Bichotte Hermelyn, Carroll R, Colton, Cook, Davila, Glick, McDonough, Taylor
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.
STATE OF NEW YORK
________________________________________________________________________
1146
2025-2026 Regular Sessions
IN ASSEMBLY
January 9, 2025
___________
Introduced by M. of A. SIMON, GONZALEZ-ROJAS, REYES -- Multi-Sponsored
by -- M. of A. BICHOTTE HERMELYN, R. CARROLL, COLTON, COOK, DAVILA,
GLICK, McDONOUGH, TAYLOR -- 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.
LBD02826-01-5
A. 1146 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 ombudsperson. (a) There is hereby established the position of
6 the student loan ombudsperson, within the department of financial
7 services, to be appointed by the commissioner to provide timely assist-
8 ance to any student loan borrower who has a student education loan.
9 (b) The student loan ombudsperson shall work in consultation with the
10 commissioner. The responsibilities of the student loan ombudsperson 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 ombudsperson, in consultation with the commis-
38 sioner, shall establish a student loan borrower education course to
39 include educational presentations and materials regarding student educa-
40 tion 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; and
A. 1146 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 who 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 applications
A. 1146 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 of
A. 1146 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 ombudsperson annually with the governor and the legislature beginning on
55 January first, two thousand twenty-eight. Such report shall include,
56 but not be limited to:
A. 1146 6
1 (a) the number of complaints received by the student loan ombudsperson
2 from student loan borrowers;
3 (b) the types of complaints received by the student loan ombudsperson
4 from student loan borrowers;
5 (c) any recommendations to improve the effectiveness of the position
6 of student loan ombudsperson; 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.
