Bill Text: NY A02275 | 2023-2024 | General Assembly | Introduced
Bill Title: Establishes the student loan borrower bill of rights to protect borrowers and ensure that student loan servicers act more as loan counselors than debt collectors.
Spectrum: Strong Partisan Bill (Democrat 13-1)
Status: (Introduced) 2024-01-03 - referred to higher education [A02275 Detail]
Download: New_York-2023-A02275-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 2275 2023-2024 Regular Sessions IN ASSEMBLY January 25, 2023 ___________ Introduced by M. of A. SIMON, GONZALEZ-ROJAS -- Multi-Sponsored by -- M. of A. BICHOTTE HERMELYN, CARROLL, COLTON, COOK, DARLING, DAVILA, FAHY, GLICK, McDONOUGH, TAYLOR, THIELE -- read once and referred to the Committee on Higher Education AN ACT to amend the education law, in relation to creating a student loan borrower bill of rights The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The education law is amended by adding a new section 684 to 2 read as follows: 3 § 684. Student loan borrower bill of rights. 1. Definitions. As used 4 in this section: 5 (a) "Servicing" shall mean receiving a scheduled periodic payment from 6 a borrower pursuant to the terms of a loan, including amounts for escrow 7 accounts, and making the payments to the owner of the loan or other 8 third party of principal and interest and other payments with respect to 9 the amounts received from the borrower as may be required pursuant to 10 the terms of the servicing loan document or servicing contract. In the 11 case of a home equity conversion mortgage or reverse mortgage as refer- 12 enced in this section, servicing includes making payments to the borrow- 13 er. In the case of a student education loan as referenced in this 14 section, servicing includes applying the payments of principal and 15 interest and other such payments with respect to the amounts received 16 from a student loan borrower as may be required pursuant to the terms of 17 a student education loan and performing other administrative services 18 with respect to a student education loan. 19 (b) "Student education loan" shall mean any loan primarily used to 20 finance education or other school-related expenses. 21 (c) "Student loan borrower" shall mean any resident of New York who 22 has received or agreed to pay a student education loan, or any person EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD03248-01-3A. 2275 2 1 who shares responsibility with such New York resident for repaying the 2 student education loan. 3 (d) "Student loan servicer" shall mean any person responsible for the 4 servicing of a student education loan to a student loan borrower. 5 2. Loan ombudsman. (a) There is hereby established the position of the 6 student loan ombudsman, within the department of financial services, to 7 be appointed by the commissioner to provide timely assistance to any 8 student loan borrower who has a student education loan. 9 (b) The student loan ombudsman shall work in consultation with the 10 commissioner. The responsibilities of the student loan ombudsman will 11 include, but not be limited to: 12 (i) receiving, reviewing and assisting in resolving complaints from 13 student loan borrowers, including, but not limited to, attempting to 14 resolve such complaints in collaboration with institutions of higher 15 education, student loan servicers, and any other participants in student 16 loan lending, including, but not limited to, the state university of New 17 York, and the department; 18 (ii) compiling and analyzing data on student loan borrower complaints 19 and any subsequent resolutions; 20 (iii) assisting student loan borrowers to understand their rights and 21 responsibilities under the terms of student education loans; 22 (iv) providing information to the public regarding the problems and 23 concerns of student loan borrowers; 24 (v) making recommendations to the commissioner for resolving such 25 problems and concerns; 26 (vi) analyzing and monitoring the development and implementation of 27 federal, state and local laws, regulations and policies relating to 28 student loan borrowers and recommend any related changes deemed neces- 29 sary; 30 (vii) reviewing complete student education loan history for any 31 student loan borrower who has provided written consent for such review; 32 and 33 (viii) disseminating information to student loan borrowers, potential 34 student loan borrowers, public institutions of higher education, student 35 loan servicers and any other participant in student education loan lend- 36 ing. 37 (c) The student loan ombudsman, in consultation with the commissioner, 38 shall establish a student loan borrower education course to include 39 educational presentations and materials regarding student education 40 loans. Such program shall include, but not be limited to: 41 (i) an explanation of key loan terms, prescribed documentation 42 requirements, monthly payment obligations, income-based repayment 43 options, loan forgiveness and disclosure requirements; and 44 (ii) the student loan borrower education course shall be funded by any 45 license, renewal, late filing, or investigation fees, as well as any 46 penalties assessed under this section. 47 3. Licensing. (a) No person or entity shall act as a student loan 48 servicer, directly or indirectly, without first obtaining a license from 49 the commissioner, unless such person is exempt from licensure pursuant 50 to this section. 51 (b) The following persons or entities are exempt from student loan 52 servicer licensing requirements: 53 (i) any bank, out-of-state bank, New York credit union, federal credit 54 union or out-of-state credit union; 55 (ii) any wholly owned subsidiary of any such bank or credit union; andA. 2275 3 1 (iii) any operating subsidiary where each owner of such operating 2 subsidiary is wholly owned by the same bank or credit union. 3 (c) Any person or entity seeking to act within the state as a student 4 loan servicer shall submit a written application to the commissioner for 5 a license in such form as the commissioner prescribes. 6 (d) Upon the filing of an application for an initial license and the 7 payment of the fees for license and investigation, the commissioner 8 shall investigate the financial condition and responsibility, financial 9 and business experience, character and general fitness of the applicant. 10 The commissioner may issue a license if the commissioner finds that: 11 (i) the applicant's financial condition is sound; 12 (ii) the applicant's business will be conducted honestly, fairly, 13 equitably, carefully and efficiently within the purposes and intent of 14 this section; 15 (iii)(1) if the applicant is an individual, such individual is in all 16 respects properly qualified and of good character; 17 (2) if the applicant is a partnership, each partner is in all respects 18 properly qualified and of good character; 19 (3) if the applicant is a corporation or association, the president, 20 chairperson of the executive committee, senior officer responsible for 21 the corporation's business and chief financial officer or any other 22 person or performs similar functions as determined by the commissioner, 23 each director, each trustee and each shareholder owning ten percent or 24 more of each class of the securities of such corporation is in all 25 respects properly qualified and of good character; or 26 (4) if the applicant is a limited liability company, each member is in 27 all respects properly qualified and of good character; 28 (iv) no person on behalf of the applicant has knowingly made any 29 incorrect statement of a material fact in the application, or in any 30 report or statement made pursuant to this section; 31 (v) no person on behalf of the applicant knowingly has omitted to 32 state any material fact necessary to give the commissioner any informa- 33 tion lawfully required by the commissioner; 34 (vi) the applicant has met any other requirements as determined by the 35 commissioner. 36 (e)(i) A license shall be for a period of one year as of a date deter- 37 mined by the commissioner and shall expire unless renewed, suspended or 38 revoked pursuant to this section. 39 (ii) Not later than fifteen days after a licensee ceases to engage in 40 the business of student loan servicing in this state for any reason, 41 including a business decision to terminate operations in this state, 42 license revocation, bankruptcy or voluntary dissolution, such licensee 43 shall provide written notice of surrender to the commissioner and shall 44 surrender to the commissioner such license for each location in which 45 such licensee has ceased to engage in such business. 46 (iii) A written notice of surrender shall identify the location where 47 the records of the licensee will be stored and the name, address and 48 telephone number of an individual authorized to provide access to the 49 records. The surrender of a license does not reduce or eliminate the 50 licensee's civil or criminal liability arising from acts or omissions 51 occurring prior to the surrender of the license. 52 (f) A license may be renewed for the ensuing one year period upon the 53 filing of an application containing all required documents and fees as 54 provided in paragraph (c) of this subdivision. A renewal application 55 shall be filed at least thirty days prior to the date such license 56 expires. The commissioner may assess a late fee for renewal applicationsA. 2275 4 1 filed within thirty days of license expiration. If an application for a 2 renewal license has been filed with the commissioner on or before the 3 date the license expires, the license sought to be renewed shall contin- 4 ue in full force and effect until issuance by the commissioner of the 5 renewal license or until the commissioner has notified the licensee in 6 writing of the commissioner's refusal to issue such renewal license 7 together with the grounds upon which such refusal is based. The commis- 8 sioner may refuse to issue a renewal license on any ground on which the 9 commissioner might refuse to issue an initial license. 10 (g) If the commissioner determines that a check filed with the commis- 11 sioner to pay a license or renewal fee has been dishonored, the commis- 12 sioner shall automatically suspend the license. The commissioner shall 13 notify the licensee in writing of the automatic suspension pending 14 proceedings for revocation or refusal to renew and an opportunity for a 15 hearing on such actions. 16 (h) The commissioner may deem an application for a license abandoned 17 if the applicant fails to respond to any request for information 18 required under this section, or any regulations adopted pursuant to 19 such. The commissioner shall notify the applicant, in writing, that if 20 the applicant fails to submit such information later than sixty days 21 after the date on which such request for information was made, the 22 application shall be deemed abandoned. An application filing fee paid 23 prior to the date an application is deemed abandoned shall not be 24 refunded. Abandonment of an application pursuant to this paragraph 25 shall not preclude the applicant from submitting a new application for a 26 license under the provisions of this section. 27 4. Prohibitions. (a) A student loan servicer shall not: 28 (i) directly or indirectly employ any scheme, device or artifice to 29 defraud or mislead student loan borrowers; 30 (ii) engage in any unfair or deceptive practice toward any person or 31 misrepresent or omit any material information in connection with the 32 servicing of a student education loan, including, but not limited to, 33 misrepresenting the amount, nature or terms of any fee or payment due or 34 claimed to be due on a student education loan, the terms and conditions 35 of the loan agreement or the borrower's obligations under the loan; 36 (iii) obtain property by fraud or misrepresentation; 37 (iv) knowingly misapply or recklessly apply student education loan 38 payments to the outstanding balance of a student education loan; 39 (v) knowingly or recklessly provide inaccurate information to a credit 40 bureau, thereby harming a student loan borrower's creditworthiness; 41 (vi) fail to report both the favorable and unfavorable payment history 42 of the student loan borrower to a nationally recognized consumer credit 43 bureau at least annually if the student loan servicer regularly reports 44 information to a credit bureau; 45 (vii) refuse to communicate with an authorized representative of the 46 student loan borrower who provides a written authorization signed by the 47 student loan borrower, provided the student loan servicer may adopt 48 procedures reasonably related to verifying that the representative is in 49 fact authorized to act on behalf of the student loan borrower; or 50 (viii) negligently make any false statement or knowingly and willfully 51 make any omission of a material fact in connection with any information 52 or reports filed with a governmental agency or in connection with any 53 investigation conducted by the superintendent of financial services or 54 another governmental agency. 55 (b) No person or entity licensed to act within New York as a student 56 loan servicer shall do so under any other name or at any other place ofA. 2275 5 1 business other than that named in the license. Any change of location of 2 a place of business of a licensee shall require prior written notice to 3 the commissioner. Not more than one place of business shall be main- 4 tained under the same license. A license shall not be transferable or 5 assignable. 6 (c) A student loan servicer or a person or entity exempt from licen- 7 sure pursuant to subdivision three of this section shall maintain 8 adequate records of each student education loan transaction for not less 9 than two years following the final payment on such student education 10 loan or the assignment of such student education loan, whichever occurs 11 first, or such longer period as may be required by any other provision 12 of law. The commissioner may request a student loan servicer to make 13 such records available. A student loan servicer must comply with such 14 request within five business days. The commissioner may grant a licensee 15 additional time to make such records available upon request. 16 (d) A student loan servicer shall comply with all applicable federal 17 laws and regulations relating to student loan servicing. Any violation 18 of federal law or regulation shall be deemed a violation of this section 19 and a basis upon which the commissioner may take enforcement action 20 pursuant to such. 21 5. Licensing examinations. (a) The commissioner shall have the author- 22 ity to conduct investigations and examinations for the purposes of: 23 (i) initial licensing, license renewal, license suspension, license 24 revocation or termination, or general or specific inquiry or investi- 25 gation to determine compliance with this section, the commissioner may 26 access, receive and use any books, accounts, records, files, documents, 27 information or other evidence; and 28 (ii) investigating violations or complaints arising under this 29 section. 30 (b) In making any examination or investigation authorized by this 31 section, the commissioner may access documents and records of the 32 student loan servicer, licensee or person under examination or investi- 33 gation. Unless the commissioner has reasonable grounds to believe the 34 documents or records of the student loan servicer, licensee or person 35 have been, or are at risk of being, altered or destroyed for purposes of 36 concealing a violation of this section, the student loan servicer or 37 owner of the documents and records shall have access to the documents or 38 records as necessary to conduct ordinary business affairs. 39 (c) No student loan servicer or person subject to investigation or 40 examination under this section may knowingly withhold, abstract, remove, 41 mutilate, or destroy any books, records, computer records or other 42 information. 43 (d) The commissioner may suspend, revoke or refuse to renew any 44 license issued under this section if the commissioner finds that: 45 (i) the licensee has violated any provision of this section or any 46 regulation made pursuant to this section, or (ii) any fact or condition 47 exists which, if it had existed at the time of the original application 48 for the license, clearly would have warranted a denial of such license. 49 No abatement of the license fee shall be made if the license is surren- 50 dered, revoked or suspended prior to the expiration of the period for 51 which it was issued. 52 6. Report. Notwithstanding any general or special law to the contrary, 53 the commissioner shall file a report on the work of the student loan 54 ombudsman annually with the governor and the legislature beginning on 55 January first, two thousand twenty-six. Such report shall include, but 56 not be limited to:A. 2275 6 1 (a) the number of complaints received by the student loan ombudsman 2 from student loan borrowers; 3 (b) the types of complaints received by the student loan ombudsman 4 from student loan borrowers; 5 (c) any recommendations to improve the effectiveness of the position 6 of student loan ombudsman; and 7 (d) any recommendations to improve regulation, oversight, and enforce- 8 ment of the department of financial services over the licensing and 9 enforcement of student loan servicers. 10 § 2. This act shall take effect on the one hundred twentieth day after 11 it shall have become a law.
