The problem: Student loan debt in the United States stands at an all-time high of approximately $1.5 trillion spread across more than 44 million borrowers. According to some observers, Massachusetts ranks 12th among states with the highest student debt burden, with average debt exceeding $30,000 per borrower. Against this backdrop, Massachusetts and other states have aspired to a larger regulatory and enforcement role with respect to student loan servicers, the industry participants with the closest relationship to borrowers.
The situation: Two current developments in Massachusetts have significant implications for student loan servicers: (i) state lawmakers are considering enacting a “student loan bill of rights” that would establish state-level regulations specifically aimed at servicers; and (ii) Massachusetts Attorney General Maura Healey has increased enforcement activities against servicers.
Looking Ahead: Student loan servicers should begin preparing for the possibility of new state-level regulations and should adopt appropriate contingency plans. Servicers should also expect continued scrutiny from Attorney General Healey even if new regulations never materialize.
The Student loan Bill away from Rights (“SL Statement off Rights”) try produced about Massachusetts legislature inside the 2017 given that Senate Statement No. 129. An amended kind of the bill introduced unanimously from the Massachusetts Senate from inside the 2018 but don’t appear to possess a ballot on the Massachusetts House regarding Agents. The latest sponsors of SL Statement off Rights refiled property variation (just like the amended, H. 3977) and Senate adaptation (S. 160) to your 2019 session. The fresh Joint Committee into the User Safety and you may Top-notch Licensure held an excellent reading towards the Senate type for the , plus the Joint Panel on Monetary Characteristics stored a listening to the our house version from inside the . Our home variation is actually reported absolutely of the Combined Committee and you may upcoming known our house Committee on the Ways and means. None version of the balance could have been booked for a full vote, although costs sponsors continue to reception greatly for its passage.
It would would a state licensure and you will regulatory regimen to own servicers administered and applied from the Massachusetts Section regarding Banking institutions. All nonbank servicers would, for the first time, be asked to make an application for permits susceptible to annual restoration. The fresh new Division away from Banking institutions carry out give permits dependent on criteria relevant to your applicant’s monetary standing and you may repair practices. Just financial institutions, borrowing unions, as well as their subsidiaries might possibly be excused using this license requirement.
From what regulating techniques, servicers manage essentially getting blocked regarding engaging in unfair upkeep methods otherwise make you to violates federal laws or regulations. They might become at the mercy of assessment and you can examinations, as well as the Division away from Banking companies would have the legal right to suspend or revoke a license or impose penalties and fees to own maintenance abuses. The newest Section out-of Banks was needed to promulgate using legislation planning give then detail regarding the just what comprises a repair violation plus the extent regarding controlled things. Unlike the newest licensure routine, this new SL Expenses out of Legal rights signifies that it condition supervision would apply to each other nonbank and you may financial servicers, though it try unsure if or not and exactly how the levels otherwise variety of out of oversight you will differ among those establishments.
New SL Expenses out-of Rights would carry out good “education loan ombudsman” to assist in fixing certain complaints regarding individuals. The bill contemplates that ombudsman could target affairs, such as, regarding cost possibilities, salary garnishments, defaults, asking issues, range efforts, and financing discharge applications. Brand new ombudsman would teach individuals about student loan repayment selection and you will related activities. The new ombudsman carry out address things regarding each other nonbank and you may financial servicers.
None of these provisions create be immediately effective in the event the expenses became law, getting servicers with a preliminary shield having planning. Brand new specifications pertaining to the latest ombudsman carry out start working when you look at the , and the licensing and you may regulatory techniques perform start working inside .
Finally, passage of the newest SL Statement out-of Legal rights perform place Massachusetts in the line along with other claims which have passed laws and regulations especially addressing college student financing repair. Connecticut, Tx, Illinois, Maine, Maryland, Las vegas, nevada, New jersey, Ny, Rhode Island, and you can Washington have the ability to passed education loan expense out of liberties. Equivalent laws has been lead from inside the Iowa, Minnesota, Missouri, New Mexico, New york, California, and Oregon. Although some of them laws and regulations try up against federal preemption inquiries, it is still around viewed if or not people legislation might, entirely or perhaps in area, feel invalidated with the preemption factor. Above all, Massachusetts lawmakers do not appear to be dissuaded by this prospective uncertainty.
State legislators aren’t the only personal officeholders from inside the Massachusetts concentrated with the education loan servicers. Massachusetts Attorney General Healey could have been effective in the targeting servicers since the the girl election into the 2014. Among other things, she registered for the funds which have ACS Training Services for abusive student loan collection strategies, significantly less than and this ACS provided to pay a $dos.cuatro billion great and you may remark certain borrowers’ earnings-created https://tennesseetitleloans.net/cities/pikeville/ package apps. She plus sued Pennsylvania Degree Guidance Institution (“PHEAA”) in Suffolk Superior Court getting abuses from Massachusetts Section 93A and you may the fresh government Individual Economic Security Operate, and therefore situation stays pending after the court’s denial away from PHEAA’s actions to help you dismiss.
Alone, Attorneys Standard Healey have entered inside the education loan servicing lobbying perform. She led a small grouping of state attorney general inside the criticizing Secretary out-of Knowledge Betsy DeVos’s revocation regarding education loan maintenance reforms. She together with joined a great coalition out of lawyer general to call on Assistant DeVos “in order to refute an ongoing strategy from the education loan servicers … to help you secure disease fighting capability … of county-top oversight,” and one number of lawyer standard inside the lobbying Congress not to ever ticket amendments for the Degree Act (“HEA”) that would furthermore immunize student loan servicers. These types of efforts seem to have become about a bit successful. Particularly, when you find yourself Assistant DeVos granted good memorandum arguing that condition controls from student loan servicers is actually preempted of the government law, the new modification towards HEA never ever became laws.