United States Tackle Student Loan Management | Manatt, Phelps & Phillips, srl


Oversight of the student loan service remains a priority for state regulators, with new regulations taking effect in New York, California, Colorado and Maine, and several other states considering similar measures.

State-level expedited enforcement may well be triggered both by the Consumer Financial Protection Bureau’s ouster of its old student loan unit, as we have previously reported., and the apparent direction of the Department of Education to student loan officers not to produce the requested documents in the CFPB supervisory examinations.

What happened

States approach the issue of student loans differently, but generally in a way that favors student borrowers and exercises greater oversight over lenders and loan administrators.

Earlier this year, New York City amended state banking law to add a host of new requirements for student loan managers. The law came into effect on October 9.

On the same day, the New York Department of Financial Services (DFS) announced the creation of a Student Debt Advisory Board. The board will provide advice on consumer protection, student financial products and services, and communities that have been significantly affected by student debt, the DFS said.

Days later, the DFS issued a final rule that requires student loan managers to provide clear and complete information about fees, payments owed, and loan terms and conditions. The final rule also governs the required manner of applying payments, so that payments are applied in the best interest of borrowers, rather than in a way that maximizes service charges.

Additionally, student borrowers should be made aware of income-based loan repayment and cancellation options, and agents should maintain and provide consumers with a “detailed history” of their accounts. Accurate information must be provided to credit reporting agencies, and timely and substantial responses are required for consumer complaints.

When a borrower loan is transferred to a new manager, the former manager must ensure that all necessary information is transferred with the loan, and the borrower must be informed in a timely manner of where to direct the decisions. payments during transfer.

The final rule also prohibits student loan managers from defrauding or misleading borrowers; engage in any unjust, deceptive, abusive or predatory act or practice; and the misapplication of borrower payments.
Other states have also enacted new laws and regulations.

In California, the Department of Business Oversight (DBO) earlier this year released the final student loan manager regulation, enacted after the state’s Student Loan Servicing Act was passed, requiring managers to apply for and to obtain a license from DBO to operate in the state. .

Colorado has enacted a bill establishing a bill of rights for student borrowers and oversight of student loan services. This state’s Student Loan Servicers Act came into effect on August 2, 2019. The Maine Student Bill of Rights, passed in June, places similar licensing and driving requirements on repairers.

Also on the list of states with new maintenance services laws this year: Maryland, Nevada, New Jersey, and Rhode Island. Several other legislatures have considered bills to regulate services, including California (tightening existing law), Massachusetts, North Carolina and Pennsylvania.

To read the New York regulations, click here.

To read California law, click here.

To read Colorado law, click here.

To read the Maine law, click here.

Why is this important

As the CFPB has scaled back its enforcement in the area of ​​student loans and the Department of Education has shifted to a reduced oversight role, states have stepped up efforts to address regulatory gaps, particularly with respect to student loan managers. With several states now weighing measures similar to those New York, California, Colorado and Maine have taken recently, we expect the trend towards greater state-level oversight of student loans and service. loans continue.

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