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A08862 Summary:

BILL NOA08862
 
SAME ASSAME AS S08463
 
SPONSORSimon
 
COSPNSRMosley, D'Urso, Glick, Ortiz, Gottfried, Jenne, Galef, Jaffee, Colton, Fahy, Pichardo, McDonough, Errigo, Cahill, Castorina, De La Rosa, Davila, Crespo, Wright, Richardson, Blake, Cook, Bichotte, Taylor, Niou, Carroll, Pellegrino
 
MLTSPNSRGiglio, Miller ML, Nolan, Thiele
 
Add 684, Ed L
 
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.
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A08862 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          8862
 
                               2017-2018 Regular Sessions
 
                   IN ASSEMBLY
 
                                    December 22, 2017
                                       ___________
 
        Introduced  by M. of A. SIMON -- read once and referred to the Committee
          on Higher Education
 
        AN ACT to amend the education law, in relation to the 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
    23  who  shares  responsibility with such New York resident for repaying the
    24  student education loan.
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD13931-01-7

        A. 8862                             2
 
     1    (d) "Student loan servicer" shall mean any person responsible for  the
     2  servicing of a student education loan to a student loan borrower.
     3    2. Loan ombudsman. (a) There is hereby established the position of the
     4  student  loan ombudsman, within the department of financial services, to
     5  be appointed by the commissioner to provide  timely  assistance  to  any
     6  student loan borrower who has a student education loan.
     7    (b)  The  student  loan  ombudsman shall work in consultation with the
     8  commissioner. The responsibilities of the student  loan  ombudsman  will
     9  include, but not be limited to:
    10    (i)  receiving,  reviewing  and assisting in resolving complaints from
    11  student loan borrowers, including, but not  limited  to,  attempting  to
    12  resolve  such  complaints  in  collaboration with institutions of higher
    13  education, student loan servicers, and any other participants in student
    14  loan lending, including, but not limited to, the state university of New
    15  York, and the department;
    16    (ii) compiling and analyzing data on student loan borrower  complaints
    17  and any subsequent resolutions;
    18    (iii)  assisting student loan borrowers to understand their rights and
    19  responsibilities under the terms of student education loans;
    20    (iv) providing information to the public regarding  the  problems  and
    21  concerns of student loan borrowers;
    22    (v)  making  recommendations  to  the  commissioner for resolving such
    23  problems and concerns;
    24    (vi) analyzing and monitoring the development  and  implementation  of
    25  federal,  state  and  local  laws,  regulations and policies relating to
    26  student loan borrowers and recommend any related changes  deemed  neces-
    27  sary;
    28    (vii)  reviewing  complete  student  education  loan  history  for any
    29  student loan borrower who has provided written consent for such  review;
    30  and
    31    (viii)  disseminating information to student loan borrowers, potential
    32  student loan borrowers, public institutions of higher education, student
    33  loan servicers and any other participant in student education loan lend-
    34  ing.
    35    (c) The student loan ombudsman, in consultation with the commissioner,
    36  shall establish a student loan  borrower  education  course  to  include
    37  educational  presentations  and  materials  regarding  student education
    38  loans. Such program shall include, but not be limited to:
    39    (i)  an  explanation  of  key  loan  terms,  prescribed  documentation
    40  requirements,   monthly   payment  obligations,  income-based  repayment
    41  options, loan forgiveness and disclosure requirements; and
    42    (ii) the student loan borrower education course shall be funded by any
    43  license, renewal, late filing, or investigation fees,  as  well  as  any
    44  penalties assessed under this section.
    45    3.  Licensing.  (a)  No  person  or entity shall act as a student loan
    46  servicer, directly or indirectly, without first obtaining a license from
    47  the commissioner, unless such person is exempt from  licensure  pursuant
    48  to this section.
    49    (b)  The  following  persons  or entities are exempt from student loan
    50  servicer licensing requirements:
    51    (i) any bank, out-of-state bank, New York credit union, federal credit
    52  union or out-of-state credit union;
    53    (ii) any wholly owned subsidiary of any such bank or credit union; and
    54    (iii) any operating subsidiary where  each  owner  of  such  operating
    55  subsidiary is wholly owned by the same bank or credit union.

        A. 8862                             3
 
     1    (c)  Any person or entity seeking to act within the state as a student
     2  loan servicer shall submit a written application to the commissioner for
     3  a license in such form as the commissioner prescribes.
     4    (d)  Upon  the filing of an application for an initial license and the
     5  payment of the fees for  license  and  investigation,  the  commissioner
     6  shall  investigate the financial condition and responsibility, financial
     7  and business experience, character and general fitness of the applicant.
     8  The commissioner may issue a license if the commissioner finds that:
     9    (i) the applicant's financial condition is sound;
    10    (ii) the applicant's business  will  be  conducted  honestly,  fairly,
    11  equitably,  carefully  and efficiently within the purposes and intent of
    12  this section;
    13    (iii)(1) if the applicant is an individual, such individual is in  all
    14  respects properly qualified and of good character;
    15    (2) if the applicant is a partnership, each partner is in all respects
    16  properly qualified and of good character;
    17    (3)  if  the applicant is a corporation or association, the president,
    18  chairperson of the executive committee, senior officer  responsible  for
    19  the  corporation's  business  and  chief  financial officer or any other
    20  person or performs similar functions as determined by the  commissioner,
    21  each  director,  each trustee and each shareholder owning ten percent or
    22  more of each class of the securities  of  such  corporation  is  in  all
    23  respects properly qualified and of good character; or
    24    (4) if the applicant is a limited liability company, each member is in
    25  all respects properly qualified and of good character;
    26    (iv)  no  person  on  behalf  of  the applicant has knowingly made any
    27  incorrect statement of a material fact in the  application,  or  in  any
    28  report or statement made pursuant to this section;
    29    (v)  no  person  on  behalf  of the applicant knowingly has omitted to
    30  state any material fact necessary to give the commissioner any  informa-
    31  tion lawfully required by the commissioner;
    32    (vi) the applicant has met any other requirements as determined by the
    33  commissioner.
    34    (e)(i) A license shall be for a period of one year as of a date deter-
    35  mined  by the commissioner and shall expire unless renewed, suspended or
    36  revoked pursuant to this section.
    37    (ii) Not later than fifteen days after a licensee ceases to engage  in
    38  the  business  of  student  loan servicing in this state for any reason,
    39  including a business decision to terminate  operations  in  this  state,
    40  license  revocation,  bankruptcy or voluntary dissolution, such licensee
    41  shall provide written notice of surrender to the commissioner and  shall
    42  surrender  to  the  commissioner such license for each location in which
    43  such licensee has ceased to engage in such business.
    44    (iii) A written notice of surrender shall identify the location  where
    45  the  records  of  the  licensee will be stored and the name, address and
    46  telephone number of an individual authorized to provide  access  to  the
    47  records.  The  surrender  of  a license does not reduce or eliminate the
    48  licensee's civil or criminal liability arising from  acts  or  omissions
    49  occurring prior to the surrender of the license.
    50    (f)  A license may be renewed for the ensuing one year period upon the
    51  filing of an application containing all required documents and  fees  as
    52  provided  in  paragraph  (c)  of this subdivision. A renewal application
    53  shall be filed at least thirty days  prior  to  the  date  such  license
    54  expires. The commissioner may assess a late fee for renewal applications
    55  filed  within thirty days of license expiration. If an application for a
    56  renewal license has been filed with the commissioner on  or  before  the

        A. 8862                             4
 
     1  date the license expires, the license sought to be renewed shall contin-
     2  ue  in  full  force and effect until issuance by the commissioner of the
     3  renewal license or until the commissioner has notified the  licensee  in
     4  writing  of  the  commissioner's  refusal  to issue such renewal license
     5  together with the grounds upon which such refusal is based. The  commis-
     6  sioner  may refuse to issue a renewal license on any ground on which the
     7  commissioner might refuse to issue an initial license.
     8    (g) If the commissioner determines that a check filed with the commis-
     9  sioner to pay a license or renewal fee has been dishonored, the  commis-
    10  sioner  shall  automatically suspend the license. The commissioner shall
    11  notify the licensee in  writing  of  the  automatic  suspension  pending
    12  proceedings  for revocation or refusal to renew and an opportunity for a
    13  hearing on such actions.
    14    (h) The commissioner may deem an application for a  license  abandoned
    15  if  the  applicant  fails  to  respond  to  any  request for information
    16  required under this section, or  any  regulations  adopted  pursuant  to
    17  such.  The  commissioner shall notify the applicant, in writing, that if
    18  the applicant fails to submit such information  later  than  sixty  days
    19  after  the  date  on  which  such  request for information was made, the
    20  application shall be deemed abandoned. An application  filing  fee  paid
    21  prior  to  the  date  an  application  is  deemed abandoned shall not be
    22  refunded.   Abandonment of an application  pursuant  to  this  paragraph
    23  shall not preclude the applicant from submitting a new application for a
    24  license under the provisions of this section.
    25    4. Prohibitions. (a) A student loan servicer shall not:
    26    (i)  directly  or  indirectly employ any scheme, device or artifice to
    27  defraud or mislead student loan borrowers;
    28    (ii) engage in any unfair or deceptive practice toward any  person  or
    29  misrepresent  or  omit  any  material information in connection with the
    30  servicing of a student education loan, including, but  not  limited  to,
    31  misrepresenting the amount, nature or terms of any fee or payment due or
    32  claimed  to be due on a student education loan, the terms and conditions
    33  of the loan agreement or the borrower's obligations under the loan;
    34    (iii) obtain property by fraud or misrepresentation;
    35    (iv) knowingly misapply or recklessly  apply  student  education  loan
    36  payments to the outstanding balance of a student education loan;
    37    (v) knowingly or recklessly provide inaccurate information to a credit
    38  bureau, thereby harming a student loan borrower's creditworthiness;
    39    (vi) fail to report both the favorable and unfavorable payment history
    40  of  the student loan borrower to a nationally recognized consumer credit
    41  bureau at least annually if the student loan servicer regularly  reports
    42  information to a credit bureau;
    43    (vii)  refuse  to communicate with an authorized representative of the
    44  student loan borrower who provides a written authorization signed by the
    45  student loan borrower, provided the  student  loan  servicer  may  adopt
    46  procedures reasonably related to verifying that the representative is in
    47  fact authorized to act on behalf of the student loan borrower; or
    48    (viii) negligently make any false statement or knowingly and willfully
    49  make  any omission of a material fact in connection with any information
    50  or reports filed with a governmental agency or in  connection  with  any
    51  investigation  conducted  by the superintendent of financial services or
    52  another governmental agency.
    53    (b) No person or entity licensed to act within New York as  a  student
    54  loan  servicer shall do so under any other name or at any other place of
    55  business other than that named in the license. Any change of location of
    56  a place of business of a licensee shall require prior written notice  to

        A. 8862                             5
 
     1  the  commissioner.  Not  more  than one place of business shall be main-
     2  tained under the same license. A license shall not  be  transferable  or
     3  assignable.
     4    (c)  A  student loan servicer or a person or entity exempt from licen-
     5  sure pursuant to  subdivision  three  of  this  section  shall  maintain
     6  adequate records of each student education loan transaction for not less
     7  than  two  years  following  the final payment on such student education
     8  loan or the assignment of such student education loan, whichever  occurs
     9  first,  or  such longer period as may be required by any other provision
    10  of law. The commissioner may request a student  loan  servicer  to  make
    11  such  records  available.  A student loan servicer must comply with such
    12  request within five business days. The commissioner may grant a licensee
    13  additional time to make such records available upon request.
    14    (d) A student loan servicer shall comply with all  applicable  federal
    15  laws  and  regulations relating to student loan servicing. Any violation
    16  of federal law or regulation shall be deemed a violation of this section
    17  and a basis upon which the  commissioner  may  take  enforcement  action
    18  pursuant to such.
    19    5. Licensing examinations. (a) The commissioner shall have the author-
    20  ity to conduct investigations and examinations for the purposes of:
    21    (i)  initial  licensing,  license renewal, license suspension, license
    22  revocation or termination, or general or specific  inquiry  or  investi-
    23  gation  to  determine compliance with this section, the commissioner may
    24  access, receive and use any books, accounts, records, files,  documents,
    25  information or other evidence; and
    26    (ii)   investigating  violations  or  complaints  arising  under  this
    27  section.
    28    (b) In making any examination  or  investigation  authorized  by  this
    29  section,  the  commissioner  may  access  documents  and  records of the
    30  student loan servicer, licensee or person under examination or  investi-
    31  gation.    Unless the commissioner has reasonable grounds to believe the
    32  documents or records of the student loan servicer,  licensee  or  person
    33  have been, or are at risk of being, altered or destroyed for purposes of
    34  concealing  a  violation  of  this section, the student loan servicer or
    35  owner of the documents and records shall have access to the documents or
    36  records as necessary to conduct ordinary business affairs.
    37    (c) No student loan servicer or person  subject  to  investigation  or
    38  examination under this section may knowingly withhold, abstract, remove,
    39  mutilate,  or  destroy  any  books,  records,  computer records or other
    40  information.
    41    (d) The commissioner may  suspend,  revoke  or  refuse  to  renew  any
    42  license issued under this section if the commissioner finds that:
    43    (i)  the  licensee  has  violated any provision of this section or any
    44  regulation made pursuant to this section, or (ii) any fact or  condition
    45  exists  which, if it had existed at the time of the original application
    46  for the license, clearly would have warranted a denial of such  license.
    47  No  abatement of the license fee shall be made if the license is surren-
    48  dered, revoked or suspended prior to the expiration of  the  period  for
    49  which it was issued.
    50    6. Report. Notwithstanding any general or special law to the contrary,
    51  the  commissioner  shall  file  a report on the work of the student loan
    52  ombudsman annually with the governor and the  legislature  beginning  on
    53  January  first, two thousand twenty.  Such report shall include, but not
    54  be limited to:
    55    (a) the number of complaints received by the  student  loan  ombudsman
    56  from student loan borrowers;

        A. 8862                             6

     1    (b)  the  types  of  complaints received by the student loan ombudsman
     2  from student loan borrowers;
     3    (c)  any  recommendations to improve the effectiveness of the position
     4  of student loan ombudsman; and
     5    (d) any recommendations to improve regulation, oversight, and enforce-
     6  ment of the department of financial  services  over  the  licensing  and
     7  enforcement of student loan servicers.
     8    § 2. This act shall take effect on the one hundred twentieth day after
     9  it shall have become a law.
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