Bill Text: CA AB376 | 2019-2020 | Regular Session | Amended
Bill Title: Student loan servicing.
Spectrum: Partisan Bill (Democrat 12-0)
Status: (Passed) 2020-09-25 - Chaptered by Secretary of State - Chapter 154, Statutes of 2020. [AB376 Detail]
Download: California-2019-AB376-Amended.html
Amended
IN
Senate
June 20, 2019 |
Amended
IN
Assembly
May 16, 2019 |
Amended
IN
Assembly
March 25, 2019 |
Assembly Bill | No. 376 |
Introduced by Assembly Member Mark Stone (Principal coauthor: Assembly Member Limón) |
February 05, 2019 |
LEGISLATIVE COUNSEL'S DIGEST
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YESBill Text
The people of the State of California do enact as follows:
SECTION 1.
(a) The Legislature finds and declares all of the following:SEC. 2.
Title 1.6C.10 (commencing with Section 1788.100) is added to Part 4 of Division 3 of the Civil Code, to read:TITLE 1.6C.10. Student Loans: Borrower Rights
CHAPTER 1. Student Borrower Bill Of Rights
1788.100.
For purposes of this title, the following definitions apply:1788.101.
(a) (1) A person shall not engage in abusive acts or practices when servicing a student loan in this state.(b)
(1)
(2)
(A)
(B)
(i)
(ii)
(C)
(c)
CHAPTER 2. Setting Clear “Rules of the Road” for the Student Loan Industry
1788.102.
Except to the extent that this section is inconsistent with any provision of federal law or regulation, and then only to the extent of the inconsistency, a(b)Apply an overpayment on a loan in a manner that is in the best financial interest of a student loan borrower, unless a borrower provides instructions to the contrary, consistent with subdivision (h) of Section 28130 of the Financial Code.
(1)A student loan servicer shall be considered to meet the requirements of this subdivision if the servicer applies the overpayment to the highest interest-rate loan on the borrower’s account, unless the borrower specifies otherwise.
(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.
(c)Apply partial payments in a manner that
minimizes late fees and negative credit reporting.
(1)If there are multiple loans on a borrower’s account with an equal stage of delinquency, the person engaged in student loan servicing in this state shall satisfy the requirements of this subdivision by applying partial payments to satisfy as many loans as possible on a borrower’s account.
(2)For purposes of this subdivision, “partial payment” means a payment on a student loan in an amount less than the monthly amount due from a borrower on a student loan, also commonly referred to as an underpayment.
(h)Treat any inbound inquiry or complaint that cannot be completed in a single phone call as a qualified request subject to the same requirements and protections established for “qualified written requests” under Section 28130 of the Financial Code, and have policies and procedures permitting borrowers to escalate a complaint or inquiry to a senior representative if the borrower is dissatisfied with the outcome of the initial qualified request.
(i)
(j)
(k)
(l)
(1)The availability of any program or protection specific to military borrowers or applicable to military borrowers.
(2)The amount, nature, or terms of any fee or payment due or claimed to be due on a student loan.
(3)The terms and conditions of the student loan agreement.
(4)The borrower’s obligations under the student loan.
(m)
(1)The availability of any program or protection specific to borrowers working in public service or applicable to those borrowers.
(2)The amount, nature, or terms of any fee or payment due or claimed to be due on a student loan.
(3)The terms and conditions of the student loan agreement.
(4)The borrower’s obligations under the student loan.
(n)
(1)The
availability of any program or protection specific to older borrowers or cosigners or applicable to those borrowers or cosigners.
(2)The amount, nature, or terms of any fee or payment due or claimed to be due on a student loan.
(3)The terms and conditions of the student loan agreement.
(4)The borrower’s or cosigner’s obligations under the student loan.
(o)
(p)
(q)Comply with Sections 28130, 28134, and 28136 of the Financial Code.
CHAPTER 3. Enforcement of the Student Borrower Bill of Rights
1788.103.
(a) ACHAPTER 4. Establishment of The California Student Borrower Advocate to Stand Up for the Rights of Student Borrowers
1788.104.
(a) Not later than 180 days following the operative date of this title, the commissioner shall designate a Student Borrower Advocate within the department to provide timely assistance to any student loan borrower with any student loan. The Student Borrower Advocate shall hire additional staff as necessary to implement this section.CHAPTER 5. Shining a Spotlight on Student Loan Industry Practices
1788.105.
(a) The department shall monitor for risks to consumers in the provision of student loan servicing, including developments in the market for those services.SEC. 3.
Section 28104 of the Financial Code is amended to read:28104.
For the purposes of this division, the following terms have the following meanings:(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 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)
(m)
(n)
SEC. 3.SEC. 4.
Section 28106 of the Financial Code is amended to read:28106.
(a) The commissioner shall administer the provisions of this division and may promulgate rules and regulations and issue orders consistent with that authority.SEC. 5.
Section 28130 of the Financial Code is amended to read:28130.
A licensee shall do all of the following:(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. 6.
Section 28134 of the Financial Code is repealed.(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 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.
SEC. 7.
Section 28136 of the Financial Code is repealed.The licensee shall not do any of the following:
(a)Directly or indirectly employ any scheme, device, or artifice to defraud or mislead a borrower.
(b)Engage in any unfair or deceptive practice toward any borrower or misrepresent or omit any material information in connection with the servicing of a student loan, including, but not limited to, misrepresenting the amount, nature, or terms of any 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.
(c)Misapply payments
made by a borrower to the outstanding balance of a student loan.
(d)If the licensee 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. For purposes of this subdivision, a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis is one that meets the definition in Section 603(p) of the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)).
(e)Refuse to communicate with an authorized representative of the borrower who provides a written authorization signed by the
borrower, provided the licensee 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.
(f)Negligently or intentionally make any false statement or knowingly and willfully make any omission of a material fact in connection with any information or reports filed with the commissioner, the department, or another governmental agency.