Code Section Group

Financial Code - FIN

DIVISION 12.5. Student Loan Servicing Act [28100 - 28182]

  ( Division 12.5 added by Stats. 2016, Ch. 824, Sec. 2. )

CHAPTER 1. General Provisions [28100 - 28104]

  ( Chapter 1 added by Stats. 2016, Ch. 824, Sec. 2. )

ARTICLE 3. Definitions [28104- 28104.]
  ( Article 3 added by Stats. 2016, Ch. 824, Sec. 2. )


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) “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 the borrower’s student loan or facilitating the activities described in paragraph (1) or (2).

(l) (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 the borrower’s education program and has a balance due at the time of the borrower’s disenrollment from the postsecondary institution.

(m) “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.”

(Amended by Stats. 2020, Ch. 154, Sec. 3. (AB 376) Effective January 1, 2021.)

FINFinancial Code - FIN3.