Student loan servicing.

Existing law, the Student Loan Servicing Act, prohibits a person from engaging in the business of servicing a student loan in California without first obtaining a license. Existing law commits the administration of these provisions to the Commissioner of Business Oversight and grants the commissioner various powers in this regard, including the authority to conduct investigations of applicants and licensees. The act requires an applicant for a license to submit audited financial statements prepared in accordance with generally accepted accounting principles and acceptable to the commissioner that indicate a net worth of at least $250,000 and requires a licensee to maintain a minimum net worth of $250,000. Existing law, the Rosenthal Fair Debt Collection Practices Act, regulates the collection of consumer debts by debt collectors, as defined. Under existing law, a debt collector who violates the act is liable to a debtor for actual damages resulting from the violation, and is subject to additional civil penalties for any willful or knowing violation of the act, and other specified remedies. This bill would authorize the commissioner to allow a licensee that is a wholly owned subsidiary of a public holding company required to comply with the requirements of the Securities and Exchange Commission to satisfy the requirement to submit audited financial statements with an application for a license and to maintain a minimum net worth of $250,000 by submitting the annual consolidated audited financial statements filed with the Securities and Exchange Commission, as specified. This bill would impose new requirements on a student loan servicer, defined as any person engaged in the business of servicing student loans in the state. These requirements would include the timely posting, processing, and crediting of student loan payments within certain timeframes, applying overpayments consistent with the best financial interest of a student loan borrower, as defined, applying partial payments to minimize late fees and negative credit reporting, maintaining records, timely processing of paperwork, and diligently overseeing service providers. The bill would require a student loan servicer to provide specialized training for customer service personnel that advises military borrowers, borrowers in public service, borrowers with disabilities, and older borrowers. The bill would prohibit a student loan servicer from engaging in unfair or deceptive practices, or abusive acts or practices in connection with the servicing of a student loan, as specified. The bill would authorize a consumer who suffers damages as a result of a person's failure to comply with these provisions as well as all applicable federal laws relating to student loan servicing to bring an action for actual damages, injunctive relief, restitution, punitive damages, attorney's fees, and other relief, including treble damages in certain circumstances. The bill would require a consumer to give specified notice to a person before bringing an action for damages against that person for a violation of the bill's provisions and would provide that person an opportunity to cure the alleged violation, as specified. The bill would prohibit an attempt to cure a violation by a person who receives a notice of that violation from being admissible in court against that person but would authorize the attempt to cure to be admitted as evidence by that person, as specified. The bill would define terms for purposes of its provisions. The bill would require, beginning on July 1, 2021, the commissioner, as specified, to designate a Student Loan Ombudsman to work within the department and to hire additional staff, as needed to implement these provisions. The bill would require the Student Loan Ombudsman to receive and review complaints, to refer complaints to an appropriate unit within the department that would be authorized to investigate the complaint, and to refer complaints regarding servicers not subject to licensing under the Student Loan Servicing Act to the Department of Justice, which would be permitted to investigate those complaints. The bill would require complaints regarding any private postsecondary educational institution licensed by the Bureau for Private Postsecondary Education to be referred to the Bureau for Private Postsecondary Education's Office of Student Assistance and Relief. The bill would require the Student Loan Ombudsman to confer with the Department of Justice and the Office of Student Assistance and Relief regarding the student loan servicing complaints, the proper referral processes for those complaints, and the reporting requirements imposed by the bill. The bill would require the Student Loan Ombudsman not later than 18 months after the operative date of the bill, and no less than once yearly thereafter, to submit a report to the appropriate committees of the Legislature regarding the implementation of these provisions, the types of complaints received, and other data and analysis on student loan issues. The bill would also, beginning July 1, 2021, authorize the Commissioner of Business Oversight to monitor for risks to consumers in the provision of student loan servicing and would authorize the commissioner to gather information regarding the organization, business conduct, and activities of student loan services. The bill would authorize the commissioner to gather and compile information from student loan servicers and to develop and publicize metrics based on the data collected. Among other actions, the bill would authorize the commissioner to require student loan servicers to file, under oath or otherwise, annual or special reports or answers in writing to specific questions. By expanding the crime of perjury, the bill would impose a state-mandated local program. The bill would include related legislative findings and would make conforming and nonsubstantive changes to provisions in the Student Loan Servicing Act. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.