New Statutes Taking Effect in North Dakota – Part 2
by Amy Kleinschmit
Chief Compliance Officer
7/11/2019

Continuing the discussion of new statutes taking effect in North Dakota from where we left off previously in our June 20 Memo article, here are some additional summaries on a few more of the laws that will be going into effect in North Dakota later this summer that may be of interest to credit unions. The effective dates are noted below for each bill; however, the list for all other changes can be found here.

Towing abandoned vehicles.

HB 1263 amended chapter 23.1-15 which relates to abandoned motor vehicles. This amendment was effective March 27, 2019. Of interest is section 23.1-15-06 which provides that the owner, secured parties, or a lienholder of an abandoned motor vehicle, within thirty days after receipt of the notice required by section 23.1-15-05, has a right to reclaim the vehicle from a commercial towing service taking the motor vehicle into custody upon payment of all towing and storage charges resulting from taking the vehicle into custody. Storage charges may not exceed $50 per day for an abandoned passenger vehicle, pickup, van, or truck that does not exceed twenty thousand registered gross weight pounds [9071.85 kilograms]. This section also applies to emergency towing.

If the abandoned motor vehicle is not reclaimed by the owner or a lienholder, the commercial towing company service takes custody of the vehicle. The vehicle is then sold and the towing company can reimburse itself for the cost of towing, preserving and storing the vehicle. Any remainder from the proceeds of a sale must be held for the owner of the vehicle or entitled lienholder or secured parties for ninety days and then must be delivered to the administrator of the state abandoned property office.

Delivery and Issuance of Certificates of Vehicle Titles.

HB 1407 amends sections 39-05-17 and 39-05-20 and relates to the delivery and issuance of certificates of vehicle title. This change is effective August 1, 2019. Section 39-05-20 addresses when the transferee may obtain a new certificate of title when they are unable to obtain a properly assigned certificate of title for a vehicle. The transferee may apply to the department for a new certificate along with presenting proof of ownership upon which the department will cancel the old certificate and issue a new certificate. HB 1407 added several provision to address scenarios when the transferee is an insurer that paid a total loss claim; a 501(c)(3) and the vehicle was donated; a licensed motor vehicle dealer; or an individual.

If the transferee is an insurer that has paid a total loss claim on a vehicle but the payment has not satisfied all liens of record on the vehicle, the transferee is not required to comply with the procedures outlined in title 35 to establish satisfactory proof of ownership and the department may cancel the old certificate of title and issue a new certificate to the insurer free and clear of all liens and claims of ownership.

If the transferee is a licensed motor vehicle dealer that, at the request of an insurer, took possession of a vehicle that is the subject of an insurance claim but for which a total loss claim is not paid by the insurer and the vehicle has been in the possession of the dealer for more than thirty days, the necessary satisfactory proof of ownership includes only proof the dealer made at least two written attempts by certified mail with return receipt addressed to the owner of record and any known lienholder to have the vehicle removed from the dealer's facility, upon payment of applicable charges. If satisfactory proof of ownership is established, the department may cancel the old certificate of title and issue a new certificate to the licensed motor vehicle dealer free and clear of all liens and claims of ownership.

If the transferee is an individual, satisfactory proof of ownership must include that the transferee has paid for the vehicle, and that the transferee made at least two written attempts by certified mail with return receipt addressed to the owner of record and any known lienholder to obtain the certificate of title. If satisfactory proof of ownership is established, the department shall cancel the old certificate of title and issue a new certificate to the individual, subject to any existing lien.

Review of technology providers to credit unions.

SB 2093 amended 6-01-09 to add “credit unions” within the scope of review that the ND DFI commissioner may examine, or cause to be examined, or review the books and records of any technology service provider that provides services to financial corporations, credit unions, and financial institutions under the commissioner's supervision, to evaluate that entity's risk management systems and controls and compliance with applicable laws that affect such services provided to financial corporations, credit unions, and financial institutions. This change became effective July 1, 2019.

Games of chance rules.

SB 2162, which is effective August 1, 2019, amended statutes relating to games of chance under Chapter 53-06.1. The changes increased the amount of prizes that can be awarded under local permits and restricted event permits. Now an organization or closely related organizations as a whole may award a primary prize that does not exceed $8,000 (increase from $6,000)  and total prizes of all games do not exceed $40,000 (increase from $12,000) per year. These maximum prize amounts do not apply to raffles conducted under chapter 20.1-08 (Game, Fish, Predators and Boating rules).

Foreclosure and abandoned property.

SB 2205, which is effective August 1, 2019, amends various sections under chapter 32-19, Foreclosure of Real Estate Mortgage by Action and creates a new section, namely 32-19-23.1 Abandoned property – prima facie evidence. An affidavit made under this new section must include at least one of the following facts; a. Windows or entrances to the premises are boarded or shuttered, or multiple window panes are broken; b. Doors to the premises are destroyed, broken, unhinged, or continuously unlocked; c. Gas, electric, or water service to the premises has been terminated; d. Rubbish, trash, or debris has accumulated on the mortgaged premises; e. Law enforcement has received at least two reports of trespassers, vandalism, or other illegal acts on the premises; or f. The premises is deteriorating and either below or in imminent danger of falling below minimum community standards for public safety and sanitation.

Also, this provision only applies to mortgaged property that is: a. Ten acres or less; b. Improved with a residential dwelling that consists of fewer than five units and is not a model home or under construction; and c. Not used in agricultural production.

Customer contract clauses.

HB 1195 enacted certain consumer protections for contract provisions and is effective August 1, 2019. Under this new rule, which created section 51-07-30, "Customer" means a person that borrows, buys, leases, or obtains services or property under a service contract. "Service contract" means a written agreement between a customer and a party acting in the usual course of business in which a customer borrows, buys, leases, or obtains personal property, real property, or services for valuable consideration.

The rule requires if a service contract contains terms and conditions clauses, the service contract must be accepted by the customer for the service contract to be enforceable. "Terms and conditions" means general and special arrangements, provisions, requirements, rules, specifications, and standards that form an integral part of an agreement or contract. Also, if a service contract contains a liquidated damages clause, the clause must provide specific examples of how any fees or charges will be calculated.

Prevention of financial exploitation.

SB 2179 is effective August 1, 2019 and is aimed at the prevention of financial exploitation. Chapter 6-08.1 discusses requirements relating to the disclosure of customer information and a credit union’s duty to ensure its confidentiality. Section 6-08.1-03 provides that a financial institution, including a credit union, may not disclose customer information to a person, governmental agency, or law enforcement agency unless the disclosure is made in accordance with any of the exceptions listed in the statute. SB 2179 added subsection 8 as exception - “For purposes of reporting suspected financial exploitation of an eligible adult under chapter 6 - 08.5 (which is discussed below) to a law enforcement agency or the department of human services.” However, it goes on to state that, “This subsection may not be construed to impose a duty on a financial institution to investigate a suspected financial exploitation of an eligible adult or to make a report to the department of human services or law enforcement agency.”

SB 2179 created a new chapter 6-08.5 titled Financial Exploitation Prevention. Under this chapter, if a financial service provider, which includes credit unions, has a good faith belief to suspect financial exploitation occurred, was attempted, or is being attempted, the credit union may refuse a financial transaction or hold a financial transaction on an account: a. Belonging to the eligible adult; b. On which the eligible adult is a beneficiary, including a trust, guardianship, or conservatorship account; or c. Belonging to a person suspected of perpetrating financial exploitation. For purposes of this chapter, "eligible adult" means an individual who is at least sixty-five years of age or a vulnerable adult. "vulnerable adult" means an adult who has a substantial mental or functional impairment.

"Financial transaction" means any of the following as applicable to the business or services provided by a financial service provider: A transfer or request to transfer or disburse funds or assets in an account; A request to initiate a wire transfer, initiate an automated clearing house transfer, or issue a money order, cashier's check, or official check; A request to negotiate a check or other negotiable instrument; A request to change the ownership of an account; A request for a loan, extension of credit, or draw on a line of credit; or A request to designate or change the designation of a beneficiary to receive any property, benefit, or contract right for an eligible adult.

Also, for the purposes of this chapter, "financial exploitation" means the wrongful or unauthorized taking, withholding, appropriation, or use of an eligible adult's money, assets, or property for one's own benefit or the benefit of a third party. The term includes defrauding an eligible adult.

A credit union may also refuse or hold a financial transaction if the department of human services or a law enforcement agency provides information to the credit union demonstrating it is reasonable to believe financial exploitation occurred, was attempted, or is being attempted. However, this provision does not require the credit union to refuse or hold a financial transaction. Except as ordered by a court, a credit union may determine whether to refuse or hold a financial transaction based on the information available to the credit union.

A credit union refusing or holding a financial transaction based on a good faith belief to suspect financial exploitation occurred, was attempted, or is being attempted shall make a reasonable effort to notify, orally or in writing, one or more parties authorized to transact business on the account; and report the incident to the department of human services, if the incident involves financial exploitation of a vulnerable adult. However, notice is not required to be provided to a party authorized to conduct business on the account if the party is the suspected perpetrator of financial exploitation.

The new chapter provides immunity under state law to the credit union, or an employee, officer, or director of a credit union. Specifically, the credit union or individual is immune from all criminal, civil, and administrative liability: a. For refusing or not refusing a financial transaction, or for holding or not holding a financial transaction under this section; or b. For actions taken in furtherance of the determination made under subdivision a, if the determination is based upon a good faith belief financial exploitation occurred, was attempted, or is being attempted.

Section 6-08.5-03 discusses reporting to law enforcement agency or the department of human services. It clarifies that this section does not impose a duty on a financial institution to investigate a suspected financial exploitation of an eligible adult or to make a report to a law enforcement agency or the department of human services. But if a credit union does report, the credit union, or an employee, officer, or director of a financial service provider, is immune from all criminal, civil, and administrative liability for reporting or not reporting under this section if the determination is made based on a good faith belief that financial exploitation occurred, was attempted, or is being attempted.

Section 6-08.5-4 discusses who the credit union may contact regarding suspected financial exploitation. A credit union may offer obtain and periodically update a list of individuals from the eligible adult they authorize the credit union to contact if the credit union has reasonable cause to suspect the eligible adult is a victim or a target of financial exploitation. However, the credit union may choose not to contact an individual on the list provided, if the credit union suspects the individual is engaged in financial exploitation.

A credit union having a good faith belief to suspect an eligible adult is the victim or target of financial exploitation may convey the suspicion to one or more of the following individuals, provided the individual is not the suspected perpetrator: a. An individual on the list described above; b. A co-owner, additional authorized signatory, or beneficiary on the eligible adult's account; c. An attorney - in - fact, trustee, conservator, guardian, or other fiduciary who has been selected or appointed to manage some or all of the financial affairs of the eligible adult.

If the credit union provides information under this provision, the credit union may limit the information, such as disclosing only that the credit union has reasonable cause to suspect the eligible adult may be a victim or target of financial exploitation, without disclosing any other details or confidential personal information regarding the financial affairs of the eligible adult. A similar provision for immunity is provided under this section.

With regard to power of attorney, section 6-08.5-05 provides that a credit union may refuse to accept an acknowledged power of attorney if the credit union has a good faith belief to suspect the principal is or may be the victim or target of financial exploitation by the agent or individual acting for or with the agent.

A credit union, or an employee, officer, or director of a financial service provider, is immune from all criminal, civil, and administrative liability for refusing to accept a power of attorney or for accepting a power of attorney under this section and for actions taken in furtherance of that determination if the determination was based on a good faith belief financial exploitation occurred, was attempted, or was being attempted.

*Reminder – not addressed in state law, but please be mindful of reporting requirements under federal law, i.e. SARs, when applicable.

 

CUAD members may contact Amy Kleinschmit with any compliance related questions.

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