Overdraft Notification Implementation - Frequently Asked Questions
1.Where are the overdraft notifications sent?
The financial institution should send all trust account overdraft notices to:
Disciplinary Board of the North Dakota Supreme Court
Judicial Wing, First Floor
600 East Boulevard Avenue, Dept. 180
Bismarck, ND 58505-0530
Fax # 701 328-4480
2. Does the rule apply only to IOLTA accounts?
No. The rule applies to all interest bearing lawyer trust accounts, such as IOLTA accounts, separate trust accounts for particular clients, or pooled accounts with sub-accounting. Identification of accounts to which the rule applies may be difficult since North Dakota attorneys are not presently required to specifically label the applicable accounts as “trust account.” The financial institution should make reasonable efforts to identify the accounts to which the rule applies; however, the financial institution may rely on the account holder’s designation of an account as a trust account to which Rule 1.15 applies or as a type of account to which the rule does not apply.
3. If the instrument is honored by the financial institution, must the fact that it was presented against insufficient funds still be reported?
Yes. The rule requires reporting whether or not the financial institution honors the instrument. Rule 1.15(l).
4. Is there an approved report form to be sent to the Disciplinary Board of the North Dakota Supreme Court concerning overdrafts?
No. If an instrument is dishonored a copy of the notice of dishonor customarily sent to the depositor is sufficient. Rule 1.15(m)(2) sets out a list of specific items to be furnished to the Disciplinary Board when an instrument is presented against insufficient funds but is paid by the financial institution.
5. Must all overdrafts be reported?
Yes, all overdrafts must be reported, irrespective of the cause. When the Board receives the overdraft notice, the attorney will be required to explain. An explanation from the financial institution will be helpful to the Board’s investigation. If the financial institution learns that its own error caused the overdraft, the Board requests the institution to provide a written explanation of that to the lawyer so that the lawyer may provide it to the Board.
6. Can financial institutions charge lawyers a fee for providing this notice?
Yes. The rule does not preclude the financial institution from charging a lawyer or law firm the reasonable cost of producing the notice. Rule 1.15(o). Charging fees is a matter of contract between the institution and the depositor.
7. Must instruments be reported which are returned unpaid due to incompleteness?
No. Only properly payable instruments that, if presented in the normal course of business, in a form requiring payment under the laws of this jurisdiction are reportable. Rule 1.0(k), NDRPC. A check that lacks a signature, for example, is not properly payable.
8. What is classified as a financial institution?
Financial institution is a bank, savings bank, trust company, savings and loan association, savings association, credit union, or federally regulated investment company authorized by federal or state law to do business in North Dakota and insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or the Federal Savings and Loan Insurance Corporation. Rule 1.15(f), NDRPC.
9. What is the policy of the Disciplinary Board of the North Dakota Supreme Court with respect to financial institutions that occasionally fail to report overdrafts through error?
Occasional negligence in failing to report to the Board will not cause removal from the list of approved institutions. However, a pattern of neglect or bad faith in not complying with the rule may cause the Board to revoke approval.