Bill Summary for S 194 (2023-2024)

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Summary date: 

Mar 2 2023

Bill Information:

View NCGA Bill Details2023-2024 Session
Senate Bill 194 (Public) Filed Thursday, March 2, 2023
Intro. by Galey, Craven, Settle.

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Bill 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 seven 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 (except when required to communicate that a debt is disputed), 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 June 1, 2024.

Amends Article 26 by 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, 2025, as specified. Requires annual reporting to the NCGA as specified. Effective January 1, 2025.

Includes a severability clause.