AN ACT TO ENACT A STUDENT BORROWERS' BILL OF RIGHTS BY ESTABLISHING THE POSITION OF A STUDENT LOAN OMBUDSMAN IN THE OFFICE OF THE COMMISSIONER OF BANKS AND BY PROVIDING THAT THE COMMISSIONER OF BANKS SHALL LICENSE AND REGULATE STUDENT LOAN SERVICERS.
Enacts Article 26, Student Borrowers' Bill of Rights, to GS Chapter 53. Sets forth the Article's purpose and defined terms. Establishes the position of Student Loan Ombudsman (SLO) within the Office of the Commissioner of Banks (Commissioner). Delineates eight duties of the SLO, including receiving, reviewing, and attempting to resolve complaints from borrowers, assisting borrowers in understanding their rights and responsibilities under the terms of student loans, and monitoring the development and implementation of federal, State, and local laws concerning borrowers and recommended necessary changes. Directs the SLO, in consultation with the Commissioner, to prepare a student loan borrowing course by January 1, 2021, and include the components specified. Requires the course be available to high school students and students in higher education, and to any borrower who requests it. Requires periodic update of the course. Effective July 1, 2020.
Establishes a student loan servicer license. Specifies that a licensee can conduct business at one or more locations in the state under a single license. Identifies five exemptions from the Article, including banks, credit unions, and savings and loan associations or their wholly owned subsidiary, any federal entity, a student loan servicer contracted by the US Department of Education, and any State entity. Details application requirements, which must be verified by oath or affirmation of the applicant or a designee, and includes a record of any criminal convictions for the applicant, controlling person, or any key management personnel for the prior 10-year period. Establishes a $1,000 license fee and an $800 investigation fee. Requires the Commissioner to investigate the applicant's financial condition and responsibility, financial and business experience, and character and general fitness. Allows for applications to be deemed abandoned after failure to respond to the Commissioner's information requests and upon 30 days' written notice. Details required findings of the Commissioner before a license can be issued, including finding that the applicant's business will be conducted honestly, fairly, equitably, carefully, efficiently, consistent with the Article's purpose and intent, and in a manner commanding the community's confidence and trust. Provides for the expiration of a license on September 30 of the odd-numbered year following issuance. Allows for renewal by application by September 1 of the year of expiration, and requires the applicant to meet the same requirements and fees as the initial application. Provides for a late fee of $100 for late renewal applications. Provides that the license is effective during the pendency of the renewal application. Sets requirements for the surrender of the license within 15 days of ceasing student loan servicing in the state, and requires notice to the Commissioner of the location of the licensee's records.
Establishes an annual assessment for each licensee of $2,000 if the total volume of loans serviced by the licensee in the previous calendar year was no more than $1.5 million. Provides a table for an additional amount to be paid in addition to the $2,000, based on the servicer's total volume of loans serviced over $1.5 million, at rates ranging from 7 cents per thousand to 1 cent per thousand. Authorizes the Commissioner to collect the assessment annually or in periodic installments.
Details duties of a licensee to the Commissioner regarding updates to licensee information, reporting on student loan activities in the state, and providing records to the Commissioner upon request. Details duties of a licensee to the borrower, including disclosing the servicer's fee schedule at the time the licensee obtains the right to service the student loan, and responding to a borrower inquiry within 30 days of receipt. Establishes licensee requirements regarding record retention and consumer reporting.
Details 11 acts prohibited by a licensee, including engaging in unfair and deceptive trade practices and communicating with a borrower in any manner designed to harass or intimidate the borrower.
Authorizes the Commissioner to investigate and examine a student loan servicer subject to the Article to determine compliance with the Article, regardless of licensure. Defines powers of the Commission in investigation and examining student loan servicers under the Article, including the power to subpoena any relevant persons or evidence; the power to retain attorneys, accountants, or other professionals and specialists as investigators, examiners, or auditors to conduct or assist in conducting the investigation or examination; and accepting and relying on investigation and examination reports made by other government officials. Prohibits the Commissioner from preventing a servicer from accessing its own records in its ordinary course of business unless the Commissioner has reason to believe there is a risk that the records will be altered or destroyed to conceal a violation of the Article. Provides for the assessment of actual costs in instances of extraordinary review.
Deems all information obtained by the Commissioner subject to confidential treatment as provided in GS 53C-2-7 (Commissioner's official records). Provides for sharing agreements with state and federal agencies to the extent allowed by state law, with shared information retaining applicable privileges and confidentiality protections provided under state and federal law. Permits the Commissioner to release a list of licensees or aggregated financial data of licensees.
Authorizes the Commissioner to limit, suspend, revoke, or refuse to renew a license for violation of the Article or any rule adopted under the Article. Also authorizes the Commissioner to issue a cease and desist order to any student loan servicer in violation of the Article or any rule adopted under the Article. Further authorizes the Commissioner to seek an injunction in Wake County Superior Court.
Authorizes the Commissioner to assess a civil penalty of up to $25,000 for a violation of the Article upon consideration of the specified factors, including the degree and extent of harm to the borrowers and efforts of the servicer to correct the violation. Requires the clear proceeds of penalties to be remitted to the Civil Penalty and Forfeiture Fund. Also allows the Commissioner to order the a student loan servicer to pay restitution to a borrower injured by a violation of the Article.
Establishes a civil action for borrowers injured by a violation of the Article by a student loan servicer. Deems a violation of the Article an unfair trade or deceptive practice under GS Chapter 75. Allows for a prevailing borrower to recover actual damages and costs, and any remedies available under GS Chapter 75.
Deems a student loan servicer subject to the Article to have consented to state jurisdiction and appointed the Secretary of State as the student loan servicer's agent for purposes of accepting service of process in an action arising under the Article. Deems the Commissioner to have complied with service of process laws upon mailing notice by certified mail to a student loan servicer subject to the Article, postage paid and addressed to the last known address on file with the Commissioner.
Authorizes the State Banking Commission to adopt implementing rules. Sets out a process of appeal from a rule or order of the Commissioner and allows any aggrieved party to petition for judicial review under GS 53C-2-6.
Establishes an annual reporting requirement, beginning January 1, 2022, for the Commissioner to report to the Governor and specified NCGA committees and divisions regarding the implementation and effectiveness of the SLO and any steps necessary for the Commission to gain regulatory control over the licensing and oversight of student loan services.
Provides that the above provisions regarding licensure (proposed GS 53-444 through GS 53-457) are effective October 1, 2021, and apply to acts or omissions committed by student loan servicers on or after that date.
Provides for funding of the salary and benefits of the SLO position created by GS 53-443, as enacted, by appropriating overrealized receipts available to the Banking Commission beginning with the 2020-21 fiscal year for that purpose.
Provides a severability clause.
Effective July 1, 2020.