NOTE: This article has been amended to correct an error in the previous version.
On March 14, 2019, North Dakota enacted legislation amending certain financial services laws relating to the examination of technology service providers, capital and examination requirements for trust companies, and the definition of financial institution, as well as certain licensing provisions including those governing surety bonds for money brokers and collection agencies, posting of license information for deferred presentment service providers, annual renewal fees for money transmitters, and annual reports for debt-settlement providers. The provisions take effect on August 1, 2019.
Amendments to the financial services laws:
Examination of technology service providers: The Commissioner will now have authority to examine technology service providers that provide services to credit unions, as well as the current authority to examine such providers that provide services to financial corporations and financial institutions.
Capital and examination requirements for trust companies: Prior to amendment, the financial services law provided that the amount of stock of any trust company could not be less than $100,000, and that the same must be divided into shares of $100 each. The law also prohibited trust companies from transacting any business or exercising any powers as such until the minimum amount of capital stock was subscribed for, and not less than $50,000 thereof actually had been paid in, invested, and deposited as provided by law. As amended, the law provides that the amount of capital of any such corporation may not be less than $1,000,000, with no less than $500,000 of that amount in liquid assets. The amendments also authorize the Commissioner to provide notice to trust companies prior to examination where, prior to amendment, the Commissioner was not permitted to do so.
Definition of financial institution: Prior to amendment, the North Dakota Department of Financial Institutions defined “financial institution” to mean any organization that is physically located in the state which is authorized to do business under state or federal laws relating to financial institutions, including, without limitation, a bank, including the Bank of North Dakota, a savings bank, a trust company, a savings and loan association, or a credit union. As amended, the definition will no longer include the requirement that an organization is physically located in North Dakota.
Amendments to certain licensing provisions:
Surety bonds (money brokers and collection agencies): The amendments increase the amount of the surety bond that a money broker must maintain from $25,000 to $50,000, and that a collection agency must maintain from $20,000 to $50,000.
Posting of license information and license expiration (deferred presentment service providers): Prior to amendment, a deferred presentment service provider was required to keep its license conspicuously posted in its place of business and to provide notice to its customers in North Dakota of the license number under which it is operating. As amended, a deferred presentment service provider is required to keep a notice – which must include the license number and instructions for customers to look up the licensee on the NMLS for license verification – conspicuously posted in its place of business and to provide the same notice to its customers in North Dakota. Additionally, as amended, a deferred presentment service provider license is effective through the remainder of the fiscal year ending December 31 after the license’s date of issuance (unless earlier surrendered, suspended, or revoked). Prior to amendment, the license was effective through the remainder of the fiscal year ending June 30 (unless earlier surrendered, suspended, or revoked).
Annual renewal fees (money transmitters): The amendments increase the annual renewal fee that a money transmitter must pay from $450 to $500 or one-fourth of one percent of the money transmission dollar volume in North Dakota for the twelve months ending June 30, whichever is greater. The annual renewal fee is capped at $2,500.
Annual reports (debt-settlement providers): The amendments change the date by which a parent company of a debt-settlement provider must file a composite annual report with the Commissioner from before August 1 of each year to before January 1 of each year.