Bill Text: MI HB6448 | 2017-2018 | 99th Legislature | Introduced
Bill Title: Financial institutions; other; licensing of student loan servicers; require. Creates new act. TIE BAR WITH: HB 6446'18
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2018-11-07 - Bill Electronically Reproduced 10/17/2018 [HB6448 Detail]
Download: Michigan-2017-HB6448-Introduced.html
HOUSE BILL No. 6448
October 17, 2018, Introduced by Rep. Yanez and referred to the Committee on Appropriations.
A bill to regulate student loan lenders and servicers; to
require the licensing of certain student loan servicers; to
prescribe the powers and duties of certain other public officers
and agencies; to provide for the promulgation of rules; and to
provide remedies and penalties.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"student loan servicer licensing act".
Sec. 3. As used in this act:
(a) "Department" means the department of insurance and
financial services.
(b) "Depository institution" means a state or national bank,
state or federal savings bank, state or federal savings and loan
association, or state or federal credit union.
(c) "Director" means the director of the department or his or
her designated representative.
(d) "Servicing" means any of the following:
(i) Receiving any scheduled periodic payments from a student
loan borrower under the terms of a student education loan.
(ii) Applying the payments of principal and interest and any
other payments with respect to the amounts received from a student
loan borrower, as may be required under the terms of a student
education loan.
(iii) Performing any other administrative services with
respect to a student education loan.
(e) "Student education loan" means any loan that is primarily
for personal use to finance education or other school-related
expenses.
(f) "Student loan borrower" means either of the following:
(i) A resident of this state who has received or agreed to pay
a student education loan.
(ii) Any person that shares responsibility with an individual
described in subparagraph (i) for repaying his or her student
education loan.
(g) "Student loan servicer" means any person, wherever
located, that is responsible for the servicing of any student
education loan to any student loan borrower. The term includes a
person that is required to obtain a license under this act or is
exempt from the licensing requirements of this act under section 7.
Sec. 5. (1) Subject to section 7, a person shall not act as a
student loan servicer, directly or indirectly, without first
obtaining a license from the director under this section.
(2) A person that is applying for an initial license under
this act to engage in the business of a student loan servicer in
this state shall submit a written application to the director, in
the form prescribed by the director, and include each of the
following with that application:
(a) The applicant's financial statements, audited or reviewed
by an independent certified public accountant.
(b) A history of criminal convictions of each of the
following, as applicable:
(i) The applicant, if the applicant is an individual.
(ii) Each partner, if the applicant is a partnership.
(iii) Each member, if the applicant is a limited liability
company or association.
(iv) Each officer, director, and principal employee, if the
applicant is a corporation.
(c) Any information pertaining to a history of criminal
convictions provided under subdivision (b) that the director
considers necessary to determine whether to issue a license to the
applicant under section 9. The director may also conduct a criminal
history check of any individual described in subdivision (b) in
connection with that determination.
(d) A nonrefundable license fee of $1,000.00.
(e) A nonrefundable investigation fee of $800.00.
(3) The student loan servicer regulatory fund is created in
the state treasury. All of the following apply to the student loan
servicer regulatory fund:
(a) Except as provided in section 29, licensing and
investigation fees received under this act shall be forwarded to
the state treasurer for deposit into the fund.
(b) The director shall use the money in the fund to administer
and enforce this act.
(c) The state treasurer shall direct the investment of the
fund and shall credit to the fund interest and earnings from fund
investments.
(d) Money in the fund at the close of the fiscal year shall
remain in the fund and shall not lapse to the general fund.
(e) The department is the administrator of the fund for
auditing purposes.
Sec. 7. The following persons are exempt from the licensing
requirements of this act:
(a) A depository institution.
(b) A wholly owned subsidiary of a depository institution.
(c) An operating subsidiary that is wholly owned by 1 or more
subsidiaries described in subdivision (b).
Sec. 9. If the director receives a completed application and
the license and investigation fees for an initial license under
this act, the director shall investigate the financial condition
and responsibility, financial and business experience, character,
and general fitness of the applicant and may issue a license if he
or she finds that all of the following are met:
(a) The applicant's financial condition is sound.
(b) The applicant's business will be conducted honestly,
fairly, equitably, carefully, and efficiently within the purposes
and intent of this act, and in a manner that commands the
confidence and trust of the community.
(c) Each of the following, as applicable:
(i) If the applicant is an individual, the applicant.
(ii) If the applicant is a partnership, each partner.
(iii) If the applicant is a corporation, each of the
following:
(A) The president.
(B) The chairperson of the executive committee.
(C) Each senior officer who is responsible for the
corporation's business.
(D) The chief financial officer.
(E) Any other individuals who perform similar functions to
those performed by an individual described in sub-subparagraphs (A)
to (D), as determined by the director.
(F) Each of the corporation's directors or trustees.
(G) Each shareholder that owns 10% or more of each class of
the securities of the corporation.
(iv) If the applicant is a limited liability company or
association, each member.
(d) No individual acting on behalf of the applicant has
knowingly made any incorrect statement of a material fact in the
application or in any report or statement made under this act.
(e) No individual acting on behalf of the applicant has
knowingly omitted to state any material fact necessary to give the
director any information that the director has lawfully requested
under this act.
(f) The applicant has paid the investigation fee and the
license fee required under section 5(2).
(g) The applicant has met any other similar requirements as
established by the director by rule.
Sec. 11. (1) A license issued under this act expires on
September 30 of the odd-numbered year following its issuance,
unless the license is renewed or earlier surrendered, suspended, or
revoked under this act.
(2) Within 15 days after a licensee ceases to engage in the
business of student loan servicing in this state for any reason,
including a business decision to terminate operations in this
state, license revocation, bankruptcy, or voluntary dissolution,
the licensee shall provide written notice of surrender to the
director and shall surrender to the director its license for each
location in which the licensee has ceased to engage in the business
of student loan servicing. The written notice of surrender shall
identify the location where the records of the licensee will be
stored and the name, address, and telephone number of an individual
who is authorized to provide access to the records. The surrender
of a license does not reduce or eliminate the licensee's civil or
criminal liability arising from acts or omissions occurring before
the surrender of the license, including any administrative actions
undertaken by the director to revoke or suspend a license, assess a
civil penalty, order restitution, or exercise any other authority
granted to the director under this act.
Sec. 13. (1) A licensee may renew a license for the ensuing
24-month period by filing an application with the director, that
includes all of the documents and fees described in section 5(2)
for an initial license, on or before the date the current license
expires. However, if the director receives the completed
application after September 1 of the year in which the current
license expires, the applicant for renewal shall pay an additional
$100.00 late fee.
(2) If the director receives a completed application for a
renewal license on or before the date the current license expires,
the current license continues in full force and effect until the
date that 1 of the following occurs:
(a) The director issues a renewal license.
(b) The director notifies the licensee in writing that he or
she refuses to issue a renewal license and the grounds for that
refusal. The director may refuse to issue a renewal license on any
ground on which he or she may refuse to issue an initial license
under section 5.
Sec. 15. (1) If the director determines that a check submitted
to him or her to pay an investigation, license, renewal, or late
fee has been dishonored, the director shall automatically suspend
the applicant's current license and an applicant's renewal license,
if any, that has been issued but is not yet effective. The director
shall give the licensee notice of the automatic suspension pending
proceedings for revocation or refusal to renew and the licensee is
entitled to a hearing on those actions, conducted under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328.
(2) An applicant or licensee shall notify the director, in
writing, if any of the information provided in its initial
application for a license or its most recent application for a
renewal license, as applicable, is no longer accurate. The
applicant or licensee shall provide this notice to the director
within 10 business days after the occurrence of the event that
resulted in the information previously provided becoming
inaccurate.
(3) The director may consider an application for an initial or
renewal license abandoned if the applicant fails to respond to any
request for information required under this act or any rules
promulgated under this act. The director shall notify the
applicant, in writing, that if the applicant fails to submit the
information requested within 60 days after the date on which the
request for information is made, the application is considered
abandoned. An applicant that paid an application filing fee paid
before the date an application is considered abandoned under this
subsection shall not receive a refund of that fee. Abandonment of
an application under this subsection does not preclude the
applicant from submitting a new application for a license under
this act.
Sec. 17. (1) A person that is licensed under this act to
engage in business as a student loan servicer shall not engage in
that business in this state under any other name or at any other
place of business than the name or address described in the
license.
(2) A licensee may change the location of its place of
business if it provides the director with written notice at least
60 days before the change of location.
(3) A licensee may conduct business as a student loan servicer
at only 1 location under a single license, but the director may
issue more than 1 license to the same licensee if the licensee
complies with the requirements of this act for each new license.
(4) A license under this act is not transferable or
assignable.
Sec. 19. (1) A student loan servicer shall maintain adequate
records of each student education loan transaction during the term
of the loan and for at least 2 years following the date of the
final payment on the student education loan, or until the date of
the assignment of the student education loan, whichever occurs
first, or for any longer period required under any other provision
of law.
(2) If requested by the director, a student loan servicer
shall make the records described in subsection (1) available to the
director, or send those records to the director by registered or
certified mail, return receipt requested, or by any express
delivery carrier that provides a dated delivery receipt, within 5
business days after the director requests access to those records.
On request, the director may grant a licensee additional time to
make those records available or send the records to the director.
Sec. 21. A student loan servicer shall not do any of the
following:
(a) Directly or indirectly employ any scheme, device, or
artifice to defraud or mislead student loan borrowers.
(b) Engage in any unfair or deceptive practice toward any
person or misrepresent or omit any material information in
connection with the servicing of a student education 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 education loan, the terms and conditions of the loan
agreement, or the borrower's obligations under the loan.
(c) Obtain property by fraud or misrepresentation.
(d) Knowingly misapply or recklessly apply student education
loan payments to the outstanding balance of a student education
loan.
(e) Harm a student loan borrower's creditworthiness by
knowingly or recklessly providing inaccurate information to a
credit reporting agency.
(f) Fail to report both the favorable and unfavorable payment
history of a student loan borrower to a nationally recognized
credit reporting agency at least annually if the student loan
servicer regularly reports information to a credit reporting
agency.
(g) Refuse to communicate with an authorized representative of
the student loan borrower who provides a written authorization
signed by the student loan borrower. However, a student loan
servicer may adopt procedures reasonably related to verifying that
a representative is in fact authorized to act on behalf of a
student loan borrower.
(h) Negligently make any false statement or knowingly and
willfully make any omission of a material fact in connection with
any information or reports filed with a governmental agency or in
connection with any investigation conducted by the director, the
department, or another governmental agency.
(i) Fail or neglect to comply with all applicable federal
statutes and regulations relating to student loan servicing,
including, but not limited to, the truth in lending act, 15 USC
1601 to 1667f, and the regulations promulgated under that act, 12
CFR part 226.
Sec. 23. (1) The director's authority to conduct
investigations and examinations of license applicants, licensed
student loan servicers, or other student loan servicers under this
act is subject to all of the following:
(a) For purposes of initial licensing, license renewal,
license suspension, license revocation or termination, or general
or specific inquiry or investigation to determine compliance with
this act, the director may access, receive, and use any books,
accounts, records, files, documents, information, or evidence,
including, but not limited to, any of the following:
(i) Criminal, civil, and administrative history information.
(ii) Personal history and experience information, including
independent credit reports obtained from a consumer reporting
agency described in section 603(p) of the fair credit reporting
act, 15 USC 1681a.
(iii) Any other documents, information, or evidence the
director considers relevant to the inquiry or investigation
regardless of the location, possession, control, or custody of the
documents, information, or evidence.
(b) For the purposes of investigating violations or complaints
arising under this act or for the purposes of examination, the
director may review, investigate, or examine any student loan
servicer licensee or other person that is subject to this act as
often as necessary in order to carry out the purposes of this act.
The director may direct, subpoena, or order the attendance of and
examine under oath any individual whose testimony is required about
a student education loan, the business of a student loan servicer,
or the subject matter of an examination or investigation and may
direct, subpoena, or order that individual to produce books,
accounts, records, files, and any other documents the director
considers relevant to the inquiry.
(2) While conducting an examination or investigation under
this act, the director may control access to any documents and
records of the student loan servicer licensee or other person that
is the subject of the examination or investigation. The director
may take possession of the documents and records or place an
individual in exclusive charge of the documents and records in the
place where they are usually kept. If the director is in control of
documents and records under this subsection, a person shall not
remove or attempt to remove any of the documents and records except
pursuant to a court order or with the consent of the director.
Unless the director has reasonable grounds to believe the documents
or records of the student loan servicer licensee or other person
have been, or are at risk of being, altered or destroyed for
purposes of concealing a violation of this act, the student loan
servicer licensee or other owner of the documents and records shall
have access to the documents or records as necessary to conduct its
ordinary business affairs.
(3) For purposes of this section, the director may do any of
the following:
(a) Retain attorneys, accountants, or other professionals and
specialists as examiners, auditors, or investigators to conduct or
assist in the conduct of examinations or investigations.
(b) Enter into agreements or relationships with other
government officials or regulatory associations in order to improve
efficiencies and reduce regulatory burden by sharing resources,
standardized or uniform methods or procedures, and documents,
records, information, or evidence obtained under this section.
(c) Use, hire, contract, or employ public or privately
available analytical systems, methods, or software to examine or
investigate a student loan servicer licensee, a student loan
servicer that is exempt from licensure under section 7, or any
other person that is subject to this act.
(d) Accept and rely on examination or investigation reports
made by other local, state, or federal government officials.
(e) Accept audit reports made by an independent certified
public accountant for a student loan servicer licensee, a student
loan servicer that is exempt from licensure under section 7, or any
other person that is subject to this act, in the course of
conducting that part of the examination that covers the same
general subject matter as the audit; and incorporate the audit
report in the report of examination, report of investigation, or
other writing of the director.
(4) A student loan servicer licensee, a student loan servicer
that is exempt from licensure under section 7, or any other person
that is subject to investigation or examination under this section
shall not knowingly withhold, abstract, remove, mutilate, destroy,
or secrete any books, records, computer records, or other
information.
Sec. 25. (1) After notice and opportunity for a hearing under
the administrative procedures act of 1969, 1969 PA 306, MCL 24.201
to 24.328, the director may suspend, revoke, or refuse to renew a
license issued under this act, require the payment of restitution
by a licensee, or impose an administrative fine on a licensee in an
amount that does not exceed $3,000.00 if the director finds either
of the following:
(a) That a licensee has violated this act or a rule
promulgated under this act.
(b) That a fact or condition exists that, if it had existed at
the time of the original application for the license, clearly would
have warranted a denial of the license.
(2) A licensee shall not receive a refund of any part of the
license fee if a license is surrendered, revoked, or suspended
under subsection (1) before the expiration of the period for which
it was issued.
(3) In addition to any sanction under subsection (1) if the
person is a licensee, a student loan servicer that is licensed
under this act, a student loan servicer that is exempt from
licensure under section 7, or any other person that violates this
act or directly or indirectly counsels, aids, or abets in a
violation is responsible for a civil fine of not more than
$3,000.00 for each violation. The civil fine shall be sued for and
recovered by the director and shall be collected and enforced by
summary proceedings by the attorney general.
Sec. 27. The director shall promulgate rules under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, as necessary to implement, administer, and enforce this
act.
Sec. 29. On or before January 1 of each year beginning in
2019, the director shall submit a report to the senate and house
standing committees with oversight over matters relating to banking
and higher education. The report shall address the implementation
of this act and any additional steps that the director considers
necessary for the department to gain regulatory control over the
licensing and enforcement of student loan servicers under this act.
Enacting section 1. This act takes effect 90 days after the
date it is enacted into law.
Enacting section 2. This act does not take effect unless
Senate Bill No.____ or House Bill No. 6446 (request no. 06646'18) of
the 99th Legislature is enacted into law.
