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AB-796 Student loan servicers: loan forgiveness information.(2019-2020)

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Date Published: 02/20/2019 09:00 PM
AB796:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill No. 796


Introduced by Assembly Member Holden

February 20, 2019


An act to amend Section 28130 of, and to add Section 28130.5 to, the Financial Code, relating to student loans.


LEGISLATIVE COUNSEL'S DIGEST


AB 796, as introduced, Holden. Student loan servicers: loan forgiveness information.
The Student Loan Servicing Act provides for the licensure, regulation, and oversight of student loan servicers by the Department of Business Oversight, which is headed by the Commissioner of Business Oversight. The act prohibits a person from engaging in the business of servicing a student loan in this state without a license, subject to specific exclusions. The act imposes civil and criminal penalties for violations of its provisions.
Under the act, a licensee is required to provide information on its internet website or links to information regarding repayment and loan forgiveness options that may be available to borrowers and to also provide this information or these links to borrowers via written correspondence or email at least once a year.
This bill would require a licensee, via written correspondence or email once a year, to also provide free of charge a description of the terms and conditions under which a borrower may obtain full or partial forgiveness or discharge of principal and interest, defer repayment of principal or interest, or be granted forbearance on a federal loan, including various information about the types of loans that can be forgiven or discharged and the impact of consolidation. By expanding the scope of a crime, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 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. year, including providing the information required by Section 28130.5.
(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 account or an explanation for the licensee’s position that the borrower’s 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. 2.

 Section 28130.5 is added to the Financial Code, to read:

28130.5.
 In addition to the information required pursuant to Section 28130, a licensee, via written correspondence or email at least once per calendar year, shall provide free to charge a detailed description of the terms and conditions under which a borrower may obtain full or partial forgiveness or discharge of principal and interest, defer repayment of principal or interest, or be granted forbearance on a federal Title IV loan, including foregiveness benefits or discharge benefits available to a Federal Family Education Loan (FFEL) borrower who consolidates their loan into the federal Direct Loan program. The description shall include all of the following:
(a) The difference between forgiveness, cancellation, and discharge.
(b) The different forgiveness, cancellation, and discharge programs available and how to qualify for them.
(c) The types of loans that can be forgiven or discharged.
(d) The impact of consolidation, enrollment status, and new loans on forgiveness.
(e) The forms required under federal law, including employment certification forms.

SEC. 3.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.