Usury in North Dakota

A creditor may charge, receive, and collect a late payment charge on all money due on account from thirty days after the obligation of the debtor to pay has been incurred. A creditor may assign an account receivable that is subject to this section. An assignee of an account receivable has the same right to charge a late payment charge as does an original creditor for the assigned account receivable.

The late payment charge allowed under this section may not exceed one and three-fourths percent per month.

The late payment charge allowed under this section may not be charged unless, when the obligation was incurred, the creditor did not intend to extend any credit beyond thirty days and any late payment of the obligation was unanticipated.

This Court has recognized N.D.C.C. §§ 13-01-14 and 13-01-15 apply to finance charges on accounts receivable when no contractual provision explicitly authorizes the finance charges. See Industrial Fiberglass v. Jandt, 361 N.W.2d 595, 600 (N.D.1985); Metric Constr., Inc. *323 v. Great Plains Properties, 344 N.W.2d 679, 682-83 (N.D.1984).

Such statement must state, in any order, the following: - The percentage amount of the late payment charge which will be charged beginning thirty days after the obligation is incurred for purposes of section 13-01-14, or beginning after the billed medical services become delinquent for purposes of section 13-01-14.1. - The unpaid balance at the end of the period. - An identification of any amount debited to the debtor's account during the period. - The payments made by or for the debtor to the creditor during the period. - The amount of the late payment charge. - Additional items may be included in the statement to explain the computations made in determining the amount to be paid by the debtor.

This section does not apply to: - Money due on retail installment contracts, as defined in chapter 51-13. - Money due on revolving charge accounts, as defined in chapter 51-14. - Money due a medical services provider on accounts receivable for medical bills.

A creditor may not charge the account receivable late payment charge provided for under section 13-01-14 or 13-01-14.1 unless the creditor promptly supplies the debtor with a statement as of the end of each monthly period, or other regular period agreed upon by the creditor and the debtor, in which there is any unpaid balance.

This Court said no evidence existed of a written contract authorizing finance charges, and “unless [N.D.C.C. § ] 13-01-14 applie[d], there [was] no legal or contractual basis for a 1.5% per month finance charge, and [the creditor] would be limited to the presumed rate of interest of 6% per annum under N.D.C.C. § 47-14-05.” Royal Jewelers, at 527. This Court concluded no findings existed about whether the creditor intended to extend credit to the debtor beyond thirty days or whether late payment was anticipated under N.D.C.C. § 13-01-14. Royal Jewelers, at 527. This Court reversed and remanded the award of late payment charges for findings on the predicate facts for the applicability of N.D.C.C. § 13-01-14. Royal Jewelers, at 527.

The court’s findings, however, did not address late payment charges or the predicate facts for the applicability of N.D.C.C. §§ 13-01-14 and 13-01-15 as a component of damages. We are unable to understand the basis for the court’s decision regarding late payment charges as a component of Patterson’s obligations to Titan. We reverse the judgment and remand for findings addressing this issue.

Except as otherwise provided by the laws of this state, a person, either directly or indirectly, may not take or receive, or agree to take or receive, in money, goods, or things in action, or in any other way, any greater sum or greater value for the loan or forbearance of money, goods, or things in action than five and one-half percent per annum higher than the current cost of money as reflected by the average rate of interest payable on United States treasury bills maturing in six months in effect for North Dakota for the six months immediately preceding the month in which the transaction occurs, as computed and declared on the last day of each month by the state banking commissioner, but that in any event the maximum allowable interest rate ceiling may not be less than seven percent, and in the computation of interest the same may not be compounded; provided, however, that a minimum interest charge of fifteen dollars may be made. A contract may not provide for the payment of interest on interest overdue, but this section does not apply to a contract to pay interest at a lawful rate on interest that is overdue at the time such contract is made. Any violation of this section is deemed usury.

This section does not apply to a: - Bona fide pawnbroking transaction in an amount not exceeding ten thousand dollars which is made by a bona fide pawnbroking business transacted under a pawnbroker's license; - Loan made to a foreign or domestic corporation, foreign or domestic limited liability company, cooperative corporation or association, or trust; - Loan made to a partnership, limited partnership, or association that files a state or federal partnership income tax return; - Loan or forbearance of money, goods, or things in action the principal amount of which amounts to more than thirty-five thousand dollars; and - Loan made by a lending institution which is regulated or funded by an agency of a state or of the federal government.

Notwithstanding the interest rate limit set under this section, state-chartered banks and the Bank of North Dakota may charge interest at a rate equal to the maximum allowable rate which lawfully may be charged for a particular type of loan by national banking associations or state or federally chartered savings and loan associations operating out of facilities located in this state.

The taking, receiving, reserving, or charging of a rate of interest greater than is allowed by the laws of this state relative to usury shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it or which has been agreed to be paid thereon, and in addition thereto, a forfeiture of twenty-five percent of the principal thereof. In case the greater rate of interest has been paid, the person by whom it has been paid, or that person's legal representative may: - Recover back twice the amount of interest thus paid, together with twenty-five percent of the principal from the person taking or receiving the same, but an action must be commenced for such purpose within four years after the time when the usurious transaction occurred; or - Offset twice the amount of such interest against any indebtedness which the person who paid the same owes to the party or parties receiving such usurious interest.

interest before maturity is compensation for the use of money and is regulated by Section 47-14-09, N.D.C.C., and that interest allowed after maturity is considered compensation for damages for the wrongful detention of money and is regulated by Section 47-14-05, N.D.C.C.

Although sections 47-14-05 and 47-14-09 have been amended since Dallea, their core language has not changed. 3 It is apparent the interest charged here was not before maturity, nor was it compensation for the use of money. It was compensation for damages for the wrongful detention of money. As such, section 47-14-05, N.D.C.C., applies to the transaction, not N.D.C.C. § 47-14-09.

Interest for any legal indebtedness must be at the rate of six percent per annum unless a different rate not to exceed the rate specified in section 47-14-09 is contracted for in writing. Unless otherwise agreed by the parties in writing, all contracts must bear the same rate of interest after maturity as they bear before maturity. A charge for a late payment penalty may be imposed only if the amount of the late charge or the method of calculation of the late charge has been agreed to by the parties in the loan documents that are signed by the borrower.

Because the lease is not subject to North Dakota’s usury statute, we reverse.

We reverse the district court’s decision applying usury to the lease and remand this case to the district court to apply N.D.C.C. § 47-14-05 to James’ recovery under the lease and reconsider its decision not to award attorney’s fees.

Under section 47-14-05, N.D.C.C., post-maturity interest rates and late fees are limited. Royal Jewelers, Inc. v. Kopp, 365 N.W.2d 525, 527 (N.D.1985) (holding Royal Jewelers was entitled only to interest allowed under 47-14-05 where customer was charged “service charges” for the balance on an open account). Unlike section 47-14-09, however, a violation of 47-14-05 does not constitute usury. See Dallea, 152 N.W.2d at 418-20 (finding N.D.C.C. § 47-14-05 applies to the note, but the note is not usurious).