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The North Dakota Subprime Marketplace: Title and Payday Loans in North Dakota

In terms of population, North Dakota is one of the smallest states in the country, with just 755,393 people who call it home. In 2016, just over 75,000 North Dakotans, or 10.7% of the population, fell below the federal poverty line ($24,340 for a family of four in 2016). That is better than the national poverty rate of 15.1% and is the 10th lowest in the country.

The median household income in North Dakota $59,114 slightly higher than the nationwide average of $55,322. With such a low cost of living, that money could go a long way. Most people in the Roughrider State are doing just fine, but those 75,000 people who live paycheck to paycheck are still at risk of falling victim to predatory payday and title lenders.

Median Household Income: North Dakota vs. Nationally
North Dakota
The U.S.
Median Household Income

Payday Loans in North Dakota

Payday loans in North Dakota are called Deferred Presentment Services, which refers to the delayed cashing of checks given as collateral for a loan. In North Dakota, this can be done with a physical check, or a lender can obtain permission to transfer or withdraw the funds electronically.

According to North Dakota law, all licensed deferred presentment providers must maintain a net worth of at least $25,000 per licensed location, which prevents any random person from setting up a payday loan storefront. The initial application costs $850, and subsequent annual licensing fees are $450.

The latest figure for the total number of payday lenders in North Dakota is 56. That means there are 7.4 payday lenders per 100,000 people in the state. Comparatively, there are 29 McDonald’s and 13 Starbucks in the Roughrider state. That means there are 3.84 McDonald’s and 1.72 Starbucks per 100,000 people. So, for every chance you have to buy a McDouble off the now defunct dollar menu, there’s two more opportunities to start a potentially endless cycle of debt.

Those 56 payday lender stores averaged 1,940 loans per store in 2013, lending out nearly $34.8 million in loans and collecting $6.9 million in fees. The average loan amount was $320. While Starbucks can be expensive, it’s probably better for your budget in the long run to overpay for a Venti latte than the 520% APR that lenders can charge for a payday loan.

History of Payday Loans in North Dakota

In North Dakota, payday loans are regulated under N.D. Century Code 13-08. The law was initially implemented on July 1, 2001 and was amended on April 1, 2013. Prior to the law, most payday outlets were run out of pawn shops. The Minneapolis Federal Reserve estimated in October 2000 that there were roughly 25 payday/title loan outlets being run from pawn shops in North Dakota, some of which would charge interest rates up to 360% APR, with a 2-week repayment period.

In fact, the problem was bad enough that the North Dakota Attorney General and Department of Financial Institutions (which regulates the industry in the state) ordered many pawn shops to stop offering payday loans. One lender chose not to comply with the order and ended up paying back $27,000 in illegal interest charges. Shortly after, the North Dakota Legislature legalized payday loans, which limited the amount lenders can charge to 20% of the loan amount. Just over a year later, in November 2002, 59 lenders had opened, including seven in Bismarck and fourteen in Fargo. At the peak of the payday lending boom in North Dakota, there were 76 lenders in the state.

The Consumer Financial Protection Bureau wrote rules regulating payday loans in 2016. The rules require lenders in every state to determine if borrowers could repay without re-borrowing or defaulting. It also requires them to verify income information, use a database to discover simultaneous loans by a single borrower, and keep records to show compliance with the rules. As of January 2018, these rules are being reconsidered, and it seems unlikely that they will go into effect.

North Dakota Payday Loan Rules and Regulations

Whenever a payday lender issues a loan in North Dakota, state law requires that prior to the funds being given to the borrower, lenders must “provide to the customer a clear and conspicuous printed notice” indicating:

  • That a deferred presentment service transaction is not intended to meet long-term financial needs.
  • That the customer should use a deferred presentment service transaction only to meet short-term cash needs.
  • That the customer will be required to pay additional fees if the deferred presentment service transaction is renewed rather than paid in full when due. If the transaction is renewed, any amount paid in excess of the fee applies to the payoff amount.
  • A schedule of fees charged for deferred presentment service.
  • Any information required under federal law.
  • No property, titles to any property, or mortgages may be received or held directly or indirectly by the licensee as a condition of a deferred presentment service transaction or as a method of collection on a defaulted deferred presentment service transaction without proper civil process.

Payday loans are legal in North Dakota but there are some decent protections in place for consumers, including longer loan terms and protections against criminal charges. Unfortunately, lenders are still allowed to charge an exorbitant APR of 520%, which is extremely high compared to South Dakota’s maximum APR of 36%.

At a Glance
Quick Facts: Payday Lending in North Dakota
  • Maximum Loan Amount: $500, lenders cannot participate in a transaction with customers that have outstanding obligations exceeding $600, whether it is to the licensee or another establishment
  • Loan Term: Up to 60 days, including renewal
  • Rollovers Permitted: Yes, but fee cannot exceed 20% of the loan amount
  • Fees and Finance Charges: 20% + database fee
  • Finance Charge on a 14-Day $100 Loan: $20
  • APR on a 14-Day $100 Loan: 520%
  • Maximum Number of Outstanding Loans at a Time: No limit, max $600 loaned at a time
  • Cooling-Off Period: 3 business days
  • Collection Fees: $20

Title Loans in North Dakota

Title loans differ from payday loans, or deferred presentments, because instead of giving a post dated check as collateral, a borrower offers their vehicle. Title loans can be tempting, because they offer credit-poor borrowers the ability to access a lot more money than a traditional payday loan. Title loans are marketed as 30-day loans, but the average borrower rolls over the loan eight times and pays back more than 200% of the principal.

If you take out a title loan and put up your car as collateral, the car is still yours during the course of the loan. However, if that loan goes unpaid, the lender may take your vehicle. According to a 2016 Consumer Financial Protection Bureau study, one in five title loan borrowers eventually have their car repossessed. When financially vulnerable people lose their vehicles, they often lose much more as it becomes difficult or impossible for them to get to work, thus continuing the cycle of debt.

In 2016, title loan fees drained $3,846,479,876 from the U.S. economy. Thankfully, North Dakota did not contribute a single cent to that number.

The History of Title Loans in North Dakota

Title loans are not legal in the Roughrider state. Much like payday loans in North Dakota, pawn shops used to give out title loans prior to the order by the state Attorney General and Department of Financial Institutions ordered that they cease such practices.

North Dakota is one of 30 states that does not allow title loans, and this is true for both physical storefronts and online title loans. Unfortunately, nearby states don’t all have the same laws related to title loans, and this means that North Dakotans can still get trapped by title loans in neighboring South Dakota.

North Dakota Title Loan Restrictions

What about all those ads you see online saying you can get a title loan in North Dakota? Many of these are the result of search engine optimization and will show up no matter what state you type in. However, others will tell you they CAN offer online title loans in North Dakota, but this is false. Other types of loans may be available online in the state, but not title loans.

Thankfully, North Dakota’s neighbors to the east and west have also banned title loans. Unfortunately, this is not true of its sister state, South Dakota. However, even though South Dakota allows title lending, there have been recent developments in the state in favor of consumers.

South Dakota’s laws on title loans changed thanks to a ballot referendum in November 2016 called Initiated Measure 21. This measure capped the interest rate charged by money lenders licensed under South Dakota Codified Law Chapter 54-4 at 36%. This included payday and title loans, but not companies like banks or other federally insured institutions. The ballot measure was fiercely opposed by trade groups, but passed with an overwhelming 75% of voters saying yes. So while title and payday loans are still legal in the state, many lenders have forgone renewing their licenses.

Yes, it is true that title loans are not legal in North Dakota. But that doesn’t mean it’s not important to know how dangerous they are so you can resist the temptation of crossing the border to get one. Losing your car can seriously hamstring not only your life, but also your finances. How are you supposed to get to work to pay off your loan if you can’t get there? Better loan options exist that do not involve potentially losing a car.

Regulating Payday and Title Loans in North Dakota

While they aren’t necessarily creeping around every single corner, predatory lenders exist in every state, and it’s important to know as much as possible about them if you feel you absolutely must borrow from one. Predatory lending can take many different forms, such as charging interest that is too high or overly aggressive collection practices. Essentially, if your lender is breaking the law to take advantage of you, that’s predatory lending. It’s illegal.

Don’t think that nothing will happen or that no one will care if you report a predatory lender. Speaking up can give others around you courage to do the same and hopefully stop the same practice from happening to one of your friends or family members.

How to Report a Predatory Lender in North Dakota

If you haven’t taken out a payday loan, this is a great reminder as to why you should never do that. However, if you already find yourself in this situation, you should file a complaint with the North Dakota Department of Financial Institutions (DFI), which regulates deferred presentment service providers (you can find the form here).

There are some important points to remember before submitting a complaint:

  • The DFI cannot become involved in complaints that are being or have been litigated. They are regulators, not lawyers.
  • The consumer complaint form asks that you “describe events in the order in which they occurred, including any names, telephone numbers, and a full description of the problem with the amount(s) and date(s) of any transaction(s). You should also include any response from the financial institution or company.” (Translation: Document absolutely EVERYTHING.)
  • While North Dakota doesn’t require it, being able to show that you made attempts to reconcile the situation always helps.
  • Again, documenting every little thing is important, as your lender will probably use every little thing they can against you!

North Dakota Department of Financial Institutions
2000 Schafer Street, Suite G
Bismarck, ND 58501-1204

  • Phone: (701) 328-9933
  • Fax: (701) 328-0290
  • Email:

Consumer Protection in North Dakota

While the DFI can do a lot for you, they make one point very clear on their website:

“It is important to note that the Department of Financial Institutions is a regulatory agency and not a consumer protection agency. Based upon the foregoing, the Department may not have the authority to pursue the types of remedies that would provide a direct benefit to the consumer.”

In light of this, North Dakotans have a couple other options if further remedies are needed. At the state level, there is the Attorney General’s office, led by Wayne Stenehjem, which does handle certain consumer complaints, which you can find here. You can start by calling 1-800-472-2600, the Consumer Protection line, where you will be screened to see if you case is applicable to the AG’s office.

If state level fails you, file a complaint with the Consumer Financial Protection Bureau (CFPB) by calling (855) 411-2372 or by using their website. Unfortunately, the current administration is making efforts to tear down the CFPB, so it is unclear how much they can or will be able to do. Additionally, you can file a complaint with the Better Business Bureau. They handled 1,389 complaints related to payday lenders in 2016 and were able to settle 51% of them.

There have been relatively recent legislative attempts to right the wrongs of payday loans in North Dakota. In 2009, a bill, HB1421, was introduced that would have lowered payday loan fees from 20% to 15%. The bill would also have cut maximum loan amounts from $500 to $250 and placed $300 limit on the amount of money someone can borrow from a single payday lender. At the time, the limit was $600. Unfortunately, the bill was defeated, with the North Dakota House voting 88-5 against.

While change is possible, even fighting an 88-5 margin, for now it is probably best to avoid payday loans if at all possible. Any business whose margins depend on your failure isn’t a business worth your patronage. If you are considering a payday loan, hopefully you will think twice about the potential consequences down the road.

Guides to Payday and Title Loans in North Dakota Cities

Payday and title loans are a big issue for North Dakota residents. And it gets even more complicated at the city level. Check back soon for these payday and title loan guides to the following cities in North Dakota:

Bismarck | Grand Forks | Fargo