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S05056 Summary:

S05056 Actions:

S05056 Committee Votes:

S05056 Floor Votes:

S05056 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         5056--A
            Cal. No. 1098
 
                               2023-2024 Regular Sessions
 
                    IN SENATE
 
                                    February 22, 2023
                                       ___________
 
        Introduced  by  Sen.  THOMAS -- read twice and ordered printed, and when
          printed to be committed to the Committee on Banks -- reported  favora-
          bly  from  said committee and committed to the Committee on Finance --
          committee discharged and said bill committed to the Committee on Rules
          -- reported favorably from said committee, ordered to a third reading,
          passed by Senate and delivered to the Assembly, recalled, vote  recon-
          sidered,  restored  to  third  reading, amended and ordered reprinted,
          retaining its place in the order of third reading
 
        AN ACT to amend the financial services law, in relation  to  creating  a
          private education debt registry
 
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. The financial services law is amended by adding a new arti-
     2  cle 9 to read as follows:
     3                                  ARTICLE 9
     4                       PRIVATE EDUCATION DEBT REGISTRY
     5  Section 901. Definitions.
     6          902. Private education debt registry.
     7          903. Rules and regulations.
     8          904. Violations.
     9          905. Severability.
    10    § 901. Definitions. As used in this article:
    11    1. "Fiscal year" means the twelve-month period that the private educa-
    12  tion creditor uses for financial reporting and budgeting.
    13    2. "Higher education" means higher education, including career  educa-
    14  tion,  as  those  terms are defined in section two of the education law,
    15  via correspondence, online, or in  person,  regardless  of  whether  the
    16  higher education institution is accredited within New York state.
    17    3.  "Higher  education  expense" means any expense arising from higher
    18  education.
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD08128-04-3
        S. 5056--A                          2
 
     1    4. "Private education creditor" means any person engaged in the  busi-
     2  ness  of securing, making, or extending a private education debt, or any
     3  holder of a private education debt, including providers of higher educa-
     4  tion to which a student education debt is owed. "Private education cred-
     5  itor"  shall  not include the following persons, only to the extent that
     6  state regulation is preempted by federal law:
     7    (a) any federally chartered bank, savings bank, savings and loan asso-
     8  ciation, or credit union;
     9    (b) any bank, savings bank, savings and loan  association,  or  credit
    10  union organized under the laws of this or any other state;
    11    (c) any wholly owned subsidiary of a federally chartered bank or cred-
    12  it union; and
    13    (d) any operating subsidiary where each owner of the operating subsid-
    14  iary  is  wholly  owned  by  the same federally chartered bank or credit
    15  union.
    16    5. "Private education debt" means an extension of credit  or  debt  or
    17  obligation  owed  or  incurred  by a consumer, contractual or otherwise,
    18  contingent or absolute, that meets all of the following criteria:
    19    (a) is not made, insured, or guaranteed under Title IV of  the  Higher
    20  Education Act of 1965 (20 U.S.C. s.1070 et seq.);
    21    (b)  is extended to a consumer expressly, in whole or in part, for, or
    22  accrues from nonpayment of, higher  education  expenses,  regardless  of
    23  whether  the  credit  or  debt  or obligation is owed to the provider of
    24  higher education that the student attends; and
    25    (c) shall not include any loan that is secured by real property  or  a
    26  dwelling.
    27    "Private education debt" shall include extensions of credit or debt or
    28  obligations owed or incurred to refinance a private education debt.
    29    6.  "Provider  of higher education" or "school" means a person engaged
    30  in the business of higher education. For  the  purposes  of  this  defi-
    31  nition,  a  person need not have obtained authorization from the depart-
    32  ment of education to operate in this state and need not be an accredited
    33  institution.
    34    § 902. Private education debt registry. 1. Beginning on or  after  the
    35  one  hundred  eightieth day after the effective date of this article, no
    36  person shall engage in business as a private education creditor in  this
    37  state  without  first satisfying the following requirements set forth in
    38  subdivisions two and three of this section.
    39    2. (a) A private education creditor  operating  in  this  state  shall
    40  register with the superintendent pursuant to any registration procedures
    41  set forth by the superintendent by rule or regulation, which may include
    42  registration  through  the  Nationwide  Multistate  Licensing System and
    43  Registry, and shall pay a fee set by the superintendent. The superinten-
    44  dent may prescribe an alternative registration process and fee structure
    45  for a provider of higher education. Registration  shall  include,  at  a
    46  minimum,  the name and address of the private education creditor and any
    47  officer, director, partner, or owner of a controlling  interest  of  the
    48  private education creditor.  A private education creditor shall annually
    49  renew its registration and pay a renewal fee pursuant to a procedure and
    50  on or before a date to be determined by the superintendent.
    51    (b)  This  subdivision  shall  not apply to regulated persons, as such
    52  term is defined in section one hundred four of this chapter, engaged  in
    53  business  as  a  private education creditor in this state, to the extent
    54  such regulation relates to its business as a private education  creditor
    55  and such persons are required to furnish data or reports annually to the
    56  superintendent.
        S. 5056--A                          3
 
     1    3.  A private education creditor operating in this state shall annual-
     2  ly, on or before a date to be determined by the superintendent  and  not
     3  to  exceed  six  months  following  the  effective date of this article,
     4  provide the superintendent with the following documents and  information
     5  about  such  creditor's  private  education  debt  portfolio  related to
     6  consumers that reside in this state pursuant to any procedure set  forth
     7  by  the  superintendent, which may include reporting through the Nation-
     8  wide Multistate Licensing System and Registry,  and  which  may  further
     9  include  different  procedures  for  regulated  persons, as that term is
    10  defined in section one hundred four of this chapter,  and  non-regulated
    11  persons:
    12    (a)  For  private  education  creditors  that  secure, make, or extend
    13  private education  debts,  other  than  those  private  education  debts
    14  reported pursuant to paragraph (c) of this subdivision, relating to such
    15  debts  owed  by  a  consumer residing in this state as of the end of the
    16  prior fiscal year:
    17    (i) a list of all schools for which such private education debts  were
    18  used  to finance higher education, including, in the case of a refinanc-
    19  ing loan, the school that the consumer attended using the private educa-
    20  tion debt that was refinanced;
    21    (ii) the total outstanding dollar amount and number  of  such  private
    22  education  debts and the number of consumers who owe such private educa-
    23  tion debts;
    24    (iii) the total dollar amount and number  of  such  private  education
    25  debts  associated  with each school identified under subparagraph (i) of
    26  this paragraph;
    27    (iv) the total dollar amount and number  of  private  education  debts
    28  secured, made, or extended in the prior fiscal year;
    29    (v)  the  total  dollar  amount  and number of private education debts
    30  secured, made, or extended in the prior fiscal year associated with each
    31  school identified under subparagraph (i) of this paragraph;
    32    (vi) the range of starting interest rates for private education  debts
    33  secured,  made,  or  extended  to consumers in the prior fiscal year and
    34  percentage of consumers who receive those rates;
    35    (vii) the overall default rate, as well as  the  overall  default  for
    36  such  debts associated with each  school  listed  under subparagraph (i)
    37  of this paragraph;
    38    (viii) the total dollar amount and number of private  education  debts
    39  that defaulted for reasons other  than  non-payment in the prior  fiscal
    40  year, as applicable;
    41    (ix)  the  total  dollar  amount and number of private education debts
    42  with a cosigner, as applicable;
    43    (x) the total dollar amount and  number  of  private  education  debts
    44  secured,  made, or extended with a cosigner in the prior fiscal year, as
    45  applicable;
    46    (xi) the total dollar amount and number  of  private  education  debts
    47  secured, made, or extended to refinance other private education debts or
    48  federal student loans, respectively, as applicable;
    49    (xii)  the  total  dollar amount and number of private education debts
    50  secured, made, or extended to refinance other private education debts or
    51  federal student loans, respectively, in the prior fiscal year, as appli-
    52  cable;
    53    (xiii) the total dollar amount and number of private  education  debts
    54  for  which  the  private  education  creditor has sued to collect in the
    55  prior fiscal year, as applicable;
        S. 5056--A                          4
 
     1    (xiv) additional information as may in the judgment of the superinten-
     2  dent be necessary and appropriate in order to assess the total size  and
     3  status of the private education debt market and to assess borrower well-
     4  being; and
     5    (xv) A copy of any model promissory note, agreement, contract or other
     6  instrument  used  by  a  private  education creditor during the previous
     7  fiscal year to substantiate that a new private education debt  has  been
     8  extended to the consumer or that a consumer owes a debt or obligation to
     9  the private education creditor.
    10    (b)  For  private  education  creditors that acquire or assume private
    11  education debts owed by a consumer residing in this state,  relating  to
    12  such debts as of the end of the prior fiscal year:
    13    (i)  a list of all schools for which such private education debts were
    14  used to finance higher education, including, in the case of a  refinanc-
    15  ing loan, the school that the consumer attended using the private educa-
    16  tion debt that was refinanced;
    17    (ii)  the  total  outstanding dollar amount and number of such private
    18  education debts and number of consumers who owe such  private  education
    19  debts;
    20    (iii)  the  total  dollar amount and number of private education debts
    21  associated with each school identified under subparagraph  (i)  of  this
    22  paragraph;
    23    (iv)  the  total  dollar  amount and number of private education debts
    24  acquired or assumed in the prior fiscal year;
    25    (v) the total dollar amount and  number  of  private  education  debts
    26  acquired or assumed in the prior fiscal year associated with each school
    27  identified under subparagraph (i) of this paragraph;
    28    (vi) the overall default rate, as well as the overall default for such
    29  debts  associated with each school listed under subparagraph (i) of this
    30  paragraph;
    31    (vii) the total dollar amount and number of  private  education  debts
    32  that  defaulted  for  reasons  other than nonpayment in the prior fiscal
    33  year, as applicable;
    34    (viii) the total dollar amount and number of private  education  debts
    35  with a cosigner, as applicable;
    36    (ix)  the  total  dollar  amount and number of private education debts
    37  that were used to refinance other private education debts,  as  applica-
    38  ble;
    39    (x)  the total dollar amount and number of private education debts for
    40  which the private education creditor has sued to collect  in  the  prior
    41  fiscal year, as applicable; and
    42    (xi)  additional information as may in the judgment of the superinten-
    43  dent be necessary and appropriate in order to assess the total size  and
    44  status of the private education debt market and to assess borrower well-
    45  being.
    46    (c)  For  private  education  creditors  that  are providers of higher
    47  education and whose private education debts result from unpaid debts  or
    48  obligations  that  were  not  extensions  of credit and that result from
    49  higher education provided in this state, relating to such  debts  as  of
    50  the end of the prior fiscal year, reported by race and gender:
    51    (i)  the  total outstanding dollar amount and number of private educa-
    52  tion debts and number of consumers who owe those debts;
    53    (ii) the total dollar amount and number  of  private  education  debts
    54  accrued  and number of consumers who owe those debts in the prior fiscal
    55  year;
        S. 5056--A                          5

     1    (iii) the total number and balance of student accounts with an academ-
     2  ic or administrative hold resulting from a private education debt;
     3    (iv) the total number and balance of student accounts with an academic
     4  or administrative hold resulting from a private education debt for which
     5  a payment was made in the prior fiscal year and average payment made;
     6    (v)  the  total number of student accounts for which federal financial
     7  aid was returned to the federal government upon the student's withdrawal
     8  from the provider of higher education in the prior fiscal year, and  the
     9  total dollar amount of any private education debt accrued as a result;
    10    (vi)  the  number  of  consumers  who owe a private education debt who
    11  received a federal pell grant and the average debt owed;
    12    (vii) the number of consumers who owe a private education debt who are
    13  considered in-state and out-of-state students, and the total  debt  owed
    14  by each group;
    15    (viii) the total dollar amount, number of private education debts, and
    16  number  of consumers for which the private education creditor has in the
    17  prior fiscal year (A) charged off the debt, (B) sent the debt to a third
    18  party  collection  agency,  (C)  initiated  a  collection  lawsuit,  (D)
    19  reported  the  debt  to a consumer credit reporting agency, and (E) sold
    20  the debt;
    21    (ix) the total dollar amount, number of private education  debts,  and
    22  number of consumers for which the private education creditor has, in the
    23  prior  fiscal year, collected on a private education debt in the follow-
    24  ing instances: (A) payment arrangements  wherein  the  payment  was  not
    25  considered  past  due,  such  as  tuition  installment  agreements;  (B)
    26  payments made on past due debts during the same academic term or billing
    27  cycle in which the debt accrued and before such debts  were  sent  to  a
    28  collection  agency; (C) payments made on past due debts before they were
    29  sent to a collection agency, excluding those payments  made  during  the
    30  same  academic  term  or  billing cycle in which the debt accrued; (D) a
    31  third party collection agency, prior to initiating a lawsuit; and (E)  a
    32  collection lawsuit, including payments made by settlement or pursuant to
    33  a judgment;
    34    (x)  additional  information as may in the judgment of the superinten-
    35  dent be necessary and appropriate in order to assess the total size  and
    36  status of the private education debt market and to assess borrower well-
    37  being; and
    38    (xi)  a  copy  of  any  model written instrument used by a provider of
    39  higher education in the prior fiscal  year  to  substantiate  a  private
    40  education  debt, including but not limited to a promissory note, enroll-
    41  ment agreement, or contract.
    42    4. Not later than one  year  following  the  effective  date  of  this
    43  section,  the  superintendent shall create a publicly accessible website
    44  that includes at least the following information about private education
    45  creditors registered in this state:
    46    (a) The name, address, telephone number and website  for  all  private
    47  education creditors;
    48    (b) A summary of the information required by subdivision three of this
    49  section; and
    50    (c)  Copies of all documents provided under subparagraph (xv) of para-
    51  graph (a) of subdivision three of this section and subparagraph (xi)  of
    52  paragraph (c) of subdivision three of this section.
    53    § 903. Rules and regulations. In addition to such powers as may other-
    54  wise be prescribed by this chapter, the superintendent is hereby author-
    55  ized  and  empowered  to promulgate such rules and regulations as may in
    56  the judgment of the superintendent be consistent with  the  purposes  of
        S. 5056--A                          6
 
     1  this  article,  or  appropriate for the effective administration of this
     2  article.
     3    §  904.  Violations.  1. If the superintendent finds, after notice and
     4  hearing, that a private education creditor has knowingly  violated  this
     5  article by failing to comply with any registration or reporting require-
     6  ment  or by furnishing inaccurate information to the superintendent, the
     7  superintendent may impose a civil penalty of not more than ten  thousand
     8  dollars for each violation.
     9    2.  The superintendent may order that any person who has been found to
    10  have knowingly violated any provision of this article, or of  the  rules
    11  and  regulations  issued pursuant thereto, and has thereby caused finan-
    12  cial harm to consumers, be barred for a term  not  exceeding  ten  years
    13  from  acting  as  a  private education creditor, or a stockholder, or an
    14  officer, director, partner or other owner, or an employee of  a  private
    15  education creditor.
    16    §  905. Severability. If any provision of this article or the applica-
    17  tion thereof to any person or circumstance  is  adjudged  invalid  by  a
    18  court  of  competent  jurisdiction,  that  judgment  shall not affect or
    19  impair the validity of the other  provisions  of  this  article  or  the
    20  application thereof to other persons and circumstances.
    21    § 2. This act shall take effect immediately.