House committee substitute to the 2nd edition makes the following changes.
Changes the effective date of new Article 26 of GS Chapter 53, Student Borrowers' Bill of Rights, to June 1, 2022 (was, January 1, 2022).
Makes organizational changes to the proposed new sections of GS Chapter 53 in Section 2, which directs the Commissioner of Banks to designate a Student Loan Ombudsman and details duties and responsibilities of the Student Loan Ombudsman. Now organizes the proposed statutes under new Article 26 rather than enacting new Article 27, renumbering the proposed statutes accordingly. No longer includes a definition for the term student loan. Changes the effective date for new GS 53-461 and GS 53-462, as renumbered, to January 1, 2023 (was, July 1, 2022).
|View NCGA Bill Details||2021|
AN ACT TO ENACT A STUDENT BORROWERS' BILL OF RIGHTS, TO PROVIDE THAT THE COMMISSIONER OF BANKS SHALL LICENSE AND REGULATE STUDENT LOAN SERVICERS, AND TO ESTABLISH THE POSITION OF THE STUDENT LOAN OMBUDSMAN.Intro. by Hunt, Setzer.
Summary date: Jul 21 2021 - View Summary
Summary date: Jun 24 2021 - View Summary
House committee substitute to the 1st edition makes the following changes.
Revises new Article 26 of GS Chapter 53, Student Borrowers' Bill of Rights, as follows. In addition to the exclusion of open-ended credit or any loan secured by real property, excludes from the defined term student loan: (1) loans originated by entities exempted from the Article by new GS 53-443, except during periods in which the loans are services by an entity not exempted under the statute; and (2) loans serviced by entities exempted under new GS 53-443. No longer specifies that the term student loan servicer is applicable regardless of whether licensed under the Article. Adds that written inquiry does not include a communication made by a consumer reporting agency involving a dispute under the federal Fair Debt Collection Practices Act.
Now more specifically prohibits student loan servicers (was, persons) from serving a student loan without a license issued pursuant to the Article. Regarding the exemptions to the Article's provisions, no longer excludes the provisions of GS 53-450 (Duties of student loan service to borrowers) and GS 53-451 (Prohibited conduct) from the exemption. Adds to the four previously stated exemptions: institutions of higher education; eligible private postsecondary institutions; and organizations that support the work of institutions of higher education and eligible private postsecondary institutions exempted.
Modifies the duties set forth of licensees to borrowers. Regarding the prohibition against furnishing to a consumer reporting agency information regarding a payment that is the subject of a written inquiry related to a dispute on a borrower's payment on a student loan during the 60 days following receipt of the written inquiry, now explicitly allows furnishing such information as required under specified federal law to communicate that a debt is disputed.
Specifies that the Article does not limit any claims otherwise arising under GS 75-1.1 with regard to unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce.
Changes the effective date of new Article 26 to January 1, 2022 (was, July 1, 2021).
Eliminates proposed Article 9 of GS Chapter 75, Protections for Student Consumers, which deemed certain actions relating to financing education unfair and deceptive trade practice. Eliminates proposed Article 38 of GS Chapter 116, Fairness to Tuition payers, which established requirements for postsecondary schools regarding refunding tuition and closure.
Adds to new Article 27 to GS Chapter 53, which directs the Commissioner of Banks to designate a Student Loan Ombudsman, to define student loan as defined in new Article 26, as enacted and amended.
Makes conforming changes to the act's long title.
Summary date: Apr 27 2021 - View Summary
Enacts new Article 26 to GS Chapter 53 to be cited as the Student Borrowers' Bill of Rights. States the Article's purpose and sets forth defined terms. Prohibits servicing a student loan without a license issued pursuant to the Article. Sets forth four exceptions to the licensure requirement, including banks and similar savings and loan associations organized under the laws of any state or federal law. Details application requirements and requires applying through the Nationwide Multistate Licensing System and Registry (NMLS) in a form acceptable by the Commissioner of Banks (Commissioner) and verified by attestation of the applicant or a designee. Sets the application fee at $1,500, with initial applicants also responsible for the actual cost of obtaining a credit report and federal and State criminal background checks, as well as processing fees required by the NMLS. Provides for application investigation and abandonment, and establishes six qualifications for licensure. Establishes procedures by which a person seeking to act as a student loan servicer is exempt from the described application procedures upon determination by the Commissioner that the person is a party to a contract awarded by the US Secretary of Education under identified federal law.
Establishes a minimum net worth requirement of $250,000 for applicants to possess and maintain at all times. Authorizes the Commissioner to increase the minimum upon consideration of 8 factors. Requires applicants to post a surety bond with the Commissioner at application, and licensees to maintain a surety bond, of $150,000, with an increased surety bond requirement based on the servicer's servicing volume in a calendar year, up to $500,000. Details parameters governing surety bonds.
Provides for annual license renewal and expiration. Establishes a $250 reinstatement fee. Provides for license cancellation if the licensee fails to reinstate the license prior to October 31, thereby requiring compliance with the initial licensure requirements. Establishes procedures for cessation of operations. Prohibits assigning a license. Subjects acquisition of a license to Commissioner approval.
Sets an annual assessment of $1 per borrower served by the licensee, collected annually or in periodic installments by the Commissioner. Requires payment for the prior year before renewal. Authorizes the Commissioner to make special assessments, as specified.
Establishes duties of a licensee, including notice of described material events, and annual reporting on four specified components and any other information deemed relevant by the Commissioner. Establishes duties of a student loan service to borrowers, including timely responding to written inquiries, postponing providing loan information subject to a written request to a consumer reporting agency, inquiring as to the preference for overpayment application, applying partial payments as to minimize late fees and negative credit reporting, providing notice of and transfer records to new student loan servicers as provided, and evaluating borrowers for repayment programs before placing the borrower in forbearance or default if available.
Enumerates twelve prohibited acts of student loan services, including (1) employing a scheme, device, or artifice to defraud or mislead borrowers or the Commissioner, (2) obtaining property by fraud or misrepresentation, and (3) misapplying payments to the outstanding balance of a student loan.
Grants the Commissioner access to documents or information including criminal, civil, and administrative history information and personal history and experience information. Authorizes the Commissioner to investigate or examine any student loan servicer as often as necessary to carry out the Article. Grants the Commissioner extensive authority to interview related parties, including borrowers. Further details the Commissioner's investigative authority, including assessing actual costs for extraordinary expenses. Provides for the Commissioner's access to records of student loan servicers upon request and details related requirements and restrictions. Provides for required reporting, including accounting compilations. Establishes five further powers of the Commissioner, including the power to hire professionals and specialists to assist in investigations and examinations. Authorizes disciplinary action against a student loan servicer who fails to timely respond to inquiries of the Commissioner regarding filed complaints involving violations of the Article or rules or orders thereunder, fails to respond to and fully cooperate with notices from the Commissioner relating to scheduling and conducting investigations and examinations, or fails to consent to a criminal history check (which is grounds for denial of licensure).
Provides for the confidentiality and sharing of information obtained by the Commissioner under the Article. Subjects actions, hearings, and procedures under the Article to the Administrative Procedure Act. Provides for notice requirements following summary suspensions and cease and desist orders and sets a period within which a licensee can request a hearing before the Commissioner.
Details the disciplinary authority and powers of the Commissioner, subject to required findings. Provides for the authority to summarily order the licensee to cease and desist or summarily suspend the license. Allows for surrender of the license.
Allows for a civil penalty for violations of the Article or rules or orders thereunder of up to $25,000 per violation. Provides for restitution, disgorgement, and injunction. Additionally establishes a civil cause of action for damages against a student loan servicer. Provides for service of process under the Article.
Authorizes the Commissioner to adopt implementing rules, with aggrieved persons permitted to appeal to the State Banking Commissioner. Authorizes the Commissioner to participate in the NMLS.
Makes the above provisions effective July 1, 2021.
Enacts new Article 9 to GS Chapter 75, deeming the following actions unfair and deceptive trade practice: (1) presenting an opportunity to finance, as defined, an education in a misleading or unfair way; (2) presenting an opportunity to finance an education in a manner that frustrates a borrower's ability to compare the opportunity with other similar opportunities to finance; and (3) engaging in any lending that discriminates on the basis of protected classes or by institution of higher education. Prohibits lending or financing student loans until the Attorney General, Commissioner of Banks, or court finds a person who has violated the statute has satisfactorily ceased and remediated the violation. Specifies that the statute does not impose a duty to disclose anything beyond what is required by federal law.
Enacts Article 38 to GS Chapter 116, establishing requirements for postsecondary schools regarding refunding tuition and closure. Requires compliance with federal or state law in issuing tuition refunds to students and returning financial assistance funds to the federal government and to the State. Deems a violation of the statute an unfair or deceptive trade practice.
Enacts new Article 27 to GS Chapter 53, directing the Commissioner to designate a Student Loan Ombudsman to carry out the duties and activities set forth in the Article, and provide timely assistance to any borrower of a student loan in the State. Details six duties the Commissioner is to ensure the Ombudsman provides, including monitoring and analyzing the development and implementation of related federal, State, and local laws and policies. Directs the Office of the Commissioner to ensure the Ombudsman establishes and maintains a student loan borrower education course by July 1, 2023, as specified. Requires annual reporting to the NCGA as specified. Effective July 1, 2022.
Includes a severability clause.