Bill Text: TX SB1859 | 2021-2022 | 87th Legislature | Introduced
Bill Title: Relating to regulating the servicing of certain student loans, requiring the occupational licensing of certain student loan servicers, and the designation of a student loan ombudsman within the Texas Department of Banking; authorizing fees; authorizing civil and administrative penalties.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2021-03-26 - Referred to Business & Commerce [SB1859 Detail]
Download: Texas-2021-SB1859-Introduced.html
87R1563 MM-F | ||
By: Powell | S.B. No. 1859 |
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relating to regulating the servicing of certain student loans, | ||
requiring the occupational licensing of certain student loan | ||
servicers, and the designation of a student loan ombudsman within | ||
the Texas Department of Banking; authorizing fees; authorizing | ||
civil and administrative penalties. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 52.335(d), Education Code, is amended to | ||
read as follows: | ||
(d) The disclosure required under this section must: | ||
(1) identify the types of education loans included in | ||
the institution's estimates; and | ||
(2) include: | ||
(A) a statement that the disclosure is not a | ||
complete and official record of the student's education loan debt; | ||
(B) an explanation regarding why the disclosure | ||
may not be complete or accurate, including an explanation that for a | ||
transfer student, the institution's estimates regarding state | ||
loans reflect only state loans incurred by the student for | ||
attendance at the institution; [ |
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(C) a statement that the institution's estimates | ||
are general in nature and are not intended as a guarantee or | ||
promise; and | ||
(D) the contact information for the student loan | ||
ombudsman designated under Section 161.051, Finance Code. | ||
SECTION 2. Subtitle E, Title 3, Finance Code, is amended by | ||
adding Chapter 161 to read as follows: | ||
CHAPTER 161. STUDENT LOAN SERVICERS | ||
SUBCHAPTER A. GENERAL PROVISIONS | ||
Sec. 161.001. DEFINITIONS. In this chapter: | ||
(1) "Banking commissioner" means the banking | ||
commissioner of Texas or a person designated by the banking | ||
commissioner and acting under the banking commissioner's direction | ||
and authority. | ||
(2) "Consumer reporting agency" has the meaning | ||
assigned by Section 20.01(5), Business & Commerce Code. | ||
(3) "Department" means the Texas Department of | ||
Banking. | ||
(4) "Finance commission" means the Finance Commission | ||
of Texas. | ||
(5) "Nationwide Multistate Licensing System and | ||
Registry" or "registry" has the meaning assigned by Section | ||
151.2031. | ||
(5) "Ombudsman" means the student loan ombudsman | ||
designated under Section 161.051. | ||
(7) "Servicing" means: | ||
(A) receiving scheduled periodic payments from a | ||
student loan borrower or notification of those payments; | ||
(B) applying student loan payments to the | ||
borrower's account under the terms of: | ||
(i) the loan; or | ||
(ii) the contract governing the servicing | ||
of the loan; | ||
(C) maintaining, on the loan holder's behalf, | ||
account records for a student loan during a period when no loan | ||
payment is required; | ||
(D) communicating with the student loan borrower | ||
regarding the loan, on the loan holder's behalf; and | ||
(E) interacting with a student loan borrower to | ||
facilitate the servicing of the student loan, as described by | ||
Paragraphs (A)-(D), including performing activities to prevent the | ||
loan's default and the default of any obligations arising from the | ||
loan. | ||
(8) "Student loan" means a loan that is extended to a | ||
student loan borrower solely to finance postsecondary education | ||
expenses. The term does not include open-end credit or a loan | ||
secured by real property. | ||
(9) "Student loan borrower" or "borrower" means: | ||
(A) a student who has obtained or agreed to pay a | ||
student loan; | ||
(B) a former student with a student loan; or | ||
(C) a person who has obtained or agreed to pay a | ||
student loan for the benefit of a student, regardless of whether the | ||
student is currently enrolled at a postsecondary educational | ||
institution. | ||
(10) "Student loan servicer" means an entity | ||
responsible for servicing a student loan. | ||
Sec. 161.002. RULES. The finance commission shall adopt | ||
rules necessary to administer, implement, and enforce this chapter. | ||
SUBCHAPTER B. STUDENT LOAN OMBUDSMAN | ||
Sec. 161.051. STUDENT LOAN OMBUDSMAN. (a) The banking | ||
commissioner shall designate a qualified employee of the department | ||
as student loan ombudsman to provide assistance to student loan | ||
borrowers in this state and to other persons as provided by this | ||
subchapter. Subject to the availability of funds, the department | ||
may hire additional staff as necessary to assist the ombudsman in | ||
carrying out the ombudsman's duties and performing the activities | ||
specified by this subchapter. | ||
(b) The ombudsman and the banking commissioner shall confer | ||
at least annually regarding: | ||
(1) student loan servicer complaints; | ||
(2) the proper referral process for student loan | ||
servicer complaints; and | ||
(3) the reporting requirement of Section 161.054. | ||
Sec. 161.052. DUTIES OF OMBUDSMAN. The ombudsman shall: | ||
(1) receive, review, and attempt to resolve complaints | ||
from student loan borrowers, including the attempted resolution of | ||
complaints in collaboration with institutions of higher education, | ||
student loan servicers, and any other participants in the student | ||
loan lending process; | ||
(2) refer to the banking commissioner any complaint | ||
received concerning a student loan servicer; | ||
(3) compile and analyze data on complaints made by | ||
student loan borrowers; | ||
(4) assist student loan borrowers in understanding the | ||
borrower's rights and responsibilities under the terms of a student | ||
loan or related contract; | ||
(5) provide information to the public, state agencies, | ||
the legislature, and other interested persons regarding the | ||
problems and concerns of student loan borrowers and make | ||
recommendations to the banking commissioner for resolving those | ||
problems and concerns; | ||
(6) analyze and monitor the development and | ||
implementation of federal and state law and policy relating to | ||
student loans and recommend any necessary changes to the banking | ||
commissioner; | ||
(7) review the complete student loan history of a | ||
student loan borrower who has provided written consent for the | ||
review; | ||
(8) disseminate information concerning the | ||
availability of the ombudsman to assist the following with respect | ||
to student loan servicing matters or concerns: | ||
(A) student loan borrowers and potential student | ||
loan borrowers; | ||
(B) institutions of higher education; | ||
(C) student loan servicers; and | ||
(D) other participants in student loan lending in | ||
this state; and | ||
(9) take other actions as necessary to fulfill the | ||
duties of the ombudsman as provided by this subchapter. | ||
Sec. 161.053. EDUCATION COURSE FOR STUDENT LOAN BORROWERS. | ||
Not later than October 1, 2022, the ombudsman, in consultation with | ||
the Texas Higher Education Coordinating Board, shall establish and | ||
maintain a student loan borrower education course. The course must | ||
include educational presentations and materials regarding student | ||
loans, including information regarding: | ||
(1) lending terms; | ||
(2) loan documentation requirements; | ||
(3) monthly payment obligations; | ||
(4) income-driven repayment options; | ||
(5) loan forgiveness programs; and | ||
(6) disclosure requirements. | ||
Sec. 161.054. ANNUAL REPORT. Not later than December 31 of | ||
each year, the ombudsman shall submit an annual report to the | ||
banking commissioner and the commissioner of the Texas Higher | ||
Education Coordinating Board. The report must: | ||
(1) address the implementation of this subchapter; | ||
(2) address the effectiveness of the ombudsman | ||
position in providing the types of assistance described by this | ||
subchapter; and | ||
(3) contain recommendations for department action to | ||
improve the regulation of student loan servicers under this | ||
chapter. | ||
SUBCHAPTER C. STUDENT LOAN SERVICER LICENSE | ||
Sec. 161.101. STUDENT LOAN SERVICER LICENSE REQUIRED. (a) | ||
Except as provided by Subsection (b), a person may not act, directly | ||
or indirectly, as a student loan servicer in this state unless the | ||
person is licensed under this subchapter. | ||
(b) The following persons are exempt from licensure under | ||
this subchapter: | ||
(1) a financial institution as defined by Section | ||
201.101; | ||
(2) a wholly owned subsidiary of a bank or credit | ||
union; and | ||
(3) an operating subsidiary in which each owner of the | ||
subsidiary is wholly owned by the same bank or credit union. | ||
Sec. 161.102. APPLICATION AND ACCOMPANYING FEE. (a) An | ||
application for a student loan servicer license must be: | ||
(1) in writing; | ||
(2) under oath; and | ||
(3) on the form prescribed by the banking | ||
commissioner. | ||
(b) Except as provided by Section 161.106, an applicant for | ||
a student loan servicer license must: | ||
(1) submit a completed application together with the | ||
payment of applicable fees through the Nationwide Multistate | ||
Licensing System and Registry; and | ||
(2) provide a recent financial statement and any other | ||
information required by the banking commissioner. | ||
(c) An application for a student loan servicer license must | ||
be accompanied by: | ||
(1) a nonrefundable license fee of $5,000 or other | ||
amount determined by the banking commissioner; and | ||
(2) a nonrefundable investigation fee in an amount | ||
determined by the banking commissioner. | ||
Sec. 161.103. CRIMINAL AND OTHER BACKGROUND CHECKS. (a) An | ||
applicant for a student loan servicer license shall provide, in the | ||
form and manner prescribed by the banking commissioner and | ||
acceptable to the Nationwide Multistate Licensing System and | ||
Registry, information concerning the applicant's identity, | ||
including: | ||
(1) fingerprints for submission to the Federal Bureau | ||
of Investigation and any governmental agency or entity authorized | ||
to receive the information to conduct a state and national criminal | ||
background check; and | ||
(2) personal history and experience information in a | ||
form prescribed by the Nationwide Multistate Licensing System and | ||
Registry, including the submission of authorization for the | ||
Nationwide Multistate Licensing System and Registry and the | ||
commissioner to obtain: | ||
(A) an independent credit report obtained from a | ||
consumer reporting agency; and | ||
(B) information related to any administrative, | ||
civil, or criminal findings by a governmental jurisdiction. | ||
(b) For purposes of this section and to reduce the points of | ||
contact that the Federal Bureau of Investigation may have to | ||
maintain for purposes of Subsection (a)(1), the banking | ||
commissioner may use the Nationwide Multistate Licensing System and | ||
Registry as a channeling agent for requesting information from and | ||
distributing information to the United States Department of | ||
Justice, any governmental agency, or any other source at the | ||
banking commissioner's direction. | ||
(c) For purposes of this section and to reduce the points of | ||
contact that the banking commissioner may have to maintain for | ||
purposes of Subsection (a) or (b), the commissioner may use the | ||
Nationwide Multistate Licensing System and Registry as a channeling | ||
agent for requesting information from and distributing information | ||
to and from any source as directed by the banking commissioner. | ||
Sec. 161.104. ABANDONMENT OF APPLICATION. (a) The banking | ||
commissioner may consider an application for a license abandoned if | ||
the applicant fails to respond to a request for information | ||
required under this subchapter. The commissioner shall notify the | ||
applicant, in writing, that if the applicant fails to submit the | ||
requested information not later than the 60th day after the date of | ||
the request, the application is considered abandoned. | ||
(b) The banking commissioner is not required to refund an | ||
application filing fee paid before the date an application is | ||
considered abandoned under this section. | ||
(c) Abandonment of an application under this section does | ||
not preclude the applicant from submitting a new application for a | ||
license under Section 161.102. | ||
Sec. 161.105. ISSUANCE OF LICENSE. (a) On submission of | ||
an application for an initial license and the payment of the license | ||
fee and investigation fee under Section 161.102, the banking | ||
commissioner shall investigate the financial condition and | ||
responsibility, financial and business experience, character, and | ||
general fitness of the applicant. | ||
(b) The banking commissioner shall issue a license if: | ||
(1) the commissioner finds that: | ||
(A) the applicant's financial condition is | ||
sound; | ||
(B) the applicant meets the prescribed | ||
qualifications; and | ||
(C) the applicant's business will be conducted | ||
fairly and lawfully, according to state and federal law, and in a | ||
manner commanding the confidence and trust of the community; | ||
(2) the commissioner has no knowledge that: | ||
(A) the applicant or a person on the applicant's | ||
behalf knowingly has made any incorrect statement of a material | ||
fact in the application, or in a report or statement made under this | ||
chapter; and | ||
(B) the applicant or a person on the applicant's | ||
behalf knowingly has omitted a material fact necessary to give the | ||
banking commissioner any information required by the commissioner; | ||
and | ||
(3) the applicant has satisfied all other requirements | ||
for licensure. | ||
(c) Not more than one place of business may be maintained | ||
under the same license, but the banking commissioner may issue more | ||
than one license to the same license holder on compliance with the | ||
provisions of this chapter as to each new license. | ||
Sec. 161.106. AUTOMATIC ISSUANCE OF LIMITED LICENSE FOR | ||
CERTAIN SERVICERS. (a) The banking commissioner shall | ||
automatically issue, in accordance with this section, a limited | ||
license to an applicant who: | ||
(1) is servicing a student loan in this state under a | ||
contract with the United States Department of Education under 20 | ||
U.S.C. Section 1087f; and | ||
(2) meets the requirements of this section. | ||
(b) An applicant for a license under this section: | ||
(1) is exempt from the application procedures | ||
established under Section 161.102, other than the requirement of | ||
Section 161.102(c); | ||
(2) is exempt from the requirements of Subchapter D if | ||
the applicant is only servicing federal student loans in this | ||
state; and | ||
(3) is subject to and must comply with Subchapter D, | ||
if the person is also servicing nonfederal student loans in this | ||
state. | ||
(c) The finance commission by rule shall prescribe the | ||
procedures to document eligibility for the issuance of a license | ||
under this section. | ||
(d) Not later than the seventh day after the date on which a | ||
license holder issued a limited license under this section receives | ||
notice of the expiration, revocation, or termination of a contract | ||
awarded to the license holder by the United States secretary of | ||
education under 20 U.S.C. Section 1087f, the license holder shall | ||
send written notice of that fact to the banking commissioner. To | ||
continue to service student loans in this state, the license holder | ||
must satisfy all requirements for licensure under this subchapter | ||
not later than the 30th day after the date the license holder | ||
received notice of the contract's expiration, revocation, or | ||
termination, unless the license holder also holds a license under | ||
this subchapter to service nonfederal student loans in this state. | ||
If the license holder fails to satisfy the licensure requirements | ||
before the expiration of the period prescribed by this subsection, | ||
the commissioner shall immediately suspend the limited license | ||
issued to the holder under this section. | ||
(e) If the servicing of a student loan in this state is not | ||
conducted by a person under a contract awarded by the United States | ||
secretary of education under 20 U.S.C. Section 1087f, this section | ||
does not prevent the banking commissioner from issuing an order to | ||
temporarily or permanently prohibit the person from acting as a | ||
student loan servicer. | ||
(f) Unless otherwise prohibited by federal law, if the | ||
servicing of a student loan is conducted by a person under a | ||
contract awarded by the United States secretary of education under | ||
20 U.S.C. Section 1087f, this section does not prevent the banking | ||
commissioner from issuing a cease and desist order or injunction | ||
against the student loan servicer to cease activities in violation | ||
of this chapter. | ||
Sec. 161.107. TERM OF LICENSE. A license issued under | ||
Section 161.105 expires at the close of business on December 31 of | ||
the year of issuance, unless the license is renewed, surrendered, | ||
suspended, or revoked under this subchapter or Subchapter D. | ||
Sec. 161.108. LICENSE RENEWAL. (a) The banking | ||
commissioner may renew a student loan servicer license on or before | ||
the license's expiration date if the student loan servicer submits | ||
an application containing all required documents and accompanying | ||
fees as provided by Section 161.102. | ||
(b) Any renewal application submitted after December 1 must | ||
be accompanied by a late fee of $100 per day. | ||
(c) The banking commissioner may not renew a license until | ||
the commissioner receives the license fee, investigation fee, and | ||
any applicable late fees and the applicable fees described by | ||
Section 161.102(b)(1) are paid to the registry. If an application | ||
for a renewal license is submitted on or before the date the license | ||
expires, the license sought to be renewed continues in full force | ||
and effect until the banking commissioner issues the renewal | ||
license or until the commissioner notifies the license holder in | ||
writing of the commissioner's refusal to issue the renewal license | ||
together with the grounds on which that refusal is based. The | ||
banking commissioner may refuse to issue a renewal license on any | ||
ground on which the commissioner might refuse to issue an initial | ||
license. | ||
Sec. 161.109. CHANGE IN INFORMATION PROVIDED IN | ||
APPLICATION. An applicant or license holder shall notify the | ||
banking commissioner, in writing, of any change in the information | ||
provided in the applicant's initial application for a license or | ||
the applicant's most recent renewal application for the license, as | ||
applicable, not later than the 10th business day after the date of | ||
the occurrence of the event that results in the information | ||
becoming inaccurate. | ||
Sec. 161.110. SURRENDER OF LICENSE. (a) Not later than the | ||
15th day after the date a license holder ceases to engage in the | ||
business of student loan servicing in this state for any reason, the | ||
license holder shall provide written notice of surrender to the | ||
banking commissioner and shall surrender to the commissioner the | ||
license holder's license for each location in which the license | ||
holder has ceased to engage in business. The written notice of | ||
surrender must identify the location where the records of the | ||
license holder will be stored and the name, address, and telephone | ||
number of an individual authorized to provide access to the | ||
records. | ||
(b) The surrender of a license does not reduce or eliminate | ||
the license holder's civil or criminal liability arising from an | ||
act or omission occurring before the surrender of the license, | ||
including any administrative action taken by the banking | ||
commissioner to: | ||
(1) revoke or suspend a license; | ||
(2) assess an administrative penalty; or | ||
(3) exercise any other authority provided to the | ||
commissioner. | ||
Sec. 161.111. NAME AND LOCATION ON LICENSE. A license | ||
issued under Section 161.105 must state: | ||
(1) the name of the license holder; and | ||
(2) the address of the office from which the servicing | ||
of the student loans is to be conducted by the license holder. | ||
Sec. 161.112. CHANGE OF LOCATION. Not later than the 31st | ||
day before the date of the change, a license holder must notify the | ||
department in writing of the license holder's intent to change the | ||
location of the license holder's place of business. | ||
Sec. 161.113. TRANSFER OR ASSIGNMENT OF LICENSE. A license | ||
under this subchapter is not transferable or assignable. | ||
SUBCHAPTER D. LICENSE REVOCATION AND SUSPENSION AND OTHER ACTIONS | ||
AGAINST LICENSE HOLDERS | ||
Sec. 161.151. INSPECTIONS; INVESTIGATIONS. (a) The | ||
banking commissioner may conduct inspections of a student loan | ||
servicer licensed under this chapter as the commissioner determines | ||
necessary to determine whether the student loan servicer is | ||
complying with this chapter and applicable rules. The inspections | ||
may include inspection of the books, records, documents, | ||
operations, and facilities of the student loan servicer and access | ||
to any documents required under rules adopted under this chapter. | ||
The commissioner may share evidence of criminal activity gathered | ||
during an inspection or investigation with any state or federal law | ||
enforcement agency. | ||
(b) On the signed written complaint of a person, the banking | ||
commissioner shall investigate the actions and records of a student | ||
loan servicer licensed under this chapter if the complaint, or the | ||
complaint and documentary or other evidence presented in connection | ||
with the complaint, provides reasonable cause. The commissioner, | ||
before commencing an investigation, shall notify the student loan | ||
servicer in writing of the complaint and that the commissioner | ||
intends to investigate the matter. | ||
(c) For reasonable cause, the banking commissioner at any | ||
time may investigate a student loan servicer licensed under this | ||
chapter to determine whether the student loan servicer is complying | ||
with this chapter and applicable rules. | ||
(d) The banking commissioner may conduct an undercover or | ||
covert investigation only if the commissioner, after due | ||
consideration of the circumstances, determines that the | ||
investigation is necessary to prevent immediate harm and to carry | ||
out the purposes of this chapter. | ||
(e) The finance commission by rule shall provide guidelines | ||
to govern an inspection or investigation, including rules to: | ||
(1) determine the information and records to which the | ||
banking commissioner may demand access during an inspection or an | ||
investigation; and | ||
(2) establish what constitutes reasonable cause for an | ||
investigation. | ||
(f) Information obtained by the banking commissioner during | ||
an inspection or investigation is confidential unless disclosure of | ||
the information is permitted or required by other law. | ||
(g) The banking commissioner may share information gathered | ||
during an inspection or investigation with any state or federal | ||
agency. | ||
(h) The banking commissioner may require reimbursement of | ||
expenses for each examiner for on-site examination or investigation | ||
of a license holder if records are located out of state or if the | ||
review is considered necessary beyond the routine examination | ||
process. The finance commission by rule shall set the maximum | ||
amount for the reimbursement of expenses authorized under this | ||
subsection. | ||
Sec. 161.152. ISSUANCE AND ENFORCEMENT OF SUBPOENA. (a) | ||
During an investigation, the banking commissioner may issue a | ||
subpoena that is addressed to a peace officer of this state or other | ||
person authorized by law to serve citation or perfect service. The | ||
subpoena may require a person to give a deposition, produce | ||
documents, or both. | ||
(b) If a person disobeys a subpoena or if a person appearing | ||
in a deposition in connection with the investigation refuses to | ||
testify, the banking commissioner may petition a district court in | ||
Travis County to issue an order requiring the person to obey the | ||
subpoena, testify, or produce documents relating to the matter. | ||
The court shall promptly set an application to enforce a subpoena | ||
issued under Subsection (a) for hearing and shall cause notice of | ||
the application and the hearing to be served upon the person to whom | ||
the subpoena is directed. | ||
Sec. 161.153. SUSPENSION, REVOCATION, OR REFUSAL TO RENEW | ||
LICENSE. (a) The banking commissioner may suspend, revoke, or | ||
refuse to renew a license issued under Section 161.105, or may take | ||
any other action, if the commissioner finds that: | ||
(1) the license holder has violated this chapter or a | ||
rule adopted under this chapter; or | ||
(2) a fact or condition exists that, if the fact or | ||
condition had existed at the time of the original application for | ||
the license, clearly would have warranted a denial of the license. | ||
(b) The banking commissioner may not abate a license fee if | ||
the license is surrendered, revoked, or suspended before the | ||
expiration of the period for which the license was issued. | ||
Sec. 161.154. CIVIL PENALTY; INJUNCTIVE RELIEF. (a) A | ||
person who violates this chapter is liable to this state for a civil | ||
penalty in an amount not to exceed: | ||
(1) $10,000 for the first violation; and | ||
(2) $20,000 for the second violation and each | ||
subsequent violation. | ||
(b) Whenever it appears to the banking commissioner that a | ||
person has violated, is violating, or is about to violate this | ||
chapter or a rule adopted under this chapter, or that a license | ||
holder, or an owner, director, officer, member, partner, | ||
shareholder, trustee, employee, or agent of a license holder, has | ||
committed fraud, engaged in an unauthorized activity, or made a | ||
misrepresentation, the attorney general, on behalf of the banking | ||
commissioner, may bring a civil action to: | ||
(1) enjoin the violation or potential violation; | ||
(2) recover a civil penalty under this section; or | ||
(3) enjoin the violation or potential violation, | ||
recover a civil penalty, or both. | ||
(c) The attorney general is entitled to recover reasonable | ||
expenses incurred in obtaining injunctive relief, recovering civil | ||
penalties, or both, under this section, including reasonable | ||
attorney's fees and court costs. | ||
Sec. 161.155. SURETY BOND. (a) A license holder shall | ||
file with the banking commissioner a surety bond obtained from a | ||
surety company authorized to do business in this state. | ||
(b) The bond must be: | ||
(1) in an amount of at least $30,000, as determined by | ||
the finance commission; and | ||
(2) in favor of: | ||
(A) this state for the benefit of a person | ||
damaged by a violation of this chapter; and | ||
(B) a person damaged by a violation of this | ||
chapter. | ||
(c) When an action is brought on a license holder's bond, | ||
the banking commissioner may require the filing of a new bond. | ||
Immediately on recovery on any action on the bond, the license | ||
holder shall file a new bond. | ||
SUBCHAPTER E. REPORTING AND OTHER REQUIREMENTS; PENALTIES | ||
Sec. 161.201. FAILURE TO COMPLY WITH FEDERAL LAW; VIOLATION | ||
OF CHAPTER. A violation of the Truth in Lending Act (15 U.S.C. | ||
Section 1601 et seq.) or any other federal law or regulation | ||
relating to the servicing of a student loan is considered a | ||
violation of this chapter, and a basis on which the banking | ||
commissioner may take enforcement action under Section 161.153 or | ||
161.154. | ||
Sec. 161.202. REPORTS; ADMINISTRATIVE PENALTY FOR FAILURE | ||
TO FILE. (a) Not later than December 1 of each year, a license | ||
holder shall file a sworn report with the banking commissioner that | ||
contains any information the commissioner may require concerning | ||
the business conducted by the license holder in this state during | ||
the preceding calendar year. The report must be made in the form | ||
and manner prescribed by the banking commissioner. | ||
(b) A license holder shall submit to the Nationwide | ||
Multistate Licensing System and Registry: | ||
(1) a student loan servicer call report of condition, | ||
in the form and manner and as frequently as required by the | ||
registry, that must include any other information required by the | ||
registry; and | ||
(2) any other report to, or through, the registry | ||
under an arrangement for reporting and sharing information as | ||
required by law. | ||
(c) A license holder violates this chapter if the license | ||
holder negligently makes a false statement or knowingly makes an | ||
omission of material fact in connection with a report or | ||
information filed with: | ||
(1) the banking commissioner; | ||
(2) the Nationwide Multistate Licensing System and | ||
Registry; or | ||
(3) a federal or state agency through the Nationwide | ||
Multistate Licensing System and Registry. | ||
(d) A license holder that fails to comply with Subsection | ||
(a) or (b) is subject to: | ||
(1) an administrative penalty in an amount not to | ||
exceed $100 for each day of noncompliance; and | ||
(2) the revocation or suspension of the license | ||
holder's license under Section 161.153. | ||
(e) In determining the amount of the administrative penalty | ||
under Subsection (d)(1), the banking commissioner must consider: | ||
(1) the seriousness of the violation, including the | ||
nature, circumstances, extent, and gravity of the violation; | ||
(2) the person's history of previous violations; | ||
(3) the amount necessary to deter a future violation; | ||
and | ||
(4) any other matter that justice may require. | ||
(f) The banking commissioner may collect the penalty in the | ||
same manner that a money judgment is enforced in district court. | ||
Sec. 161.203. ANNUAL FEE. A license holder shall pay to the | ||
banking commissioner an annual fee in an amount set by rule of the | ||
finance commission. The fee must be in an amount sufficient to | ||
cover the annual costs of implementing and enforcing this chapter. | ||
SUBCHAPTER F. CONDUCT OF STUDENT LOAN SERVICES BUSINESS; | ||
PROHIBITED ACTS | ||
Sec. 161.251. STUDENT LOAN SERVICER TO CONDUCT BUSINESS | ||
UNDER NAME AND LOCATION ON LICENSE. (a) A license holder may not | ||
conduct business under this chapter under a name other than the name | ||
stated on the license. | ||
(b) A license holder may not conduct business under this | ||
chapter at a location other than the address stated on the license. | ||
Sec. 161.252. MAINTENANCE AND AVAILABILITY OF STUDENT LOAN | ||
RECORDS. (a) To the extent allowed under federal law and unless a | ||
different retention period is prescribed by federal law, a licensed | ||
student loan servicer and a person exempt from licensure under | ||
Section 161.101(b) shall maintain adequate records of each student | ||
loan transaction, as prescribed by the department, for at least two | ||
years after the earlier of: | ||
(1) the date of the final student loan payment; or | ||
(2) if the student loan is assigned, the date of | ||
assignment. | ||
(b) Not later than the fifth business day after the date the | ||
banking commissioner requests to examine a record of a student loan | ||
transaction, the student loan servicer shall: | ||
(1) make the record available to the commissioner for | ||
inspection; or | ||
(2) send the commissioner a copy of the requested | ||
record by: | ||
(A) registered or certified mail, return receipt | ||
requested; or | ||
(B) an express delivery carrier that provides a | ||
proof of delivery receipt. | ||
(c) The banking commissioner may grant a license holder an | ||
extension of time to comply with a record request under Subsection | ||
(b). | ||
Sec. 161.253. RESPONSE TO ACCOUNT INQUIRY; APPLICATION OF | ||
CERTAIN PAYMENTS. (a) Except as otherwise provided under federal | ||
law, a student loan servicer, on receipt of a written account | ||
inquiry from a borrower or the borrower's representative, shall: | ||
(1) acknowledge receipt of the inquiry within 10 | ||
business days; | ||
(2) provide information in response to the inquiry, | ||
and, if applicable: | ||
(A) the action to be taken to correct the | ||
account; or | ||
(B) an explanation of the position taken by the | ||
loan servicer that the borrower's account is correct; | ||
(3) inquire about how to apply any overpayment made by | ||
the borrower to the loan account; | ||
(4) apply partial payments made by the borrower in a | ||
manner that minimizes late fees and negative credit reporting; and | ||
(5) evaluate the borrower for eligibility for an | ||
income-driven repayment program that may be available before | ||
placing the borrower in forbearance or default. | ||
(b) A student loan servicer must provide information in | ||
response to a written account inquiry described by Subsection | ||
(a)(2) not later than the 30th business day after the date of | ||
receipt of the inquiry. | ||
(c) An instruction from the borrower or the borrower's | ||
representative on how to apply an overpayment to a student loan | ||
under Subsection (a)(3) remains in effect during the term of the | ||
loan until the borrower or the borrower's representative provides | ||
different instructions. For purposes of this section, | ||
"overpayment," with respect to a student loan, means payment in an | ||
amount that is more than the monthly amount due. | ||
(d) If there are multiple loans on a borrower's account with | ||
an equal stage of delinquency, a student loan servicer shall | ||
satisfy the requirements of Subsection (a)(4) by applying partial | ||
payments to satisfy as many individual loan payments as possible on | ||
a borrower's account. For purposes of this section, "partial | ||
payment," with respect to an account that contains multiple | ||
individual student loans, means payment in an amount that is less | ||
than the amount necessary to satisfy the outstanding payments due | ||
on all of the individual student loans in the borrower's account. | ||
Sec. 161.254. SALE OR OTHER TRANSFER OF LOAN SERVICING. (a) | ||
If a sale, assignment, or other transfer of the servicing of a | ||
student loan results in a change in the identity of the student loan | ||
servicer to which a student loan borrower is required to send loan | ||
payments or direct any communications concerning the loan, the | ||
student loan servicer must: | ||
(1) require, as a condition of the sale, assignment, | ||
or other transfer, that the new student loan servicer honor and | ||
preserve the availability of all benefits originally represented as | ||
being available to the borrower during the term of the loan, | ||
including any benefits for which the borrower has not yet | ||
qualified; | ||
(2) transfer to the new student loan servicer all | ||
information regarding: | ||
(A) the borrower; and | ||
(B) the borrower's student loan and loan account, | ||
including: | ||
(i) the repayment status of the borrower; | ||
and | ||
(ii) any benefits associated with the loan; | ||
(3) complete the transfer of information required | ||
under Subdivision (2) not later than the 45th calendar day after the | ||
date of the sale, assignment, or other transfer of the servicing of | ||
the loan; and | ||
(4) complete the sale, assignment, or other transfer | ||
of the servicing of the loan not later than the seventh calendar day | ||
before the date on which the next loan payment becomes due. | ||
(b) If a student loan servicer obtains the right to service | ||
a student loan, the loan servicer shall adopt policies and | ||
procedures to verify that the loan servicer has received the | ||
information specified in Subsection (a)(2). | ||
Sec. 161.255. PROHIBITED ACTIONS. A student loan servicer | ||
may not: | ||
(1) directly or indirectly employ any scheme, device, | ||
or artifice to defraud or mislead student loan borrowers; | ||
(2) 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 loan, including | ||
misrepresenting: | ||
(A) the amount, nature, or terms of any fee or | ||
payment due or claimed to be due on the loan; | ||
(B) the terms of the loan agreement; or | ||
(C) the borrower's obligations under the loan; | ||
(3) obtain property by fraud or misrepresentation; | ||
(4) misapply loan payments to the outstanding student | ||
loan balance; | ||
(5) provide inaccurate information to a consumer | ||
reporting agency; | ||
(6) fail to report, at least annually, both the | ||
favorable and unfavorable payment history of the student loan | ||
borrower to a nationally recognized consumer reporting agency if | ||
the student loan servicer regularly reports payment history | ||
information to consumer reporting agencies; | ||
(7) refuse to communicate with an authorized | ||
representative of the student loan borrower who provides a written | ||
authorization signed by the borrower, provided the student loan | ||
servicer adopts reasonable procedures to verify that the | ||
representative is in fact authorized to act on the borrower's | ||
behalf; | ||
(8) make any false statement or knowingly and wilfully | ||
make any omission of a material fact in connection with: | ||
(A) information or a report filed with a | ||
governmental agency; or | ||
(B) an investigation conducted by the banking | ||
commissioner or another governmental agency; | ||
(9) fail to respond within 15 business days to | ||
communications from the department, or within a shorter, reasonable | ||
period as may be requested by the department; or | ||
(10) fail to respond within 15 business days to a | ||
consumer complaint submitted to the student loan servicer by the | ||
department, except that, if necessary, the student loan servicer | ||
may request an extension of time, not to exceed 45 business days, to | ||
respond to the complaint, if the request is accompanied by an | ||
explanation on why granting an extension of time is reasonable and | ||
necessary. | ||
SUBCHAPTER G. STUDENT LOAN BORROWER REMEDIES | ||
Sec. 161.301. ACTIONS AND COUNTERCLAIMS BY BORROWER. (a) A | ||
student loan borrower who suffers an ascertainable loss of money as | ||
a result of an action taken, omission made, or practice employed by | ||
a student loan servicer in violation of this chapter or a rule | ||
adopted under this chapter may bring an action or assert a | ||
counterclaim in court against the student loan servicer. | ||
(b) In an action brought under this section, the court, in | ||
addition to awarding any other appropriate legal or equitable | ||
relief, may award an amount not to exceed three times the actual | ||
damages sustained by the student loan borrower. The court may also | ||
award reasonable attorney's fees, filing fees, and reasonable costs | ||
of suit. | ||
Sec. 161.302. REMEDIES NOT EXCLUSIVE. The remedies | ||
provided by this chapter are not exclusive. A student loan borrower | ||
is not required to exhaust administrative remedies established | ||
under this chapter or any other applicable law before proceeding | ||
under this chapter. | ||
SECTION 3. As soon as practicable after the effective date | ||
of this Act, the Finance Commission of Texas shall adopt rules as | ||
necessary to implement Chapter 161, Finance Code, as added by this | ||
Act. | ||
SECTION 4. The initial report required by Section 161.054, | ||
Finance Code, as added by this Act, must be submitted not later than | ||
the first anniversary of the date the first student loan ombudsman | ||
is designated to serve in that capacity. | ||
SECTION 5. Notwithstanding Chapter 161, Finance Code, as | ||
added by this Act, a student loan servicer is not required to hold a | ||
license under that chapter to act as a student loan servicer in this | ||
state before June 1, 2022. | ||
SECTION 6. (a) Except as provided by Subsection (b) of this | ||
section, this Act takes effect September 1, 2021. | ||
(b) The following provisions take effect June 1, 2022: | ||
(1) Sections 161.101, 161.106, 161.251, and 161.252, | ||
Finance Code, as added by this Act; and | ||
(2) Subchapters D and E, Finance Code, as added by this | ||
Act. |