B 25-0037 — New Student Loan Borrower Bill of Rights Amendment Act of 2023

ENGROSSEDENROLLED ORIGINAL AAN BILLACT 3_____________ 25-37 5 IN THE COUNCIL OF THE DISTRICT OF COLUMBIA 7 ______________________ 9 To amend the Department of Insurance and Securities Regulation Establishment Act of 1996 to prevent abusive acts or practices related to student education loans and private education loans, require the creation of a revised Student Loan Borrower Bill of Rights by January 1, 2025, to clarify that student loan servicers under contract with the United States Department of Education shall be automatically issued a limited student loan servicing license upon meeting certain criteria, to clarify the rights and obligations regarding denials of applications for approval, to prescribe prohibited conduct on the part of student loan servicers and private education lenders, to assign duties to student loan servicers and private education lenders, to establish responsibilities of private education lenders regarding disability discharge and cosigner release, to authorize the Attorney General to bring an action for a violation of certain provisions, and to make a conforming amendment.

(1) AParagraph new(1) paragraph (1A) is addedredesignated to read as follows:paragraph (1A).

“(1A)(2) “AbusiveA actnew orparagraph practice”(1) meansis anadded actto orread practiceas that:follows:

ENGROSSED“(1) ORIGINAL“Abusive “(A)act Materially interferes with the ability of a student loan borrower to understand a term or conditionpractice” ofmeans aan studentact education loan or privatepractice educationthat: loan;

“(A) Materially interferes with the ability of a student loan borrower to understand a term or condition of a student education loan or private education loan;

or ENROLLED ORIGINAL “(II) A feature, term, or condition of a student education loan or private education loan;

“(2A)(A) “Cosigner” means an individual who is liable for the obligation of a student loan borrower without compensation, regardless of how the individual is designated in ENGROSSED ORIGINAL the contract or instrument with respect to that obligation, including an obligation under a private education loan extended to consolidate a student loan borrower’s pre-existing student loans.

ENGROSSED ORIGINAL “(6F) “Private education lender” means a person engaged in the business of securing, making, or extending private education loans, or a holder of a private education loan.

ENROLLED ORIGINAL “(6G)(A) “Private education loan” means an extension of credit that is not made, insured, or guaranteed under Title IV of the Higher Education Act of 1965 (20 U.S.C.

or “(ii) An extension of credit in which the covered educational institution is the creditor if the term is 90 days or less or an interest rate shallwill not be applied to the credit balance and the term of the extension of credit is one year or less, even if the credit is payable in more than 4 installments.

ENGROSSED ORIGINAL “(9) “Student loan borrower” means a resident of the District of Columbia who has received or agreed to pay a student education loan or a private education loan to fund his or her postsecondary education.”.

ENGROSSED ORIGINAL (B) A new paragraph (3) is added to read as follows:

“(A)(i), A person or entity seeking to act within the District of Columbia as a student loan servicer is exempt from the application procedures established pursuant to this ENROLLED ORIGINAL subsection, other than the requirements of paragraphs (1)(B) and (1)(D) of this subsection, to the extent that the student loan servicing performed is conducted pursuant to a contract awarded by the United States Secretary of Education under 20 U.S.C.

ENGROSSED ORIGINAL “(D)(i) A person or entity issued a license pursuant to this section shall provide the Commissioner with written notice within 7 days following the notification of the expiration, revocation, or termination of any contract awarded by the United States Secretary of Education under 20 U.S.C § 1087f (“written notice”).

“(F) In the case of student loan servicing conducted pursuant to a contract awarded by the United States Secretary of Education under 20 U.S.C § 1087f, nothing in this section shall prevent the Commissioner from issuing a cease-and-desist order or an injunction ENGROSSED ORIGINAL against a student loan servicer to cease activities in violation of this act or D.C.

ENROLLED ORIGINAL (3) A new subsection (k) is added to read as follows:

“(k) In a format prescribed by the Commissioner, a licensee shall maintain the contact information for the Department and the Ombudsman, as defined in section 7c(6B),2(6B), on the licensee’s website.”.

Prohibited conduct –student– student loan servicers.

ENGROSSED ORIGINAL “(4) Obtain property by fraud;

or ENGROSSED ORIGINAL “(12)(A) Fail to respond within 15 business days to a consumer complaint submitted to the student loan servicer by the Department or the Office of the Attorney General.

ENROLLED ORIGINAL “(a) Except as otherwise provided pursuant to federal law or a student education loan agreement, a student loan servicer shall:

A student loan borrower's instruction on how to apply an overpayment to a student education loan shall ENGROSSED ORIGINAL stay in effect for any future overpayments during the term of the student education loan until the borrower provides different instructions.

ENGROSSED ORIGINAL “(1)(A) As a condition of a sale, an assignment, or any other transfer of the servicing of a student education loan, a student loan servicer shall require the new student loan servicer to honor all benefits originally represented as available to a student loan borrower during the repayment of the student education loan and preserve the availability of those benefits, including any benefits for which the student loan borrower has not yet qualified.

ENROLLED ORIGINAL “(B) If a student loan servicer is not also the loan holder or is not acting on behalf of the loan holder, the student loan servicer satisfies the requirement established by this paragraph by providing the new student loan servicer with the information necessary for the new student loan servicer to honor all benefits originally represented as available to a student loan borrower during the repayment of the student education loan and preserve the availability of the benefits, including any benefits for which the student loan borrower has not yet qualified.

ENGROSSED ORIGINAL “(4) The transferring student loan servicer shall notify affected student loan borrowers of the sale, assignment, or other transfer of the servicing of the student education loan at least 7 days before the next payment on the loan is due, which notice shall include:

ENGROSSED ORIGINAL “Sec.

ENROLLED ORIGINAL “(2) A private education loan executed prior to the applicability date of this section shall permit the private education lender to accelerate payments only if the promissory note or private education loan agreement explicitly authorizes an acceleration and only for the reasons stated in the note or agreement.

except, that a private ENGROSSED ORIGINAL education lender may place a private education loan or account into default or accelerate a private education loan for payment default 90 days after the student loan borrower’s default.

ENGROSSED ORIGINAL “(9) Refuse to communicate with an authorized representative of the student loan borrower who provides a written authorization signed by the student loan borrower;

ENROLLED ORIGINAL “(10) Make any false statement or make any omission of a material fact in connection with any information or reports filed with a governmental agency or in connection with any investigation conducted by the Commissioner or another governmental agency;

“(1) A private education lender or student loan servicer acting on behalf of a private education lender when notified of the total and permanent disability of a student loan ENGROSSED ORIGINAL borrower or cosigner shall release any cosigner from the obligations under the private education loan.

ENGROSSED ORIGINAL “(7) After receiving a notification pursuant to paragraph (1) of this subsection, the private education lender shall not attempt to collect on the outstanding liability of the student loan borrower or cosigner or monitor the disability status of the student loan borrower after the date of discharge.

ENROLLED ORIGINAL “(b) Availability of alternative repayment plans.

ENGROSSED ORIGINAL “(c)(1) Prior to the extension of a private education loan that requires a cosigner, a private education lender shall deliver the following information to the cosigner:

“(d)(1) For any private education loan that obligates a cosigner, a private education lender shall provide the student loan borrower and the cosigner an annual written notice containing information about cosigner release, including the administrative, objective criteria the ENGROSSED ORIGINAL private education lender requires to approve the release of the cosigner from the private education loan obligation and the process for applying for cosigner release.

ENROLLED ORIGINAL “(2) If the student loan borrower has met the applicable requirements to be eligible for cosigner release, the private education lender shall send the student loan borrower and the cosigner a written notification by U.S.

“(B) If the private education lender denies the request for cosigner release, the student loan borrower may request any documents or information used in the determination, including the credit score threshold used by the private education lender, the student loan borrower’s consumer report, the student loan borrower’s credit score, and any other documents ENGROSSED ORIGINAL specific to the student loan borrower.

“(B) A student loan borrower who has paid the equivalent of 12 months of principal and interest payments within any 12-month period shall be considered to have satisfied ENGROSSEDENROLLED ORIGINAL a consecutive, on-time payment requirement even if the student loan borrower has not made payments monthly during the 12-month period.

ENGROSSED ORIGINAL “(i) Number of cosigner release applications received;

“(a) In addition to complying with the requirements of the New Student Loan Borrower Bill of Rights Amendment Act of 2024, aspassed approved by the Committee on Business2nd andreading Economic Development on JuneSeptember 17, 2024 (Committee(Enrolled printversion of Bill 25-37),25-37) (“act”), a student loan servicer shall comply with all applicable federal laws relating to student loan servicing, as from time to time amended, and the regulations promulgated pursuant to those federal laws.