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AB-2921 Student Loan Servicing Act: student loan accounts.(2019-2020)

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Date Published: 03/12/2020 09:00 PM
AB2921:v98#DOCUMENT

Amended  IN  Assembly  March 12, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2921


Introduced by Assembly Member Mark Stone

February 21, 2020


An act to add Section 28177 to amend Sections 28104, 28130, and 28134 of the Financial Code, relating to financial institutions.


LEGISLATIVE COUNSEL'S DIGEST


AB 2921, as amended, Mark Stone. Student Loan Servicing Act: reports. student loan accounts.
Existing law, the Student Loan Servicing Act, provides for the licensure, regulation, and oversight of student loan servicers by the Commissioner of Business Oversight, who is the head of the Department of Business Oversight. The act prohibits a person from engaging in the business of servicing a student loan in this state without a license, unless the person falls within certain exceptions. The act authorizes the commissioner to promulgate regulations and take various other administrative actions. The act requires a licensee to provide certain information regarding a borrower’s account in response to a qualified written request from a borrower, as specified.

This bill would require the department to submit a report to the Senate Committee on Banking and Financial Institutions and the Assembly Committee on Banking and Finance by January 1, 2022, and every 3 years thereafter, that details the general health of the program described above, the total number of violations of the act, and the total number of licensees.

This bill would define the term “student loan account” for purposes of the act as a student loan or loans grouped together for billing purposes by a student loan servicer. The bill would make conforming changes to reference borrower’s student loan accounts instead of borrower’s accounts.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YESNO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 28104 of the Financial Code is amended to read:

28104.
 For the purposes of this division, the following terms have the following meanings:
(a) “Applicant” means a person applying for a license pursuant to this division.
(b) “Borrower” means either of the following:
(1) A person who has received or agreed to pay a student loan.
(2) A person who shares responsibility for repaying a student loan with a person described in paragraph (1).
(c) “Commissioner” means the Commissioner of Business Oversight.
(d) “Default aversion” means those activities in which guaranty agencies engage to prevent default by a borrower pursuant to the law and regulations of the Federal Family Education Loan Program.
(e) “Department” means the Department of Business Oversight.
(f) “Engage in the business” means, without limitation, servicing student loans.
(g) “In this state” means any activity of a person relating to servicing student loans that originates from this state and is directed to persons outside this state, or that originates from outside this state and is directed to persons inside this state, or that originates inside this state and is directed to persons inside this state.
(h) “Licensee” means a person licensed pursuant to this division.
(i) “Nationwide Multistate Licensing System & Registry” means a system of record, created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, for nondepository, financial services licensing or registration, including student loan servicers, in participating state agencies, the District of Columbia, Puerto Rico, the United States Virgin Islands, and Guam.
(j) “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust, an unincorporated organization, a government, or a political subdivision of a government, and any other entity.
(k) “Qualified written request” means a written correspondence made by a borrower, other than notice on a payment medium supplied by a licensee, that is transmitted by mail, facsimile, or electronically through an email address or Internet Web site internet website designated by the licensee to receive communications from a borrower that does all of the following:
(1) Enables the licensee to identify the name and account of the borrower.
(2) Includes a statement of the reasons for the belief by the borrower, to the extent applicable, that the account is in error or that provides sufficient detail to the servicer regarding information sought by the borrower, such as requesting a complete payment history for the loan or the borrower’s account, a copy of the borrower’s student loan promissory note, or the contact information for the creditor to whom the borrower’s student loan is owed.
(l) “Servicing” means any of the following activities related to a student loan of a borrower:
(1) Performing both of the following:
(A) Receiving any scheduled periodic payments from a borrower or any notification that a borrower made a scheduled periodic payment.
(B) Applying payments to the borrower’s account pursuant to the terms of the student loan or the contract governing the servicing.
(2) During a period when no payment is required on a student loan, performing both of the following:
(A) Maintaining account records for the student loan.
(B) Communicating with the borrower regarding the student loan on behalf of the owner of the student loan promissory note.
(3) Interacting with a borrower related to that borrower’s student loan, with the goal of helping the borrower avoid default on his or her their student loan or facilitating the activities described in paragraph (1) or (2).
(m) (1) “Student loan” means any loan made solely for use to finance a postsecondary education and costs of attendance at a postsecondary institution, including, but not limited to, tuition, fees, books and supplies, room and board, transportation, and miscellaneous personal expenses. A “student loan” includes a loan made to refinance a student loan.
(2) (A) A “student loan” shall not include an extension of credit under an open-end consumer credit plan, a reverse mortgage transaction, a residential mortgage transaction, or any other loan that is secured by real property or a dwelling.
(B) A “student loan” shall not include an extension of credit made by a postsecondary educational institution to a borrower if one of the following applies:
(i) The term of the extension of credit is no longer than the borrower’s education program.
(ii) The remaining, unpaid principal balance of the extension of credit is less than $1,500 at the time of the borrower’s graduation or completion of the program.
(iii) The borrower fails to graduate or successfully complete his or her their education program and has a balance due at the time of his or her their disenrollment from the postsecondary institution.
(n) “Student loan account” means a student loan or loans grouped together for billing purposes by a student loan servicer.

(n)

(o) “Student loan servicer” means any person engaged in the business of servicing student loans. A “student loan servicer” does not include a debt collector, as defined in Section 1788.2 of the Civil Code, whose student loan debt collection business, and business operations, involve collecting, or attempting to collect, on defaulted student loans, that is, federal student loans for which no payment has been received for 270 days or more, or private student loans, in default, according to the terms of the loan documents. Debt collectors who also service nondefaulted student loans, as part of their business, and business operations, are “student loan servicers.”

SEC. 2.

 Section 28130 of the Financial Code is amended to read:

28130.
 A licensee shall do all of the following:
(a) Develop policies and procedures reasonably intended to promote compliance with this division.
(b) File with the commissioner any report required by the commissioner.
(c) Comply with the provisions of this division and any regulation or order of the commissioner.
(d) Submit to periodic examination by the commissioner as required by this division and any regulation or order of the commissioner.
(e) Advise the commissioner of filing a petition for bankruptcy within five days of the filing.
(f) Provide, free of charge on its Internet Web site, internet website, information or links to information regarding repayment and loan forgiveness options that may be available to borrowers and provide this information or these links to borrowers via written correspondence or email at least once per calendar year.
(g) (1) Respond to a qualified written request by acknowledging receipt of the request within 10 business days and within 30 business days, provide information relating to the request and, if applicable, the action the licensee will take to correct the student loan account or an explanation for the licensee’s position that the borrower’s student loan account is correct.
(2) The 30-day period described in paragraph (1) may be extended for not more than 15 days if, before the end of the 30-day period, the licensee notifies the borrower of the extension and the reasons for the delay in responding.
(3) After receipt of a qualified written request related to a dispute on a borrower’s payment on a student loan, a licensee shall not, for 60 days, furnish adverse information to any consumer reporting agency regarding any payment that is the subject of the qualified written request.
(h) (1) Except as provided in federal law or required by a student loan agreement, a licensee shall inquire of a borrower how to apply an overpayment to a student loan. A borrower’s direction on how to apply an overpayment to a student loan shall stay in effect for any future overpayments during the term of a student loan until the borrower provides different directions.
(2) For purposes of this subdivision, “overpayment” means a payment on a student loan in excess of the monthly amount due from a borrower on a student loan, also commonly referred to as a prepayment.

SEC. 3.

 Section 28134 of the Financial Code is amended to read:

28134.
 (a) If the sale, assignment, or other transfer of the servicing of a student loan results in a change in the identity of the party to whom the borrower is required to send payments or direct any communications concerning the student loan the licensee shall notify the borrower in writing at least 15 days before the borrower is required to send a payment on the student loan of all of the following:
(1) The identity of the new student loan servicer and the number of the license of the new student loan servicer issued by the commissioner.
(2) The name and address of the new student loan servicer to whom subsequent payments or communications are required to be sent.
(3) The telephone numbers and Internet Web sites of the new student loan servicer.
(4) The effective date of the sale, assignment, or transfer.
(5) The date on which the licensee, as the current student loan servicer, will stop accepting payments on the borrower’s student loan.
(6) The date on which the new student loan servicer will begin accepting payments on the borrower’s student loan.
(b) A licensee shall transfer all information regarding a borrower, a borrower’s student loan account, and a borrower’s student loan to the new licensee servicing the borrower’s student loan within 45 calendar days of the effective date of the sale, assignment, or transfer.

SECTION 1.Section 28177 is added to the Financial Code, to read:
28177.

(a)The department shall submit a report to the Senate Committee on Banking and Financial Institutions and the Assembly Committee on Banking and Finance by January 1, 2022, and every three years thereafter, that contains all of the following information:

(1)The general health of the program established by this division.

(2)The total amount of violations of this division.

(3)The number of licensees.

(b)The report shall be submitted in compliance with Section 9795 of the Government Code.