Department of Financial Institutions seeks statutory updates, adds data-security authority for nonbanks in House Bill 1127

Commissioner Lisa Cruz, head of the North Dakota Department of Financial Institutions, testified in support of House Bill 1127, telling the Industry, Business and Labor Committee the measure modernizes multiple sections of state banking law and creates a new chapter to address data security for nondepository financial institutions.

The bill combines statutory updates across chapters 6 and 13 and creates chapter 1301.2 to incorporate a model data-security standard applicable to nonbanks, Cruz said. "Safeguarding customers' data is of utmost importance," she said, arguing the change would give the state the same enforcement authority the Federal Trade Commission uses under its safeguards rule for nonbank entities.

The bill would also clarify the department’s authority to issue prohibition and removal orders for officers, directors and employees of financial institutions. Cruz said the department seeks to close a procedural gap that has allowed individuals to avoid an effective prohibition after pleading to lesser charges. The proposal would remove a statutory reinstatement route after a final removal order and make clear the board or commissioner can issue a prohibition order when an…