Code Section Group

Civil Code - CIV

DIVISION 3. OBLIGATIONS [1427 - 3273.16]

  ( Heading of Division 3 amended by Stats. 1988, Ch. 160, Sec. 14. )

PART 4. OBLIGATIONS ARISING FROM PARTICULAR TRANSACTIONS [1738 - 3273.16]

  ( Part 4 enacted 1872. )

TITLE 1.6C.10. Student Loans: Borrower Rights [1788.100 - 1788.105]

  ( Title 1.6C.10 added by Stats. 2020, Ch. 154, Sec. 2. )

CHAPTER 1. Student Borrower Bill Of Rights [1788.100 - 1788.101]
  ( Chapter 1 added by Stats. 2020, Ch. 154, Sec. 2. )

1788.100.
  

For purposes of this title, the following definitions apply:

(a) “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).

(b) “Borrower with disabilities” means a borrower who a student loan servicer knows, or reasonably should know, is a person who has a disability, as defined in Section 54.

(c) “Borrower working in public service” means a borrower who a student loan servicer knows, or reasonably should know, is employed in a public service job, as defined in the Higher Education Act (20 U.S.C. Sec. 1087e(m)) and its implementing regulations.

(d) “Commissioner” means the Commissioner of Business Oversight.

(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, 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 the Student Loan Servicing Act (Division 12.5 (commencing with Section 28100) of the Financial Code).

(i) “Military borrower” means any of the following:

(1) A borrower who is one of the following:

(A) A servicemember as defined in the Servicemember Civil Relief Act (50 U.S.C. Sec. 3911).

(B) Self-identifies as a service member when interacting with a student loan servicer.

(C) Is a service member as defined in Section 400 of the Military and Veterans Code.

(2) A borrower who is a veteran of a branch of the Armed Forces as defined in Section 101 of Title 38 of the United States Code.

(3) An authorized representative of a borrower described in paragraph (1) or (2).

(j) “Older borrower” means a borrower who a student loan servicer knows, or reasonably should know, is a senior citizen, as defined in Section 51.3.

(k) “Overpayment” means a payment on a student loan account in excess of the monthly amount due from a borrower on a student loan, also commonly referred to as a prepayment.

(l) “Partial payment” means a payment on a student loan account in an amount less than the current amount due from a borrower on the student loan account, also commonly referred to as an underpayment.

(m) “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.

(n) “Qualified request” means any inbound telephone call, the subject of which cannot be resolved in a single phone call, made by a borrower to a student loan servicer in which either the borrower requests specific information from the student loan servicer or reports what the borrower believes to be an error regarding the borrower’s account.

(o) “Qualified written request” means a written correspondence made by a borrower, other than notice on a payment medium supplied by a student loan servicer, that is transmitted by mail, facsimile, or electronically through an email address or internet website designated by the student loan servicer to receive communications from a borrower that does all of the following:

(1) Enables the student loan servicer 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.

(p) “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 their student loan or facilitating the activities described in paragraph (1) or (2).

(q) (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 one thousand five hundred dollars ($1,500) at the time of the borrower’s graduation or completion of the program.

(iii) The borrower fails to graduate or successfully complete their education program and has a balance due at the time of their disenrollment from the postsecondary institution.

(r) “Student loan account” means student loans owed by a borrower grouped together for billing purposes by a student loan servicer.

(s) “Student loan servicer” means any person engaged in the business of servicing student loans in this state. A “student loan servicer” does not include any of the following:

(1) A debt collector, as defined in subdivision (c) of Section 1788.2, 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.”

(2) In connection with its responsibilities as a guaranty agency engaged in default aversion, a state or nonprofit private institution or organization having an agreement with the United States Secretary of Education under the Higher Education Act of 1965 (20 U.S.C. Sec. 1078(b)).

(3) A federally chartered credit union.

(Added by Stats. 2020, Ch. 154, Sec. 2. (AB 376) Effective January 1, 2021.)

1788.101.
  

(a) (1) A person shall not engage in abusive acts or practices when servicing a student loan in this state.

(2) An act or practice is abusive in connection with the servicing of a student loan, if the act or practice does either of the following:

(A) Materially interferes with the ability of a borrower to understand a term or condition of a student loan.

(B) Takes unreasonable advantage of any of the following:

(i) A lack of understanding on the part of a borrower of the material risks, costs, or conditions of the student loan.

(ii) The inability of a borrower to protect the interests of the borrower when selecting or using either of the following:

(I) A student loan.

(II) A feature, term, or condition of a student loan.

(iii) The reasonable reliance by the borrower on a person engaged in servicing a student loan to act in the interests of the borrower.

(3) Abusive acts and practices include, but are not limited to, those described in paragraph (2).

(b) A student loan servicer shall not do any of the following:

(1) Directly or indirectly employ a scheme, device, or artifice to defraud or mislead a borrower.

(2) Engage in an unfair or deceptive practice toward a borrower or misrepresent or omit material information in connection with the servicing of a student loan, including, but not limited to, misrepresenting the amount, nature, or terms of a fee or payment due or claimed to be due on a student loan, the terms and conditions of the student loan agreement, or the borrower’s obligations under the student loan.

(3) Misapply payments made by a borrower to the outstanding balance of a student loan.

(4) (A) If the student loan servicer is required to or voluntarily reports to a consumer reporting agency, fail to accurately report each borrower’s payment performance to at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis, upon acceptance as a data furnisher by that consumer reporting agency.

(B) For purposes of this paragraph, “consumer reporting agency that compiles and maintains files on consumers on a nationwide basis” has the same meaning as defined in the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)).

(5) Refuse to communicate with an authorized representative of the borrower who provides a written authorization signed by the borrower, provided the student loan servicer may adopt reasonable procedures for verifying that the representative is in fact authorized to act on behalf of the borrower and for protecting the borrower from fraud or abusive practices.

(6) Negligently or intentionally make a false statement or knowingly and willfully make an omission of a material fact in connection with information or reports filed with the department or another governmental agency.

(7) Engage in an unfair or deceptive practice toward a military borrower or misrepresent or omit material information in connection with the servicing of a student loan owed by a military borrower. For purposes of this paragraph, “misrepresent or omit material information” includes, but is not limited to:

(A) Misrepresenting or omitting the availability of a program or protection specific to military borrowers or applicable to military borrowers.

(B) A misrepresentation or omission in violation of paragraph (2) of this subdivision.

(8) Engage in an unfair or deceptive practice toward any borrower working in public service or misrepresent or omit material information in connection with the servicing of a student loan owed by a borrower working in public service. For purposes of this paragraph, “misrepresent or omit material information” includes, but is not limited to:

(A) Misrepresenting or omitting the availability of a program or protection specific to borrowers working in public service or applicable to those borrowers.

(B) A misrepresentation or omission in violation of paragraph (2).

(9) Engage in an unfair or deceptive practice toward an older borrower or older cosigner or misrepresent or omit material information in connection with the servicing of a student loan owed or cosigned by an older borrower. For purposes of this paragraph, “misrepresent or omit material information” includes, but is not limited to:

(A) Misrepresenting or omitting the availability of a program or protection specific to older borrowers or older cosigners or applicable to those borrowers or cosigners.

(B) Misrepresenting or omitting the older borrower’s or older cosigner’s obligations under the student loan.

(C) A misrepresentation or omission in violation of paragraph (2).

(10) Engage in an unfair or deceptive practice toward a borrower with a disability or misrepresent or omit material information in connection with the servicing of a student loan owed by a borrower with a disability. For purposes of this paragraph, “misrepresent or omit material information” includes, but is not limited to:

(A) Misrepresenting or omitting the availability of a program or protection specific to borrowers with disabilities or applicable to those borrowers.

(B) A misrepresentation or omission in violation of paragraph (2) of this subdivision.

(Added by Stats. 2020, Ch. 154, Sec. 2. (AB 376) Effective January 1, 2021.)

CIVCivil Code - CIV