California Wants to Create “Student Borrower Bills of Rights” to Protect Students from Deceptive Loans
Inside Subprime: April 30, 2019
By Jessica Easto
Assembly Bill 376, penned by Monterey Bay Assemblyman Mark Stone, outlines a number of new requirements that would be imposed on student loan servicers, including new service procedures that would minimize late fees and negative credit reporting, maximize accuracy and timeliness of services, and provide oversight and accountability.
The bill proposes that customer service staff working with military, public service, disabled, or elderly borrowers would be required to receive specialized training and prohibit such staff from using “unfair,” “deceptive,” or “abusive” loan-servicing practices. If a borrower is negatively impacted by a loan servicer’s failure to comply with these rules, the bill allows borrowers to pursue legal action for relief.
The bill also calls for the creation of a new position, called a “Student Borrower Advocate,” who would assist with the implementation and oversight of these new provisions. For example, the Student Borrower Advocate would receive and review complaints, shepherding them through the investigative process and conferring with other regulatory bodies, including the Department of Justice and the Department of Business Oversight. Lastly, the bill would create methods for the oversight, analysis, and reporting of student loan servicing data.
The bill was created in response to the federal government’s recent changes to its own role in oversight. The Consumer Financial Protection Bureau (CFPB) announced in May its plans to close the office responsible for student-loan investigations.
“We have seen the federal government refuse to protect student borrowers and California has led the charge to fulfill this role,” said Assemblyman Stone. “California will keep pushing increased consumer protections because we understand that student loans not only affect the lives of borrowers, but have radiating negative effects throughout the economy.”
Student loan debt is at an all-time high. According to recent reports, 4 million California student-loan borrowers owe a combined $134 billion. At the same time, consumer advocates argue that the student loan industry is rife with deceptive practices that create obstacles to repayment. One large student loan servicer is currently in a lawsuit with a teacher’s union over such deceptive practices.
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