter 13-01.1-08 Meetings

N.D. Admin. Code 13-01.1-08 Meetings

CHAPTER 13-01.1-08

MEETINGS

Section 13-01.1-08-01Generally 13-01.1-08-01. Generally.

The board must conduct open meetings at which the public may attend but will not necessarily be permitted to participate. The agenda foreach open meeting will be made available in advance of the session. Items may be added to, or stricken from, the agenda without further notice. Public documents relating to the items on the agenda may be examined in the board's offices. As provided by law, the board may conduct closed meetings to consider confidential information.

History: Effective January 1, 1980; amended effective November 1, 1994.

General Authority: NDCC 6-01-04, 28-32-02

Law Implemented: NDCC 6-01-01, 6-01-04, 6-01-07.1, 44-04-19

Article 13-02 Banking and Savings and Loan Associations

Chapter 13-02-01 Maximum Rates of Interest Payable by State Banking Associations on Time and Savings Deposits

N.D. Admin. Code 13-02-01-01 Time deposits of one hundred thousand dollars or more

N.D. Admin. Code 13-02-01-02 Fixed ceiling time deposits of less than one hundred thousand dollars

N.D. Admin. Code 13-02-01-03 Savings deposits

N.D. Admin. Code 13-02-01-04 Governmental unit time deposits of less than one hundred thousand dollars

N.D. Admin. Code 13-02-01-05 Individual retirement account and Keogh (H.R. 10) plan deposits of less than one hundred thousand dollars

N.D. Admin. Code 13-02-01-06 Twenty-six-week money market time deposits of less than one hundred thousand dollars

N.D. Admin. Code 13-02-01-07 Time deposits of less than one hundred thousand dollars with maturities of two and one-half years or more

N.D. Admin. Code 13-02-01-08 Interest adjustments

N.D. Admin. Code 13-02-01-09 Temporary authorization

N.D. Admin. Code 13-02-01-10 Deposits subject to negotiable orders of withdrawal

N.D. Admin. Code 13-02-01-11 Fourteen- to ninety-day time deposit of less than one hundred thousand dollars

N.D. Admin. Code 13-02-01-12 Tax-exempt savings certificates

N.D. Admin. Code 13-02-01-13 Authorization

The state banking board authorizes state banks to pay interest on deposits in accordance with all interest rate authorizations adopted by the board of governors of the federal reserve system pursuant to the provisions of section 19 of the Federal Reserve Act, 12 CFR Part 217 (also known as regulation Q) and all interest rate adjustments authorized by the depository institutions deregulation committee pursuant to the provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980, and published in the federal register.

The authority for state banks to pay such interest on deposits shall be the date the adjustments are effective unless the state banking board shall otherwise direct within ninety days of the state banking board receiving notification of proposed adjustments.

History

• History: Effective September 1, 1982.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-03-02, 6-03-63

Chapter 13-02-02 Bank Reserves

N.D. Admin. Code 13-02-02-01 Bank reserves

Each banking association shall have on hand at all times in available funds a percentage of its deposits which shall equal the amount of reserves required of it by the board of governors of the federal reserve system.

History

• History: Amended effective April 1, 1981.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-03-37

Chapter 13-02-03 Limitation on Bank Borrowings on a Day-to-Day Basis [Repealed]

N.D. Admin. Code 13-02-03 Limitation on Bank Borrowings on a Day-to-Day Basis [Repealed]

CHAPTER 13-02-03

LIMITATION ON BANK BORROWINGS ON A DAY-TO-DAY BASIS [Repealed effective June 1, 1981]

Chapter 13-02-04 Mailing of Monthly Statements of Banks

N.D. Admin. Code 13-02-04-01 Definitions

Unless the context otherwise requires, terms used in this chapter shall have the following meanings:

1."Active account" means any checking account which has four or more entries in each month.

2."Dormant account" means any account, including savings accounts, which has had no activity except interest for two years or more, and the whereabouts of the depositor is unknown.

3."Inactive account" means any checking account which has less than four entries in each month and is not a dormant account.

N.D. Admin. Code 13-02-04-02 Active accounts - Monthly statements

Monthly statements of each active account, including statements, canceled checks, and other documents supporting charges to each account, will be available for delivery upon request as soon as possible after the close of each month's business. Delivery will be made by mail or call at the option of the association.

N.D. Admin. Code 13-02-04-03 Active accounts - Delivery of statements - Limitation

Not later than forty-five days after the close of the month all undelivered statements of active accounts, including canceled checks and other documents supporting changes to each account, will be mailed to the customer.

N.D. Admin. Code 13-02-04-04 Inactive accounts - Monthly statements

Monthly statements of inactive accounts, including statements, canceled checks, and other documents supporting charges to each account, will be available upon request as soon as possible after the close of each month. Delivery may be made by mail or call at the option of the association.

N.D. Admin. Code 13-02-04-05 Inactive accounts - Delivery of statements - Limitation

At least every twelve months statements of all inactive accounts, including canceled checks and other documents supporting charges to each account, will be mailed to the customer.

N.D. Admin. Code 13-02-04-06 Dormant accounts - Controls - Reconcilement

All dormant accounts will be under control of two officers of the bank. A dormant account register will be maintained, subject to the supervision of the officers assigned to control these accounts. Entries in the register will be reconciled to the total of the register at least each six months.

N.D. Admin. Code 13-02-04-07 Savings accounts - Current - Limitation

Statement of balance of each savings account which is not dormant will be mailed or delivered at least each twelve months.

Chapter 13-02-05 Procedure for Establishing a Facility

N.D. Admin. Code 13-02-05-01 Application to banking board required

Whenever any state bank desires to maintain and operate a facility separate from its banking house, or to move a facility previously established to another location, it must apply to the state banking board for such authority.

History

• History: Amended effective August 1, 1996.

N.D. Admin. Code 13-02-05-02 Delivery of copies to board

An original and ten copies of the application must be delivered to the state banking board.

N.D. Admin. Code 13-02-05-03 Contents of application

The application must contain the following information:

1.A copy of the applicant bank's most recent month-end financial statement.

2.A copy of the applicant bank's yearend financial statements for the last two preceding years.

3.The names and addresses of all other banks within the trade area of the banking institution's proposed facility.

4.A description of the site of the proposed facility.

5.A description of the proposed facility and an estimate of the cost of establishing and maintaining the facility.

6.A statement relating to the convenience, needs, and welfare of the people of the community and area to be served by the proposed facility.

7.A statement relating to whether other banks will be seriously injured by the approval of the application.

N.D. Admin. Code 13-02-05-04 Availability for inspection

The application must be available for inspection in the office of the commissioner of financial institutions.

History

• History: Amended effective May 1, 1996; June 1, 2002.

N.D. Admin. Code 13-02-05-05 Publication

Upon filing a completed application, the secretary of the board shall cause to be published notice of application once a week for two successive weeks in the official newspaper of the county where the proposed facility is to be located. The notice of application must also be sent by certified mail by the secretary of the board to all banks and bank facilities, if not sent to the main office, located within the trade area of the banking institution's proposed facility. Within fifteen days of the final notice provided under this section, any bank or person may submit to the board written comments concerning the application or a written request for an opportunity to be heard before the board, or both.

Notwithstanding sections 13-02-05-05 and 13-02-05-06, an applicant may elect to publish joint federal and state notice of the application pursuant to the procedural requirements of federal law.

Before publication, the applicant shall submit the proposed notice of application to the commissioner for prior approval.

History

• General Authority: NDCC 6-01-04, 6-03-11
• Law Implemented: NDCC 6-03-11, 6-03-13.3 13-02-05-05.1. Joint federal and state publication.
• History: Effective January 1, 1999.
• General Authority: NDCC 6-01-04, 6-03-13.1

N.D. Admin. Code 13-02-05-06 Timely submission of written comments - Written request for a hearing - Board's authority to hold hearing

Within fifteen days of the final notice provided pursuant to section 13-02-05-05, any bank or person may submit to the board written comments concerning the application or a written request for an opportunity to be heard before the board, or both. In the absence of a request, the board may, when it believes it to be in the public interest, order a hearing to be held.

N.D. Admin. Code 13-02-05-07 Setting of date, time, and place for hearing

If a written request for an opportunity to be heard before the board is submitted to the board or if the board, on its own initiative, orders that a hearing be held, the board shall set a date, time, and place for the hearing.

N.D. Admin. Code 13-02-05-08 Procedure to afford notice of hearing

If a hearing on the application is to be held, the board must issue a notice of hearing and specification of issues to any bank or person which requested in writing that a hearing be held and to any bank or person which has submitted written comments concerning the application. The board must also publish the notice of hearing and specification of issues one time in a newspaper of general circulation in the community where the facility is to be located.

N.D. Admin. Code 13-02-05-09 Applicant to furnish court reporter and transcript

The applicant shall arrange to have a court reporter or stenographer present at any hearing on an application to establish a separate facility unless approval is provided by the board to arrange for the use of an electronic recording device as a substitute for having a court reporter or stenographer present. Upon request, the applicant shall furnish each member of the board a transcript of the evidence taken before the board.

N.D. Admin. Code 13-02-05-10 Board to issue findings of fact, conclusions of law, and decision

Within thirty days after the evidence has been received, briefs filed, and arguments closed, or as soon thereafter as possible, the board shall make its findings of fact, conclusions of law, and decision.

N.D. Admin. Code 13-02-05-11 Procedure on application if no hearing

If no request for a hearing upon an application to establish a separate facility is submitted to the board within the time period specified in section 13-02-05-06, and the board has not, on its own initiative, ordered that a hearing be held, the board shall approve or deny the application by order upon consideration and motion at a regular or special meeting of the board.

Chapter 13-02-06 Establishment of Customer Electronic Funds Transfer Centers

N.D. Admin. Code 13-02-06-01 Authorization of electronic funds transfer centers

The commissioner shall authorize the establishment of customer electronic funds transfer centers by state-chartered banks. 13-02-06-01.1. Notification.

Upon notification to the commissioner, a bank may establish a customer electronic funds transfer center that dispenses cash, items of cash value, transfers between accounts, or allows customer account inquiry.

History

• History: Effective August 1, 1995.

N.D. Admin. Code 13-02-06-02 Criteria for approval

The criteria for approval of customer electronic funds transfer centers shall be whether or not the establishment of such centers would impair the applicant bank's capital structure. There will be no population or distance criteria applied to such centers.

N.D. Admin. Code 13-02-06-03 Operations, transactions, verification, and insurance

A bank may receive and act upon communications from its customers transmitted through customer electronic funds transfer centers requesting the withdrawal of funds either from the customer's deposit account or from a previously authorized line of credit, or instructing the bank to receive funds to the credit of the customer's accounts or to transfer funds for the customer's benefit.

The customer electronic funds transfer center may be established by the bank and operated by the customer or by a third party. In accordance with the customer's request or instruction and subject to verification by the bank, cash or checks may be received and cash may be dispensed at the location of the customer electronic funds transfer center. A customer electronic funds transfer center may be manned or unmanned. A manned customer electronic funds transfer center may not be staffed by a bank employee, except that the bank for a reasonable period of time, not to exceed thirty days initially, and not more than three additional days per month thereafter when necessitated by the employment of new personnel at the customer electronic funds transfer center, may provide an employee to instruct and assist in the operation of the customer electronic funds transfer center. Any transactions initiated at such customer electronic funds transfer center shall be subject to verification by the bank either by direct wire transmission or otherwise. A bank shall provide insurance protection under its bonding program for transactions involving such customer electronic funds transfer center.

N.D. Admin. Code 13-02-06-04 Application for electronic funds transfer center to commissioner required - Contents of application

A customer electronic funds transfer center that accepts deposits may not be established, used, or shared by a bank until thirty days after the bank has sent to the commissioner written application for the proposed establishment or use of such center. The application shall describe with regard to such center:

1.The location.

2.A general description of the area where located, e.g., shopping center, supermarket, department store, etc., and the manner of installation at that location.

3.The manner of operation, including whether the center is on direct line, or indirect by other procedures, and describing such procedures.

4.The kinds of transactions that will be performed.

5.Whether the center will be manned, and if so, by whose employee.

6.The manufacturer of the equipment to be used and, if owned, the purchase price or, if leased, the lease terms and payments and the name of the lessor.

7.Consumer protection procedures, including the disclosure of rights and liabilities of consumers and protection against wrongful or accidental disclosure of confidential information.

8.The distance from the nearest banking house, paying and receiving station, or facility, and from the nearest similar center of the applicant bank.

9.The distance from the nearest banking house, paying and receiving station, or facility, and the nearest similar center of another bank, and the name of such other bank or banks within the city or town in which the center is to be established.

10.Insurance and the security provisions protecting the center and its users.

History

• History: Amended effective October 1, 1991; August 1, 1995.

N.D. Admin. Code 13-02-06-05 Certified copy of directors' resolution required - Evidence of no impairment of capital required

In addition to the information required by section 13-02-06-04, the application shall be accompanied by a certified copy of the resolution by the bank's board of directors authorizing establishment of the proposed customer electronic funds transfer center and evidence showing that such establishment will not impair the bank's capital.

History

• Law Implemented: NDCC 6-03-03(8)

N.D. Admin. Code 13-02-06-06 Approval by commissioner required - Investigation

Before establishing a customer electronic funds transfer center that accepts deposits, the establishing bank must receive the approval of the commissioner. The commissioner's investigation upon an application to establish a customer electronic funds transfer center shall include a review of the applicant bank's capital structure.

History

• History: Amended effective October 1, 1991; August 1, 1995.

N.D. Admin. Code 13-02-06-07 Notice of change in operations

Written notice must be given to the commissioner and to all sharing banks thirty days before changing any of the operations described in an application previously submitted pursuant to section 13-02-06-04.

N.D. Admin. Code 13-02-06-08 Joint application - Reporting procedures

A corporation organized by banks or contracting with banks or one or more banks sharing one or more centers may make a joint application to the commissioner, provided that the application includes the information listed in sections 13-02-06-04 and 13-02-06-05. The commissioner reserves the right to adopt different reporting procedures as warranted by the circumstances of a particular network of centers.

N.D. Admin. Code 13-02-06-09 When no notice required

No notice need be given for any center, device, or machine which:

1.Is used solely to verify a customer's credit for purposes of check cashing; or

2.Is a part of a bank's authorized main banking house, paying and receiving station, or facility approved by the state banking board.

N.D. Admin. Code 13-02-06-10 Limitation of services to existing accounts

Electronic funds transfer services at a customer electronic funds transfer center may be provided only to existing customers of the establishing or sharing bank or banks. No new accounts may be established or solicited at such customer electronic funds transfer center.

N.D. Admin. Code 13-02-06-11 Advertising limitation

No establishing or sharing bank may advertise a shared customer electronic funds transfer center in such a manner as to make it appear that the advertising bank is the only bank offering electronic funds transfer service at the advertised customer electronic funds transfer center.

N.D. Admin. Code 13-02-06-12 Applicant bank to give notice of intent to apply

In order to facilitate sharing of customer electronic funds transfer centers, any bank intending to apply for authorization to establish such a center must, at least thirty days prior to establishing such center, give written notice of such intention to all banks in this state within a fifty-mile [80.47-kilometer] radius of the proposed center.

N.D. Admin. Code 13-02-06-13 Pro rata cost sharing criteria and requirements

In order to further facilitate sharing of customer electronic funds transfer centers, the following requirements and criteria shall apply:

1.The establishing bank shall file a report with the commissioner of all costs of establishing the center and the projected costs of operation.

2.The establishing bank shall be prohibited from requiring that other participating banks maintain an account with the establishing bank in order to share the customer electronic funds transfer center.

3.Any bank may apply to join an existing customer electronic funds transfer center at anytime upon compliance with the provisions of this chapter.

4.The pro rata costs of the initial installation and the first year of operation of a customer electronic funds transfer center shall be determined by the respective sizes of the participating banks, based upon deposits at the end of the prior fiscal year. The pro rata costs for subsequent years shall be determined by the relative number of transactions handled for each bank sharing the center.

Chapter 13-02-07 Branch Offices - State-Chartered Savings and Loan Associations

N.D. Admin. Code 13-02-07-01 Approval by banking board required

State-chartered savings and loan associations doing business within the state of North Dakota shall not establish or operate any branch office without first securing the approval of the state banking board as provided under this chapter. 13-02-07-01.1. Limitations.

State-chartered savings and loan associations are authorized to establish a branch within the same county, or any adjoining county in any city organized under the laws of this state, not having an established banking institution.

History

• History: Effective May 1, 1993.

N.D. Admin. Code 13-02-07-02 Application - When approved

An order authorizing establishment of a branch office shall be issued by the state banking board if it finds that the applicant has met the requirements of this chapter.

N.D. Admin. Code 13-02-07-03 Application - Hearing - Notice

A savings and loan association desiring to establish a new branch office within the state shall make written application to the state banking board. The commissioner will thereupon set a date for public hearing not later than ninety days from the date of filing. Notice of hearing on an application for a savings and loan branch will be issued as specified in subsection 8 of section 13-01.1-04-01.

History

• History: Amended effective June 1, 1979; January 1, 1980.

N.D. Admin. Code 13-02-07-04 Contents of application - Supporting information andissues

The application and supporting information shall show:

1.That at the time the office will be open there will be necessity for the proposed branch in a community to be served.

2.That the proposed office is adapted to the filling of such need.

N.D. Admin. Code 13-02-07-05 Written statement furnished to protestants

Each protestant making timely filing with the board shall be mailed, or otherwise furnished, a written statement of the issues to be determined as stated in section 13-02-07-04.

N.D. Admin. Code 13-02-07-06 Hearing procedure

Hearing upon the application and any protests, and appeal from any determination made, shall be had in accord with the provisions of North Dakota Century Code chapter 28-32.

History

• History: Amended effective May 1, 1993.

Chapter 13-02-08 Loans to Executive Officers and Closely Held Interests [Repealed]

N.D. Admin. Code 13-02-08 Loans to Executive Officers and Closely Held Interests [Repealed]

CHAPTER 13-02-08

LOANS TO EXECUTIVE OFFICERS AND CLOSELY HELD INTERESTS [Repealed effective August 1, 1995]

Chapter 13-02-09 Loan Limitation to One Borrower or Concern

N.D. Admin. Code 13-02-09-01 Purpose

This chapter is intended to safeguard the depositors of state banking associations by requiring the diversification of loan portfolios and repayment sources.

History

• History: Effective September 1, 1986.

N.D. Admin. Code 13-02-09-02 Definitions

In determining the total direct, indirect, or contingent liability of a borrower for purposes of North Dakota Century Code section 6-03-59, the following definitions apply:

1."Contingent liability" includes a potential economic obligation of an enterprise if:

a.It is probable that a liability will be incurred; and

b.The amount of the liability can be reasonably estimated.

2."Corporation" means any entity organized and incorporated under law, including a limited liability company.

3."Direct liability" means all obligations of an enterprise for which it has primary responsibility for repayment.

4."Indirect liability" includes a potential economic obligation of an enterprise if:

a.It is probable that a liability will be incurred; and

b.The amount of the liability can be reasonably estimated.

5."Limited partnership" means a partnership formed by two or more persons having one or more general partners and one or more limited partners, and includes a limited liability partnership.

6."Parent corporation" means a corporation which owns or controls one or more subsidiaries.

7."Probable" means that a future event or events that would cause a contingency to become a liability are likely to occur.

8."Subsidiary" means a corporation which is owned or controlled by a parent corporation.

N.D. Admin. Code 13-02-09-03 Liabilities of a borrower

1.Standby letters of credit must be included in determining the total direct, indirect, or contingent liability of a borrower who is a beneficiary of the standby letter of credit.

2.The obligations of a general partnership must be included in determining the total direct, indirect, or contingent liability of each general partner of the partnership.

3.The obligations of a limited partnership must be included, to the extent of each limited partner's share of ownership of the limited partnership, in determining the total direct, indirect, or contingent liability of each limited partner of the limited partnership, if one of the conditions of subsection 4 of section 13-02-09-04 exists. The entire obligation of a limited partnership must be included in determining the total direct, indirect, or contingent liability of the general partner of a limited partnership.

4.An extension of credit to a borrower which is participated in by the banking association to a third party with recourse must be included in determining the total direct, indirect, or contingent liability of that borrower.

5.If an extension of credit is secured by a pledged certificate of deposit drawn on the lending bank and payable to the borrower, the face value of the certificate of deposit or the borrower's obligation secured by the certificate of deposit, whichever is less, may not be considered in determining the total liability of a borrower.

6.If an extension of credit which is transferred by the banking association to a third party without recourse fails to comply with applicable call report instructions to be treated as a sale, the extension of credit must be considered in determining the total direct, indirect, or contingent liability of that borrower. Transfers that do not meet the conditions for sale treatment must be accounted for according to prevailing call report instructions.

N.D. Admin. Code 13-02-09-04 Loans to corporations and principals

1.Obligations of a parent corporation must be combined with obligations of subsidiary corporations in which the parent owns or controls a twenty-five percent or more interest, if one of the conditions in subsection 4 exists.

2.Obligations of subsidiary corporations must be combined, if one of the conditions in subsection 4 exists.

3.Except as provided in subsection 5, obligations of an individual who owns or controls a twenty-five percent or more interest in a corporation must be combined with the obligations of said corporation, if one of the conditions in subsection 4 exists.

4.Combining under this section is required if:

a.The primary source of repayment for the obligation is the profits or cash flow of the same individual, parent corporation, or other subsidiary.

b.One or more loans is for the accommodation of the individual, parent corporation, or other subsidiary.

c.The borrowing corporations are not separate concerns, in reality, but merely departments or divisions of a single enterprise.

5.If an extension of credit would otherwise be required to be combined under subsection 3, and the extension of credit is secured by a purchase money security interest for an individual borrower's personal use, or is secured by a first lien on the residence of, and the residence is owned by or is expected to be owned by (after the extension of credit) the borrower, the extension of credit may not be combined.

History

• History: Effective September 1, 1986.

N.D. Admin. Code 13-02-09-05 Loans to members of a partnership or association

Where persons are engaged in a common enterprise, whether in the form of a partnership, joint venture, or other association, and individually borrowed funds are to be used in that enterprise, the loans must be considered as a single extension of credit, unless the bank has established that the enterprise is not the source of repayment.

Chapter 13-02-10 Authorizations

N.D. Admin. Code 13-02-10-01 Investment in securities

The state banking board authorizes state banks to invest in investment securities or instruments in accordance with investment authorizations issued for national banks by the comptroller of the currency, subject to the same limitations or restrictions, if any.

History

• History: Effective February 1, 1988; amended effective October 1, 1991.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-03-38, 6-03-47.3

N.D. Admin. Code 13-02-10-02 Effective date of authority to invest

The authority for state banks to invest in investment securities or instruments must be the date the investments are effective for national banks unless the state banking board shall otherwise direct within ninety days of the state banking board receiving notification of proposed adjustments.

History

• History: Effective February 1, 1988; amended effective October 1, 1991.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-03-38, 6-03-47.3

Chapter 13-02-11 Minimum Guidelines for Report of Examining Committee

N.D. Admin. Code 13-02-11-01 Purpose

This chapter is intended to establish minimum guidelines for the report of examining committee or examination by the board of directors, annual independent certified public accountant audit, or auditors of the bank holding company, or examination by internal audit control system for report of examining committee pursuant to section 6-03-69. While the guidelines set forth in this chapter are deemed to be minimum procedures, additional procedures may be deemed prudent as determined to meet the individual needs of the bank by its directors. This chapter is further intended to safeguard the depositors of state banking associations by the establishment of procedures and provide accurate evaluations of the assets and liabilities of the bank.

History

• History: Effective April 1, 1989.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-03-69

N.D. Admin. Code 13-02-11-02 Report of examining committee

Examinations conducted by the board of directors, its examining committee, or auditors of the bank holding company, or examination by an internal audit control system for its annual report, may include the following minimum procedures to comply with the report requirement of section 6-03-69. An independent certified public accountant or accounting firm retained by the bank to perform the annual report of examining committee examination requirement, may review bank internal procedures or controls covering the following minimum procedures. In the absence of any internal procedures or controls, the determination or review of the following minimum procedures may be performed by the board of directors or its examining committee, auditors of the bank holding company, or internal audit control system:

1.Bank operations and asset accounts:

a.Determine if bank reconciliations of all general ledger accounts are performed on a timely

basis and are accurate for all major accounts.

b.Determine if the bank has written policies and procedures that are periodically reviewed and are being followed concerning major areas of bank operations. Also determine if internal controls are adequate and are being following.

c.Balance nonledger assets and review files.

d.Determine if other real estate owned (OREO) was written to its value at the time title of property was taken, and is currently carried at an amount not in excess of the value of the property. Review all transactions to ensure they are proper.

2.Loans, leases and discounts, and allowance for loan and lease losses:

a.Determine if the bank has written policies that are being reviewed and approved at least annually and are being adhered to.

b.Determine that an internal "watch list" is accurate and loans that are not "bankable" are eliminated by charge-off in a timely manner. In the absence of an internal "watch list", review and determine the value of collateral and other credit information existing to support the carrying amount of the loan.

c.Review the portfolio to ensure that applicable rules and regulations are being adhered to, inclusive of loans to directors, officers, and other insiders.

d.Determine if the allowance for loan and lease losses is reviewed by management or the board of directors, or both, at least quarterly to coincide with the call reporting requirements and accurately reflects the risk in the loan portfolio.

3.Security investments and trading accounts:

a.Determine that investment policies are adequate for the needs of the bank and are being adhered to.

b.Review the portfolio to ensure that all applicable rules and regulations are being adhered to.

c.Determine if any investments exist that are carried in excess of the net value.

4.Liquidity capital accounts and income and expenses:

a.Review all capital account entries to determine appropriateness and compliance with rules and regulations, if applicable.

b.Review income and expense items to ensure they are appropriate and properly recorded.

5.Trust department (if applicable): review internal controls and procedures to determine that such controls and procedures are in place and are being adhered to.

6.Bank subsidiaries (if applicable): determine that the value of the subsidiary supports the value that the bank is carrying as its investment in the subsidiary.

History

• History: Effective April 1, 1989.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-03-69

Chapter 13-02-12 Interstate Banking

N.D. Admin. Code 13-02-12-01 Scope

To establish requirements for a reciprocating state bank holding company making an application to acquire or organize a North Dakota state or national bank and demonstrating how they will meet the credit needs for business expansion of the local community or trade area in which the bank and any facilities, stations, or banking houses are located.

History

• Law Implemented: NDCC 6-08.3

N.D. Admin. Code 13-02-12-02 Definitions

1."Family farm" means agricultural real estate operated and owned or leased by a farmer, or other organization authorized to own or lease land used for farming or ranching under North Dakota Century Code chapter 10-06, where the majority of the labor necessary to operate the farm is performed by the farmer and the farmer's family, if any.

2."Farmer" means a resident of North Dakota whose principal occupation is or will be the production of an agricultural commodity or livestock on a family farm if granted a loan.

3."Investments in community development" means equity and debt instruments of corporations or projects designed primarily to promote community welfare such as economic rehabilitation and development of low income areas.

4."Low and moderate income housing" means housing defined under section 8 of the United States Housing Act of 1937, and the regulations adopted under the Act.

5."Student education loans" means those loans made to individuals under federal or state guidelines and direct loans for the purposes of financing education.

History

• Law Implemented: NDCC 6-08.3

N.D. Admin. Code 13-02-12-03 Developmental loans

Developmental loans include loans or investments made to residents of North Dakota in the Bank's trade area for the following purposes:

1.Operating loans for farmers and family farms;

2.Loans made to create or expand farm and nonfarm businesses;

3.Loans guaranteed by the small business administration or farmers home administration;

4.Investments in community development corporations or projects;

5.Low or moderate income housing loans;

6.Student education loans;

7.Loans made in distressed areas;

8.Loans made under the Bank of North Dakota's agricultural loan programs, including family farm loans, farm operating loans, conservation reserve program enhancement loans, and the rural rehabilitation corporation loan fund; and

9.Loans made under the Bank of North Dakota's commercial loan programs, including business development loans, small business concern loans, microbusiness loans, tourism and recreation investment program, oil and gas development loans, match loans, partnership in assisting community expansion loans, and agriculture partnership in assisting community expansion loans.

The board may designate distressed areas. The determination of a distressed area will be made on the area's unemployment rate, economic conditions, and credit needs.

History

• Law Implemented: NDCC 6-08.3-02

N.D. Admin. Code 13-02-12-04 Application

The application by the reciprocating bank holding company must contain a statement demonstrating a commitment to meet credit needs of the existing or proposed trade area. The applicant's statement must include a commitment for a level of developmental loans by number and amount, and a commitment to provide annual reports of developmental loans. Failure to set forth a plan to establish a percentage of developmental loans to total loans at a level no less than the percentage of developmental loans to total loans of the applicant's consolidated statement with all of its banking subsidiaries may constitute grounds for disapproval under subsection 5 of North Dakota Century Code

section 6-08.3-03. The description of developmental loans must be filed on an annual basis together with the description of net new funds.

History

• Law Implemented: NDCC 6-08.3-02

N.D. Admin. Code 13-02-12-05 Application content

N.D. Admin. Code 13-02-12-06 Confidential material

N.D. Admin. Code 13-02-12-07 Notice and publication

N.D. Admin. Code 13-02-12-08 Divestiture

Failure to maintain the required level and percentage of developmental loans may constitute grounds for divestiture or cease and desist proceedings under North Dakota Century Code section 6-08.3-07.

History

• Law Implemented: NDCC 6-08.3-07

N.D. Admin. Code 13-02-12-09 Undue concentration of resources or substantial lessening of competition

Chapter 13-02-13 Mergers

N.D. Admin. Code 13-02-13-01 Consolidation or merger

Any two or more banking institutions may consolidate or merge upon making application and subject to approval by the state banking board. An application to consolidate or merge is not required when a state-chartered banking institution is not the survivor. A banking institution proposing to purchase assets and assume the liabilities of another banking institution must be considered a consolidation or merger and subject to an application under this chapter.

N.D. Admin. Code 13-02-13-02 Application

An original and ten copies of the application to consolidate or merge must be filed with the board. In lieu of an original application, the state banking board will accept a copy of the application submitted to the federal deposit insurance corporation. An application must contain the following.

1.Plan of reorganization or merger;

2.Copy of notice of shareholder meeting to ratify merger or consolidation;

3.Copy of shareholders' minutes showing ratification of merger by the shareholders who own at least two-thirds of the outstanding capital stock;

4.Pro forma balance sheet of the resultant bank;

5.Any proposed changes of executive officers;

6.Description of any proposed changes to the bank's business plan, hours of operation, fees, terms for deposit and loan accounts, board of directors; and

7.Any other information determined by the commissioner or board to be necessary.

The board or commissioner may return an application whenever it is determined that the application fails to address in a prima facie manner the requirements of North Dakota Century Code section 6-03-11 and 6-03-14.1 or this section. When an application is so returned by the board or commissioner, it does not constitute a filing of an application.

N.D. Admin. Code 13-02-13-03 Publication

Upon filing a completed application, the secretary of the board shall cause to be published notice of application for two successive weeks in the official newspaper of the county where the proposed consolidated or merged banking institutions are located including the locations of any paying and receiving stations, or banking houses or offices. The notice of application must also be sent by certified mail by the secretary of the board to all banks located within the trade area of the banking institutions proposed to be consolidated or merged. Within ten days of the final notice provided under this section, any bank or party may submit to the board written comments concerning the application or a written request for an opportunity to be heard before the board, or both. In the case where a failing banking institution is to be consolidated or merged, the board or commissioner may waive the notice of application requirements. 13-02-13-03.1. Joint federal and state publication.

Notwithstanding section 13-02-13-03, an applicant may elect to publish joint federal and state notice of the application pursuant to the procedural requirements of federal law. Before publication, the applicant shall submit the proposed notice of application to the commissioner for prior approval.

History

• History: Effective January 1, 1999.

N.D. Admin. Code 13-02-13-04 Criteria for state banking board consideration for approval

When deciding whether to approve an application to consolidate or merge, the board shall examine and consider all relevant factors including:

1.Whether proper notification has been given to all shareholders;

2.Whether at least two-thirds of the shareholders have ratified the plan of reorganization or merger;

3.Whether the resultant bank has adequate capital;

4.Whether the needs of the community to be served will still be met; and

5.The adequacy and competence of management.

When a hearing has not been conducted and the board denies the application to consolidate or merge, the applicant may, within fifteen days after receipt of disapproval, petition the board for a hearing.

Unless the board determines that the application to consolidate or merge is frivolous or incomplete, the petition for hearing must be granted. After the hearing is conducted, the board shall issue an order to approve or disapprove the application on the basis of the record made at the hearing.

N.D. Admin. Code 13-02-13-05 Hearing

A public hearing by the board may be required on applications to merge or consolidate whenever the board or commissioner determines that it is in the public interest to hold such a hearing or whenever a bank or party's request for an opportunity to be heard is granted. Notice of hearing on an application will, if required, be issued at least thirty days prior to the hearing on the application. The notice of hearing must be published by the secretary of the board for two successive weeks in the official newspaper of the county where the proposed consolidated or merged banking institutions are located, including the locations of any paying and receiving stations, or banking houses or offices. The notice of hearing must also be sent by certified mail by the secretary of the board to all banks located within the trade area of the banking institutions proposed to be consolidated or merged.

Chapter 13-02-14 Life Insurance

N.D. Admin. Code 13-02-14-01 Definitions

"Key person" means the chairman of the board, the president, each vice president, the cashier, the secretary, the treasurer, or any other employee or director of a bank or bank holding company whose absence for an extended period of time would result in a significant loss of net income for the bank, unless such key person is excluded, by resolution of the board of directors or by the bylaws of the bank or bank holding company, from participation, other than in the capacity of a director, in policymaking functions of the bank or bank holding company, and the key person does not actually participate in policymaking functions of the bank or bank holding company.

N.D. Admin. Code 13-02-14-02 Authority to purchase life insurance

Banks may purchase and hold an interest in individual or group life insurance policies on the life of its key persons, directors, and borrowers, and may purchase life insurance in connection with compensation and benefit plans for its officers, directors, and employees, subject to the limitations in this chapter. The bank is not authorized to purchase policies if the board's basis for its insurable interest is primarily based upon the employee or director being a shareholder of the bank or bank holding company. Funding for the payment of compensation and benefit plans may be made or split in a joint manner between the bank, employee, director, or bank holding company as in "split dollar" or other insurance plans.

N.D. Admin. Code 13-02-14-03 Limitations

1.A bank is not authorized to purchase life insurance policies for the bank's own account as an investment.

2.Except as provided in subsections 3 and 4, the bank's purchase of life insurance policies underwritten by one company cannot exceed fifteen percent of the bank's tier 1 capital.

3.The bank's purchase of any life insurance policy underwritten by one company for key person purposes cannot exceed twenty-five percent of the bank's capital stock and surplus as measured by the policy's cash surrender value.

4.The bank's purchase of any life insurance policy underwritten by one company on a director cannot exceed ten percent of the bank's capital stock and surplus as measured by the policy's cash surrender value.

5.The bank's purchase of life insurance policies from all carriers in the aggregate cannot exceed twenty-five percent of the bank's tier 1 capital. This limit shall apply to the initial purchase of life insurance policies as measured by the amount of premium and to subsequent purchases as measured by the sum of the cash surrender value of earlier purchases plus the amount of premium committed toward subsequent purchases.

6.The bank is not authorized to purchase life insurance policies for the primary purpose of providing estate planning benefits for bank insiders unless it is part of a reasonable compensation package.

7.The bank's authority to hold life insurance on any key person ceases when the key person is no longer employed by the bank, or no longer meets the definition of key person.

8.The bank's authority to hold life insurance on a director ceases when that director is no longer a member of the board of directors and there is no liability or obligation under director compensation and benefit plans.

9.The bank's authority to purchase life insurance on borrowers is subject to the following:

a.The face value of the life insurance policy cannot exceed the borrower's obligation to the bank.

b.The bank has not charged off nor is expected to charge off the borrower's obligation.

10.In purchasing life insurance in connection with employee compensation and benefit plans, the bank may retain the policies after the insured's employment is terminated, provided the bank has continuing liabilities or obligations under such plans.

N.D. Admin. Code 13-02-14-04 Financial information

Prior to purchasing a policy, the board of directors shall evaluate the financial condition and rating, if any, of the insurance company by acquiring adequate and current financial information. The board shall, on at least an annual basis, continue to evaluate the company's financial condition and rating.

History

• History: Effective April 1, 1992.

N.D. Admin. Code 13-02-14-05 Documentation

1.In purchasing life insurance for key person purposes, the bank's board of directors must adequately document in its minutes the basis for its insurable interest and the basis for the amount of insurance. The bank's board of directors must also document in its minutes the

basis for determining how that employee or director meets the definition of a key person.

2.In purchasing life insurance in connection with compensation and benefit plans for employees, officers, and directors, the bank's board of directors must approve and document such plans or programs including the reasonableness of the plans or programs.

N.D. Admin. Code 13-02-14-06 Waiver

The state banking board or commissioner may waive any limitation or restriction in this chapter.

History

• Law Implemented: NDCC 6-03-02, 6-03-38

Chapter 13-02-15 Loan Production Offices

N.D. Admin. Code 13-02-15-01 Definitions

1."Bank funds" means cash or any check whereby the drawer and drawee are the lending bank, including a cashier's check.

2."Core banking activity" includes receiving deposits, paying checks, or lending money.

3."Loan production office" means an office which is apart from the main bank, facility, or interstate branch, where loans are solicited but money is not lent.

4."Money" is "lent" only when the borrower receives loan proceeds in person directly from bank funds either:

a.At the lending bank or its operating subsidiary; or

b.At a facility established by the lending bank or its operating subsidiary.

5."Receipt of bank funds representing loan proceeds" does not include delivery of bank funds directly by a third party provided it does not occur at a place established by the bank or its operating subsidiary.

6."Third party" is a person who customarily delivers loan proceeds directly from bank funds under accepted industry practice such as an attorney or escrow agent at a real estate closing.

N.D. Admin. Code 13-02-15-02 Authorization of loan production offices

The commissioner may authorize the establishment of intrastate and interstate loan production offices by North Dakota state-chartered banks. In determining whether to approve the application for a loan production office, the commissioner shall take into consideration the following:

1.Whether the applicant bank is at least adequately capitalized per the most recently filed report of condition and income;

2.The volume of loans that applicant anticipates generating;

3.The information provided pursuant to section 13-02-15-04; and

4.Any other information the commissioner deems appropriate.

If an application for the establishment of a loan production office is denied by the commissioner, the applicant bank may appeal the decision of the commissioner to the state banking board.

N.D. Admin. Code 13-02-15-03 Limitation

Loan production offices may not be established when the establishment of such offices would impair the applicant bank's capital structure. There are no population or geographic restrictions applied to such offices in the state of North Dakota. This chapter does not prohibit the establishment of a loan production office in North Dakota by banks located in other states provided the other state allows a North Dakota state-chartered bank to establish a loan production office in the other state.

N.D. Admin. Code 13-02-15-04 Permissible activities

Loan production offices are limited to the following activities:

1.Soliciting loans on behalf of a bank.

2.Assembling credit information.

3.Conducting property inspections and appraisals.

4.Securing title information.

5.Preparing applications for loans, including making credit decisions provided money is not lent at the loan production office.

6.Any other activity which does not constitute a core banking activity as determined by the state banking board.

N.D. Admin. Code 13-02-15-05 Loan production office application

A loan production office may not be established, or operated, by a state-chartered bank until after the bank has submitted a written application to the commissioner or board and received a certificate of

authority to operate such office. The application must describe with regard to the loan production office the following:

1.The location.

2.A general description of the area where located, e.g., shopping center, supermarket, department store, etc.

3.The proposed activity for the location.

4.Whether the location will be staffed, and if so, the nature of employee compensation, whether an employee of the bank or a fee and commission basis.

5.Description as to the types of loans to be solicited.

6.Any other information the commissioner determines necessary.

History

• History: Effective May 1, 1993.

N.D. Admin. Code 13-02-15-06 Revocation of certificate of authority

The commissioner may revoke the certificate of authority for a loan production office where it has been determined a loan production office has engaged in any activity not specifically provided for in

section 13-02-15-04.

N.D. Admin. Code 13-02-15-07 Appeal

A bank whose certificate of authority has been revoked may appeal the commissioner's decision for consideration of the board if the appeal is filed within fifteen days after receipt of notice of certificate revocation. Consideration of the board must occur within sixty days after the date the appeal is filed.

History

• History: Effective May 1, 1993.

Chapter 13-02-16 Trust Powers

N.D. Admin. Code 13-02-16-01 Authorization

A banking association receiving approval by the board to exercise trust powers may exercise trust powers at its main banking house, banking house or office, paying and receiving stations, and drive-in and walkup facility locations. Only one application is required for a banking association. Trust powers granted by the board prior to the effective date of this chapter for the bank's separate banking house locations shall be considered to heretofore apply to all locations.

History

• Law Implemented: NDCC 6-03-02(13), 6-03-13.1, 6-03-17, 6-05-01

N.D. Admin. Code 13-02-16-02 Application

An original and ten copies of the application to exercise trust powers must be filed with the board.

In lieu of an original application, the board may accept a copy of the application submitted to the federal deposit insurance corporation or federal reserve system. The applicant must provide any additional information determined by the commissioner or board to be relevant.

History

• Law Implemented: NDCC 6-03-02(13), 6-05-01

N.D. Admin. Code 13-02-16-03 Criteria for approval

The applicant must demonstrate that the proposed trust committee and officers have experience commensurate with the trust powers being requested. Upon granting trust powers, the board may require the applicant to commit to a training program of trust schools and seminars acceptable to the board. The board may also direct the applicant to enter into a training agreement with another trust company or bank.

N.D. Admin. Code 13-02-16-04 Publication

Upon filing an application, the secretary of the board shall cause to be published notice of the application for two successive weeks in the official newspaper of the county of the main banking house, and all locations. The notice of application must also be sent by certified mail by the secretary of the board to all banks and trust companies located within the banking trade area association within ten days of final publication provided under this section. Any party must submit to the board written comments concerning the application, or a written request for an opportunity to be heard or both, no later than ten days after the date of final publication. 13-02-16-04.1. Joint federal and state publication.

Notwithstanding section 13-02-16-04, an applicant may elect to publish joint federal and state notice of the application pursuant to the procedural requirements of federal law. Before publication, the applicant shall submit the proposed notice of application to the commissioner for prior approval.

History

• History: Effective January 1, 1999.
• General Authority: NDCC 6-01-04, 6-03-02(12)

N.D. Admin. Code 13-02-16-05 Hearing

A public hearing by the board may be required on an application for trust powers whenever the board or commissioner determines that it is in the public interest to hold such a hearing or whenever an interested party's request for an opportunity to be heard is granted. Notice of hearing on an application must, if required, be issued at least forty-five days prior to the hearing on an application. The notice of hearing must be published by the secretary of the board for two successive weeks in the official newspaper of the county of the main banking house, banking houses or offices, drive-in and walkup facilities, or paying and receiving stations are located. The notice of hearing must also be sent by certified mail by the secretary of the board to all banks and trust companies located within the banking association's trade area.

Chapter 13-02-17 Sale or Purchase of Associations, Banking Institutions, or Holding Companies

N.D. Admin. Code 13-02-17-01 Publication

Upon filing a completed application the secretary of the board shall cause to be published notice of application in the official newspaper of the county where the association, banking institution, or holding company is principally located. The notice must specify the name of the association, banking institution, or holding company, and the number of shares to be sold or purchased, or in any manner transferred, and the number of total outstanding shares. The notice must also provide that written comments may be submitted to the board, and the application may be requested or reviewed in the office of the department. Any party must submit written comments concerning the application to the board no later than ten days after the date of publication. The notice may be included with any notice for a similar application submitted to the federal deposit insurance corporation or the federal reserve board.

History

• History: Effective June 1, 1994.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-08-08.1(2)

Chapter 13-02-18 Discontinuance of a Facility

N.D. Admin. Code 13-02-18-01 Publication

Upon filing a completed application, the bank shall cause to be published notice of application once a week for two successiveweeks in the official newspaper of the county where the facility is located.

The notice must invite comments be sent to the board. Any person must submit written comments concerning the application to the board no later than thirty days after the date of final publication. The notice may be included with any notice for a branch closing required by the federal deposit insurance corporation or the federal reserve board.

History

• History: Effective June 1, 1994; amended effective August 1, 1996.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-03-13.1

Chapter 13-02-19 Trust Companies

N.D. Admin. Code 13-02-19-01 Application

An original and ten copies of the application to organize a trust company must be filed with the board. In lieu of an original application, the board will accept a copy of the application submitted to the federal deposit insurance corporation. The application must clearly indicate the types of trust services to be performed. The application must specify the location as to where the trust company is proposed to be located. The applicant must provide any additional information determined by the commissioner or board to be necessary.

N.D. Admin. Code 13-02-19-02 Criteria for approval

The applicant must demonstrate that the proposed trust committee and officers have experience commensurate with the trust powers being requested. Upon granting trust powers, the board may require the applicant to commit to a training program of trust schools and seminars acceptable to the board. The board may also direct the applicant to enter into a training agreement with another trust company or bank.

N.D. Admin. Code 13-02-19-03 Equity capital

The minimum equity capital for organization of a trust company is five hundred thousand dollars.

The board may require additional equity capital whenever the proposed location of the trust company, the amount of fiduciary assets projected for the trust company, the amount of direct investments by the trust company, or other relevant financial projections so indicate. The minimum equity capital level set by the board will be such as necessary to ensure that the applicant is adapted to the filling of the need to establish trust services.

N.D. Admin. Code 13-02-19-04 Publication and hearing

A notice of hearing on an application must be issued at least forty-five days prior to the hearing on an application. The notice of hearing must be published by the secretary of the board for two successive weeks in the official newspaper of the county where the proposed trust company is to be located. The notice of hearing must also be sent by certified mail by the secretary of the board to all banks and trust companies located within the trade area of the trust company.

Chapter 13-02-20 Loans Secured Primarily by Real Estate

N.D. Admin. Code 13-02-20-01 Scope

This chapter applies to loans that are dependent primarily upon real estate security.

N.D. Admin. Code 13-02-20-02 Definitions

1."Construction loan" means an extension of credit for the purpose of erecting or rehabilitating buildings or other structures, including any infrastructure necessary for development.

2."Extension of credit" or "loan" means the total amount of any loan, line of credit, or other legally binding lending commitment with respect to real property; and the total amount, based on the amount of consideration paid, of any loan, line of credit, or other legally binding lending commitment acquired by a lender by purchase, assignment, or otherwise.

3."Improved property loan" means an extension of credit secured by one of the following types of real property:

a.Farmland, ranchland, or timberland committed to ongoing management and agricultural production;

b.One-to-four family residential property that is not owner-occupied;

c.Residential property containing five or more individual dwelling units;

d.Completed commercial property; or

e.Other income-producing property that has been completed and is available for occupancy and use, except income-producing owner-occupied one-to-four family residential property.

4."Land development loan" means an extension of credit for the purpose of improving unimproved real property prior to the erection of structures. The improvement of unimproved real property may include laying placement of sewers, water pipes, utility cables, streets, and other infrastructure necessary for future development.

5."Loan origination" means the time of inception of the obligation to extend credit, or when the last event or prerequisite, controllable by the lender, occurs causing the lender to become legally bound to fund an extension of credit.

6."Loan-to-value" or "loan-to-value ratio" means the percentage or ratio that is derived at the time of loan origination by dividing an extension of credit by the total value of the property or properties, securing or being improved by the extension of credit, plus the amount of any readily marketable collateral or other acceptable collateral that secures the extension of credit.

The total amount of all senior liens on or interests in such property or properties should be included in determining the loan-to-value ratio. When mortgage insurance or collateral is used in the calculation of the loan-to-value ratio, and such mortgage insurance or collateral is later released or replaced, the loan-to-value ratio should be recalculated.

7."One-to-four family residential property" means property containing fewer than five individual dwelling units, including manufactured homes permanently affixed to the underlying property.

8."Other acceptable collateral" means any collateral in which the lender has a perfected security interest, that has a quantifiable value, and is accepted by the letter in accordance with safe and sound lending practices. Other acceptable collateral should be appropriately discounted by the lender consistent with the lender's usual practices for making loans secured by such collateral. Other acceptable collateral includes unconditional irrevocable standby letters of credit for the benefit of the lender.

9."Owner-occupied" means, when used in conjunction with the term one-to-four family residential property, that the owner of the underlying real property occupies at least one unit of the real property as a principal residence of the owner.

10."Readily marketable collateral" means insured deposits, financial instruments, and bullion in which the lender has a perfected interest. Financial instruments and bullion must be saleable under ordinary circumstances with reasonable promptness at a fair market value determined by quotations based on actual transactions, on an auction or similarly available daily bid and ask price market. Readily marketable collateral should be appropriately discounted by the lender consistent with the lender's usual practices for making loans secured by such collateral.

11."Value" means an opinion or estimate, set forth in an appraisal or evaluation, whichever may be appropriate, of the market value of real property prepared in accordance with North Dakota Century Code section 6-03-05. For loans to purchase an existing property, the term "value" means the lesser of the actual acquisition cost or the estimate of value.

N.D. Admin. Code 13-02-20-03 Loan-to-value limitations

Except as provided in this section and section 13-02-20-04:

1.Loans secured by raw land may not exceed a sixty-five percent loan-to-value ratio.

2.Loans made for land development may not exceed a seventy-five percent loan-to-value ratio.

3.Construction loans for commercial, multifamily, condominiums, cooperatives, and other nonresidential property may not exceed an eighty percent loan-to-value ratio.

4.Construction loans for one-to-four family residential real property may not exceed an eighty-five percent loan-to-value ratio.

5.Improved property loans may not exceed an eighty-five percent loan-to-value ratio.

6.Owner-occupied one-to-four family and home equity loans may not exceed a ninety percent loan-to-value ratio. However, such loans may exceed the ninety percent loan-to-value limit provided the amount above this limitation is government guaranteed, or has an appropriate credit enhancement in the form of either mortgage insurance or readily marketable collateral.

N.D. Admin. Code 13-02-20-04 Excluded transactions

The loan-to-value ratios established in this chapter do not apply to loans that are insured or guaranteed, or where there is a commitment to insure or guarantee, in part or in full, or conditionally, by the United States, its instrumentalities, this state, or its instrumentalities.

N.D. Admin. Code 13-02-20-05 Exceptions

Exceptions may be made for the consideration of loan requests from credit worthy borrowers.

However, any exceptions from the loan-to-value limits should not exceed, when aggregated with all other loans in excess of the loan-to-value limits, one hundred percent of total equity capital and reserves.

Chapter 13-02-21 Disclosure of Customer Information by Financial Institutions

N.D. Admin. Code 13-02-21-01 Definitions

As used in this chapter, the terms "customer", "customer information", and "financial institution" have the same meaning as is given to them in North Dakota Century Code section 6-08.1-01.

N.D. Admin. Code 13-02-21-02 Authorization

A financial institution that has not received a customer's express consent or opt-in election may disclose customer information to a third party only as provided by subsections 1 through 11 of North Dakota Century Code section 6-08.1-02, North Dakota Century Code section 6-08.1-03, and as follows:

1.To effect, administer, or enforce a transaction requested or authorized by the customer or in connection with servicing or processing a financial product or service requested or authorized by the customer;

2.To maintain or service the customer's account with the financial institution or with another entity as part of a private label credit card program or other extension of credit on behalf of such entity;

3.In connection with a proposed or actual securitization, secondary market sale, including sales of servicing rights, or a similar transaction related to a transaction of the customer;

4.With the consent or at the direction of the customer;

5.To protect the confidentiality or security of the financial institution's records pertaining to the customer, the service or product, or the transaction therein;

6.To protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability;

7.For required institutional risk control or for resolving customer disputes or inquiries;

8.To persons holding a legal or beneficial interest relating to the customer;

9.To persons acting in a fiduciary or representative capacity on behalf of the customer;

10.To provide information to insurance rate advisory organizations, guaranty funds or agencies, applicable rating agencies of the financial institution, persons assessing the institution's compliance with industry standards, and the institution's attorneys, accountants, and auditors;

11.To the extent specifically permitted or required under other provisions of North Dakota law, federal law, and in accordance with the Right to Financial Privacy Act of 1978, to federal law enforcement agencies, including a federal functional regulator, the secretary of the treasury with respect to subchapter II of chapter 53 of title 31, United States Code, and chapter 2 of title I of Public Law 91-508 [12 U.S.C. 1951-1959], a state insurance authority, or the federal trade commission, self-regulatory organizations, or for an investigation on a matter related to public safety;

12.To a consumer reporting agency in accordance with the federal Fair Credit Reporting Act or from a consumer report reported by a customer reporting agency;

13.In connection with a proposed or actual sale, merger, transfer, or exchange of all or a portion of a business or operating unit if the disclosure concerns solely customers of such business or unit; or

14.To comply with federal, state, or local laws, rules, and other applicable legal requirements; to comply with a properly authorized civil, criminal, or regulatory investigation or subpoena or summons by federal, state, or local authorities; or to respond to judicial process or government regulatory authorities having jurisdiction over the financial institution for examination, compliance, or other purposes as authorized by law.

A financial institution may make a disclosure of necessary customer information under this section even though a customer has advised the financial institution that the customer does not consent to the disclosure.

N.D. Admin. Code 13-02-21-03 Joint marketing

A financial institution may not disclose customer information to a nonaffiliated third party under a "joint marketing agreement" as that term is defined by section 502(b)(2) of the federal Financial Services Modernization Act of 1999 [Pub. L. 106-102; 113 Stat. 1437; 15 U.S.C. 6802(b)(2)] unless the financial institution has first obtained its customer's written consent for the disclosure. A customer's written consent is not required for marketing that is undertaken by a financial institution on its own behalf or in conjunction with a nonaffiliated party where the financial institution does not share customer information with a nonaffiliated party.

N.D. Admin. Code 13-02-21-04 Customer direction

A financial institution that has received a customer's "opt-in" election after the financial institution has notified the customer of its information sharing practices and policies as required by the federal Financial Services Modernization Act of 1999 [Pub. L. 106-102; 113 Stat. 1437; 15 U.S.C. 6802(b)(1)] has obtained the customer's direction to share customer information in accordance with and as limited by the customer's opt-in election. This section does not limit the means by which a financial institution may obtain a customer's direction to share customer information with a third party.

Chapter 13-02-22 Deposit Production Offices

N.D. Admin. Code 13-02-22-01 Definitions

1."Deposit production office" means an office which is apart from the bank's main office, facility, or interstate branch where deposits are solicited but are not received, nor are withdrawals paid or loans made.

2."Impairment of capital" means the tier 1 leverage capital ratio in the bank's most recent quarterly report of condition and income is less than five percent.

N.D. Admin. Code 13-02-22-02 Authorization of deposit production offices

The commissioner may authorize the establishment of deposit production offices by state-chartered banks. In determining whether to approve the application for a deposit office the commissioner shall take into consideration the following:

1.Whether the applicant bank is at least adequately capitalized per the most recently filed report of condition and income;

2.The volume of deposits that applicant anticipates generating;

3.The information provided pursuant to section 13-02-22-05; and

4.Any other information the commissioner deems appropriate.

If an application for the establishment of a deposit production office is denied by the commissioner, the applicant bank may appeal the decision of the commissioner to the state banking board.

N.D. Admin. Code 13-02-22-03 Limitation

Deposit production offices may not be established when the establishment of such offices would impair the applicant bank's capital structure. There are no population or geographic restrictions applied to such offices in the state of North Dakota.

N.D. Admin. Code 13-02-22-04 Permissible activities

Deposit production offices are limited to the following activities:

1.Soliciting deposits on behalf of a bank, facility, or interstate branch.

2.Providing information about deposit products.

3.Assisting persons in completing forms and related documents to open a deposit account and forwarding the forms and documents to the main bank, facility, or interstate branch.

N.D. Admin. Code 13-02-22-05 Deposit production office application

A deposit production office may not be established or operated by a state-chartered bank until after the bank has submitted a written application to the commissioner or board and received a certificate of

authority to operate such office. The application must describe with regard to the deposit production office the following:

1.The location.

2.A general description of the area where located, e.g., shopping center, supermarket, department store, etc.

3.The proposed activity for the location.

4.Whether the location will be staffed and, if so, the nature of employee compensation, whether an employee of the bank or a fee and commission basis.

5.Description as to the types of deposits to be solicited.

6.Any other information the commissioner determines necessary.

N.D. Admin. Code 13-02-22-06 Revocation of certificate of authority

The commissioner may revoke the certificate of authority for a deposit production office where it has been determined a deposit production office has engaged in any activity not specifically provided for in section 13-02-22-04.

N.D. Admin. Code 13-02-22-07 Appeal

A bank whose certificate of authority has been revoked may appeal the commissioner's decision for consideration of the board if the appeal is filed within fifteen days after receipt of notice of certificate revocation. Consideration of the board must occur within sixty days after the date the appeal is filed.

Article 13-03 Credit Unions

Chapter 13-03-01 Check Cashing Funds [Repealed]

N.D. Admin. Code 13-03-01 Check Cashing Funds [Repealed]

ARTICLE 13-03

CREDIT UNIONS

Chapter 13-03-01Check Cashing Funds [Repealed] 13-03-01.1Practice and Procedure [Repealed] 13-03-02Limiting and Restricting the Amount That May Be Loaned on Real Property Security 13-03-03Investment in First Lien, Public Utility, Industrial, Corporation, or Association Bonds, Notes, or Other Evidences of Debt Issued by Corporations Located in the United States of America 13-03-04Investment in an Office Building, Furniture, and Fixtures - Application to the State Credit Union Board 13-03-05Mergers 13-03-06Credit Union Reserve Funds and Prompt Corrective Action 13-03-07Liquidity Reserves for Remote Access Accounts [Repealed] 13-03-08Administration of Negotiable or Transferable Instruments of Account 13-03-09Usury [Repealed] 13-03-10Acting as Trustee and Custodian of Pension Plans 13-03-11Agricultural Loans [Repealed] 13-03-12Business Loans [Repealed] 13-03-13Authorizations 13-03-14Field of Membership 13-03-15Branching 13-03-16Member Business Loan Limits [Repealed] 13-03-17Excess Deposit Insurance 13-03-18Disclosure of Customer Information by Financial Institutions 13-03-19Leasing 13-03-20Participation Loans 13-03-21Purchase, Sale, and Pledge of Eligible Obligations 13-03-22Investment Activities 13-03-23Credit Union Service Organizations 13-03-24Fidelity Bond and Insurance Coverage of Credit Unions 13-03-25Supervisory Committee Audits and Verifications 13-03-26Interest Rate Risk 13-03-27Liquidity and Contingency Funding Plans 13-03-28Loan Workouts, Loan Modifications, and Nonaccrual Policy

CHAPTER 13-03-01

CHECK CASHING FUNDS [Repealed effective December 1, 1983]

Chapter 13-03-01.1 Practice and Procedure [Repealed]

N.D. Admin. Code 13-03-01.1 Practice and Procedure [Repealed]

CHAPTER 13-03-01.1

PRACTICE AND PROCEDURE [Repealed effective April 1, 2022]

Chapter 13-03-02 Limiting and Restricting the Amount That May be Loaned on Real Property Security

N.D. Admin. Code 13-03-02-01 Aggregate limited to percent of paid-in shares and deposits - Type of lien

Repealed effective August 1, 1998.

N.D. Admin. Code 13-03-02-02 Requirements for advancement of money on security of real property

No state-chartered credit union may advance money on security of real property until the following requirements are met:

1.The mortgage has been properly signed and recorded in the office of the county recorder where the real property is located.

2.The credit union must verify that the mortgagor has the right to convey the real property and the credit union must determine the order of priority of the lien established by the mortgage.

3.For real estate loans equal to or more than one million dollars or four hundred thousand dollars for residential real estate not insured, an appraisal must be conducted by a licensed or certified appraiser if required under 12 Code of Federal Regulations part 722.

4.For real estate loans that do not meet the requirements of subsection 3, a credit union must obtain an appropriate evaluation of real property collateral for transactions if an appraisal by a licensed or certified appraiser is not obtained.

5.Regardless of the value of a real estate loan, the commissioner may issue an order requiring an appraisal by a licensed or certified appraiser when necessary to address safety and soundness concerns.

6.Adequate casualty fire and tornado insurance has been obtained and is maintained throughout the life of the loan with a mortgage clause for the benefit of the credit union.

7.A note for the amount of the loan has been signed by the mortgagor or mortgagors consistent with the terms of the mortgage.

8.The credit union may make exceptions to subsections 2, 3, and 6 of this section if the mortgage is taken as an abundance of caution as set forth in 12 CFR 722.3, and the value of the real property security is not used as part of the analysis of the borrower's credit worthiness.

December 1, 2002; January 1, 2013; January 1, 2019; April 1, 2022.

History

• History: Amended effective May 1, 1982; November 1, 1985; October 1, 1994; August 1, 1998;

N.D. Admin. Code 13-03-02-03 Length of term - Amortization - Limitation on amount of percent of appraised value

1.All amortized loans secured by real property shall be limited to a term of forty years, and an amount of ninety percent of the appraised value of the real estate being mortgaged as security for the loan.

2.When a loan specified in subsection 1 is insured by private mortgage insurance, the permissible amount shall not exceed the amount that is covered by the insurance.

3.When a loan specified in subsection 1 is insured by private mortgage insurance, the permissible amount shall be extended to no more than ninety-five percent.

History

• History: Amended effective June 1, 1979; May 1, 1981; December 1, 2002; October 1, 2008.

N.D. Admin. Code 13-03-02-04 Limitation on amount loaned to one member

Repealed effective January 1, 2013.

N.D. Admin. Code 13-03-02-05 Second mortgages - Approval of credit union board

Repealed effective November 1, 1985.

N.D. Admin. Code 13-03-02-06 Exemption from restrictive provisions

The limitations set out in sections 13-03-02-02 and 13-03-02-03 shall not apply to any federally guaranteed loan, however, such loans must conform to all federal requirements for the making of the guaranteed loan.

History

• History: Effective June 1, 1979; amended effective June 1, 1983; November 1, 1985; August 1, 1998.

N.D. Admin. Code 13-03-02-07 Exceptions

A credit union may make an exception to the loan-to-value limits under section 13-03-02-03 for loans from creditworthy borrowers. However, a credit union may not make such an exception if the loan would exceed one hundred fifty percent of the credit union's net worth when the loan is aggregated with all other loans in excess of the loan-to-value limits.

History

• History: Effective October 1, 1997; amended effective January 1, 2013.

Chapter 13-03-03 Investment in First Lien, Public Utility, Industrial, Corporation, or Association Bonds, Notes, or Other Evidences of Debt Issued by Corporations Located in the United States of America

N.D. Admin. Code 13-03-03-01 Individual investment limitation - Total investment limitation

No credit union organized and operating under the laws of North Dakota shall invest more than ten percent, in the aggregate, of the total paid in shares and deposits of the credit union in first lien, public utility, industrial, corporation, or association bonds, or notes issued by corporations located in the United States of America, unless an exemption is granted by the state credit union board. In determining whether to grant an exemption, the board shall consider the following:

1.The net worth ratio of the credit union;

2.The capital, asset quality, management, earnings, liquidity, and sensitivity to market risk (CAMELS) rating of the credit union;

3.The experience of the credit union's management; and

4.Other factors deemed pertinent by the board.

History

• History: Amended effective December 1, 1978; January 1, 2007; January 1, 2013; April 1, 2022.

N.D. Admin. Code 13-03-03-02 Applicability

Section 13-03-03-01 shall not apply to a credit union's direct loans to members. A credit union's participation in a loan originating with another lender shall be considered a loan for purposes of this

chapter. Participation loans are subject to the provisions of chapter 13-03-20.

History

• History: Effective August 1, 1980; amended effective January 1, 2007.

N.D. Admin. Code 13-03-03-03 Investment in other evidences of debt

A state-chartered credit union may invest in other evidences of debt, issued by corporations located in the United States of America, upon approval from the state credit union board.

History

• History: Effective January 1, 2007.

Chapter 13-03-04 Investment in an Office Building, Furniture, and Fixtures - Application to the State Credit Union Board

N.D. Admin. Code 13-03-04-01 Maximum investment in fixed assets to be determined by state credit union board

No credit union organized and operating under the laws of North Dakota shall invest more than the greater of six percent of assets or fifty percent of net worth, but not to exceed ten percent of assets, in a credit union land and building and other fixed assets, without first applying for and obtaining approval from the state credit union board.

History

• History: Amended effective June 1, 1984; January 1, 2007; January 1, 2013; January 1, 2019; April 1, 2022.

N.D. Admin. Code 13-03-04-02 Procedure for investment in building

Any state-chartered credit union planning to construct or purchase a building shall follow and comply with the following procedure:

1.The board of directors shall adopt a resolution to invest in a building, and stating the maximum funds to be invested in a lot and building.

2.If the resolution is adopted by a majority of the board of directors, and if the resolution involves an investment, which exceeds the maximum investment established in section 13-03-04-01, the board of directors shall then make application to the North Dakota state credit union board for permission to invest in a building. If the investment is within the limit established by section 13-03-04-01, the board of directors and management will proceed with the project as approved by the board of directors.

History

• History: Amended effective June 1, 1984; January 1, 2007; April 1, 2022.

N.D. Admin. Code 13-03-04-03 Application to board to invest in building - Requirements

When applying to the state credit union board for permission to invest in a building which exceeds the limit established in section 13-03-04-01, the following procedures will be followed:

1.The secretary of the credit union will certify compliance with the provisions of section 13-03-04-02.

2.The treasurer will certify the amount to be invested. The credit union, by letter, will make a special request of the state credit union board and state the amount, and the percentage of assets and net worth they desire to invest in the lot, building, furniture, fixtures, and equipment.

History

• History: Amended effective June 1, 1984; April 1, 2022.

N.D. Admin. Code 13-03-04-04 Information required to accompany application

The following information must accompany the application:

1.A blueprint or floor plan, stating type of construction, location, and information about security provisions (vaults, safes, files, alarms), if any.

2.A balance sheet for the month ending immediately preceding the application.

3.A year-end operating statement for each of the past five years, if operating that long.

4.A schedule stating the amount of delinquent loans, and the required reserves, as of the application date.

5.A schedule stating the number and amount of loans charged off, and the amount recovered for the past five years, if operating that long.

History

• General Authority: NDCC 6-01-04, 6-06-06

Chapter 13-03-05 Mergers

N.D. Admin. Code 13-03-05-01 Procedure

Any state-chartered credit union planning to merge shall follow and comply with the following procedure:

1.The board of directors of each state-chartered credit union shall pass a resolution by a majority of the directors, in favor of the merger, stating specific terms, if any.

2.The resolution shall be submitted to the entire membership of the affected credit unions at the time of and accompanying the notice of a regular or special meeting, and must be approved by a majority of the membership of each affected credit union present at the meeting. The state credit union board, in the exercise of the board's discretion, may suspend this subsection when such suspension is in the best interests of the affected credit unions and their members.

Alternatively, the commissioner, in the exercise of the commissioner's discretion, may temporarily suspend this subsection until after approval is obtained from the state credit union board, if the merging credit union is federally chartered.

3.An application to merge must be filed with the state credit union board to approve the merger by the proper officials of each of the credit unions.

4.At least thirty days prior to the date of consideration of the application by the state credit union board, the secretary of the board shall notify all credit unions within a seventy-five-mile [120.7kilometer] radius of the continuing credit union's home office and each county in which the merging credit union maintains its principal office or a branch. The notice must specify the names and locations of both the merging credit union and the continuing credit union, and the time and place of the board meeting at which the proposed merger will be considered.

Interested credit unions will be given an opportunity to comment on the proposed merger in writing and at the meeting at which the proposal is considered. The board may, when it believes it to be in the public interest, request a hearing be held. Notice of hearing on an application will, if requested, be at least thirty days prior to the hearing. Notice of the proposed merger does not have to be given or a hearing held when the continuing credit union is to receive assistance from the national credit union administration.

5.All laws and regulations of the national credit union share insurance fund applicable to merging insured credit unions must be complied with before the merger is consummated.

6.Upon approval of the merger, the continuing credit union may elect to assume the field of membership of the merging credit union.

History

• History: Amended effective February 1, 1981; August 1, 1993; January 1, 2019; April 1, 2022.

N.D. Admin. Code 13-03-05-02 Determination by board - Surrender of charter

Repealed effective August 1, 1993.

N.D. Admin. Code 13-03-05-03 Compatibility with other laws and rules

Repealed effective August 1, 1993.

N.D. Admin. Code 13-03-05-04 Considerations for approval

In considering the application for merger, the board shall examine and consider all relevant factors including:

1.Whether proper notification has been given to all members, unless the membership meeting has been waived by the board.

2.The comments of the members of each credit union to be merged.

3.The financial condition of the continuing credit union.

In the event that a merging credit union is a failing institution under North Dakota Century Code section 6-06-08.2, the board shall have the authority to waive any application requirements or considerations for approval otherwise mandated under rule.

History

• History: Effective August 1, 1993; amended effective January 1, 2013; April 1, 2022.
• Law Implemented: NDCC 6-06-36, 6-06-37, 6-06-08.2

N.D. Admin. Code 13-03-05-05 Prohibitions

Members of the board who are also directors, committee members, or staff of one of the merging credit unions, shall declare a conflict of interest and must abstain from voting on the merger application.

N.D. Admin. Code 13-03-05-06 Determination by board - Surrender of charter

When section 13-03-05-01 has been completed, the board, by order shall approve or disapprove the proposed merger, within thirty days after receipt of the application or within thirty days after the date of hearing if a hearing is conducted, and so advise the credit unions involved of its decision. If approved, the merging credit union shall surrender its charter to the commissioner, who shall forward it to the secretary of state for cancellation.

N.D. Admin. Code 13-03-05-07 Compatibility with other laws and rules

Nothing in this chapter shall be deemed to be in conflict with the applicable federal regulation or North Dakota law governing mergers of credit unions.

History

• General Authority: NDCC 6-01-04, 6-06-36, 6-06-37

Chapter 13-03-06 Credit Union Reserve Funds and Prompt Corrective Action

N.D. Admin. Code 13-03-06-01 Definitions

1."Commercial loan" means any loan, line of credit, or letter of credit, including any unfunded commitments, and any interest a credit union obtains in such loans made by another lender, to individuals, sole proprietorships, partnerships, corporations, or other business enterprises for commercial, industrial, agricultural, or professional purposes, but not for personal expenditure purposes. Excluded from this definition are loans made by a corporate credit union; loans made by a credit union to another credit union; loans made by a federally insured credit union to a credit union service organization; loans secured by a one-to-four family residential property, unless meeting the definition of an improved property loan; loans fully secured by shares in the credit union making the extension of credit or deposits in other financial institutions; loans secured by a vehicle manufactured for household use; and loans that would otherwise meet the definition of commercial loan and which, when the aggregate outstanding balances plus unfunded commitments less any portion secured by shares in the credit union to a borrower or an associated borrower, are equal to less than fifty thousand dollars.

2."Credit grading system" means the same as credit risk rating system.

3."Credit risk rating system" means a formal process that identifies and assigns a relative credit risk score to each commercial loan in a credit union's portfolio, using ordinal ratings to represent the degree of risk. The credit risk score is determined through an evaluation of quantitative factors based on financial performance and qualitative factors based on management, operational, market, and business environmental factors.

4."Improved property loan" means an extension of credit secured by one of the following types of real property:

a.Farmland, ranchland, or timberland committed to ongoing management and agricultural production;

b.One-to-four family residential property that is not owner-occupied;

c.Residential property containing five or more individual dwelling units;

d.Completed commercial property; or

e.Other income-producing property that has been completed and is available for occupancy and use, except income-producing owner-occupied one-to-four family residential property.

5."Net worth" means the retained earnings balance of the credit union at quarter end as determined under generally accepted accounting principles. Retained earnings consist of undivided earnings, regular reserves, and any other appropriations designated by management or regulatory authorities. Net worth does not include the allowance for loan and lease loss account or other comprehensive income/loss account. Additionally:

a.For low income-designated credit unions, net worth also includes secondary capital accounts that are uninsured and subordinate to all other claims, including claims of creditors, shareholders, and the national credit union share insurance fund;

b.For a credit union that acquires another credit union in a mutual combination, net worth includes the retained earnings of the acquired credit union, or of an integrated set of activities and assets, less any bargain purchase gain recognized in either case to the extent the difference between the two is greater than zero; the acquired retained earnings must be determined at the point of acquisition under generally accepted accounting principles; and a mutual combination is a transaction in which a credit union acquires another credit union or acquires an integrated set of activities and assets that is capable of being conducted and managed as a credit union; and

c.The term "net worth" also includes loans to and accounts in an insured credit union established under section 208 of the Federal Credit Union Act (73 Stat. 628, 84 Stat. 944, 12 U.S.C. 1788), provided such loans and accounts:

(1)Have a remaining maturity of more than five years;

(2)Are subordinate to all other claims including those of shareholders, creditors, and the national credit union share insurance fund;

(3)Are not pledged as security on a loan to, or other obligation of, any party;

(4)Are not insured by the national credit union share insurance fund;

(5)Have noncumulative dividends;

(6)Are transferable; and (7)Are available to cover operating losses realized by the insured credit union that exceed its available retained earnings.

6."Net worth ratio" means the ratio of net worth of the credit union to the total assets of the credit union.

7."Net worth restoration plan" means a plan submitted by the credit union and approved by the commissioner outlining the actions the credit union will take and time frames for improving the credit union's capital position and becoming well-capitalized. The plan must comply with part 702 of the national credit union administration's rules and regulations.

8."Quarterly reserve requirement" means a transfer from current quarter earnings into the regular reserve account equal to one-tenth of one percent of assets.

9."Risk-based capital requirement" means the level of net worth necessary given the risk level of the credit union as defined in part 702 of the national credit union administration's rules and regulations.

10."Total assets" means quarter end asset balance, average daily balance over the calendar quarter, average month-end balances over the three calendar months in the calendar quarter, or the average of quarter end balances of the current and preceding calendar quarters.

11."Total reserves" means, for the purpose of this chapter, the sum of the following:

a.The retained earnings balance of the credit union at quarter end as determined under generally accepted accounting principles;

b.The allowance for loan and lease loss account;

c.Other comprehensive income or loss;

d.Unrealized gain or loss on available for sale securities; and

e.Secondary capital.

12."Retained earnings" means undivided earnings, regular reserves, and any other appropriations designated by regulatory authorities.

January 1, 2013; January 1, 2019; April 1, 2022.

History

• History: Amended effective January 1, 1981; August 1, 1984; June 1, 2002; January 1, 2007;

N.D. Admin. Code 13-03-06-02 Maintaining an allowance for loan and lease loss account

All credit unions operating under a charter issued by the state of North Dakota shall be required to maintain an allowance for loan and lease loss account in accordance with generally accepted accounting principles and rules of the national credit union administration.

January 1, 2019.

History

• History: Amended effective June 1, 1979; January 1, 1981; January 1, 2007; January 1, 2013;

N.D. Admin. Code 13-03-06-03 Calculation

The adequacy of the allowance for loan and lease loss account as required under North Dakota Century Code section 6-06-21 will be based upon generally accepted accounting principles and incorporate the credit union's credit risk rating system as outlined in section 13-03-06-05. The commissioner may require a credit union to put aside additional reserves when funding levels are deemed to be unsafe or unsound as set forth in North Dakota Century Code section 6-06-08.4.

History

• History: Effective January 1, 1981; amended effective June 1, 2002; January 1, 2007; January 1, 2013; January 1, 2019.

N.D. Admin. Code 13-03-06-04 Prompt corrective action

When the credit union's net worth ratio falls below seven percent after allowing for full and fair disclosure in the allowance for loan and lease loss account, or fails to meet the risk-based capital requirements of part 702 of the national credit union administration's rules and regulations, the credit union is required to meet the prompt corrective action requirements under North Dakota Century Code

section 6-06-08.4 and part 702 of the national credit union administration's rules and regulations. Any required reserves to be made under prompt corrective action will be made to the regular reserve account.

January 1, 2019; April 1, 2022.

History

• History: Effective January 1, 1981; amended effective May 1, 1981; January 1, 2007; January 1, 2013;

N.D. Admin. Code 13-03-06-05 Requirements

The board of directors shall develop a policy requiring risk monitoring and a credit grading system, and management shall establish a process to implement a credit grading system and monitoring to effectively measure and monitor the level of risk in relation to total reserves. The system must:

1.Assign credit risk ratings to commercial loans at inception and reviewed as frequently as necessary to satisfy the credit union's risk monitoring and reporting policies;

2.Ensure adequate allowance for loan and lease loss funding as required by generally accepted accounting principles;

3.Include the loan classification categories of watch or special mention, substandard, doubtful, and loss;

4.Accurately identify loan risk ratings and classifications in accordance with accepted industry and regulatory guidance and as assigned during examinations;

5.Establish a process for the board of directors to oversee the performance of the loan portfolio, including periodic reporting to the board of directors aggregate loan portfolio credit risk rating levels, trends, loan classifications as a percentage of the credit union's total reserves or net worth, and loan concentration levels to net worth in relation to established policy limits;

6.Include board of director review of the need for independent review and validation of the accuracy of the commercial loan credit risk rating system and frequency of such action; and

7.Assess the impact of current market conditions and the potential impact of changing market conditions in a stressed environment to include:

a.For commercial loans, the impact of the changes on the borrower, associated borrowers, and credit union's earnings and net worth;

b.Portfolio concentrations greater than one hundred percent of credit union net worth in consumer loans with similar characteristics, assess the impact of changes on credit union's earnings and net worth; and

c.Portfolio concentrations greater than one hundred percent of credit union net worth in investments with similar characteristics, assess the impact of changes on credit union's earnings and net worth.

History

• History: Effective January 1, 2019.
• Law Implemented: NDCC 6-06-06

Chapter 13-03-07 Liquidity Reserves for Remote Access Accounts [Repealed]

N.D. Admin. Code 13-03-07 Liquidity Reserves for Remote Access Accounts [Repealed]

CHAPTER 13-03-07

LIQUIDITY RESERVES FOR REMOTE ACCESS ACCOUNTS [Repealed effective January 1, 2007]

Chapter 13-03-08 Administration of Negotiable or Transferable Instruments of Account

N.D. Admin. Code 13-03-08-01 Definitions

Negotiable or transferable instrument of account means an account from which the holder is authorized to withdraw funds by means of a negotiable or transferable instrument or other order.

History

• History: Effective August 1, 1981.
• Law Implemented: NDCC 6-01-04, 6-06-06

N.D. Admin. Code 13-03-08-02 Issuance of negotiable or transferable instruments

The board of directors, by resolution, may establish negotiable or transferable instrument accounts with different dividend rates in conformance with the following:

1.Any terms and conditions prescribed by the board of directors and concerning the issuance and maintenance of negotiable or transferable instrument accounts must be consistent with the requirements of this section.

2.Negotiable and transferable instrument accounts shall be subject to any notice which may be imposed pursuant to the credit union's bylaws.

3.In addition to the general requirements applicable to the establishment and maintenance of negotiable and transferable instrument accounts, the board of directors shall provide for:

a.Surety bond coverage.

b.Establishing an account agreement with each member that outlines both credit union and member responsibilities.

c.Retaining copies or photo reproductions of paid instruments or other evidence of paid orders of withdrawal on file for a period as required by applicable state law.

d.Written operational and program specifications on file at the credit union's principal office.

e.A share or deposit account which is separate and apart from all other accounts held by the member to be used for accessing by negotiable or transferable instrument.

4.The board of directors may provide for:

a.Fees to be assessed for account usage to include but not limited to, charges for stop-payment orders, overdrafts, failure to maintain required balances, and costs required to maintain the account.

b.Participation in guarantee arrangements.

c.A dividend to be paid, any terms of which are not inconsistent with the North Dakota Century Code and the bylaws of the credit union.

History

• History: Effective August 1, 1981.
• Law Implemented: NDCC 6-06-06

N.D. Admin. Code 13-03-08-03 Credit applications and overdrafts

Consistent with policies established by the board of directors, the credit committee or loan officer shall ensure that a credit application is kept on file for each borrower supporting the decision to make a loan or establish a line of credit. A credit union may advance money to a member to cover an account deficit without having a credit application from the borrower on file if the credit union has a written overdraft policy. The policy must set a cap on the total dollar amount of all overdrafts the credit union will honor consistent with the credit union's ability to absorb losses, establish a time limit not to exceed sixty calendar days for a member either to deposit funds or obtain an approved loan from the credit union to cover each overdraft, limit the dollar amount of overdrafts the credit union will honor per member, and establish the fee, if any, that the credit union will charge members for honoring overdrafts.

All overdrafts will be reported on the credit union's financial statements in accordance with generally accepted accounting principles, and will be treated as a loan in determining compliance with subdivision g of subsection 1 of North Dakota Century Code section 6-06-12 and North Dakota Administrative Code chapter 13-03-06.

History

• History: Effective January 1, 2013; amended effective January 1, 2019.
• Law Implemented: NDCC 6-06-06

Chapter 13-03-09 Usury [Repealed]

N.D. Admin. Code 13-03-09 Usury [Repealed]

CHAPTER 13-03-09

USURY [Repealed effective November 1, 1997]

Chapter 13-03-10 Acting as Trustee and Custodian of Pension Plans

N.D. Admin. Code 13-03-10-01 Acting as trustee and custodian

A credit union is authorized to act as trustee or custodian, and may receive reasonable compensation for so acting, under any written trust instrument or custodial agreement forming part of a pension plan which qualifies or qualified for specific tax treatment under section 401(d) or 408 of the Internal Revenue Code, for its members or groups or organizations of its members, provided the funds of such plans are invested in share accounts or share certificate accounts of the credit union.

All funds held in a trustee or custodial capacity must be maintained in accordance with applicable laws and rules and regulations.

The credit union shall maintain individual records for each participant which show in detail all transactions relating to the funds of each participant or beneficiary.

History

• History: Effective June 1, 1983.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-06-06

N.D. Admin. Code 13-03-10-02 Appointment of successor trustee or custodian

The plan shall provide for the appointment of a successor trustee or custodian by a person, committee, corporation, or organization other than the credit union or any person acting in one's capacity as a director, employee, or agent of the credit union, upon notice from the credit union or the board that the credit union is unwilling or unable to continue to act as trustee or custodian.

History

• History: Effective June 1, 1983.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-06-06

Chapter 13-03-11 Agricultural Loans [Repealed]

N.D. Admin. Code 13-03-11 Agricultural Loans [Repealed]

CHAPTER 13-03-11

AGRICULTURAL LOANS [Repealed effective December 1, 1992]

Chapter 13-03-12 Business Loans [Repealed]

N.D. Admin. Code 13-03-12 Business Loans [Repealed]

CHAPTER 13-03-12

BUSINESS LOANS [Repealed effective December 1, 1992]

Chapter 13-03-13 Authorizations

N.D. Admin. Code 13-03-13-01 Community development revolving loan program

Credit unions may participate in the national credit union administration's community development revolving loan program for credit unions subject to the rules established under part 705 of the national credit union administration's rules and regulations.

History

• History: Effective March 1, 1988; amended effective December 1, 1992; January 1, 2007.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-06-06

N.D. Admin. Code 13-03-13-02 Designation of low-income status - Receipt of secondary capital accounts by low-income designated credit unions

A credit union may be designated as a low-income credit union and may offer secondary capital accounts subject to the rules established by the national credit union administration under part 701.34 of the national credit union administration's rules and regulations.

History

• History: Effective March 1, 1988; amended effective December 1, 1992; January 1, 2007.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-06-06

N.D. Admin. Code 13-03-13-03 Effective date of authority to invest

N.D. Admin. Code 13-03-13-04 Authority to invest in credit union service organizations

N.D. Admin. Code 13-03-13-05 Definitions

N.D. Admin. Code 13-03-13-06 Application

N.D. Admin. Code 13-03-13-07 Hearing

N.D. Admin. Code 13-03-13-08 Permissible services and activities

N.D. Admin. Code 13-03-13-09 Limitations on investments in credit union service organizations

N.D. Admin. Code 13-03-13-10 Conflict of interest

N.D. Admin. Code 13-03-13-11 Examinations

Chapter 13-03-14 Field of Membership

N.D. Admin. Code 13-03-14-01 Definitions

1."Branch", for the purpose of this chapter, means any credit union facility which is established apart from the principal office where credit union business is transacted, not including remote electronic facilities, such as automated teller facilities, point-of-sale terminals, etc.

2."Closed charter" means a credit union charter issued to serve groups having a common bond of occupation or association.

3."Geographical boundaries" means a geographical area that does not extend beyond a seventy-five-mile [120.70-kilometer] radius of the home office.

4."Home office" means the location or place of business designated by the credit union as its home office which must be located in the credit union field of membership. Such a designation of a home office shall not expand a credit union's field of membership.

5."Open charter" means a credit union charter issued to serve groups within a geographical boundary.

History

• History: Effective April 1, 1988; amended effective September 1, 1988; January 1, 2007.

N.D. Admin. Code 13-03-14-02 Field of membership expansion

1.A North Dakota state-chartered credit union may expand its field of membership subject to approval of the state credit union board and in accordance with the provisions of this chapter and North Dakota Century Code chapter 6-06.

2.The state credit union board, when considering the expansion of a charter, shall consider the following:

a.If the expansion is for an open charter, the exact geographical boundaries, expressed by city, county, township, or highway boundaries, or a stated radius from the principal or branch office, must be clearly spelled out;

b.The negative impact to any other state or federally chartered credit union in the expanded area;

c.Any expressed opposition to the expansion by any other credit union;

d.The credit union must demonstrate the ability to succeed in expanding their field of membership;

e.Relevant public comment in favor of or in opposition to expanding the field of membership; and

f.Any other factor that the state credit union board deems pertinent.

History

• History: Effective April 1, 1988; amended effective October 1, 1997; January 1, 2007.

N.D. Admin. Code 13-03-14-03 Application to expand field of membership

A credit union wishing to expand its field of membership shall comply with the following:

1.Approval to expand the field of membership must be given by the board of directors of the credit union by a majority of that board;

2.After approval by the credit union's board of directors, application must be made to the state credit union board to expand its field of membership. The necessary forms for "application for field of membership expansion", including the business plan and the financial impact to the credit union and as required in subsection 3, may be secured from the department of financial institutions;

3.The application to expand the field of membership must be accompanied by the necessary documents for amendment of bylaws as required by North Dakota Century Code section 6-06-04;

4.The credit union shall, at least thirty days prior to the date of consideration by the state credit union board of an open charter application, cause a notice of the proposed field of membership expansion to be published in the official newspaper of the county of the credit union's home office and each county which is proposed to be included in the expanded field of membership. The credit union shall, at least thirty days prior to the date of consideration by the state credit union board of a closed charter application, cause a notice of the proposed field of membership expansion to be published in the eight major newspapers in the state set forth in subdivisions a through h of subsection 1 of section 13-01.1-04-01. However, if a closed charter credit union intends to limit its expansion into specified geographical areas within the state, the notice must only be published in the official newspaper of the county or counties affected by the proposed expansion; and

5.The notice must specify the time and place of the meeting of the state credit union board at which the application for the charter expansion will be acted upon. Comments may be submitted to the board concerning the application, or a written request for an opportunity to be heard before the board may be submitted. The board may, when it believes it to be in the public interest, order a hearing to be held.

History

• History: Effective April 1, 1988; amended effective October 1, 1997; June 1, 2002; January 1, 2019.

N.D. Admin. Code 13-03-14-04 Waiver

The state credit union board, in the exercise of its discretion, may waive the provisions of this

chapter when such waiver is in the best interests of a failing institution.

History

• History: Effective April 1, 1988; June 1, 2002.
• Law Implemented: NDCC 6-06-08.2

N.D. Admin. Code 13-03-14-05 Field of membership of continuing credit union in the event of merger

In the event of a merger between credit unions with different fields of membership, the surviving credit union may, at the election of the surviving credit union, expand its field of membership to include the field of membership of the merged credit union.

History

• History: Effective January 1, 2007; amended effective April 1, 2022.

Chapter 13-03-15 Branching

N.D. Admin. Code 13-03-15-01 Definitions

1."Branch", for the purpose of this chapter, means any credit union facility which is established apart from the principal office where credit union business is transacted, not including remote electronic facilities, such as automated teller facilities, point-of-sale terminals, etc.

2."Closed charter" means a credit union charter issued to serve groups having a common bond of occupation or association.

3."Geographical boundaries" means the outer perimeters of the area which may be served as expressed in the field of membership authority and may be expressed by city, county, township, or highway boundaries, or a stated radius from the principal office of the credit union.

4."Open charter" means a credit union charter issued to serve groups within a well-defined rural or urban district.

5."Principal office" means the location or place of business, or both, in which the credit union was organized and stated on the certificate of organization or any amendments thereto and recorded with the secretary of state.

History

• History: Effective April 1, 1988.

N.D. Admin. Code 13-03-15-02 Establishment of a branch

1.Any North Dakota state-chartered credit union may establish a branch facility subject to approval of the state credit union board and in accordance with the provisions of this chapter.

2.All branch facility advertising and building signs must state the identity of the credit union.

History

• History: Effective April 1, 1988; amended effective October 1, 1990; January 1, 2007.

N.D. Admin. Code 13-03-15-03 Location of branch

1.Branches of "closed charter" credit unions established pursuant to the provisions of this

chapter must be reasonably necessary in order to properly serve units of the field of membership which are not being properly served by the principal credit union office. The location of such office shall not be restricted except that, in the judgment of the state credit union board, it must be located so as to accomplish the above.

2.Branches of "open charter" credit unions must be located within the geographical boundaries which are authorized by the charter. The establishment of such branch facility may not, of itself, expand the geographical boundaries of the credit union's field of membership.

History

• History: Effective April 1, 1988.

N.D. Admin. Code 13-03-15-04 Application to establish a branch

1.A credit union wishing to establish a branch shall comply with the following:

a.Approval to establish the branch must be given by the board of directors of the credit union by a majority of that board; and

b.After approval by the credit union's board of directors, application must be made to the state credit union board or to the commissioner to establish the branch. The necessary forms for "application to establish a branch", including the business plan and the financial impact to the credit union, may be secured from the department of financial institutions.

2.The state credit union board or commissioner, when considering the branching of a credit union, shall consider the following:

a.If the branch is for an open charter, and if the application to establish the branch is accompanied by an application to expand the field of membership, the exact geographical boundaries, expressed by city, county, township, or highway boundaries, or a stated radius from the branch office, must be clearly spelled out;

b.Whether the credit union has demonstrated the ability to succeed with the branch; and

c.Any other factor that the state credit union board or commissioner deems pertinent.

3.If the commissioner's decision with respect to an application is unfavorable, the applicant credit union may appeal the decision to the state credit union board by filing a notice of appeal with the commissioner within twenty days after the commissioner has notified the applicant credit union of the decision.

January 1, 2019; April 1, 2022.

History

• History: Effective April 1, 1988; amended effective June 1, 2002; January 1, 2007; January 1, 2013;

N.D. Admin. Code 13-03-15-05 Waiver

The state credit union board or commissioner, in the exercise of their discretion, may waive the provisions of this chapter when such waiver is in the best interests of a failing institution.

History

• History: Effective April 1, 1988; amended effective April 1, 2022.

N.D. Admin. Code 13-03-15-06 Notice regarding closing of a branch

Any credit union intending to close a branch shall provide its membership and the commissioner with notice of the closing at least thirty days prior to the closing date.

History

• History: Effective January 1, 2013.

N.D. Admin. Code 13-03-15-07 Operations during epidemic or emergency - Notice to department

A credit union that operates physical facilities in any area that is experiencing an epidemic or other emergency may adjust the credit union's operations in any manner that is reasonable to protect the credit union's members, employees, assets, or business. Under this section, a credit union may temporarily close or relocate offices, employees, or operations; restrict access to offices or services; and change the manner in which the credit union provides services. A credit union shall notify the department of financial institutions of any actions the credit union takes under the authority of this

section if such action results in a closure greater than one business day. The credit union shall give the department notice promptly and in any case within three business days of the credit union's decision to adjust the credit union's operations. The notice must describe the credit union's actions and the expected duration of the credit union's adjusted operations. Unless extended by the commissioner, a credit union's authority to change the credit union's operations under this section may not exceed sixty days.

History

• History: Effective April 1, 2022.

Chapter 13-03-16 Member Business Loan Limits [Repealed]

N.D. Admin. Code 13-03-16 Member Business Loan Limits [Repealed]

CHAPTER 13-03-16

MEMBER BUSINESS LOAN LIMITS [Repealed effective January 1, 2019]

Chapter 13-03-17 Excess Deposit Insurance

N.D. Admin. Code 13-03-17-01 Authorization

The board of directors of a North Dakota state-chartered credit union may authorize purchase of an excess deposit insurance policy in addition to deposit insurance coverage provided by the national credit share insurance fund for the credit union's members.

N.D. Admin. Code 13-03-17-02 Financial information

Prior to purchasing an excess deposit insurance policy, the board of directors shall evaluate the financial condition and rating, if any, of the insurance company by acquiring adequate and current financial information. The board shall, on at least an annual basis, continue to evaluate the company's financial condition and rating.

N.D. Admin. Code 13-03-17-03 Notice of termination of insurance

If an excess deposit insurance policy is terminated, either at the request of the credit union or the insurance company, the credit union must notify in writing all members covered by such excess deposit insurance at least ninety days prior to the effective date of termination. The credit union must allow any member affected by the policy termination to withdraw the deposit without the assessment of any fee or early withdrawal penalty.

Chapter 13-03-18 Disclosure of Customer Information by Financial Institutions

N.D. Admin. Code 13-03-18-01 Definitions

As used in this chapter, the terms "customer", "customer information", and "financial institution" have the same meaning as is given to them in North Dakota Century Code section 6-08.1-01.

N.D. Admin. Code 13-03-18-02 Authorization

A financial institution that has not received a customer's express consent or opt-in election may disclose customer information to a third party only as provided by subsections 1 through 11 of North Dakota Century Code section 6-08.1-02, North Dakota Century Code section 6-08.1-03, and as follows:

1.To effect, administer, or enforce a transaction requested or authorized by the customer or in connection with servicing or processing a financial product or service requested or authorized by the customer;

2.To maintain or service the customer's account with the financial institution or with another entity as part of a private label credit card program or other extension of credit on behalf of such entity;

3.In connection with a proposed or actual securitization, secondary market sale, including sales of servicing rights, or a similar transaction related to a transaction of the customer;

4.With the consent or at the direction of the customer;

5.To protect the confidentiality or security of the financial institution's records pertaining to the customer, the service or product, or the transaction therein;

6.To protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability;

7.For required institutional risk control or for resolving customer disputes or inquiries;

8.To persons holding a legal or beneficial interest relating to the customer;

9.To persons acting in a fiduciary or representative capacity on behalf of the customer;

10.To provide information to insurance rate advisory organizations, guaranty funds or agencies, applicable rating agencies of the financial institution, persons assessing the institution's compliance with industry standards, and the institution's attorneys, accountants, and auditors;

11.To the extent specifically permitted or required under other provisions of North Dakota law, federal law, and in accordance with the Right to Financial Privacy Act of 1978, to federal law enforcement agencies, including a federal functional regulator, the secretary of the treasury with respect to subchapter II of chapter 53 of title 31, United States Code, and chapter 2 of title I of Public Law 91-508 [12 U.S.C. 1951-1959], a state insurance authority, or the federal trade commission, self-regulatory organizations, or for an investigation on a matter related to public safety;

12.To a consumer reporting agency in accordance with the federal Fair Credit Reporting Act or from a consumer report reported by a customer reporting agency;

13.In connection with a proposed or actual sale, merger, transfer, or exchange of all or a portion of a business or operating unit if the disclosure concerns solely customers of such business or unit; or

14.To comply with federal, state, or local laws, rules, and other applicable legal requirements; to comply with a properly authorized civil, criminal, or regulatory investigation or subpoena or summons by federal, state, or local authorities; or to respond to judicial process or government regulatory authorities having jurisdiction over the financial institution for examination, compliance, or other purposes as authorized by law.

A financial institution may make a disclosure of necessary customer information under this section even though a customer has advised the financial institution that the customer does not consent to the disclosure.

N.D. Admin. Code 13-03-18-03 Joint marketing

A financial institution may not disclose customer information to a nonaffiliated third party under a "joint marketing agreement" as that term is defined by section 502(b)(2) of the federal Financial Services Modernization Act of 1999 [Pub. L. 106-102; 113 Stat. 1437; 15 U.S.C. 6802(b)(2)] unless the financial institution has first obtained its customer's written consent for the disclosure. A customer's written consent is not required for marketing that is undertaken by a financial institution on its own behalf or in conjunction with a nonaffiliated party where the financial institution does not share customer information with a nonaffiliated party.

N.D. Admin. Code 13-03-18-04 Customer direction

A financial institution that has received a customer's "opt-in" election after the financial institution has notified the customer of its information sharing practices and policies as required by the federal Financial Services Modernization Act of 1999 [Pub. L. 106-102; 113 Stat. 1437; 15 U.S.C. 6802(b)(1)] has obtained the customer's direction to share customer information in accordance with and as limited by the customer's opt-in election. This section does not limit the means by which a financial institution may obtain a customer's direction to share customer information with a third party.

Chapter 13-03-19 Leasing

N.D. Admin. Code 13-03-19-01 Authorization

A state-chartered credit union may engage in direct leasing, indirect leasing, open-end leasing, or closed-end leasing subject to the limitations prescribed under this chapter.

N.D. Admin. Code 13-03-19-02 Definitions

For purposes of this rule, the following definitions will apply:

1."Closed-end lease" means the credit union assumes the risk and responsibility for any difference in the estimated residual value and the actual value of the property at lease end.

However, the member is responsible for any excess wear and tear and excess mileage charges as established under the lease.

2."Direct lease" means the credit union purchases personal property from a vendor, becoming the owner of the property at the request of a member of the credit union and then leases the property to that member.

3."Full payout lease" means a lease in which the lessor's service is limited to the financing of the asset, with the lessee paying all other costs, including maintenance and taxes, and has the option of purchasing the asset at the end of the lease for a nominal price. The lease shall be fully amortized over the term of the lease or lifetime of the asset, whichever is less.

4."Inception of the lease" means the date of the lease agreement or commitment, if earlier, or the date the lease is purchased by the credit union. For purposes of this definition, a commitment shall be in writing, signed by the parties in interest to the transaction, and shall specifically set forth the principal terms of the transaction.

5."Independent third-party appraiser" means an individual not involved with the lease transaction, except as the appraiser, with no direct or indirect interest, financial or otherwise, in the property appraised or the parties involved with the transaction. The credit union shall take appropriate steps to ensure the appraiser exercises independent judgment and that the appraisal is adequate.

6."Indirect lease" means a third party leases property to a member of the credit union and the credit union then purchases the lease from the third party for the purposes of leasing the property to the member.

7."Lease servicer" means the entity that collects monthly principal and interest payments from the lessee and then forwards the payments to the purchasing credit union or maintains lease records for a fee.

8."Leasing company" means the enterprise that makes leases or assembles leases for resale to a credit union.

9."Lessee" means the party using the leased property.

10."Lessor" means the party owning the leased property.

11."Open-end lease" means the member of the credit union assumes the risk and responsibility for any difference in the estimated residual value and the actual value of the property at lease end.

12."Residual value" means the estimated fair value of the leased property at the end of the lease term.

N.D. Admin. Code 13-03-19-03 Lease requirements

1.The lease must be a net lease. In a net lease, your member assumes all the burdens of ownership, including maintenance and repair, licensing and registration, taxes, and insurance.

2.The lease must be a full payout lease. In a full payout lease, you must reasonably expect to recoup your entire investment in the leased property, plus the estimated cost of financing, from the lessee's payments and the estimated residual value of the leased property at the expiration of the lease term.

3.The amount of the estimated residual value to satisfy the full payout lease requirement shall not exceed twenty-five percent of the original cost of the leased property unless the amount above twenty-five percent is guaranteed. Estimated residual value must be reasonable in light of the leased property and all circumstances relevant to the leasing arrangement.

4.When the credit union does not own the leased property in an indirect leasing arrangement, the credit union must:

a.Obtain a full assignment of the lease. A full assignment is the assignment of all the rights, interests, obligations, and title in the lease.

b.Be named as the sole lienholder of the leased property.

c.Receive a security agreement, signed by the leasing company, granting the credit union a sole lien in the leased property and the right to take possession and dispose of the leased property in the event of a default by the lessee, a default in the leasing company's obligations to the credit union, or a material adverse change in the leasing company's financial condition.

d.Take all necessary steps to record and perfect the credit union's security interest in the leased property.

5.The credit union must retain salvage powers over the leased property.

6.The credit union must maintain a contingent liability insurance policy with an endorsement for leasing or be named as the coinsured if the credit union does not own the leased property.

The credit union must use an insurance company with a nationally recognized industry rating of at least a B+.

7.The credit union member must carry the normal liability and property insurance on the leased property. The credit union must be named as an additional insured on the liability insurance policy and as loss payee on the property insurance policy.

N.D. Admin. Code 13-03-19-04 Lease policy required

The board of directors of the credit union will formulate and maintain a written lease policy. At a minimum, the lease policy should address the following:

1.Identify acceptable lease servicers and lessors, for purchased leases only.

2.Establish aggregate volume of paper to be purchased from approved servicers and lessors, for purchased leases only.

3.Identify the geographic area where the credit union will consider purchasing or originating leases.

4.Establish lease portfolio diversification standards.

5.Set appropriate terms and conditions by type of leases.

6.Establish lease approval and origination procedures.

7.Establish prudent underwriting standards.

8.Establish lease administration procedures.

9.Establish appraisal and evaluation programs.

10.Monitor the lease portfolio and provide timely reports to the board of directors.

11.Set forth permitted exceptions to policy.

12.Require an independent credit analysis of the lessee.

13.Require the credit union to obtain collateral values, lien status, lease agreements, participation agreements, and title documentation within forty-five calendar days from the date of inception with original documentation to be maintained in the credit file.

14.Require a credit union officer or an independent third-party appraiser to conduct at inception, and annually thereafter, an inspection of the leased tangible property for all leases greater than one hundred thousand dollars and to document the credit file with the inspection report.

15.Require rental payments to be made on a periodic basis no less frequently than annually.

16.Require the term of the lease not to exceed seven years.

17.Require an annual analysis of the financial condition of the leasing company or lease servicer.

This will include the review of an annual opinion audit by a certified public accountant.

N.D. Admin. Code 13-03-19-05 Limitations

A credit union's investment in purchased leases from a single leasing company or affiliated leasing companies shall not exceed ten percent of the net worth of the credit union.

N.D. Admin. Code 13-03-19-06 Appeal to state credit union board

A credit union may appeal to the state credit union board for an increase in the limitation in purchased leases under section 13-03-19-05.

Chapter 13-03-20 Participation Loans

N.D. Admin. Code 13-03-20-01 Definitions

For purposes of this section:

1."Associated borrower" means any other person or entity with a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower. This means any person or entity named as a borrower or debtor in a loan or extension of credit, or any other person or entity, such as a drawer, endorser, or guarantor, engaged in a common enterprise with the borrower, or deriving a direct benefit from the loan to the borrower.

Exceptions to this definition for partnerships, joint ventures, and associations are as follows:

a.If the borrower is a partnership, joint venture, or association, and the other person with a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower, is a member or partner of the borrower, and neither a direct benefit nor a common enterprise exists, such other person is not an associated borrower.

b.If the borrower is a member or partner of a partnership, joint venture, or association, and the other entity with a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower is the partnership, joint venture, or association and the borrower is a limited partner of that other entity, and by the terms of a partnership or membership agreement valid under applicable law, the borrower is not held generally liable for the debts or actions of that other entity, such other entity is not an associated borrower.

c.If the borrower is a member or partner of a partnership, joint venture, or association, and the other person with a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower is another member or partner of the partnership, joint venture, or association, and neither a direct benefit nor a common enterprise exists, such other person is not an associated borrower.

2."Common enterprise" means:

a.The expected source of repayment for each loan or extension of credit is the same for each borrower and no individual borrower has another source of income from which the loan, together with the borrower's other obligations, may be fully repaid. An employer may not be treated as a source of repayment because of wages and salaries paid to an employee, unless the standards described in subdivision b of this definition are met;

b.Loans or extensions of credit are made to borrowers who are related directly or indirectly through common control, including if one borrower is directly or indirectly controlled by another borrower and:

(1)Substantial financial interdependence exists between or among the borrowers.

Substantial financial interdependence means fifty percent or more of one borrower's gross receipts or gross expenditures, on an annual basis, are derived from transactions with another borrower. Gross receipts and expenditures include gross revenues or expenses, intercompany loans, dividends, capital contributions, and similar receipts or payments; or (2)Separate borrowers obtain loans or extensions of credit to acquire a business enterprise of which those borrowers will own more than fifty percent of the voting securities or voting interests.

3."Control" means a person or entity directly or indirectly, or acting through or together with one or more persons or entities:

a.Owns, controls, or has the power to vote twenty-five percent or more of any class of voting securities of another person or entity;

b.Controls, in any manner, the election of a majority of the directors, trustees, or other persons exercising similar functions of another person or entity; or

c.Has the power to exercise a controlling influence over the management or policies of another person or entity.

4."Credit union" means any state-chartered credit union.

5."Credit union organization" means any organization as determined by the state credit union board established primarily to serve the daily operational needs of its member credit unions.

The term does not include trade associations, membership organizations principally composed of credit unions, or corporations, or other businesses which principally provide services to credit union members as opposed to corporations or businesses whose business relates to the daily in-house operations of credit unions.

6."Direct benefit" means the proceeds of a loan or extension of credit to a borrower, or assets purchased with those proceeds, which are transferred to another person or entity, other than in a bona fide arm's-length transaction where the proceeds are used to acquire property, goods, or services.

7."Eligible organization" means a credit union, credit union organization, or financial organization.

8."Financial organization" means any federally chartered or federally insured financial institution and any state or federal government agency, or its subdivisions, including the Bank of North Dakota.

9."Loan participation" means a loan where one or more eligible organizations participate pursuant to a written agreement with the originating lender, and the written agreement requires the originating lender's continuing participation throughout the life of the loan. It does not include a loan interest into a pool of loans.

10."Originating lender" means the participant with which the borrower initially or originally contracts for a loan and who, thereafter or concurrently with the funding of the loan, sells participations to other lenders.

History

• History: Effective January 1, 2007; amended effective January 1, 2019.

N.D. Admin. Code 13-03-20-02 Authorization

1.Subject to the provisions of this section, any state-chartered credit union may participate in making loans with eligible organizations within the limitations of the board of directors' written participation loan policies, provided it meets the requirements of this subsection.

a.The purchase complies with all regulatory requirements to the same extent as if the purchasing credit union had originated the loan, including the loans to one borrower provisions in 12 CFR 723.

b.A written master participation agreement shall be properly executed, acted upon by the state-chartered credit union's board of directors, or if the board has so delegated in its policy, the investment committee, loan committee, or senior management officials and retained in the state-chartered credit union's office. The master agreement shall:

(1)Be properly executed by authorized representatives of all parties under applicable law;

(2)Be properly authorized by the credit union's board of directors or, if the board has so delegated in its policy, a designated committee or senior management official, under the federally insured credit union's bylaws and applicable law; and (3)The original and copies be retained in the credit union's office.

c.Prior to purchase, the identification of the specific loan participation being purchased, either directly in the agreement or through a document that is incorporated by reference into the agreement, shall state:

(1)The interest the originating lender will retain in the loan to be participated. The retained interest must be at least ten percent of the outstanding balance of the loan through the life of the loan;

(2)The location and custodian for original loan documents;

(3)An explanation of the conditions under which parties to the agreement can gain access to financial and other performance information about a loan, the borrower, and the servicer so the parties can monitor the loan;

(4)An explanation of the duties and responsibilities of the originating lender, servicer, and participants with respect to all aspects of the participation, including servicing, default, foreclosure, collection, and other matters involving the ongoing administration of the loan; and (5)Circumstances and conditions under which participants may replace the servicer.

d.The board establishes a limit on the aggregate amount of loan participations that may be purchased from any one originating lender.

e.The board establishes limits on the amount of loan participations that may be purchased by each loan type, not to exceed a specified percentage of the credit union's net worth;

f.The board establish a limit on the aggregate amount of loan participations that may be purchased with respect to a single borrower, or group of associated borrowers, not to exceed fifteen percent of the credit union's net worth, unless this amount is waived by the state credit union board and the national credit union administration; and

g.A state-chartered credit union may sell to or purchase from any participant the servicing of any loan in which it owns a participation interest.

2.An originating lender which is a state-chartered credit union shall:

a.Originate loans only to its members;

b.Retain an interest of at least ten percent of the face amount of each loan;

c.Retain the original or copies of the loan documents; and

d.Require the credit committee or loan officer to use the same underwriting standards for participation loans used for loans that are not being sold in a participation agreement unless there is a participation agreement in place prior to the disbursement of the loan. If a participation agreement is in place prior to disbursement, either the credit union's loan policies or the participation agreement shall address any variance from nonparticipation loan underwriting standards.

3.A participant state-chartered credit union that is not an originating lender shall:

a.Participate only in loans it is empowered to grant, having a participation policy in place which sets forth the loan underwriting standards prior to entering into a participation agreement;

b.Participate in participation loans only if made to its own members or members of another participating credit union, or loans made to persons located within the purchasing credt union's field of membership by eligible organizations, or financial organizations;

c.Retain the original or a copy of the written participation loan agreement and a schedule of loans covered by the agreement; and

d.Obtain the approval of the board of directors or investment committee, loan committee, or credit manager of the disbursement of proceeds to the originating lender.

History

• History: Effective January 1, 2007; amended effective January 1, 2013; January 1, 2019.

N.D. Admin. Code 13-03-20-03 Waivers

A credit union may seek a waiver from any of the limitations in subdivision f of subsection 1 of

section 13-03-20-02. A credit union shall submit a written request to the commissioner containing an explanation for the purpose of the waiver. The commissioner may request the credit union provide documentation in support of its request. Upon receipt of the written request and all supporting documentation the request must be brought before the state credit union board for consideration. The board shall consider all relevant information related to the request including the safety and soundness of the credit union. If approved, the waiver application must be forwarded to the national credit union administration for consideration. Approval by the state credit union board is contingent on approval by the national credit union administration.

History

• History: Effective January 1, 2019.

Chapter 13-03-21 Purchase, Sale, and Pledge of Eligible Obligations

N.D. Admin. Code 13-03-21-01 Definitions

For purposes of this section:

1."Eligible obligation" means a loan or group of loans.

2."Student loan" means a loan granted to finance the borrower's attendance at an institution of higher education or at a vocational school, which is secured by and on which payment of the outstanding principal and interest has been deferred in accordance with the insurance or guarantee of the federal government, of a state government, or any agency of either.

3."Unimpaired capital and surplus" means the total of a credit union's net worth and member shares.

History

• History: Effective January 1, 2007.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-06-06

N.D. Admin. Code 13-03-21-02 Authorizations

1.Purchase.

a.A credit union may purchase, in whole or in part, within the limitations of the board of directors' written purchase policies:

(1)Eligible obligations of its members, originating from any source in the United States, if either they are loans it is empowered to grant or they are refinanced with the consent of the borrowers, within sixty days after they are purchased, so that they are loans it is empowered to grant;

(2)Eligible obligations of a liquidating credit union's individual members, from the liquidating credit union;

(3)Student loans, from any source, if the purchaser is granting student loans on an ongoing basis and if the purchase will facilitate the purchasing credit union's packaging of a pool of such loans to be sold or pledged on the secondary market; and (4)Real estate-secured loans, originating from any source, if the purchaser is granting real estate-secured loans on an ongoing basis and loans will be sold to the secondary market in the same manner as loans to the credit union's members, and loans sold include a substantial portion of loans to the credit union's members.

b.A credit union may make purchases in accordance with this subsection provided:

(1)The board of directors or investment committee, loan committee, or credit manager approves the purchase; and (2)A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the purchaser's office; and for purchases under paragraph 2 of subdivision a, any advance written approval from the national credit union administration required by section 741.8 of national credit union administration rules and regulations is obtained before consummation of such purchase.

c.The aggregate of the unpaid balance of eligible obligations under this subsection cannot exceed five percent of the unimpaired capital and surplus of the purchaser. The following can be excluded in calculating this five percent limitation:

(1)Student loans purchased in accordance with paragraph 3 of subdivision a;

(2)Real estate loans purchased in accordance with paragraph 4 of subdivision a;

(3)Eligible obligations purchased in accordance with paragraph 1 of subdivision a that are refinanced by the purchaser so that it is a loan it is empowered to grant; and (4)An indirect lending or indirect leasing arrangement that is classified as a loan and not the purchase of an eligible obligation because the credit union makes the final underwriting decision and the sales or lease contract is assigned to the credit union very soon after it is signed by the member and the dealer or leasing company.

2.Sale. A credit union may sell, in whole or in part, to any source, eligible obligations of its members, eligible obligations purchased in accordance with paragraph 2 of subdivision a of subsection 1, student loans purchased in accordance with paragraph 3 of subdivision a of subsection 1, and real estate loans purchased in accordance with paragraph 4 of subdivision a of subsection 1, within the limitations of the board of directors' written sale policies, provided:

a.The board of directors, investment committee, loan committee, or credit manager approves the sale; and

b.A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the seller's office.

3.Pledge.

a.A credit union may pledge, in whole or in part, to any source, eligible obligations of its members, eligible obligations purchased in accordance with paragraph 2 of subdivision a of subsection 1, student loans purchased in accordance with paragraph 3 of subdivision a of subsection 1, and real estate loan purchased in accordance with paragraph 4 of subdivision a of subsection 1, within the limitations of the board of directors written pledge policies, provided:

(1)The board of directors, investment committee, loan committee, or credit manager approves the pledge;

(2)Copies of the original loan documents are retained; and (3)A written agreement covering the pledging arrangement is retained in the office of the credit union that pledges the eligible obligations.

b.The pledge agreement shall identify the eligible obligations covered by the agreement.

4.Servicing. A credit union may agree to service any eligible obligation it purchases or sells in whole or in part.

5.Ten percent limitation. The total indebtedness owing to any credit union by any person, inclusive of retained and reacquired interests, shall not exceed ten percent of its unimpaired capital and surplus.

History

• History: Effective January 1, 2007; amended effective January 1, 2013; April 1, 2022.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-06-06

Chapter 13-03-22 Investment Activities

N.D. Admin. Code 13-03-22-01 Definitions

The following definitions apply to this chapter:

1."Adjusted trading" means selling an investment to a counterparty at a price above its current fair value and simultaneously purchasing or committing to purchase from the counterparty another investment at a price above its current market value.

2."Borrowing repurchase transaction" means a transaction in which the credit union agrees to sell a security to a counterparty and to repurchase the same or identical security from the counterparty at a specified future date and at a specified price.

3."Call" means an option that gives the holder the right to buy the underlying security at a specified price during a fixed time period.

4."Charitable contributions and donations" means gifts provided to assist others through contributions of staff, equipment, money, or other resources through charities that are exempt from taxation under 501(c)(3) of the Internal Revenue Code.

5."Counterparty" means a swap dealer, derivatives clearing organization, exchange, or commercial loan customers that participates as the other party in a derivatives transaction with a credit union.

6."Derivatives" means a financial contract that derives its value from the value and performance of some other underlying financial instrument or variable, such as an index or interest rate.

7."Derivatives clearing organization" has the meaning as defined by the commodity futures trading commission in 17 CFR 1.3 effective March 15, 2021.

8."Distribution in kind" means acceptance of remaining charitable donation account assets, upon termination of the account, in their original form instead of in cash resulting from the liquidation of assets.

9."Domestic interest rates" means interest rates derived in the United States and are United States dollar-denominated.

10."Earnings at risk" means the changes to earnings, typically in the short term, for example, twelve to thirty-six months, caused by changes in interest rates.

11."Economic effectiveness" means the extent to which a derivatives transaction results in offsetting changes in the interest rate risk that the transaction was, and is, intended to provide.

12."Embedded option" means a characteristic of an investment that gives the issuer or holder the right to alter the level and timing of the cashflows of the investment. Embedded options include call and put provisions and interest rate caps and floors. Since a prepayment option in a mortgage is a type of call provision, a mortgage-backed security composed of mortgages that may be prepaid is an example of an investment with an embedded option.

13."Eurodollar deposit" means a United States dollar denominated deposit in a foreign branch of a United States depository institution.

14."European financial options contract" means an option that can be exercised only on its expiration date.

15."External service provider" means any entity that provides services to management in carrying out its derivatives program and the requirements of this chapter.

16."Fair value" means the amount at which an instrument could be exchanged in a current, arms-length transaction between willing parties, as opposed to a forced or liquidation sale.

17."Financial options contract" means an agreement to make or take delivery of a standardized financial instrument upon demand by the holder of the contract as specified in the agreement.

18."Futures commission merchant" has the meaning as defined by the commodity futures trading commission in 17 CFR 1.3 effective March 15, 2021.

19."Industry-recognized information provider" means an organization that obtains compensation by providing information to investors and receives no compensation for the purchase or sale of investments.

20."Interest rate risk" means the current and prospective risk to a credit union's capital and earnings arising from movements in interest rates.

21."Introducing broker" means a futures brokerage firm that deals directly with the client, while the trade execution is done by a futures commission merchant.

22."Investment repurchase transaction" means a transaction in which an investor agrees to purchase a security from a counterparty and to resell the same or an identical security to that counterparty at a specified future date and at a specified price.

23."Margin" means the minimum amount of eligible collateral, as defined in subdivision c of subsection 3 of section 13-03-22-16, that must be deposited between parties to a derivatives transaction, as detailed in a master services agreement.

24."Master services agreement" means a document agreed upon between two parties that sets out standard terms that apply to all transactions entered into between those parties. The most common form of a master services agreement for derivatives is an international swap dealer association master agreement.

25."Maturity" means the date the last principal amount of a security is scheduled to come due and does not mean the call date or the weighted average life of a security.

26."Noncleared" means transactions that do not go through a derivatives clearing organization.

27."Put" means a financial options contract that entitles the holder to sell, entirely at the holder's option, a specified quantity of a security at a specified price at any time until the stated expiration date of the contract.

28."Qualified charity" means a charitable organization or other nonprofit entity recognized as exempt from taxation under section 501(c)(3) of the Internal Revenue Code.

29."Real estate mortgage investment conduit" means a mortgage passthrough security and is synonymous with the terms MBS and passthrough. The scope of the MBS market extends to structured mortgage securities such as collateralized mortgage obligations, real estate mortgage conduits, and strips, for which passthroughs are the most common form of collateral.

30."Registered investment adviser" means an investment advisor registered with the securities and exchange committee pursuant to the Investment Advisors Act of 1940.

31."Registered investment company" means an investment company that is registered with the securities and exchange commission under the Investment Company Act of 1940 [15 U.S.C. 80a]. Examples of registered investment companies are mutual funds and unit trust investments.

32."Residual interest" means the remainder cashflows from collateralized mortgage obligations or real estate mortgage conduits, or other mortgage-backed security transaction, after payments due bondholders and trust administrative expenses have been satisfied.

33."Security" means a share, participation, or other interest in property or in an enterprise of the issuer or an obligation of the issuer that:

a.Either is represented by an instrument issued in bearer or registered form or, if not represented by an instrument, is registered in books maintained to record transfers by or on behalf of the issuer;

b.Is of a type commonly recognized in any area in which it is issued or dealt in as a medium for investment; and

c.Either is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations.

34."Senior executive officer" means a person who participates or has authority to participate in major policymaking and decisionmaking functions of the credit union, whether or not the officer has an official title. The chief executive officer, chief financial officer, chief credit officer, president, vice president, and controller are considered senior executive officers.

35."Structured liability offering" means a share product created by a credit union with contractual option features, such as periodic caps and calls, similar to those found in structured securities or structured notes.

36."Swap dealer" has the meaning as defined by the commodity futures trading commission in 17 CFR 1.3 effective March 15, 2021.

37."Threshold amount" means an unsecured credit exposure that a party to a derivatives transaction is prepared to accept before requesting additional eligible collateral, as defined in subdivision c of subsection 3 of section 13-03-22-16, from the other party.

38."Total return" means the actual rate of return on all investments in a charitable donation account over a given period of up to five years, including realized interest, capital gains, dividends, and distributions, but exclusive of account fees, and expenses provided they were not paid to the credit union that established the account or any of its affiliates. For the purpose of this definition, affiliate is an entity the credit union has an ownership interest in, directly or indirectly, but not an ownership interest due to funding of employee benefits.

39."Weighted average life" means the weighted average time to the return of a dollar of principal.

Calculated by multiplying each portion of principal received by the time at which it is expected to be received, based on a reasonable and supportable estimate of that time, and then summing and dividing by the total amount of principal.

40."Zero coupon investment" means an investment that makes no periodic interest payments but instead is sold at a discount from its face value. The holder of a zero coupon investment realizes the rate of return through the gradual appreciation of the investment, which is redeemed at face value on a specified maturity date.

N.D. Admin. Code 13-03-22-02 Permissible investments

A credit union may invest in the following types of investments:

1.Bonds of the United States without limitation in securities issued as direct obligations of the United States government or any agency thereof and in any trust established for investing directly or collectively in such securities.

2.Bonds or evidences of debt of this state or in bonds of states of the United States.

3.Bonds or certificates of indebtedness of any county, city, or school district, issued pursuant to

authority of law, subject to a limitation of thirty percent of the assets of the credit union.

4.First lien, public utility, industrial, corporation, or association bonds, notes or other evidences of debt issued by corporations located in the United States to the extent authorized under

chapter 13-03-03. These investments must be rated in one of the four highest rating categories by a nationally recognized statistical rating organization registered with the securities and exchange commission. In the case of different ratings from different rating organizations, the lower rating applies.

5.Shares of a registered investment company or collective investment fund, as long as the prospectus of the company or fund restricts the investment portfolio to investments and investment transactions that are permissible for state-chartered credit unions.

6.Corporate credit union shares or deposits, including paid-in or membership capital. A credit union's aggregate amount of paid-in capital and membership capital in one corporate credit union is limited to two percent of its assets measured at the time of investment or adjustment.

A credit union's aggregate amount of paid-in capital and membership capital in all corporate credit unions is limited to four percent of its assets measured at the time of investment or adjustment.

7.Certificates of deposit or other deposits issued by federally insured state or national banks, mutual savings banks, trust companies, or issued by an insured financial institution located in a territory of the United States that is either insured by the federal deposit insurance corporation or by the national credit union administration. Included in these deposits are yankee dollar deposits, Eurodollar deposits, banker's acceptances, deposit notes, and bank notes with original weighted average maturities of less than five years.

8.Variable rate investments as long as the index is tied to domestic interest rates and not, for example, to foreign currencies, foreign interest rates, or domestic or foreign commodity prices, equity prices, or inflation rates.

9.A fixed rate or variable rate collateralized mortgage obligation or real estate mortgage investment conduit issued by an agency of the federal government.

10.Derivative products but only for the purposes of managing interest rate risk and subject to the limitations outlined in section 13-03-22-16.

11.Charitable donation accounts subject to the limitations outlined in section 13-03-22-17.

N.D. Admin. Code 13-03-22-03 Prohibited investments

A credit union cannot invest in the following types of investments:

1.Any privately issued collateralized mortgage obligation or real estate mortgage investment conduit.

2.Any zero coupon investment with a maturity date that is more than ten years from the settlement date.

3.Any mortgage servicing rights as an investment but may perform mortgage servicing functions as a financial service for a member as long as the mortgage loan is owned by the member.

4.Any stripped mortgage-backed securities, residual interests in collateralized mortgage obligations or real estate mortgage investment conduits, or residual interests in small business-related securities.

5.Any commercial mortgage-related security that is not permitted by chapter 13-03-03.

N.D. Admin. Code 13-03-22-04 Permissible investment activities

1.Regular way settlement and delivery versus payment basis. A credit union may only contract for the purchase or sale of a security as long as the delivery of the security is by regular way settlement and the transaction is accomplished on a delivery versus payment basis.

2.Federal funds. A credit union may sell federal funds to an institution described in subsection 4 of North Dakota Century Code section 6-06-06 and credit unions, as long as the interest or other consideration received from the financial institution is at the market rate for federal funds transactions.

3.Investment repurchase transaction. A credit union may enter into an investment repurchase transaction so long as:

a.Any securities the credit union receives are permissible investments for state-chartered credit unions; the credit union, or its agent, either takes physical possession or control of the repurchase securities or is recorded as owner of them through the federal reserve book entry securities transfer system; the credit union, or its agent receives a daily assessment of their market value, including accrued interest; and the credit union maintains adequate margins that reflect a risk assessment of the securities and the term of the transaction; and

b.The credit union has entered into signed contracts with all approved counterparties.

4.Borrowing repurchase transaction. A credit union may enter into a borrowing repurchase transaction so long as:

a.The transaction meets the requirements of subsection 3;

b.Any cash the credit union receives is subject to the borrowing limit specified in North Dakota Century Code section 6-06-19 and any investments the credit union purchases with that cash are permissible for credit unions; and

c.The investments referenced in subdivision b mature no later than the maturity of the borrowing repurchase transaction.

5.Securities lending transaction. A credit union may enter into a securities lending transaction so long as:

a.The credit union receives written confirmation of the loan;

b.Any collateral the credit union receives is a legal investment for credit unions; the credit union, or its agent, obtains a first priority security interest in the collateral by taking physical possession or control of the collateral, or is recorded as owner of the collateral through the federal reserve book entry securities transfer system; the credit union, or its agent, receives a daily assessment of the market value of the collateral, including accrued interest; and the credit union maintains adequate margin that reflects a risk assessment of the collateral and the term of the loan;

c.Any cash the credit union receives is subject to the borrowing limit specified in North Dakota Century Code section 6-06-19 and any investments the credit union purchases with that cash are permissible for credit unions and mature no later than the maturity of the transaction; and

d.The credit union has executed a written loan and security agreement with the borrower. 6.a.Trading securities. A credit union may trade securities which are permitted for credit unions to own, including engaging in when-issued trading and pair-off transactions, so long as the credit union can show that it has sufficient resources, knowledge, systems, and procedures to handle the risks.

b.A credit union must record any security it purchases or sells for trading purposes at fair value on the trade date. The trade date is the date the credit union commits, orally or in writing, to purchase or sell a security.

c.At least monthly, the credit union must give its board of directors or investment-related committee a written report listing all purchase and sale transactions of trading securities and the resulting gain or loss on an individual basis.

N.D. Admin. Code 13-03-22-05 Prohibited investment activities - Adjusted trading or short sales

A credit union may not engage in adjusted trading or short sales.

N.D. Admin. Code 13-03-22-06 Investment policies

A credit union's board of directors must establish written investment policies consistent with North Dakota Century Code chapter 6-06, this part, and other applicable laws and regulations and must review this policy at least annually. These policies may be a part of a broader asset-liability management or similarly functioning policy. Written investment policies must address the following:

1.The purposes and objectives of the credit union's investment activities;

2.The characteristics of the investments the credit union may make, including the issuer, maturity, index, cap, floor, coupon rate, coupon formula, call provision, average life, and interest rate risk;

3.How the credit union will manage interest rate risk;

4.How the credit union will manage liquidity risk;

5.How the credit union will manage credit risk, including specifically listing institutions, issuers, and counterparties that may be used, or criteria for their selection, and limits on the amounts that may be invested with each;

6.How the credit union will manage concentration risk, which can result from dealing with a single issuer or related issuers, lack of geographic distribution, holding obligations with similar characteristics like maturities and indexes, holding bonds having the same trustee, and holding securitized loans having the same originator, packager, or guarantor;

7.Who has investment authority and the extent of that authority. Those with authority must be qualified by education or experience to assess the risk characteristics of investments and investment transactions. Only officials or employees of the credit union may be voting members of an investment-related committee;

8.The broker-dealers the credit union may use;

9.The safekeepers the credit union may use;

10.How the credit union will handle an investment that, after purchase, is outside of board policy or fails a requirement of this part; and

11.How the credit union will conduct investment trading activities, if applicable, including addressing:

a.Who has purchase and sale authority;

b.Limits on trading account size;

c.Allocation of cashflow to trading accounts;

d.Stop loss or sale provisions;

e.Dollar-size limitations of specific types, quantity, and maturity to be purchased;

f.Limits on the length of time an investment may be inventoried in a trading account; and

g.Internal controls, including segregation of duties.

N.D. Admin. Code 13-03-22-07 Recordkeeping and documentation requirements

1.Credit unions must comply with all generally accepted accounting principles applicable to reports or statements required to be filed with the national credit union administration.

2.A credit union must maintain documentation for each investment transaction for as long as it holds the investment and until the documentation has been examined in accordance with North Dakota Century Code section 6-06-08. The documentation should include, when applicable, bids and prices at purchase and sale and for periodic updates, relevant disclosure documents or a description of the security from an industry-recognized information provider, financial data, and tests and reports required by credit union's investment policy and this

chapter.

3.A credit union must maintain documentation its board of directors used to approve a broker-dealer or a safekeeper for as long as the broker-dealer or safekeeper is approved and until the documentation has been examined in accordance with North Dakota Century Code

section 6-06-08.

4.A credit union must obtain an individual confirmation statement from each broker-dealer for each investment purchased or sold.

N.D. Admin. Code 13-03-22-08 Discretionary control over investments

A credit union must retain discretionary control over its purchase and sale of investments. A credit union has not delegated discretionary control to an investment adviser when the credit union reviews all recommendations from investment advisers and is required to authorize a recommended purchase or sale transaction before its execution.

N.D. Admin. Code 13-03-22-09 Credit analysis required

A credit union must conduct and document a credit analysis on an investment and the issuing entity before purchasing it, except for investments issued or fully guaranteed as to principal and interest by the United States government or its agencies, enterprises, or corporations or fully insured (including accumulated interest) by the national credit union administration or the federal deposit insurance corporation. A credit union must update this analysis at least annually for as long as it holds the investment.

N.D. Admin. Code 13-03-22-10 Notice of noncompliant investments

A credit union's board of directors must receive notice as soon as possible, but no later than the next regularly scheduled board meeting, of any investment that either is outside of board policy after purchase or has failed a requirement of this chapter. The board of directors must document its action regarding the investment in the minutes of the board meeting, including a detailed explanation of any decision not to sell it. The credit union must notify in writing the commissioner of the department of financial institutions of an investment that has failed a requirement of this chapter within five days of the board meeting.

N.D. Admin. Code 13-03-22-11 Broker-dealers

1.A credit union may purchase and sell investments through a broker-dealer as long as the broker-dealer is registered as a broker-dealer with the securities and exchange commission under the Securities Exchange Act of 1934 [15 U.S.C. 781 et seq.] or is a depository institution whose broker-dealer activities are regulated by a federal or state regulatory agency.

2.Before purchasing an investment through a broker-dealer, a credit union must analyze and annually update the following:

a.The background of any sales representative with whom the credit union is doing business;

b.Information available from state or federal securities regulators and securities industry self-regulatory organizations, such as the national association of securities dealers and the North American securities administrators association, about any enforcement actions against the broker-dealer, its affiliates, or associated personnel; and

c.If the broker-dealer is acting as the credit union's counterparty, the ability of the broker-dealer and its subsidiaries or affiliates to fulfill commitments, as evidenced by capital strength, liquidity, and operating results. The credit union should consider current financial data, annual reports, reports of nationally recognized statistical rating agencies, relevant disclosure documents, and other sources of financial information.

3.The requirements of subsection 1 do not apply when the credit union purchases a certificate of deposit or share certificate directly from a bank, credit union, or other depository institution.

N.D. Admin. Code 13-03-22-12 Safekeeping of investments

1.A credit union's purchased investments and repurchase collateral must be in the credit union's possession, recorded as owned by the credit union through the federal reserve book entry system, or held by a board-approved safekeeper under a written custodial agreement that requires the safekeeper to exercise at least ordinary care. The written custodial agreement will also include a provision that the safekeeper cannot use the credit union's securities for collateral on any borrowings of the safekeeper.

2.Any safekeeper used by a credit union must be regulated and supervised by either the securities and exchange commission, a federal or state depository institution regulatory agency, or a state trust company regulatory agency.

3.A credit union must obtain and reconcile monthly a statement of purchased investments and repurchase collateral held in safekeeping.

4.Annually, the credit union must analyze the ability of the safekeeper to fulfill its custodial responsibilities, as evidenced by capital strength, liquidity, and operating results. The credit union should consider current financial data, annual reports, reports of nationally recognized statistical rating agencies, relevant disclosure documents, and other sources of financial information.

N.D. Admin. Code 13-03-22-13 Valuing securities

1.Before purchasing or selling a security, a credit union must obtain either price quotations on the security from at least two broker-dealers or a price quotation on the security from an industry-recognized information provider. This requirement to obtain price quotations does not apply to new issues purchased at par or at original issue discount.

2.At least monthly, a credit union must determine the fair value of each security it holds. It may determine fair value by obtaining a price quotation on the security from an industry-recognized information provider, a broker-dealer, or a safekeeper.

3.At least annually, the credit union's supervisory committee or its external auditor must independently assess the reliability of monthly price quotations received from a broker-dealer or a safekeeper. The credit union's supervisory committee or external auditor must follow generally accepted auditing standards, which require either recomputation or reference to market quotations.

4.If a credit union is unable to obtain a price quotation required by this section for a particular security, then it may obtain a quotation for a security with substantially similar characteristics.

N.D. Admin. Code 13-03-22-14 Monitoring securities

1.At least monthly, a credit union must prepare a written report setting forth, for each security held, the fair value and dollar change since the prior month-end, with summary information for the entire portfolio.

2.At least quarterly, a credit union must prepare a written report setting forth the sum of fair values of all fixed and variable rate securities held, including deposits in other financial institutions, that have one or more of the following features:

a.Embedded options;

b.Remaining maturities greater than three years; or

c.Coupon formulas that are related to more than one index or are inversely related to, or multiples of, an index.

3.When the amount calculated in subsection 2 is greater than a credit union's net worth, the report described in that paragraph must provide a reasonable and supportable estimate of the potential impact, in percentage and dollar terms, of an immediate and sustained parallel shift in market interest rates of plus or minus three hundred basis points on:

a.The fair value of each security in the credit union's portfolio;

b.The fair value of the credit union's portfolio as a whole; and

c.The credit union's net worth.

4.If the credit union does not have an investment-related committee, then each member of its board of directors must receive a copy of the reports described in subsections 1 through 3. If the credit union has an investment-related committee, then each member of the committee must receive copies of the reports, and each member of the board of directors must receive a summary of the information in the reports.

N.D. Admin. Code 13-03-22-15 Application required

A state-chartered credit union may invest in any other investment or engage in any other investment activity that a federal-chartered credit union may invest in or engage in subject to an application to the state credit union board and approval from the state credit union board, subject to any limitations the state credit union board may place on the credit union.

N.D. Admin. Code 13-03-22-16 Derivatives

1.A state-chartered credit union may enter into derivatives that:

a.Are for the purpose of managing interest rate risk;

b.Denominated in United States dollars;

c.Based on domestic interests; and

d.Not used to create structured liability offerings for members or nonmembers.

2.A state-chartered credit union may not engage in embedded options required under generally accepted accounting principles to be accounted for separately from the host contract.

3.To enter into derivative transactions, a credit union must:

a.Have an executed master services agreement with a counterparty. Such agreement must be reviewed by legal counsel with expertise in similar types of transactions to ensure the agreement reasonably protects the interest of the credit union;

b.Use only the following counterparties:

(1)For exchange-traded and cleared derivatives: swap dealers, introducing brokers, or futures commission merchants, or both, that are current registrants of the commodity futures trading commission; or (2)For noncleared derivative transactions: swap dealers that are current registrants of the commodity futures trading commission.

(3)Commercial loan customers for the purpose of limiting the interest rate risk associated with their specific loan transactions.

c.Utilize contracted margin requirements with a maximum margin threshold amount of two hundred fifty thousand dollars; and

d.For noncleared derivative transactions, accept as eligible collateral, for margin requirements, only the following: cash (United States dollars), United States treasuries, government-sponsored enterprise debt, United States government agency debt, government-sponsored enterprise residential mortgage-backed security passthrough securities, and United States government agency residential mortgage-backed security passthrough securities.

e.Operate according to comprehensive written policies and procedures for control, measurement, and management of derivative transactions. At a minimum, the policies and procedures must address the requirements of this rule and any additional limitations imposed by the credit union's board of directors. A credit union's board of directors shall review the policies and procedures described in this section at least annually and update them when necessary.

4.A credit union engaging in derivative transactions must have sufficient reporting on the activity to include:

a.Board reporting. At least quarterly, a credit union's senior executive officers shall deliver a comprehensive derivatives report, as described in subdivision c to the credit union's board of directors.

b.Senior executive officer and asset liability or similarly functioning committee. At least monthly, credit union staff shall deliver a comprehensive derivatives report, as described in subdivision c to the credit union's senior executive officers and, if applicable, the credit union's asset liability or similarly functioning committee.

c.Comprehensive derivatives management report. At a minimum, the reports required in subdivisions a and b must include:

(1)Identification of any areas of noncompliance with any provision of this section or the credit union's policies, and the planned remediation of such noncompliance;

(2)An itemization of the credit union's individual transactions subject to this section, the current values of such transactions, and each individual transaction's intended use for interest rate risk mitigation; and (3)A comprehensive view of the credit union's risk reports, including interest rate risk calculations with details of the transactions subject to this section.

d.Prepurchase due diligence. Before executing any derivatives transaction, management shall identify and document the circumstances that lead to the decision to execute the derivatives transaction, specify the strategy management will employ, and demonstrate the economic effectiveness of the transaction.

e.Retention requirement. Reports required by this section must, at a minimum, be retained for as long as it holds the derivative and until the documentation has been examined in accordance with North Dakota Century Code section 6-06-08.

f.Management shall notify the commissioner within five days of entering its first derivatives contract.

g.Notification of noncompliance. Notification of any noncompliance as part of the derivatives management report required in paragraph 1 of subdivision c must be submitted to the commissioner and to the credit union's board of directors within thirty days.

5.Personnel and processes required to manage a derivatives program include:

a.A credit union using derivative transactions must internally possess the following experience and competencies:

(1)Before entering into the initial derivatives transaction, a credit union's board members must receive training that provides a general understanding of derivative transactions, and the knowledge required to provide strategic oversight of the credit union's derivatives program.

(2)Any person that becomes a board member after the initial derivatives transaction must receive the same training, updated if necessary, as required by paragraph 1.

b.A credit union's senior executive officers must be able to understand, approve, and provide oversight for the derivatives program. These individuals must have a comprehensive understanding of how the derivative transactions fit into the credit union's interest rate risk management process.

c.To engage in the derivative transactions, a credit union must employ staff with experience in the following areas:

(1)Staff must be qualified to understand and oversee asset/liability risk management, including the appropriate role of the transactions subject to this section. Staff must be qualified to understand and undertake or oversee the appropriate modeling and analytics related to net economic value and earnings at risk;

(2)Staff must be qualified to understand and oversee appropriate accounting and financial reporting for derivatives in accordance with generally accepted accounting principles;

(3)Staff must be qualified to undertake or oversee derivative trade executions; and (4)Staff must be qualified to evaluate counterparty, collateral, and margin risk as described in subdivisions b and c of subsection 3.

d.To effectively manage the transactions subject to this section, management shall ensure that effective accounting, review processes, and internal controls have been established, to include:

(1)Within the first year after commencing its first derivatives transaction, management shall have an internal controls review that is focused on the integration and introduction of the program, and ensure the timely identification of weaknesses in internal controls, accounting, and all operational and oversight processes. This review must be performed by a qualified independent entity;

(2)Any credit union engaging in derivative transactions pursuant to this section must obtain an annual opinion audit and be compliant with generally accepted accounting principles for all derivatives-related accounting and reporting;

(3)Before executing its first derivative transaction, management shall establish a collateral management process that monitors the credit union's collateral and margining requirements and ensures that its transactions are collateralized in accordance with the collateral requirements of this section and the credit union's master services agreement with its counterparty;

(4)Before executing its first derivative transaction, management shall establish and document a liquidity review process to analyze and measure potential liquidity needs related to its derivatives program and the additional collateral requirements due to changes in interest rates. Management shall, as part of its liquidity risk management, calculate and track contingent liquidity needs in the event a transaction needs to be novated or terminated, and shall establish effective controls for liquidity exposures arising from both market or product liquidity and instrument cash flows; and (5)Appropriate controls and segregation of duties.

6.A credit union using derivatives may use external service providers to support or conduct aspects of its derivative management program, provided:

a.The external service provider, including affiliates, does not:

(1)Act as a counterparty to any derivative transactions that involve the credit union;

(2)Act as a principal or agent in any derivative transactions that involve the credit union; or (3)Have discretionary authority to execute any of the credit union's derivative transactions.

b.The credit union has the internal capacity, experience, and skills to oversee and manage any external service providers it uses;

c.Management documents the specific uses of external service providers in its policies and procedures; and

d.The credit union retains internal staff to meet the requirements of subsection 5.

7.If a credit union has violated any part of this section, is or has engaged in unsafe or unsound practices, or is in unsafe or unsound condition, the commissioner may provide written notice to the credit union prohibiting them from entering into new derivatives transactions, effective upon receipt of the notice. The commissioner may also require divesture of derivative products. The credit union can appeal this prohibition or divesture to the state credit union board, and must provide written notice of their intent to appeal to the department within twenty days of receipt of the prohibition or divesture requirement as outlined in North Dakota Century Code section 6-01-04.2.

History

• History: Effective April 1, 2022.

N.D. Admin. Code 13-03-22-17 Charitable donation accounts

Credit unions may invest in charitable donation accounts provided:

1.The charitable donation account is structured as a hybrid charitable and investment vehicle used to provide charitable contributions and donations to a qualified charity.

2.The maximum book value of investment in all charitable donation accounts is limited to five percent of credit union net worth. Any credit union in violation of this limit must bring the investment into compliance with this limit within thirty days of the violation.

3.The charitable donation accounts will be held as a segregated custodial account or special

purpose entity and must be specifically identified as a charitable donation account.

4.Any trust established for the charitable donation account must be regulated by a state or federal financial regulatory agency, and any trustee or persons making investment decisions for the charitable donation account must be a registered investment advisor or regulated by a state or federal agency.

5.The board of directors of the credit union has established policies governing the account consistent with the requirements of this section and safe and sound business practices.

6.The terms and conditions of the written agreement between the parties to the charitable donation account must:

a.Be consistent with the provisions of this section and safe and sound business practices.

b.Require the charitable donation account to make charitable contributions and donations only to charities named that are exempt from taxation under section 501(c)(3) of the Internal Revenue Code.

c.Document the investment strategies and risk tolerances the administrator must follow.

d.Require all aspects of the account, including distributions and liquidations be accounted for in accordance with generally accepted accounting principles.

e.Identify the frequency of distributions to qualified charities.

7.The charitable donation account makes a distribution no less frequently than every five years, and distributes a minimum of fifty-one percent of the account's total return over the period since the last distribution.

8.Upon termination and liquidation of the charitable donation account, credit unions may receive a distribution in kind of remaining assets or cash if the assets are otherwise permissible investments for a credit union.

History

• History: Effective April 1, 2022.

Chapter 13-03-23 Credit Union Service Organizations

N.D. Admin. Code 13-03-23-01 Authority to invest in credit union service organizations or subsidiary credit union service organizations

State credit unions may invest in credit union service organizations or subsidiary credit union service organizations, subject to the limitation provided for in this chapter and subject to approval by order of the board.

History

• History: Effective January 1, 2007; amended effective January 1, 2019.

N.D. Admin. Code 13-03-23-02 Definitions

Unless the context otherwise requires, terms in this chapter have the following meanings:

1."Affiliated" means those credit unions that have either invested in or made loans to a credit union service organization.

2."Credit union service organization" means a financial service organization created by a credit union or group of credit unions or a league service organization to provide services not available from credit unions themselves.

3."Immediate family member" means a spouse or other family member living in the same household.

4."Net worth" means the retained earnings balance of the credit union at quarter end as determined under generally accepted accounting principles. Retained earnings consist of undivided earnings, regular reserves, and any other appropriations designated by management or regulatory authorities. For low income-designated credit unions, net worth also includes secondary capital accounts that are uninsured and subordinate to all other claims, including claims of creditors, shareholders, and the national credit union share insurance fund. For any credit union, net worth does not include the allowance for loan and lease loss account.

5."Officials or senior management employees" means members of the board of directors, supervisory committee, or credit committee; chief executive officer (typically this individual holds the title of president or treasurer or manager); any assistant chief executive officers, e.g., assistant president, vice president, or assistant treasurer or manager; and the chief financial officer or comptroller.

6."Subsidiary credit union service organization" means any entity in which a credit union service organization has an ownership interest of any amount, if that entity is engaged primarily in providing products or services to credit unions or credit union members or credit union service organizations.

History

• History: Effective January 1, 2007; amended effective January 1, 2013; January 1, 2019.

N.D. Admin. Code 13-03-23-03 Application

An application to establish, make an initial investment, or increase the amount of an investment in a credit union service organization must be submitted to the commissioner in writing and must contain the following:

1.A full explanation and complete documentation of the proposed credit union service organization;

2.A listing of proposed management and their qualifications;

3.A proposed business plan with financial projections for at least three years;

4.The amount of investment authority requested; and

5.Any additional information as requested by the board or commissioner.

Once an application is determined to be complete by the commissioner, it must be submitted to the board for consideration. The board shall issue an order to either approve or disapprove the application.

Upon notice of disapproval, the applicant has fifteen days to petition for a hearing before the board.

History

• History: Effective January 1, 2007; amended effective January 1, 2013.

N.D. Admin. Code 13-03-23-04 Hearing

A public hearing by the board may be required on applications to invest in credit union service organizations whenever the board or commissioner determines that it is in the public interest to hold such a hearing or whenever a credit union or party requests an opportunity to be heard is granted.

Notice of hearing on an application will be issued at least thirty days prior to the hearing on the application.

History

• History: Effective January 1, 2007.

N.D. Admin. Code 13-03-23-05 Permissible services and activities

1.A state credit union, upon being granted authority under section 13-03-23-03, and complying with all applicable state licensing requirements, may invest in those credit union service organizations or subsidiary credit union service organizaitons that provide one or more of the following services and activities:

a.Checking and currency services:

(1)Check cashing;

(2)Coin and currency services;

(3)Money order, savings bonds, travelers checks; and purchase and sale of United States mint commemorative coins services; and (4)Stored value products;

b.Clerical, professional, and management services:

(1)Accounting services;

(2)Courier services;

(3)Credit analysis;

(4)Facsimile transmissions and copying services;

(5)Internal audits for credit unions;

(6)Locator services;

(7)Management and personnel training and support;

(8)Marketing services;

(9)Research services;

(10)Supervisory committee audits; and (11)Employee leasing services;

c.Business loan origination, including the authority to buy and sell participation interests in such loans;

d.Consumer mortgage loan origination, including the authority to buy and sell participation interests in such loans;

e.Electronic transaction services:

(1)Automated teller machine services;

(2)Credit card and debit card services;

(3)Data processing;

(4)Electronic fund transfer services;

(5)Electronic income tax filing;

(6)Payment item processing;

(7)Wire transfer services; and (8)Cyber financial services;

f.Financial counseling services:

(1)Developing and administering individual retirement accounts and Keogh, deferred compensation, and other personnel benefit plans;

(2)Estate planning;

(3)Financial planning and counseling;

(4)Income tax preparation;

(5)Investment counseling;

(6)Retirement counseling; and (7)Business counseling and consultant services;

g.Fixed asset services:

(1)Management, development, sale, or lease of fixed assets; and (2)Sale, lease, or servicing of computer hardware or software;

h.Insurance brokerage or agency:

(1)Agency for sale of insurance;

(2)Provision of vehicle warranty programs;

(3)Provision of group purchasing programs; and (4)Real estate settlement services;

i.Leasing:

(1)Personal property; and (2)Real estate leasing of excess credit union service organizations property;

j.Loan support services:

(1)Debt collection services;

(2)Loan processing, servicing, and sales;

(3)Sale of repossessed collateral;

(4)Real estate settlement services;

(5)Purchase and servicing of nonperforming loans; and (6)Referral and processing of loan applications for members whose loan applications have been denied by the credit union;

k.Record retention, security, and disaster recovery services:

(1)Alarm-monitoring and other security services;

(2)Disaster recovery services;

(3)Microfilm, microfiche, optical and electronic imaging, and CD-ROM data storage and retrieval services;

(4)Provision of forms and supplies; and (5)Record retention and storage;

l.Securities brokerage services;

m.Shared credit union branch (service center) operations;

n.Student loan origination, including the authority to buy and sell participation interests in such loans;

o.Travel agency services;

p.Trust and trust-related services:

(1)Acting as administrator for prepaid legal service plans;

(2)Acting as trustee, guardian, conservator, estate administrator, or in any other fiduciary capacity; and (3)Trust services;

q.Real estate brokerage services;

r.Credit union service organization investments in noncredit union service organization service providers: in connection with providing a permissible service, a credit union service organization or subsidiary credit union service organization may invest in a noncredit union service organization service provider. The amount of the credit union service organization's investment is limited to the amount necessary to participate in the service provider, or a greater amount if necessary to receive a reduced price for goods and services;

s.Credit card loan origination; and

t.Payroll processing services.

If a credit union service organization or subsidiary credit union service organization intends on offering any services and activities not previously authorized under an application submitted in accordance with section 13-03-23-03, the credit union shall notify the commissioner at least twenty days prior to any change of operations.

2.The board may issue an order approving any service or activity which is not expressly authorized in subsection 1.

3.Based upon supervisory, legal, or safety and soundness reasons, the board or commissioner may at any time limit any of the credit union service organization or subsidiary credit union service organizations activities expressly listed in subsection 1 or adopted by the board under subsection 2.

4.The board in granting approval for a service or activity shall consider all relevant factors, including:

a.Whether the credit union service organization or subsidiary credit union service organizations management or staff possesses adequate expertise or skills to perform the service or activity; and

b.Whether the proposed activity or service is reasonably expected to be profitable.

History

• History: Effective January 1, 2007; amended effective January 1, 2013; January 1, 2019.

N.D. Admin. Code 13-03-23-06 Limitations on investments in and loans to credit union service organizations or subsidiary credit union service organizations

The following limitations apply to state credit unions for investments in credit union service organizations or subsidiary credit union service organizations:

1.A credit union may not invest in shares, stocks, or obligations of credit union service organizations or subsidiary credit union service organizations in an amount exceeding ten percent of its net worth.

2.Credit unions may not make loans to a credit union service organization or subsidiary credit union service organizations in which it is affiliated in an amount exceeding ten percent of its net worth.

History

• History: Effective January 1, 2007; amended effective January 1, 2013; January 1, 2019.

N.D. Admin. Code 13-03-23-07 Conflict of interest

Individuals who serve as officials or senior management employees of an affiliated state credit union, and immediate family members of such individuals, may not receive any salary, commission, investment income, or other income or compensation from a credit union service organization, or subsidiary credit union service organization, either directly or indirectly, or from any person being served through the credit union service organization or subsidiary credit union service organization.

This provision does not prohibit an official or senior management employee of a state credit union from assisting in the operation of a credit union service organization or subsidiary credit union service organization, provided the individual is not compensated by the credit union service organization or subsidiary credit union service organization. Further, the credit union service organization or subsidiary credit union service organization may reimburse the state credit union for the services provided by the individual.

History

• History: Effective January 1, 2007; amended effective January 1, 2019.

N.D. Admin. Code 13-03-23-08 Examinations

A credit union shall allow the commissioner or the commissioner's examiner, at the commissioner's discretion, to inspect or examine all the books or records of the credit union service organization and subsidiary credit union service organization for the purpose of determining compliance with this chapter and to determine the value of the credit union's investment or loans. In order to accomplish the forgoing, each credit union must have a written agreement in place with the credit union service organization and any subsidiary credit union service organization, prior to investing in or lending to the credit union service organization or subsidiary credit union service organization, and prior to the credit union service organization investing in or lending to the subsidiary credit union service organization, providing that the credit union service organization and subsidiary credit union service organization will:

1.Provide the department with the right to inspect or examine all records of the credit union service organization;

2.Account for all its transactions in accordance with generally accepted accounting principles;

3.Prepare quarterly financial statements and provide the credit union with a copy of these statements within forty-five days of the quarter end;

4.Obtain an annual financial statement audit of its financial statements by a licensed certified public accountant in accordance with generally accepted auditing standards. A wholly owned credit union service organization is not required to obtain a separate annual financial statement audit if that wholly owned credit union service organization is included in the annual consolidated financial statement audit of the investing credit union; and

5.Comply with applicable federal, state, and local laws.

History

• History: Effective January 1, 2007; amended effective January 1, 2013; January 1, 2019.
• Law Implemented: NDCC 6-01-04, 6-01-09, 6-06-06, 6-06-08

N.D. Admin. Code 13-03-23-09 Structure of a credit union service organization and subsidiary credit union service organization

1.A credit union and a credit union service organization or subsidiary credit union service organization must be operated in a manner that demonstrates to the public the separate corporate existence of the credit union and the credit union service organization or subsidiary credit union service organization. Good business practices dictate each must operate so that:

a.Its respective business transactions, accounts, and records are not intermingled;

b.Each observes the formalities of its separate corporate procedures;

c.Each is adequately financed as a separate unit in the light of normal obligations reasonably foreseeable in a business of its size and character;

d.Each is held out to the public as a separate enterprise;

e.The credit union does not dominate the credit union service organization or subsidiary credit union service organization to the extent the credit union service organization or subsidiary credit union service organization is treated as a department of the credit union; and

f.Unless the credit union has guaranteed a loan obtained by the credit union service organization or subsidiary credit union service organization, all borrowings by the credit union service organization or subsidiary credit union service organization indicate that the credit union is not liable.

2.Prior to a credit union investing in a credit union service organization or subsidiary credit union service organization, the credit union shall obtain written legal advice as to whether the credit union service organization or subsidiary credit union service organization is established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in, or loaned to, the credit union service organization or subsidiary credit union service organization. In addition, if a credit union invests in, or makes a loan to, a credit union service organization or subsidiary credit union service organization, and that credit union service organization or subsidiary credit union service organization plans to change its structure, the federally insured credit union also shall obtain prior written legal advice that the credit union service organization or subsidiary credit union service organization will remain established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in, or loaned to, the credit union service organization or subsidiary credit union service organization. The written legal advice must address factors that have led courts to "pierce the corporate veil," such as inadequate capitalization, lack of separate corporate identity, common boards of directors and employees, control of one entity over another, and lack of separate books and records. The written legal advice must be provided by independent legal counsel of the investing credit union or the credit union service organization or subsidiary credit union service organization.

History

• History: Effective January 1, 2019.

Chapter 13-03-24 Fidelity Bond and Insurance Coverage of Credit Unions

N.D. Admin. Code 13-03-24-01 Fidelity bond required

All credit unions are required to have a fidelity bond for credit union employees and officials and for other insurance coverage for losses such as theft, holdup, vandalism, and similar losses caused by persons outside the credit union.

History

• History: Effective January 1, 2007.

N.D. Admin. Code 13-03-24-02 Annual review required

1.The board of directors of each credit union must at least annually review its fidelity and other insurance coverage to ensure that it is adequate in relation to the potential risks facing the credit union and the minimum requirements set by the state credit union board.

2.The board of directors shall review all applications for purchase or renewal of its fidelity bond coverage. The board shall pass a resolution approving the purchase or renewal of fidelity bond coverage and delegate one member of the board, who is not an employee of the credit union, to sign the purchase or renewal agreement and all attachments; provided, however, that no board members may be a signatory on consecutive purchase or renewal agreements for the same fidelity bond coverage policy.

N.D. Admin. Code 13-03-24-03 Acceptable bond forms

At a minimum, the bond coverage must:

1.Be purchased in an individual policy from a company holding a certificate of authority from the secretary of the treasury.

2.Include fidelity bonds that cover fraud and dishonesty by all employees, directors, officers, supervisory committee members, and credit committee members. Fidelity bond coverage may also cover activities of a credit union service organization provided the credit union owns more than fifty percent of the credit union service organization or the credit union service organization or it is organized by the credit union for the exclusive benefit of the credit union’s employees.

3.Include an option for the liquidating agent to purchase coverage in the event of an involuntary liquidation that extends the discovery period for a covered loss for at least one year after liquidation.

4.In the case of a voluntary liquidation, remain in effect, or provide that the discovery period is extended, for at least four months after the final distribution of assets.

5.Be a bond form that has been approved by the national credit union administration board.

N.D. Admin. Code 13-03-24-04 Required minimum amount of coverage

1.The minimum required amount of fidelity bond coverage for any single loss is computed based upon a credit union's total assets.

AssetsMinimum Bond $0 to $4,000,000Lesser of total assets or $250,000 $4,000,001 to $50,000,000$100,000 plus $50,000 for each million or fraction thereof over $1,000,000 $50,000,001 to $500,000,000$2,550,000 plus $10,000 for each million or fraction thereof over $50,000,000, to a maximum of $5,000,000 Over $500,000,000One percent of assets, rounded to the nearest hundred million, to a maximum of $9,000,000

2.This is the minimum coverage required, but a credit union's board of directors should purchase additional coverage when circumstances warrant. In making this determination, a board of directors should consider its own internal risk assessment, its fraud trends and loss experience, and factors, such as its cash on hand, cash in transit, and the nature and risks inherent in any expanded services it offers, such as wire transfer and remittance services.

3.While the above is the minimum amount of bond coverage, credit unions should maintain increased coverage equal to the greater of either of the following amounts within thirty days of discovery of the need for such increase:

a.The amount of the daily cash fund, i.e., daily cash plus anticipated daily money receipts on the credit union's premises; or

b.The total amount of the credit union's money in transit in any one shipment.

c.Increased coverage is not required pursuant to this subsection when the credit union temporarily increases its cash fund because of unusual events which cannot reasonably be expected to recur.

4.Any aggregate limit of liability provided for in a fidelity bond policy must be at least twice the single loss limit of liability. This requirement does not apply to optional insurance coverage.

5.Any proposal to reduce the required bond coverage must be approved in writing by the state credit union board at least twenty days in advance of the effective date of the reduction.

N.D. Admin. Code 13-03-24-05 Maximum allowable deductibles

1.The maximum amount of allowable deductibles is computed based on a credit union's asset size, as follows:

AssetsMaximum Deductible $0 - $100,000No deductibles allowed $100,001 - $250,000$1,000 $250,001 - $1,000,000$2,000 Over $1,000,000$2,000 plus 1/1000 of total assets up to a maximum deductible of $200,000; for credit unions that have received a composite capital, asset quality, management, earnings, liquidity, and sensitivity to market risk rating of "1" or "2" for the last two full examinations and maintained a net worth classification of well capitalized for the six immediately preceding quarters, the maximum deductible is $1,000,000

2.The deductibles may apply to one or more insurance clauses in a policy. Any deductibles in excess of the above amounts must receive the prior written permission of the state credit union board.

3.A deductible may not exceed ten percent of a credit union's net worth.

N.D. Admin. Code 13-03-24-06 Additional coverage required

The state credit union board may require additional coverage when the board determines that a credit union's current coverage is inadequate. The credit union must purchase this additional coverage within thirty days.

History

• History: Effective January 1, 2007.
• Law Implemented: NDCC 6-01-06

Chapter 13-03-25 Supervisory Committee Audits and Verifications

N.D. Admin. Code 13-03-25-01 Definitions

1."Compensated person" means any accounting or auditing professional, excluding a credit union employee, who is compensated for performing more than one supervisory committee audit or verification of members' accounts per calendar year, or both.

2."Confirm" or "confirmation" refers to a written verification with a third-party person or organization pertaining to an account balance or condition. Examples of confirmation letters are bank or corporate credit union account confirmation, investment account confirmation, borrowing or line of credit confirmation, attorney letter confirmation, and member share or loan account confirmation.

3."Financial statement audit" or "opinion audit" means an audit of the financial statements of a credit union performed in accordance with GAAS by an independent person who is licensed by the state. The objective of a financial statement audit is to express an opinion as to whether those financial statements of the credit union present fairly, in all material respects, the financial position and the results of its operations and its cashflows in conformity with GAAP, as defined herein.

4."GAAP" means generally accepted accounting principles, which refers to the conventions, rules, and procedures which define accepted accounting practice. GAAP includes both broad general guidelines and detailed practices and procedures, provides a standard by which to measure financial statement presentations, and encompasses not only accounting principles and practices but also the methods of applying them.

5."GAAS" means generally accepted auditing standards, which refers to the standards approved and adopted by the American institute of certified public accountants which apply when an independent, licensed certified public accountant audits financial statements. Auditing standards differ from auditing procedures in that "procedures" address acts to be performed, whereas "standards" measure the quality of the performance of those acts and the objectives to be achieved by use of the procedures undertaken. In addition, auditing standards address the auditor's professional judgment exercised in performing the audit and in preparing the report of the audit.

6."Independent" means the impartiality necessary for the dependability of the compensated auditor's findings. Independence requires the exercise of fairness toward credit union officials, members, creditors, and others who may rely upon the report of a supervisory committee audit report.

7."Internal control" means the process, established by the credit union's board of directors, officers, and employees designed to provide reasonable assurance of reliable financial reporting and safeguarding of assets against unauthorized acquisition, use, or disposition.

8."Materiality" refers to a statement, fact, or item, which, giving full consideration to the surrounding circumstances as they exist at the time, it is of such a nature that its disclosure, or the method of treating it, would be likely to influence or to make a difference in the judgment and conduct of a reasonable person. Materiality should take into account ending balances as well as the volume of transactions in an account. Typically, balances or transaction volume greater than five percent of the credit union's net worth should be considered material.

9."Reportable conditions" means a matter coming to the attention of the independent, compensated auditor which in the auditor's judgment represents a significant deficiency in the design or operation of the internal control structure of the credit union which could adversely affect its ability to record, process, summarize, and report financial data consistent with the representations of management in the financial statements.

10."Review" refers to the examination of board minutes, policies and procedures, and a review of a sample portion of activities, rather than all of the activities.

11."State-licensed person" means a certified public accountant or public accountant who is licensed by the state to perform accounting or auditing services for that credit union.

12."Test" refers to procedures applied to the individual items that compose an account balance or class of transactions. The tests involve confirmation, inspection, or observation procedures to provide evidence about the recorded amount.

N.D. Admin. Code 13-03-25-02 General responsibilities of the supervisory committee

1.Basic. The supervisory committee is responsible for ensuring that the board of directors and management of the credit union:

a.Meet required financial reporting objectives; and

b.Establish practices and procedures sufficient to safeguard members' assets.

2.Specific. To carry out the responsibilities set forth in subsection 1, the supervisory committee must determine whether:

a.Internal controls are established and effectively maintained to achieve the credit union's financial reporting objectives which must be sufficient to satisfy the requirements of the supervisory committee audit, verification of members' accounts and its additional responsibilities;

b.The credit union's accounting records and financial reports are promptly prepared and accurately reflect operations and results;

c.The relevant plans, policies, and control procedures established by the board of directors are properly administered; and

d.Policies and control procedures are sufficient to safeguard against error, conflict of interest, self-dealing, and fraud.

3.Mandates. In carrying out the responsibilities set forth in subsections 1 and 2, the supervisory committee must:

a.Ensure that the credit union adheres to the measurement and filing requirements for reports filed with the commissioner for the department of financial institutions under North Dakota Century Code section 6-06-08 and with the national credit union administration board under part 741.6 of national credit union administration rules and regulations;

b.Perform or obtain a supervisory committee audit, as prescribed in section 13-03-25-04 and under North Dakota Century Code section 6-06-15;

c.Verify or cause the verification of members' accounts against the record of the credit union, as prescribed in section 13-03-25-06; and

d.Act to avoid imposition of sanctions for failure to comply with the requirements of this

chapter, as prescribed in sections 13-03-25-07 and 13-03-25-08.

N.D. Admin. Code 13-03-25-03 Audit responsibility of the supervisory committee

1.Annual audit requirement. A credit union is required to obtain an annual supervisory committee audit or financial statement audit that occurs at least once every calendar year (period of performance) and must cover the period elapsed since the last audit period (period effectively covered).

2.Financial statement audit. Any credit union with assets greater than twenty-five million dollars as of its previous year-end call report must obtain an annual audit of its financial statements performed in accordance with GAAS by an independent person who is licensed to do so in this state. Any credit union with assets less than twenty-five million dollars may also choose this option. Prior to obtaining a financial statement audit, the credit union will make a good-faith attempt to obtain a copy of the peer review report of the auditing firm directly from the auditing firm to ensure the firm's auditing practices and procedures are in conformance with GAAS.

3.Supervisory committee audit. Any credit union with assets less than twenty-five million dollars, if not obtaining a financial statement audit, must obtain or perform a supervisory committee audit. This audit:

a.Must be completed by a qualified independent party such as a supervisory committee, board of directors, internal auditor, accounting professional, or others who can demonstrate qualifications and independence.

b.Must at a minimum document a review of:

(1)Board of director minutes to determine whether there are any material changes to the credit union's activities or condition that are relevant to the areas to be reviewed in the audit.

(2)Test and confirm material asset and liability accounts, including:

(a)Loans;

(b)Cash on deposit;

(c)Investments;

(d)Shares; and (e)Borrowings.

(3)Test material equity, income, and expense accounts.

(4)Test for unrecorded liabilities.

(5)Review key internal controls, including:

(a)Bank reconciliation procedures;

(b)Cash controls;

(c)Dormant account controls;

(d)Wire and automated clearing house transfer controls;

(e)Loan approval and disbursement procedures;

(f) Controls over accounts of employees and officials;

(g)Other real estate owned; and (h)Foreclosed and repossessed assets.

(6)Test the mathematical accuracy of the allowance for loan and lease losses account and ensure the methodology is properly applied.

(7)Test loan delinquency and charge-offs.

N.D. Admin. Code 13-03-25-04 Requirements for verification of accounts

1.Verification obligation. The supervisory committee, at least every two years, shall cause the accounts of members to be verified against the records of the treasurer of the credit union.

2.Methods. Any of the following methods may be used to verify members' passbooks and accounts, as appropriate:

a.Controlled verification. A controlled verification of one hundred percent of members' share and loan accounts.

b.Statistical method. A sampling method which provides for:

(1)Random selection;

(2)A sample which is representative of the population from which it is selected;

(3)An equal choice of selecting each dollar in the population;

(4)Sufficient accounts in both number and scope on which to base conclusions concerning management's financial reporting objectives; and (5)Additional procedures to be performed if evidence provided by confirmations alone is not sufficient.

c.Nonstatistical method. When the verification is performed by an independent person licensed by the state, the auditor may choose among the sampling methods set forth in subdivisions a and b and nonstatistical sampling methods consistent with GAAS if such methods provide for:

(1)Sufficient accounts in both number and scope on which to base conclusions concerning management's financial reporting objectives to provide assurance that the general ledger accounts are fairly stated in relation to the financial statements taken as a whole;

(2)Additional procedures to be performed by the auditor if evidence provided by confirmations alone is not sufficient; and (3)Documentation of the sampling procedures used and of their consistency with GAAS, to be provided to the commissioner of the department of financial institutions upon request.

3.Retention of records. The supervisory committee must retain the records of each verification of members' passbooks and accounts until it completes the next verification of members' passbooks and accounts.

N.D. Admin. Code 13-03-25-05 Assistance from outside, compensated person

1.Unrelated to officials. A compensated auditor who performs a supervisory committee audit on behalf of a credit union may not be related by blood or marriage to any management employee, member of either the board of directors, the supervisory committee, or the credit committee, or loan officer of that credit union.

2.Engagement letter. The engagement of a compensated auditor to perform all or a portion of the scope of a financial statement audit or supervisory committee audit shall be evidenced by an engagement letter. In all cases, the engagement must be contracted directly with the supervisory committee. The engagement letter must be signed by the compensated auditor and acknowledged therein by the supervisory committee prior to commencement of the engagement.

3.Contents of letter. The engagement letter shall:

a.Specify the terms, conditions, and objections of the engagement;

b.Identify the basis of accounting to be used;

c.If a supervisory committee guide audit, include an appendix setting forth the procedures to be performed;

d.Specify the rate of, or total, compensation to be paid for the audit;

e.Provide that upon completion of the engagement letter, the auditor shall deliver to the supervisory committee a written report of the audit and notice in writing, either within the report or communicated separately, of any internal control reportable conditions or irregularities or illegal acts, if any, which come to the auditor's attention during the normal course of the audit, i.e., no notice required if none noted;

f.Specify a target date of delivery of the written reports with such delivery date enabling the credit union to meet its annual audit requirements;

g.Certify that department of financial institution staff or national credit union administration staff, or both, will be provided unconditional access to the complete set of original working papers, either at the offices of the credit union or at a mutually agreed-upon location, for purposes of inspections; and

h.Acknowledge that working papers shall be retained for a minimum of three years from the date of the written report.

4.Complete scope. If the engagement is to perform a supervisory committee guide audit intended to fully meet the requirements of subdivision b of subsection 3 of section 13-03-25-03, the engagement letter shall certify that the audit will address the complete scope of that engagement.

5.Exclusions from scope. If the engagement is to perform a supervisory committee guide audit which will exclude any item required by the applicable section, the engagement letter shall:

a.Identify the excluded items;

b.State that, because of the exclusions, the resulting audit will not, by itself, fulfill the scope of the supervisory committee audit; and

c.Caution that the supervisory committee will remain responsible for fulfilling the scope of a supervisory committee audit with respect to the excluded items.

N.D. Admin. Code 13-03-25-06 Audit report and working paper maintenance and access

1.Audit report. Upon completion or receipt, or both, of the written report of a financial statement audit or a supervisory committee audit, the supervisory committee must verify that the audit was performed and reported in accordance with the terms of the engagement letter prescribed herein. The supervisory committee must submit the reports to the board of directors and provide a summary of the results of the audit to the members of the credit union orally or in writing at the next annual meeting of the credit union. If a member so requests, the supervisory committee shall provide the member access to the full audit report. If the department of financial institutions or the national credit union administration so requests, the supervisory committee shall provide either the department of financial institutions or national credit union administration a copy of each of the audit reports it receives or produces.

2.Working papers. The supervisory committee shall be responsible for preparing and maintaining, or making available, a complete set of original working papers supporting each supervisory committee audit. The supervisory committee shall, upon request, provide the department of financial institutions or national credit union administration staff unconditional access to such working papers, either at the offices of the credit union or at a mutually agreed-upon location, for purposes of inspecting such working papers.

N.D. Admin. Code 13-03-25-07 Sanctions for failure to comply with this chapter

Failure of a supervisory committee or its independent compensated auditor or other person, or any of them, to comply with the requirements of this section, or the terms of the engagement letter required by this section, is ground for:

1.The commissioner to reject the supervisory committee audit and provide a reasonable opportunity to correct deficiencies;

2.The commissioner to impose the remedies available in section 13-03-25-08, provided any of the conditions specified therein is present; and

3.The national credit union administration board to seek formal administrative sanctions against the supervisory committee or its independent, compensated auditor, or both, pursuant to

section 206(r) of the Federal Credit Union Act [12 U.S.C. 1786(r)].

N.D. Admin. Code 13-03-25-08 Statutory audit remedies for credit unions

1.Audit by alternative licensed person. The state credit union board may compel a credit union to obtain a supervisory committee audit which meets the minimum requirements of

section 13-03-25-03 and which is performed by an independent person who is licensed by the state for any fiscal year in which any of the following three conditions is present:

a.The supervisory committee has not obtained an annual financial statement audit or performed a supervisory committee audit;

b.The supervisory committee has obtained a financial statement audit or performed a supervisory committee audit which does not meet the requirements of this chapter; or

c.The credit union has experienced serious and persistent recordkeeping deficiencies as defined in subsection 3.

2.Financial statement audit required. The state credit union board may compel a credit union to obtain a financial statement audit performed in accordance with GAAS by an independent person who is licensed by the state, even if such audit is not required by section 13-03-25-03, for any fiscal year in which the credit union has experienced serious and persistent recordkeeping deficiencies as defined in subsection 3. The objective of a financial statement audit performed under this subsection is to reconstruct the records of the credit union sufficiently to allow an unqualified or, if necessary, a qualified opinion on the credit union's financial statements. An adverse opinion or disclaimer of opinion should be the exception rather than the norm.

3.Serious and persistent recordkeeping deficiencies defined. A recordkeeping deficiency is serious if the state credit union board reasonably believes that the board of directors and management of the credit union have not timely met financial reporting objectives and established practices and procedures sufficient to safeguard members' assets. A serious recordkeeping deficiency is persistent when it continues beyond a usual, expected, or reasonable period of time.

Chapter 13-03-26 Interest Rate Risk

N.D. Admin. Code 13-03-26-01 Definitions

1."Gap analysis" is a simple interest rate risk measurement method that reports the mismatch between rate sensitive assets and rate sensitive liabilities over a given time period. Gap can only suffice for simple balance sheets that primarily consist of short-term bullet type investments and non-mortgage-related assets.

2."Income simulation" is an interest rate risk measurement method used to estimate earnings exposure to changes in interest rates. An income simulation analysis projects interest cashflows of all assets, liabilities, and off-balance sheet instruments in a credit union's portfolio to estimate future net interest income over a chosen time frame. Simulations typically include evaluations under a base-case scenario, and instantaneous parallel rate shocks, and may include alternate interest rate scenarios.

3."Interest rate risk" means the risk that changes in market rates will adversely affect a credit union's net economic value or earnings or both. Interest rate risk generally arises from a mismatch between the timing of cashflows from fixed rate instruments, and interest rate resets of variable rate instruments, on either side of the balance sheet. As interest rates change, earnings or net economic value may decline.

4."Net economic value" measures the effect of interest rates on the market value of net worth by calculating the present value of assets minus the present value of liabilities. This calculation measures the long-term interest rate risk in a credit union's balance sheet at a fixed point in time. By capturing the impact of interest rate changes on the value of all future cashflows, net economic value provides a comprehensive measurement of interest rate risk. Net economic value computations demonstrate the economic value of net worth under current interest rates and shocked interest rate scenarios.

History

• History: Effective January 1, 2019.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-06-06

N.D. Admin. Code 13-03-26-02 Interest rate risk policy and program requirements

1.Any credit union that has assets of less than fifty million dollars must maintain a basic written policy that provides a credit union board-approved framework for managing interest rate risk.

2.Any credit union that has assets of fifty million dollars or more is required to have an interest rate risk policy and program that incorporates the following elements into their interest rate risk program:

a.Board-approved interest rate risk policy.

b.Oversight by the board of directors and implementation by management.

c.Risk measurement systems assessing the interest rate risk sensitivity of earnings and asset and liability values.

d.Internal controls to monitor adherence to interest rate risk limits.

e.Decisionmaking that is informed and guided by interest rate risk measures.

3.The board of directors shall establish adequacy of an interest rate risk policy and its limits.

This must be either a separate policy or part of other written policies. The policy must be consistent with the credit union's business strategies and reflect the board's risk tolerance, taking into account the credit union's financial condition and risk measurement systems and methods commensurate with the balance sheet structure. The policy must state actions and authorities required for exceptions to policy, limits, and authorizations.

4.The policy established to address interest rate risk must identify responsibilities and procedures for identifying, measuring, monitoring, controlling, and reporting interest rate risk, and establish risk limits. A written policy will:

a.Identify committees, persons, or other parties responsible for review of the credit union's interest rate risk exposure;

b.Direct appropriate actions to ensure management takes steps to manage interest rate risk so that interest rate risk exposures are identified, measured, monitored, and controlled;

c.State the frequency with which management will report on measurement results to the board to ensure routine review of information that is current and at least quarterly and in sufficient detail to assess the credit union's interest rate risk profile;

d.Set risk limits for interest rate risk exposures based on selected measures, such as limits for changes in repricing or duration gaps, income simulation, asset valuation, or net economic value;

e.Choose tests, such as interest rate shocks, that the credit union will perform using the selected measures;

f.Provide for periodic review of material changes in interest rate risk exposures and compliance with board-approved policy and risk limits;

g.Provide for assessment of the interest rate risk impact of any new business activities prior to implementation such as evaluating the interest rate risk profile of a new product or service; and

h.Provide for at least an annual evaluation of policy to determine whether it is still commensurate with the size, complexity, and risk profile of the credit union.

5.Interest rate risk policy limits must maintain risk exposures within prudent levels.

6.To implement the board's interest rate risk policy, management shall:

a.Develop and maintain adequate interest rate risk measurement systems;

b.Evaluate and understand interest rate risk exposures;

c.Establish an appropriate system of internal controls, such as establishing separation between the risk taker and interest rate risk measurement staff;

d.Allocate sufficient resources for an effective interest rate risk program. For example, a complex credit union with an elevated interest rate risk profile likely will necessitate a greater allocation of resources to identify and focus on interest rate risk exposures;

e.Develop and support competent staff with technical expertise commensurate with the interest rate risk program;

f.Identify the procedures and assumptions involved in implementing the interest rate risk measurement systems;

g.Establish clear lines of authority and responsibility for managing interest rate risk; and

h.Provide a sufficient set of reports to ensure compliance with board-approved policies.

7.Credit unions shall have interest rate risk measurement systems that capture and measure all material and identified sources of interest rate risk. An interest rate risk measurement system quantifies the risk contained in the credit union's balance sheet and integrates the important sources of interest rate risk faced by a credit union in order to facilitate management of its risk exposures. This must include:

a.Model and analysis assumptions that are reasonable and supportable;

b.Documentation of any changes to assumptions based on observed information;

c.Monitoring of positions with uncertain maturities, rates and cashflows, such as nonmaturity shares, fixed rate mortgages where prepayments may vary, adjustable rate mortgages, and instruments with embedded options, such as calls; and

d.Interest rate risk calculation techniques, measures, and tests to be sufficiently rigorous to capture risk. Some options to calculate this risk include:

(1)Gap analysis for noncomplex or low-risk balance sheets;

(2)Income simulation; and (3)Net economic value.

8.Prudent internal controls must be established as permitted by the size, structure, and risk profile of the credit union.

9.Credit unions with large or complex balance sheets shall establish prudent risk mitigation processes which include:

a.A policy that provides for the use of outside parties to validate the tests and limits commensurate with the risk exposure and complexity of the credit union;

b.Interest rate risk measurement systems that report compliance with policy limits as shown both by risks to earnings and net economic value of equity under a variety of defined and reasonable interest rate scenarios;

c.The effect of changes in assumptions on interest rate risk exposure results such as the impact of slower or faster prepayments on earnings and economic value; and

d.Enhanced levels of separation between risk taking and risk assessment such as assignment of resources to separate the investments function from interest rate risk measurement, and interest rate risk monitoring and oversight.

History

• History: Effective January 1, 2019.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-06-06

Chapter 13-03-27 Liquidity and Contingency Funding Plans

N.D. Admin. Code 13-03-27-01 Policy requirements

1.Any credit union that has assets of less than fifty million dollars shall maintain a basic written policy that provides a credit union board-approved framework for managing liquidity and a list of contingent liquidity sources that can be employed under adverse circumstances.

2.Any credit union that has assets of fifty million dollars or more shall establish and document a contingency funding plan that meets the requirements of subsection 4.

3.In addition to the requirement specified in subsection 2 to establish and maintain a contingency funding plan, any credit union that has assets of two hundred fifty million dollars or more shall establish and document access to at least one contingent federal liquidity source for use in times of financial emergency and distressed economic circumstances. These credit unions shall conduct advance planning and periodic testing to ensure contingent funding sources are readily available when needed. A credit union subject to this subsection may demonstrate access to a contingent federal liquidity source by:

a.Maintaining regular membership in the central liquidity facility, as described in 12 CFR

part 725;

b.Maintaining membership in the central liquidity facility through an agent, as described in 12 CFR part 725; or

c.Establishing borrowing access at the federal reserve discount window by filing the necessary lending agreements and corporate resolutions to obtain credit from a federal reserve bank pursuant to 12 CFR part 201.

4.A credit union shall have a written contingency funding plan commensurate with its complexity, risk profile, and scope of operations that sets out strategies for addressing liquidity shortfalls in emergency situations. The contingency funding plan may be a separate policy or may be incorporated into an existing policy such as an asset/liability policy, a funds management policy, or a business continuity policy. The contingency funding plan must address, at a minimum, the following:

a.The sufficiency of the institution's liquidity sources to meet normal operating requirements as well as contingent events;

b.The identification of contingent liquidity sources;

c.Policies to manage a range of stress environments, identification of some possible stress events, and identification of likely liquidity responses to such events;

d.Lines of responsibility within the institution to respond to liquidity events;

e.Management processes that include clear implementation and escalation procedures for liquidity events; and

f.The frequency the institution will test and update the plan.

5.A credit union is subject to the requirements of subsections 2 or 3 when two consecutive national credit union administration call reports show its assets to be at least fifty million dollars or two hundred fifty million dollars, respectively. A credit union has one hundred twenty days from the effective date of that second call report to meet the greater requirements.

History

• History: Effective January 1, 2019.
• General Authority: NDCC 6-01-04
• Law Implemented: NDCC 6-06-06

Chapter 13-03-28 Loan Workouts, Loan Modifications, and Nonaccrual Policy

N.D. Admin. Code 13-03-28-01 Definitions

1."Cash basis" method of income recognition is set forth in generally accepted accounting principles and means while a loan is in nonaccrual status, some or all of the cash interest payments received may be treated as interest income on a cash basis as long as the remaining recorded investment in the loan, after charge-off of identified losses, if any, is deemed to be fully collectible.

2."Charge-off" means a direct reduction (credit) to the carrying amount of a loan carried at amortized cost resulting from uncollectability with a corresponding reduction (debit) of the allowance for loan and lease loss account. Recoveries of loans previously charged off should be recorded when received.

3."Cost recovery" method of income recognition means equal amounts of revenue and expense are recognized as collections are made until all costs have been recovered, postponing any recognition of profit until that time.

4."Credit grading system" means a formal process that identifies and assigns a relative credit score to each commercial loan as set forth under chapter 13-03-06.

5."Deferral" means deferring a contractually due payment on a closed-end loan without affecting the other terms, including maturity, of the loan. The account is shown current upon granting the deferral.

6."Extension" means extending monthly payments on a closed-end loan and rolling back the maturity by the number of months extended. The account is shown current upon granting the extension. If extension fees are assessed, they should be collected at the time of the extension and not added to the balance of the loan.

7."In the process of collection" means collection of the loan is proceeding in due course either:

a.Through legal action, including judgment enforcement procedures; or

b.In appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future, generally within the next ninety days.

8."Loan classifications" means all loans meeting the definition of substandard, doubtful, or loss in accordance with accepted industry and regulatory guidance and as assigned during examinations.

9."New loan" means the terms of the revised loan are at least as favorable to the credit union, having terms are market-based, and profit driven, as the terms for comparable loans to other customers with similar collection risks who are not refinancing or restructuring a loan with the credit union, and the revisions to the original debt are more than minor.

10."Past due" means a loan is determined to be delinquent in relation to its contractual repayment terms including formal restructures, and must consider the time value of money.

Credit unions may use the following method to recognize partial payments on "consumer credit," which includes credit extended to individuals for household, family, and other personal expenditures, including credit cards, and loans to individuals secured by their personal residence, including home equity and home improvement loans. A payment equivalent to ninety percent or more of the contractual payment may be considered a full payment in computing past due status.

11."Re-age" means returning a past due account to current status without collecting the total amount of principal, interest, and fees that are contractually due.

12."Recorded investment in a loan" means the loan balance adjusted for any unamortized premium or discount and unamortized loan fees or costs, less any amount previously charged off, plus recorded accrued interest.

13."Renewal" means underwriting a matured, closed-end loan generally at its outstanding principal amount and on similar terms.

14."Rewrite" means significantly changing the terms of an existing loan, including payment amounts, interest rates, amortization schedules, or its final maturity.

15."Total reserves" means, for the purpose of this section, net worth as defined in chapter 13-03-06 plus the allowance for loan and lease loss account.

16."Troubled debt restructure" loans are as defined in generally accepted accounting principles.

17."Well secured" means the loan is collateralized by:

a.A perfected security interest in, or pledges of, real or personal property, including securities with an estimable value, less cost to sell, sufficient to recover the recorded investment in the loan, as well as a reasonable return on that amount; or bBy the guarantee of a financially responsible party who has demonstrated support of the credit by making loan payments or injecting cash or otherwise improving the financial position of the business to allow it to make loan payments.

18."Workout loans" include types of workout loans to borrowers in financial difficulties include re-agings, extensions, deferrals, renewals, or rewrites. Borrower retention programs, new loans unless used to restructure or pay existing loans, skip-a-pay programs or like loans are not encompassed within this definition.

N.D. Admin. Code 13-03-28-02 Loan workout policy and monitoring requirements

1.The board and management shall adopt and adhere to an explicit written policy and standards that control the use of loan workouts, and establish controls to ensure the policy is consistently applied. These policies must:

a.Be commensurate with the size and complexity of the credit union;

b.Define eligibility requirements, under what conditions the credit union will consider a loan workout, including establishing limits on the number of times an individual loan may be modified;

c.Ensure credit union makes loan workout decisions based on the borrower's renewed willingness and ability to repay the loan;

d.Establish sound controls to ensure loan workout actions are appropriately structured;

e.Prohibit additional advances to finance credit union fees or commissions. Advances to cover third party fees such as appraisals or property taxes are permissible;

f.Either prohibit the financing of accrued interest into the loan principal also referred to as capitalizing interest or require a policy allowing for the capitalization of interest only if it is in the best interest of both the borrower and the credit union. If capitalizing of interest is allowed, the policy must require:

(1)Compliance with all consumer compliance laws and regulations.

(2)Documentation showing the borrower's ability to repay the debt.

(3)Provide written and accurate disclosures consistent with consumer compliance laws.

(4)Appropriate accounting and reporting of the loans accrual and delinquency status.

(5)Consideration on how to apply modifications consistently.

(6)Consideration for options to allow missed payments to be made at the end of a loan to limit delinquency.

(7)Safeguards, such as additional board reporting to avoid masking risk in the loan portfolio.

(8)Procedures to avoid delaying loss recognition resulting in an inaccurate allowance for loan and lease losses account or loan valuations.

(9)Procedures to avoid overstating income or credit union net worth.

(10)Effective internal controls.

g.Require documentation that demonstrates the borrower is willing and able to repay the loan; and

h.Require workout loans to be accurately classified; for commercial loans be risk rated with the credit union's credit grading system; be consistent with accepted industry and regulatory guidance, including federal financial institutions examination council's uniform retail classification and account management policy; and accurately identify loans for impairment testing consistent with generally accepted accounting principles.

2.Loan policy must require documented workout arrangements that consider and balance the best interests of both the borrower and the credit union.

3.Management and the board of directors shall implement comprehensive and effective risk management and internal controls. This must include:

a.Thresholds based on aggregate volume of loan workout activity which trigger enhanced reporting to the board of directors;

b.Monitoring of total loan classifications in relation to the credit union's total reserves;

c.A written charge-off policy that it is consistently applied and consistent with industry standards; and

d.A process capable of identifying, documenting, and aggregating any loan that is re-aged, extended, deferred, renewed, or rewritten, including the frequency and extent such action has been taken, and aggregate these loans by loan type.

History

• History: Effective January 1, 2019; amended effective April 1, 2022.

N.D. Admin. Code 13-03-28-03 Past due status workout loans including troubled debt restructure past due status

1.The past due status of all loans must be calculated consistent with loan contract terms, including amendments made to loan terms through a formal restructure. Credit unions shall report delinquency on the call report consistent with this policy.

2.Troubled debt restructure status must be determined and reported without the application of materiality threshold exclusions.

N.D. Admin. Code 13-03-28-04 Loan nonaccrual policy and procedures

1.Policy or procedure must prohibit the accrual of interest or fees on any loan upon which principal or interest has been in default for a period of ninety days or more.

2.Policy or procedure must require loans to be placed in nonaccrual status if maintained on a cash or cost recovery basis under generally accepted accounting principles because of deterioration in the financial condition of the borrower, or for which payment in full of principal or interest is not expected.

3.Policy or procedure must allow nonaccrual noncommercial loan to be restored to accrual status when:

a.Its past due status is less than ninety days, generally accepted accounting principles does not require it to be maintained on the cash or cost recovery basis, and the credit union is plausibly assured of repayment of the remaining contractual principal and interest within a reasonable period;

b.When it otherwise becomes both well secured and in the process of collection; or

c.The asset is a purchased impaired loan and it meets the criteria under generally accepted accounting principles for accrual of income under the interest method specified therein.

4.Policy or procedure must allow nonaccrual commercial loans to be restored to accrual status provided the following conditions are satisfied:

a.The restructuring and any chargeoff taken on the loan are supported by a current, well documented credit evaluation of the borrower's financial condition and prospects for repayment under the revised terms.

b.Repayment performance is demonstrated and would involve timely payments under the restructured loan's terms of principal and interest in cash or cash equivalents. In returning the member business workout loan to accrual status, sustained historical repayment performance for a reasonable time prior to the restructuring may be taken into account. Such a restructuring must improve the collectability of the loan in accordance with a reasonable repayment schedule and does not relieve the credit union from the responsibility to promptly charge off all identified losses.

5.After a formal restructure of a member business loan, if the restructured loan has been returned to accrual status, the loan otherwise remains subject to the nonaccrual standards of this rule. If any interest payments received while the member business loan was in nonaccrual status were applied to reduce the recorded investment in the loan the application of these payments to the loan's recorded investment must not be reversed and interest income must not be credited. Likewise, accrued but uncollected interest reversed or charged off at the point the member business workout loan was placed on nonaccrual status cannot be restored to accrual; it can only be recognized as income if collected in cash or cash equivalents from the member.

Article 13-04 Consumer Finance

Chapter 13-04-01 Small Loans [Repealed]

N.D. Admin. Code 13-04-01 Small Loans [Repealed]

ARTICLE 13-04

CONSUMER FINANCE

Chapter 13-04-01Small Loans [Repealed] 13-04-02Collection Agencies 13-04-03Code of Ethical Conduct

CHAPTER 13-04-01

SMALL LOANS [Repealed effective November 1, 1997]

Chapter 13-04-02 Collection Agencies

N.D. Admin. Code 13-04-02-01 Definitions

1."Debt collector" means any collection agency, employee of a collection agency, and any person engaging, directly or indirectly, in debt collection, and includes any person who sells, or offers to sell, forms represented to be a collection system, device, or scheme, intended or calculated to be used to collect debts and the person is required to be licensed under North Dakota Century Code chapter 13-05.

2."Debtor" means any person who is subject to debt.

3."Person" means a person as defined under North Dakota Century Code section 1-01-49.

History

• Law Implemented: NDCC 13-05-01, 13-05-02

N.D. Admin. Code 13-04-02-02 Prohibited advertising and communications

No collection agency or debt collector shall:

1.Publish or cause to be published any list of debtors, except for credit reporting purposes, advertise or threaten to advertise for sale any debt as a means of forcing payment thereof, or use similar devices or methods of intimidation.

2.Communicate with debtors in a misleading or deceptive manner by using the stationery of a lawyer, forms or instruments which only lawyers are authorized to prepare, or instruments which simulate the form and appearance of judicial process.

3.Exercise authority on behalf of a creditor to employ the services of lawyers unless the creditor has specifically authorized the agency in writing to do so, and the agency's course of conduct is always consistent with a true relationship of attorney and client between the lawyer and the creditor.

4.Refuse to return any debt and all valuable papers deposited with a debt upon written request of the creditor, claimant, or forwarder after tender of such amounts due and owing to the agency within thirty days after such request; neglect, refuse, or intentionally fail to account to its clients for all money collected within forty-five days from the last day of the month in which the same is collected; or refuse or fail to furnish at intervals of not less than ninety days upon written request of the claimant or forwarder, a written report upon debts received from such claimant or forwarder.

5.In collection letters or publications, or in any communication, oral or written, threaten wage garnishment or legal suit without an objective intention to engage a lawyer and commence legal action upon the debtor's failure to comply with the request or demand made.

6.Use or employ constables, sheriffs, or any other officer authorized to serve legal papers in connection with the collection of a debt, except when performing their legally authorized duties.

History

• Law Implemented: NDCC 13-05-02, 13-05-06

N.D. Admin. Code 13-04-02-03 Debt collectors - Approval

Licensed collection agencies may only appoint debt collectors who are of good moral character, are knowledgeable in collection agency practices and ethics, have a good credit reputation, and have a reputation for fair and honest dealings. The name and address of a person appointed as a debt collector must be forwarded to the department by the licensed collection agency.

History

• History: Amended effective July 1, 1984; July 1, 1998; April 1, 2013.
• Law Implemented: NDCC 13-05-03(4)

N.D. Admin. Code 13-04-02-04 Prohibited practices

No debt collector may:

1.Perform legal services, furnish legal advice, or falsely represent, directly or by implication, that the debt collector is an attorney.

2.Solicit assignments of claims for the purpose of suit or at the instigation of an attorney.

3.Institute judicial proceedings on behalf of other persons except on an assigned debt.

4.Communicate with debtors in the name of an attorney or upon stationery or other written matter bearing an attorney's name.

5.Make any demand for or payment of money constituting a share of compensation for services performed or to be performed by an attorney in collecting a debt.

6.Violate sections 804 through 810 of the Federal Fair Debt Collection Practices Act [Pub. L. 90-321; 91 Stat. 876 through 880; 15 U.S.C. 1692b through 1692h].

History

• History: Amended effective July 1, 1984; October 1, 1997; April 1, 2013.

N.D. Admin. Code 13-04-02-05 Threats or coercion prohibited

No debt collector may collect or attempt to collect any debt by means of any threat, coercion, or attempt to coerce. Without limiting the general application of the foregoing, no debt collector may:

1.Use, or expressly or implicitly threaten the use of violence or other criminal means, to cause harm to the person, reputation, or property of any person.

2.Accuse or threaten to accuse any person of fraud or any other crime, or any conduct which, if true, would tend to disgrace such other person, or in any way subject the person to ridicule or any conduct which, if true, would tend to disgrace the person, or in any way subject the person to the ridicule or contempt of society.

3.Make to another person, including any credit reporting agency, false accusations, or threats of false accusations, that a debtor is willfully refusing to pay a just debt.

4.Threaten to sell or assign to another the obligation of the debtor with an attending representation or implication that the result of such sale or assignment would be that the debtor would lose any defense to the debt or would be subjected to harsh, vindictive, or abusive collection attempts.

5.Represent that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person, unless such action is lawful and the debt collector or creditor intends and is legally entitled to bring such action.

N.D. Admin. Code 13-04-02-06 Harassment or abuse prohibited

No debt collector may oppress, harass, or abuse any person in connection with the collection of or attempt to collect any debt alleged to be due and owing by that person or another. Without limiting the general application of the foregoing, no debt collector may:

1.Use profane or obscene language or language that is intended to abuse the hearer or reader.

2.Place telephone calls without disclosure to the debtor of the caller's true identity, including name and collection agency.

3.Cause expense to any person in the form of long distance telephone tolls, telegram fees, or other charge incurred by a medium of communications, by concealment of the true purpose of the notice, letter, message, or communication.

4.Cause a telephone to ring or engage any person in telephone conversation repeatedly or continuously, or at unusual times or times known to be inconvenient.

N.D. Admin. Code 13-04-02-07 Unreasonable publication prohibited

No debt collector may unreasonably publicize information relating to any alleged indebtedness or debtor. Without limiting the general application of the foregoing, no debt collector may:

1.Communicate any information relating to a debtor's indebtedness to any employer or the employer's agent except as reasonably necessary for legal process or to effectuate a past judgment judicial remedy.

2.Disclose, publish, or communicate information relating to a debtor's indebtedness to any relative or family member of the debtor, excluding the husband or wife, except through proper legal action or process or with the express consent of the debtor.

3.Disclose, publish, or communicate any information relating to a debtor's indebtedness to any other person, by publishing or posting any list of debtors, commonly known as deadbeat lists, by advertising for sale any claim to enforce payment of a debt, or in any manner other than through proper legal action, process, or proceeding.

4.Use any form of communication to the debtor, which ordinarily may be seen by any other person, that displays or conveys any information about the alleged debt other than the return address and phone number of the debt collector.

N.D. Admin. Code 13-04-02-08 Fraudulent, deceptive, or misleading representations prohibited

No debt collector may use any fraudulent, deceptive, or misleading representation or means to collect or attempt to collect debts or to obtain information concerning debtors. Without limiting the general application of the foregoing, no debt collector may:

1.Use any name while engaged in the collection of debts other than the debt collector's true name unless the assumed name is registered with the department as an alias for the debt collector.

2.Make misleading representations in any communication made to collect or attempt to collect a debt or to obtain or attempt to obtain information about a debtor.

3.Falsely represent that the debt collector has information in the debt collector's possession or something of value for the debtor in order to solicit or discover information about the debtor.

4.Fail to clearly disclose the name and full business address of the person to whom the debt has been assigned or is owed at the time of making any demand for money.

5.Falsely represent or imply that any debt collector is vouched for, bonded by,affiliated with, or is an instrumentality, agent, or official of this state or any agency of federal, state, or local government.

6.Falsely represent the character, extent, or amount of a debt against a debtor, or of its status in any legal proceeding.

7.Use, distribute, or sell any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by a court, an official, or any other legally constituted or authorized authority, or which creates a false impression about its source, authorization, or approval.

8.Represent that an existing obligation of the debtor may be increased by the addition of attorney's fees, investigation fees, service fees, or any other fees or charges when in fact such fees or charges may not legally be added to the existing obligation.

9.Falsely represent, or give a false impression about the status or true nature of or the services rendered by the debt collector or the debt collector's business.

History

• History: Amended effective July 1, 1984; October 1, 1997; April 1, 2013.

N.D. Admin. Code 13-04-02-09 Unfair or unconscionable means prohibited

No debt collector may use unfair or unconscionable means to collect or attempt to collect any debt.

Without limiting the general application of the foregoing, no debt collector may:

1.Seek or obtain any written statement or acknowledgment in any form that specifies that a debtor's obligation is one incurred for necessaries of life where the original obligation was not in fact incurred for such necessaries.

2.Seek or obtain any written statement or acknowledgment in any form containing an affirmation of any obligation by a debtor who has been declared bankrupt, without clearly disclosing the nature and consequences of such affirmation and the fact that the debtor is not legally obligated to make such affirmation.

3.Collect or attempt to collect from the debtor any part or all of the debt collector's fee or charge for services rendered.

4.Collect or attempt to collect any interest or other charge, fee, or expense incidental to the principal obligation unless such interest or incidental fee, charge, or expense is expressly authorized by law or by the agreement creating the obligation and legally chargeable to the debtor.

5.Communicate with a debtor whenever it appears that the debtor is represented by an attorney and the attorney's name and address are known unless the attorney has failed to respond to a communication within thirty days or the debt collector has been advised by the debtor or attorney that the attorney no longer represents the debtor.

N.D. Admin. Code 13-04-02-10 Postal violations prohibited

No debt collector may use, distribute, sell, or prepare for use, any written communication that violates or fails to conform to United States postal laws and regulations.

History

• History: Amended effective July 1, 1984.

N.D. Admin. Code 13-04-02-11 Trust account - Deposits - When to be made

The client's share of collections must be deposited into a trust account in a financial institution insured by a federal agency within forty-eight hours.

History

• History: Amended effective July 1, 1984.

N.D. Admin. Code 13-04-02-12 Disbursements from the trust account

Disbursements of twenty-five dollars or more from the trust account to clients must be made no later than thirty days after the monthly closing for the month in which the money was collected.

Disbursements of less than twenty-five dollars must be made no later than sixty days after the monthly closing for the month in which any portion of the money was first collected.

History

• History: Effective July 1, 1984.

N.D. Admin. Code 13-04-02-13 Receipts for collection of currency and coin

No debt collector may accept currency or coin as payment for a debt without issuing an original receipt to the debtor and maintaining a duplicate receipt as a part of the debt collector's permanent records.

History

• History: Effective July 1, 1984; amended effective April 1, 2013.

N.D. Admin. Code 13-04-02-14 Statement furnished upon request

A collection agency, upon a written or oral request by the debtor, shall provide a written statement to the debtor indicating the current balance of the remaining debt, the total of all interest charged, and a record of all payments applied to that debt. The statement must include all activity since the debt was turned over to the collection agency or since the date of any previously furnished statement. A collection agency is not required to furnish a requested written statement more frequently than once every six months.

History

• History: Effective October 1, 1997.

Chapter 13-04-03 Code of Ethical Conduct

N.D. Admin. Code 13-04-03-01 Canon 1

Maintain a high standard of business principles and never be guilty of conduct which will bring reproach upon the industry or the commissioner of financial institutions.

History

• History: Amended effective June 1, 2002.

N.D. Admin. Code 13-04-03-02 Canon 2

Not have been engaged or be engaged in any activities supporting or aiding any organization that advocates the overthrow of the constitutionally established government of its country.

N.D. Admin. Code 13-04-03-03 Canon 3

Comply with all city, county, state, and federal laws relating to the ownership and operation of a collection business and provision of collection services.

N.D. Admin. Code 13-04-03-04 Canon 4

Do business under a designation or business name or identification that does not mislead creditors, consumers, or the general public into believing that it is some other type of business than it is.

N.D. Admin. Code 13-04-03-05 Canon 5

Operate under a name or in any manner which does not imply that such agency is a branch of or associated with any department of the federal government or of any state or municipal government, and refrain from using any seal, insignia, envelope, or other device which simulates that of any government department or agency.

N.D. Admin. Code 13-04-03-06 Canon 6

Ensure that all personnel are familiar with the laws under which the collection business is conducted, the rules and regulations, and the code of ethics and that they fully respond to and comply with them.

N.D. Admin. Code 13-04-03-07 Canon 7

Delegate assigned tasks only to qualified personnel.

N.D. Admin. Code 13-04-03-08 Canon 8

Never knowingly misrepresent an institution or organization with which affiliated, nor knowingly represent affiliation with institutions or organizations when such affiliation does not exist.

N.D. Admin. Code 13-04-03-09 Canon 9

Not discriminate on grounds of race, color, creed, or national origin in the selection of creditors represented, in the selection of staff employees, or in dealings with consumers.

N.D. Admin. Code 13-04-03-10 Canon 10

Maintain a sufficiently strong financial position to reasonably assure the agency's continued operation.

N.D. Admin. Code 13-04-03-11 Canon 11

Comply with the guides against debt collection deception of the federal trade commission as they apply to collection agency practices.

N.D. Admin. Code 13-04-03-12 Canon 12

Comply with the Federal Communications Act, with particular attention to sections 203 and 223 as they refer to the use of the telephone. These sections specifically prohibit the use of the telephone in a manner that is for the purpose of and calculated to "frighten, abuse, torment, or harass another" . . . or for . . . "unlawful purpose".

Article 13-05 Money Brokers

Chapter 13-05-01 Money Brokers

N.D. Admin. Code 13-05-01-01 No advance fee - Exception

Except as specified by this section, no money broker may accept any type of fee in advance, to include expense deposits, from a potential borrower for the procurement of a loan. A money broker may accept an advance expense deposit which may not exceed the money broker's good-faith estimate of the actual cost of any appraisal or credit reports performed by an independent appraiser or independent credit reporting agency and required by the originating lender for the evaluation of the potential borrower's loan application. Any expense deposit that exceeds the actual cost of any appraisal or credit reports must be promptly refunded to the borrower or credited to the borrower's account at the time of the loan closing.

History

• History: Effective February 1, 1984; amended effective October 1, 1984.

N.D. Admin. Code 13-05-01-02 Contracts to be in writing

Before a money broker performs any services for a potential borrower, the money broker and the borrower shall enter into a written contract specifying the duties and conditions under which the money broker shall perform the broker's services. The contract must fully disclose estimated commissions and fees, must have a definite expiration date, and must indicate costs to be paid if the loan is not closed. A provision must be made designating the timing of fee payments (i.e., on commitment, on closing, on funding).

N.D. Admin. Code 13-05-01-03 Full disclosure required

In all dealings between a borrower and a money broker, the money broker is charged with a duty to fully and fairly inform the prospective borrower of all liabilities, costs, and other financial obligations that can or will be incurred by the borrower if the borrower uses the services of the money broker.

N.D. Admin. Code 13-05-01-04 Contents of loan disclosure statement

Whenever a money broker arranges a loan for a borrower, the following loan disclosure statements must be prepared by the money broker for the borrower and set forth in a plain language and meaningful order:

1.Summary of loan terms. Money brokers must provide all loan disclosures mandated under title 12, Code of Federal Regulations, part 1024 and title 12, Code of Federal Regulations,

part 1026.

2.General information concerning loans.

a.The amount of principal and interest payable, the interest rate, the number of payments and whether they are monthly or quarterly, and whether there is a final or balloon payment to pay off the loan in full. If there is a balloon payment, the following cautionary instructions must be printed in bold type on the contract: CAUTION TO BORROWER: IF YOU DO NOT HAVE THE FUNDS TO PAY THE BALLOON PAYMENT WHEN DUE, IT MAY BE NECESSARY FOR YOU TO OBTAIN A NEW LOAN AGAINST YOUR PROPERTY FOR THIS PURPOSE AND YOU MAY BE REQUIRED TO AGAIN PAY COMMISSION AND EXPENSES FOR ARRANGING THE LOAN. KEEP THIS IN MIND IN DECIDING UPON THE AMOUNT AND TERMS OF THE LOAN THAT YOU OBTAIN AT THIS TIME.

b.Other information necessary, including the land description, types of instruments to be executed, and type of lien that will be against the property if the instruments are executed.

c.Any prepayment penalty on full disclosure of the terms thereof.

d.Whether credit life or credit disability will be required of the borrower as a condition of making the loan.

History

• History: Effective February 1, 1984; amended effective April 1, 2013.
• Law Implemented: NDCC 13-04.1-01, 13-04.1-06, 13-04.1-07

N.D. Admin. Code 13-05-01-05 Restrictions on chargeable costs and expenses

In addition to the initial written contract, the money broker shall give to the potential borrower an estimate of the amount of chargeable costs and expenses that will be collected by the money broker in case no loan is found for the borrower. An estimated total cost to the borrower under these conditions must be itemized and stated to the borrower. All of these costs and expenses, if actually expended and chargeable to the borrower, must have been actually and reasonably expended for the potential borrower's benefit.

N.D. Admin. Code 13-05-01-06 Filing of annual reports

Repealed effective April 1, 2013.

N.D. Admin. Code 13-05-01-07 Availability of records

The money broker shall maintain all records of its transactions at its office for at least six years and these records must be subject to examination by the department of financial institutions.

History

• History: Effective February 1, 1984; amended effective June 1, 2002.
• Law Implemented: NDCC 13-04.1-07

N.D. Admin. Code 13-05-01-08 Statements to borrowers

When loan funds are not provided or arranged for a borrower, any statement from the money broker to the potential borrower whereby the money broker seeks reimbursement of any costs and expenses must contain an itemized listing of costs and expenses chargeable to the potential borrower.

N.D. Admin. Code 13-05-01-09 Notice to borrower regarding regulation by the department of financial institutions

The written contract as provided in section 13-05-01-03 of these regulations must contain the following notice in capital letters: NOTICE: MONEY BROKERS ARE LICENSED AND REGULATED BY THE DEPARTMENT OF FINANCIAL INSTITUTIONS, 1200 MEMORIAL HIGHWAY, BISMARCK, NORTH DAKOTA 58504. THE DEPARTMENT OF FINANCIAL INSTITUTIONS HAS NOT PASSED ON THE MERITS OF THE CONTRACT AND LICENSING DOES NOT CONSTITUTE AN APPROVAL OF THE TERMS OR OF THE BROKER'S ABILITY TO ARRANGE ANY LOAN. COMPLAINTS REGARDING THE SERVICES OF MONEY BROKERS SHOULD BE DIRECTED TO THE DEPARTMENT OF FINANCIAL INSTITUTIONS.

History

• History: Effective February 1, 1984; amended effective December 1, 1995; November 1, 1997; June 1, 2002.

N.D. Admin. Code 13-05-01-10 Copy of written contracts to the potential borrower

A copy of all written contracts between the money broker and the potential borrower must be given to the potential borrower at the time that the contract is signed.

N.D. Admin. Code 13-05-01-11 Unprofessional conduct and grounds for revocation of license

Any act or conduct violating any of the provisions of this chapter or any law or rule regarding money brokers constitutes unprofessional conduct and constitutes grounds for revocation of the money broker license.

History

• Law Implemented: NDCC 13-04.1-08

Article 13-06 Deferred Presentment Service Providers

Chapter 13-06-01 Deferred Presentment Service Providers

N.D. Admin. Code 13-06-01-01 Definitions

As used in this chapter:

1."Annual percentage rate" means a measure of the cost of credit, expressed as a yearly rate, as calculated under the Truth in Lending Act [15 U.S.C. 1601].

2."Closed transaction" or "close" means a completed deferred presentment service transaction that has been closed on the database.

3."Close of business" means the time of day that a provider closes its office to the public for the calendar day.

4."Database" means the statewide transactional database administered by the department pursuant to North Dakota Century Code chapter 13-08.

5."Database vendor" means the vendor contracted with the department for the purpose of developing and administering the daily operations of the database.

6."Date of the transaction" means the date on which the written agreement is signed and the funds are advanced.

7."Deferred presentment service provider" means an entity often referred to as a payday loan, payday advance, or deferred deposit loan provider.

8."Department" means the North Dakota department of financial institutions.

9."Financial responsibility" means a financial condition, at a minimum, that is a positive net worth as disclosed in the most recent financial statement.

10."Generally accepted accounting practices" means procedures adopted by the American institute of certified public accountants and federal accounting standards boards.

11."Maturity date" means the date agreed upon by a licensee and customer to present a check for final payment. "Maturity date" may also be referred to as date of negotiation, date of presentment, or presenting a check for payment.

12."Open transaction" or "open" means a deferred presentment service transaction which has been registered and recorded but not completed on the database.

13."Principal shareholders" means any shareholders which control directly or indirectly the power to vote twenty-five percent or more of the voting shares of the corporation.

14."Recorded" means the database has assigned a transaction authorization number to a registered transaction, logged it as an open transaction, and communicated the transaction authorization number to the deferred presentment provider.

15."Registered" means that a deferred presentment provider has provided to the database the information required to identify a valid deferred presentment transaction.

16."Transaction" means a deferred presentment service transaction.

17."Unencumbered assets" means any assets when a market value can be readily determined and which are not pledged or held under a security interest.

History

• Law Implemented: NDCC 13-08-01

N.D. Admin. Code 13-06-01-02 Financial responsibility

In order to determine financial responsibility, applicants shall provide with the application the most current fiscal year-end financial statements, prepared in accordance with generally accepted accounting principles. The applicant shall also include financial statements for the most recent quarter end.

History

• Law Implemented: NDCC 13-08-03

N.D. Admin. Code 13-06-01-03 Determination of bond amount

Each applicant shall maintain a bond issued by a surety company authorized to do business in this state. The bond amount is generally based on the high point of the receivables of the applicant's business, as of the most recent March thirty-first report. If an applicant has more than one licensed location, the bond amount is based on the combined receivables of all locations as of the most recent March thirty-first report. The initial bond amount is based on projected receivables.

A minimum of a twenty thousand dollar bond is based on receivables less than one hundred thousand dollars; a minimum of a fifty thousand dollar bond is based on receivables from one hundred thousand dollars to two hundred fifty thousand dollars; and a minimum of a seventy-five thousand dollar bond is based on receivables greater than two hundred fifty thousand dollars.

However, the commissioner may require a higher bond in the commissioner's sole discretion. The

basis for determining the bond amount or any increases in the amount will be based, in part, on:

1.Financial responsibility of the licensee.

2.Issuance of any enforcement action against the licensee by this state or any other governmental entity.

History

• Law Implemented: NDCC 13-08-03(4)

N.D. Admin. Code 13-06-01-04 Application

A photograph of the exterior and interior of the business location must be included with the initial application. The application must include fingerprint cards from principal shareholders and managers.

Any application received that is incomplete will be returned to the applicant and will not be considered for a license until the completed application is submitted in full.

History

• General Authority: NDCC 13-08-04, 13-08-10
• Law Implemented: NDCC 13-08-04(3), 13-08-06(1)

N.D. Admin. Code 13-06-01-05 Posting fees

Licensees shall post a notice of fees in a conspicuous location in a minimum font size of forty-eight point.

History

• Law Implemented: NDCC 13-08-06(1)

N.D. Admin. Code 13-06-01-06 Change of control

The change of control application must be filed and approved by the commissioner prior to the date the 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 new applicant must meet the same criteria required of all deferred presentment service provider applicants, including payment of the investigation fee of four hundred dollars. At the commissioner's discretion, the commissioner may require a new license application.

History

• General Authority: NDCC 13-08-07, 13-08-10
• Law Implemented: NDCC 13-08-07

N.D. Admin. Code 13-06-01-07 Reports of commissioner

Written reports in this section must be on a form prescribed by the commissioner. Written reports that are required by the commissioner to be filed within fifteen calendar days of the occurrence of the events are:

1.A report of the name change of the licensee must be filed with the department prior to the name change.

2.Whenever a licensee desires to change the licensed place of business, the licensee shall provide the department with the following prior to the relocation:

a.A written notice providing the complete address of the new location.

b.Photographs of both the exterior and interior of the new location.

c.A written sworn statement that the new location will not share the premises with that of another business.

d.A report of a change of management of the licensee.

e.The original license for reissue.

History

• Law Implemented: NDCC 13-08-08(4)

N.D. Admin. Code 13-06-01-08 Regulations - Examinations

For purposes of any investigation, examination, or proceeding under North Dakota Century Code

chapter 13-08, the commissioner may require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the examination, investigation, or proceeding.

N.D. Admin. Code 13-06-01-09 Retention of records

The records must be kept for six years from the date of the last transaction. Records must be located at the licensee's business location. With the commissioner's prior written approval, the licensee may retain records at a location other than the licensed location. The licensee shall make a written request to retain records at a location other than the licensed location which shall include the following:

1.The address of the offsite location.

2.A contact person and telephone number at the offsite location.

3.An acknowledgment that the licensee will pay for all examination expenses.

4.A statement that all books, records, and account information shall be made available within seventy-two hours after the department's request at either the licensed location or the offsite location.

History

• Law Implemented: NDCC 13-08-11

N.D. Admin. Code 13-06-01-10 Required records

Every licensee shall keep the following records:

1.Transaction register.

a.The transaction register must contain the original entry and be a permanent record, and must show for every transaction the transaction number, date of transaction, maturity date, date of rollover and new maturity date if any, amount of transaction, name of customer, and the amount of fees expressed in dollar amount.

b.The transaction register must be kept numerically by transaction number in the order made and must have headings for each of the items required.

2.An individual account record. An individual account record must be kept for each customer.

Such account record must show the name and address of the customer, transaction number, date of transaction, maturity date, and fee expressed in dollar amount.

3.File of all original papers. A separate file shall be maintained for each customer and shall contain the written agreement and acknowledged copy of the disclosure statement of transaction. Evidence of disclosure must be retained for six years from the date of the transaction. When prior written approval has been obtained from the commissioner, a licensee may maintain these files in any medium or format that accurately reproduces original documents or papers.

4.Check copies. Copies of checks received in the deferred presentment service transaction.

5.Cash book. All receipts and disbursements, of any amount whatsoever, must be entered in the cash book or equivalent record on the day they occur. Separate headings must be provided for payments and fees collected from customers. The cash book must be a record of all details of income and disbursements, including all entries to individual accounts of customers.

6.Alphabetical record of customers. The alphabetical record must show the transaction number and the name of each customer who is currently indebted to the licensee, with sufficient information to locate the account record.

7.Permanent file. Each licensee shall maintain a permanent file which includes the following:

a.A copy of all correspondence sent to or received from the department within the past twenty-four months.

b.A copy of the last two examination reports and any related correspondence.

8.Check record. A record must be retained of each check presented for negotiation, including checks deposited, cashed, and checks presented directly to the customer's issuing bank.

9.Returned checks. A record must be retained of all checks returned for nonsufficient funds, account closed, or stop payment.

10.Rescinded transactions. A record must be retained of all rescinded transactions by customer as a separate record.

Erasures may not be made in the payment and charge sections of any account records or written agreements. In case of error, a line must be drawn in ink through the improper entry and the correct entry made on the following line. The entries on the record must correspond with the receipts given the customer.

Records of transactions made under North Dakota Century Code chapter 13-08 must be kept separate or readily identifiable from other types of business conducted in the office.

Electronic data processing, combination forms, and special office systems may be used if in accordance with generally accepted accounting practices and must contain the information required by this section.

History

• Law Implemented: NDCC 13-08-11

N.D. Admin. Code 13-06-01-11 Procedures

1.Each document used in the transaction process bearing evidence of indebtedness, and executed by a check maker, must bear a transaction number.

2.The name and address of the licensee making the transaction must appear on all disclosure statements, all written agreements, and any other documents associated with the transaction.

3.At the time any transaction is made, the licensee shall give to the maker of the check a written disclosure statement. The written disclosure statement must be in a font size not less than ten point. The disclosure statement must be signed by the check maker.

4.The disclosure statement must contain the following items, which must be explained to and initialed by the check maker:

a.The schedule of fees charged;

b.No security held as condition of transaction or method of collection; and

c.Information required under federal law:

(1)Truth in Lending Act [15 U.S.C. 1601].

(2)Privacy notice under Federal Trade Commission Regulation - Privacy of Consumer Financial Information [16 CFR, part 313].

(3)Equal Credit Opportunity Act [15 U.S.C. 1691-1691f].

5.A licensee may not take any written agreement or other document related to the transaction in which the blanks are not filled in completely before the proceeds of the transaction are delivered. All spaces or sections not used in the preparation of legal documents must be ruled out or designated as "none" or "N/A".

History

• Law Implemented: NDCC 13-08-12(1)

N.D. Admin. Code 13-06-01-12 Credit practices

Any deferred presentment service provider that contracts with a third-party collection service in an attempt to collect nonsufficient funds, account closed, stop payment orders, or any other returned checks shall provide in the contract a notice of the twenty dollar maximum allowed returned check charge collected per transaction.

A licensee while collecting or attempting to collect an alleged debt may not engage in any of the following acts:

1.Using or threatening to use force, violence, or physical harm to a customer or the customer's family or property.

2.Threatening arrest or criminal prosecution when no basis for such action lawfully exists.

3.Threatening the seizure, attachment, and sale of a customer's property when such action can only be taken pursuant to court order unless disclosure is made that prior court proceedings are required.

4.Disclosing or threatening to disclose information adversely affecting a customer's reputation for creditworthiness with knowledge or reason to know such information is false.

5.Threatening to initiate or initiating communication with a customer's employer.

6.Communicating or threatening to communicate with a customer or the customer's family with such unreasonable frequency as to constitute harassment or at times reasonably considered to be unusual hours or known to be inconvenient.

7.Using profane, obscene, or abusive language with a customer or the customer's family.

8.Disclosing or threatening to disclose information relating to a customer's indebtedness to any other person except when such other person has a legitimate business need for the information.

9.Disclosing or threatening to disclose information concerning the existence of a debt, which the licensee knows to be reasonably disputed by the customer, without disclosing the fact that the debt is disputed.

10.Attempting or threatening to attempt enforcement of a right or remedy with knowledge or reason to know that the right or remedy does not exist.

11.Using any form of communication simulating legal or judicial process which gives the appearance of being authorized, issued, or approved by a governmental agency or official or attorney at law when it is not.

12.Using badges, uniforms, or other indicia of any governmental agency or official except as authorized by law.

13.Misrepresenting the amount of the debt alleged to be owed.

14.Representing that an alleged debt may be increased by the addition of attorney's fees, investigation fees, or any other fees or charges when there is no contractual or statutory authorization for such addition.

N.D. Admin. Code 13-06-01-13 General

1.The deferred presentment service check must be presented for payment within sixty days of the original transaction date.

2.When a payment is made in cash, the licensee shall give a receipt to the customer.

3.Unless otherwise authorized by subsection 14 of North Dakota Century Code section 13-08-12, no other business may be conducted at the licensed location unless authorized in writing by the commissioner. The commissioner's authorization will be predicated upon the licensee's agreement to the following:

a.That the authorization will not conceal nor facilitate concealment of an evasion of North Dakota Century Code chapter 13-06.

b.To comply with any applicable state or federal statutes and regulations.

c.To obtain any license or registration required by a federal, state, or local governmental agency to engage in the other business authorized.

d.That the commissioner may examine all records and investigate any or all transactions of the licensee.

e.That the commissioner retains the right, upon notice and opportunity to be heard, to alter, amend, or revoke another business authorization.

f.That if any federal or state statute or regulation enacted thereafter prohibits the activity, the authorization shall become null and void immediately.

N.D. Admin. Code 13-06-01-14 Written agreement

Repealed effective April 1, 2013.

N.D. Admin. Code 13-06-01-15 Surrender of license

A licensee may surrender a deferred presentment service business license by delivering to the commissioner written notice that the license is surrendered. The surrender does not affect the licensee's civil or criminal liability for acts committed prior to such surrender, affect the liability of the surety on the bond, or entitle such licensee to a return of any part of the annual license fee or fees. The commissioner may establish procedures for the disposition of the books, accounts, and records of the licensee and may require such action as the commissioner deems necessary for the protection of the maker of checks that are outstanding at the time of surrender of the license.

N.D. Admin. Code 13-06-01-16 Advertising

A licensee may not advertise in a false, misleading, or deceptive manner or imply or indicate that the rates or charges for loans made are "approved", "set", or "established" by the department of financial institutions.

The commissioner may directly administer, or contract with a third-party vendor to operate and maintain a website on behalf of the department, in which each transaction shall be recorded for the

purpose of preventing violations of North Dakota Century Code chapter 13-08. Each transaction shall be registered with the database and receive a transaction authorization number evidencing the transaction as being recorded in the database prior to a licensee giving currency or a payment instrument to the customer. As part of the registration process, the licensee shall choose an employee to serve as the licensee's security administrator to act as a point of contact for matters relating to the database administration.

1.Prior to engaging in any transaction, a licensee must:

a.Access the vendor database using the assigned user identification and password provided to each employee by the security administrator for the licensee.

b.Conduct a search of the database based upon either a social security number, alien registration number, or individual taxpayer identification number of the customer seeking a new transaction. The database will provide the result of the search indicating whether the customer is eligible or ineligible to enter into a new transaction.

c.If the customer is eligible for a new transaction, the licensee shall submit all of the required information regarding a customer necessary to have the transaction registered on the database.

d.Once all of the required information has been submitted to the database, and the customer's eligibility is confirmed, the transaction will be recorded as open on the database, assigned a transaction authorization number, and the transaction authorization number will be communicated to the licensee as evidence that the transaction has been authorized by the database. The licensee shall place the transaction authorization number on the deferred presentment agreement and provide a copy of the agreement to the customer.

e.In the event that the database is not accessible, the licensee shall follow procedures outlined by the database vendor.

2.It is a violation of this chapter for a licensee to knowingly enter transactional information into the database that is incomplete or inaccurate. 13-06-01-16.3. Cancellation, modification, or closing of transactions on database.

1.If a deferred presentment agreement is canceled, the licensee shall not assess either the transaction fee or the verification fee to the customer. The licensee shall immediately close the transaction on the database.

2.If a licensee becomes aware of a change of information relating to an open transaction, the licensee shall immediately update the transaction on the database to ensure that all identifying information regarding both the customer and the transaction are accurate, including any comments on the transaction which the licensee deems relevant.

3.Licensee shall be responsible for immediately closing all transactions on the database. The licensee shall input the date a transaction closes, as well as the payment method.

4.The department shall have the authority to make changes to the database transactions as deemed necessary. This includes the ability to instruct the database vendor to close any transactions associated with a licensee whose license to conduct business in North Dakota remains in a nonactive status for thirty days or more. 13-06-01-16.4. Database transaction fees.

A licensee shall be responsible to make payment of all database transaction fees charged for registering a transaction on the database administered or authorized by the commissioner. Database transaction fees will be charged on a per transaction basis. A licensee may charge the database transaction fee to each customer securing the loan for which the database transaction fee is based.

History

• History: Effective July 1, 2001; partially voided effective April 17, 2002. 13-06-01-16.1. Database.
• Law Implemented: NDCC 13-08-02 13-06-01-16.2. Database transaction requirements.

N.D. Admin. Code 13-06-01-17 Enforcement

The commissioner may publish information concerning any violation of the statute or any rule,

regulation, or order of the commissioner under the statute.

The department or department agents may confiscate control of any record for purposes of verification of bond claims.

Article 13-07 Money Transmitters

Chapter 13-07-01 Money Transmitters

N.D. Admin. Code 13-07-01-01 Definitions

For purposes of this chapter, "past due or doubtful of collection" means cash due from an authorized delegate that is not remitted on or before the tenth business day after the date authorized delegate is required to remit the money under the written agreement between the license holder and the authorized delegate.

History

• History: Effective April 1, 2013.
• General Authority: NDCC 13-09-14
• Law Implemented: NDCC 13-09-02, 13-09-15

Article 13-08 Mortgage Loan Originators

Chapter 13-08-01 Mortgage Loan Originators

N.D. Admin. Code 13-08-01-01 Fees

At the time of making an application for licensure under North Dakota Century Code chapter 13-10, the applicant shall include payment in the sum of twenty-five dollars, as a fee for investigating the application, and the sum of fifty dollars for the license fee. Additionally, each licensee shall pay a fifty dollar annual fee upon each renewal. When a mortgage loan originator has been delinquent in renewing its license, the department may charge an additional fee of fifty dollars for the reinstatement of such license. Upon a change of employment to a different money broker, a mortgage loan originator shall pay a fee of twenty-five dollars. All fees shall be submitted through the nationwide mortgage licensing system.

History

• History: Effective April 1, 2013.
• General Authority: NDCC 13-10-03, 13-10-10
• Law Implemented: NDCC 13-10-10

Chapter 13-01

N.D. Admin. Code 13-01

ARTICLE 13-01

GENERAL ADMINISTRATION [Repealed effective April 1, 2022]