S 2180 — Requires registration of postsecondary education debt creditors; establishes protections for borrowers.

     f.1 On or before 1[July 1, 2026, and each July 1 thereafter] July 1 of each year1, the commissioner shall post on the department’s Internet website the following information about each postsecondary education debt creditor registered in this State:

     (1)   the name, address, telephone number, and website for all registered postsecondary education debt creditors;

     (2)   the information required under subsections b.

and c.

and      (3) (3)   a copy of each model promissory note, agreement, contract, or other instrument used by the postsecondary education debt creditor during the previous year to substantiate that postsecondary education debt has been extended to a borrower or that a borrower owes a debt to the postsecondary education debt creditor.       f.    1[f. The commissioner may impose a civil penalty not exceeding $25,000 on any entity for a violation of this section.  Each violation of this section, including any order, rule or regulation made or issued pursuant to the act, shall constitute a separate offense.  Additionally, each violation which constitutes a knowing violation shall be a crime of the third degree.

    ] g.   g.1    The commissioner may orderimpose thata anycivil entitypenalty whonot hasexceeding been$25,000 foundon toany haveentity knowinglyfor violateda anyviolation provision of this section,section.  orEach violation of the rules and regulations issued pursuant to this section, beincluding barredany fororder, arule termor notregulation exceedingmade 10or yearsissued frompursuant actingto asthe aact, postsecondaryshall educationconstitute debt creditor, or a stockholder,separate oroffense.  anAdditionally, officer,each director,violation partnerwhich orconstitutes othera owner,knowing orviolation anshall employeebe of a postsecondarycrime educationof debtthe creditor.third degree.

     1[g.] h.1     The commissioner may order that any entity who has been found to have knowingly violated any provision of this section, or of the rules and regulations issued pursuant to this section, be barred for a term not exceeding 10 years from acting as a postsecondary education debt creditor, or a stockholder, or an officer, director, partner or other owner, or an employee of a postsecondary education debt creditor.

     (1) (1)   how the postsecondary education debt obligation shall appear on the cosigner’s credit;

     (2) (2)   how the cosigner shall be notified if the postsecondary education debt becomes delinquent, including how the cosigner can cure the delinquency in order to avoid negative credit furnishing and loss of cosigner release eligibility;

and      (3) (3)   for postsecondary education debt that provides a cosigner release option, the conditions for eligibility for release of the cosigner’s obligation on the postsecondary education debt, including the number of on-time payments and any other criteria required to approve the release of cosigner from the postsecondary education debt obligation.

     c.   c.     If the borrower has met the applicable payment requirement to be eligible for cosigner release, the postsecondary education debt creditor shall send the borrower and the cosigner a written notification by mail or by electronic mail, where a borrower or cosigner has elected to receive electronic communications from the postsecondary education debt creditor, informing the borrower and cosigner that the payment requirement to be eligible for cosigner release has been met.

     e.   e.     Within 30 days after a borrower submits a completed application for cosigner release, the postsecondary education debt creditor shall send the borrower and cosigner a written notice that informs the borrower and cosigner whether the cosigner release application has been approved or denied.  If the postsecondary education debt creditor denies a request for cosigner release, the borrower may request any documents or information used in the determination, including, but not limited to, the credit score threshold used by the postsecondary education debt creditor and any other documents specific to the borrower in the possession of the postsecondary education debt creditor or the postsecondary education debt creditor’s third-party contractors.

     c.   c.     A postsecondary education debt creditor shall not impose any negative consequences on any cosigner during the 60 days following the issuance of the notice required pursuant to subsection d.

     e.   e.     If a borrower or cosigner requests a change in terms that restarts the count of consecutive, on-time payments required for cosigner release, the postsecondary education debt creditor shall notify the borrower and cosigner in writing, by mail, or by electronic mail, if a borrower or cosigner has elected to receive electronic communications from the postsecondary education debt creditor, of the impact of the change and provide the borrower or cosigner the right to withdraw or reverse the request to avoid that impact.

     h.    (1)      (1)        A postsecondary education debt creditor shall provide a cosigner with access to all documents or records related to the cosigned postsecondary education debt that are available to the borrower.

     (2) (2)   If a postsecondary education debt creditor provides electronic access to documents and records for a borrower, it shall provide equivalent electronic access to the cosigner.

       5.    a.         (1)      (1)        A postsecondary education debt executed after the effective date of this act shall not include a provision that permits the postsecondary education debt creditor to accelerate, in whole or in part, payments on the postsecondary education debt, except in cases of payment default.

     (2) (2)   For any postsecondary education debt executed prior to the effective date of this act, the postsecondary education debt creditor shall accelerate payments only if the promissory note or debt agreement explicitly authorizes an acceleration and only for the reasons stated in the note or agreement.

     c.   c.     A postsecondary education debt creditor shall not place any postsecondary education debt or account into default or accelerate postsecondary education debt while a borrower is seeking a debt modification or enrollment in a flexible repayment plan, except that a postsecondary education debt creditor may place postsecondary education debt or account into default or accelerate postsecondary education debt for payment default 90 days following the borrower’s default.

     c.   c.     A postsecondary education debt creditor shall notify a borrower and cosigner for postsecondary education debt if either a cosigner or borrower is released from the obligations of the postsecondary education debt under this section, within 30 days of the release.

     e.   e.     (1)  In the event a cosigner is released from the obligations of postsecondary education debt pursuant to this section, the postsecondary education debt creditor shall not require the borrower to obtain another cosigner on the postsecondary education debt obligation.

       7.    a.  Prior to offering a person postsecondary education debt that is being used to refinance existing postsecondary education debt, a postsecondary education debt creditor shall provide the person a disclosure that benefits and protections applicable to the existing postsecondary education debt may be lost due to the refinancing.

     (1) (1)   provide on its website a description of any alternative repayment options offered by the postsecondary education debt creditor for postsecondary education debt;

     (2) (2)   establish policies and procedures and implement them consistently in order to facilitate the evaluation of flexible repayment option requests, including providing accurate information regarding any alternative repayment options that may be available to the borrower through the promissory note or that may have been marketed to the borrower through marketing materials;

and      (3) (3)   consistently present and offer postsecondary education debt repayment options to borrowers with similar financial circumstances, if the postsecondary education debt creditor offers repayment options.

     c.   c.     If a postsecondary education debt creditor does not offer the same interest rate to all borrowers, the postsecondary education debt creditor shall publish the criteria used to determine the rate for which a borrower is eligible in all places where the interest rate is published.

     a.   a.     offer any postsecondary education debt that is not in conformity with this act, or that is in violation of any other State or federal law;

or      c.   c.     make, advertise, print, display, publish, distribute, electronically transmit, telecast or broadcast, in any manner, any statement or representation which is false, misleading or deceptive.

     (1) (1)   the name of the owner of the postsecondary education debt;

     (2) (2)   the original creditor's name;

     (3) (3)   the name of the postsecondary creditor that owned the postsecondary education debt at the time of default;

     (4) (4)   the account number used to identify the postsecondary education debt at the time of default and, if different, the account number used by the original creditor to identify the postsecondary education debt;

     (5) (5)   the amount due at the time of default;

     (6) (6)   a schedule of all transactions credited or debited to the postsecondary education debt  account;

     (7) (7)   a copy of all pages of the contract, application or other documents evidencing the borrower’s liability for the postsecondary education debt, stating all terms and conditions applicable to the postsecondary education debt;

and      (8) (8)   a clear and conspicuous statement disclosing that the borrower has a right to request all information possessed by the postsecondary education debt creditor related to the defaulted postsecondary education debt, including, but not limited to the required information described in subsection b.

     (1) (1)   the name of the owner of the postsecondary education debt;

     (2) (2)   the original creditor's name;

     (3) (3)   the postsecondary creditor’s name at the time of default;

     (4) (4)   the account number used to identify the postsecondary education debt at the time of default and, if different, the account number used by the original creditor to identify the postsecondary education debt;

     (5) (5)   the amount due at default;

     (6) (6)   a schedule of all transactions credited or debited to the postsecondary education debt account;

     (7) (7)   an itemization of interest and fees, if any, claimed to be owed and whether those were imposed by the original creditor or any subsequent owners of the postsecondary education debt product;

     (8) (8)   the date that the postsecondary education debt was incurred;

     (9) (9)   a billing statement or other account record indicating the date of the first partial payment or the first day that a payment was missed, whichever is earlier;

     c.   c.     Failure by a postsecondary education debt creditor or debt collector to produce to a borrower, within 30 days of a verbal or written request, any documentation described in subsection a.

     (1) (1)   a copy of the notice of intention provided pursuant to section 10 of this act, including the information a postsecondary education debt creditor is required to retain pursuant to subsection b.

     (2) (2)   the date of the first partial or missed payment;

     (3) (3)   the date of the last payment, if applicable;

     (4) (4)   a copy of any self-certification or needs analysis conducted by the original creditor prior to origination of the postsecondary education debt;

     (5) (5)   a statement as to whether the postsecondary education debt creditor is willing to renegotiate the terms of the debt;

and      (6) (6)   a statement as to whether the debt is eligible for any flexible repayment option.

     c.   c.     No court shall enter a judgment on a postsecondary education debt obligation if the postsecondary education debt creditor or debt collector does not comply with the requirements of this section.

       12.  a.

     (1) (1)   an order setting aside or vacating any default judgment entered against the person;

     (2) (2)   a judgment in favor of the borrower or cosigner;

     (3) (3)   actual damages, but in no case shall the total award of damages be less than $500;

     (4) (4)   an order enjoining the unlawful methods, acts, or practices;

     (6) (6)   attorney's fees and costs;

and      (7) (7)   any other relief that the court deems proper.

    STATEMENT           This bill requires the registration of postsecondary education debt creditors and establishes protections for borrowers.

      The bill prohibits a postsecondary education debt creditor from extending postsecondary education debt to a New Jersey resident without first registering with the Commissioner of Banking and Insurance and with the Nationwide Multistate Licensing System and Registry.

Postsecondary education debt creditors are required to provide the commissioner, at the time of registration and not less than once per year thereafter, certain information about the entities and the postsecondary education debt that they provide.  The commissioner is required to post on the department’s website information about postsecondary education debt creditors registered in the State.  The bill also requires postsecondary education debt creditors to post on their websites a copy of each model promissory note, agreement, contract or other instrument used by the postsecondary education debt creditor to substantiate postsecondary education debt.

The bill provides that the commissioner may impose a civil penalty not exceeding $25,000 on any person for a violation of the registration provisions of the bill.

Each violation which constitutes a knowing violation is a crime of the third degree, which is punishable by three to five years imprisonment or a fine of up to $15,000, or both.

      The bill requires postsecondary education debt creditors to deliver certain information to a cosigner related to impacts on the cosigner in certain circumstances, prior to the extension of postsecondary education debt that requires a cosigner.  For any postsecondary education debt that obligates a cosigner and provides for cosigner release, a postsecondary education debt creditor is required to provide the borrower and the cosigner an annual written or electronic notice containing clear and conspicuous information about cosigner release.

Under the bill, if the borrower has met the applicable payment requirement to be eligible for cosigner release, the postsecondary education debt creditor is to send the borrower and the cosigner a notification informing them that the payments requirement to be eligible for cosigner release has been met.

      The bill requires a postsecondary education debt creditor to provide written notice to a borrower who applies for cosigner release, but whose application is incomplete.

Within 30 days after a borrower submits a completed application for cosigner release, the postsecondary education debt creditor is required to send the borrower and cosigner a written notice that informs them whether the cosigner release application has been approved or denied.

      The bill prohibits a postsecondary education debt creditor from imposing any restriction that permanently bars a borrower from qualifying for cosigner release.  For any postsecondary education debt executed after the effective date of the bill, a postsecondary education debt creditor is prohibited from requiring greater than 12 consecutive, on-time payments of principal and interest as criteria to apply for cosigner release.  This codifies the standard currently used by major student loan companies, such as Sallie Mae Bank.

Under the bill, if a borrower or cosigner requests a change in terms that restarts the count of consecutive, on-time payments, the postsecondary education debt creditor is to notify the borrower and cosigner in writing, by mail, or by electronic mail, of the impact of the change and provide the borrower or cosigner the right to withdraw or reverse the request.  The bill provides that a borrower has the right to request an appeal of a postsecondary education debt creditor determination to deny a request for cosigner release, and the postsecondary education debt creditor is required to permit the borrower to submit certain additional documentation.  The bill requires postsecondary education debt creditors to establish and maintain a comprehensive record management system.

      The bill prohibits postsecondary education debt executed after the effective date of the bill from including a provision that permits the postsecondary education debt creditor to accelerate, in whole or in part, payments on the postsecondary education debt, except in cases of payment default.  The bill prohibits a postsecondary education debt executed after the effective date of the bill from including a provision that permits a postsecondary education debt creditor to attempt to collect against the cosigner’s estate, other than for payment default.  Upon receiving notification of the death or bankruptcy of a cosigner, when the postsecondary education debt is not more than 60 days delinquent at the time of the notification, the postsecondary education debt creditor may not change any terms or benefits under the promissory note, repayment schedule, repayment terms, or monthly payment amount or any other debt provision.

      Under the bill, a postsecondary education debt creditor, upon determination of the total and permanent disability of a borrower or cosigner, is required to release the borrower or cosigner from their obligations under postsecondary education debt, as is the case with federal student loans.

Upon determination of the total and permanent disability of a cosigner, a postsecondary education debt creditor is required to release that individual cosigner from the obligations of the cosigner.

The bill requires postsecondary education debt creditors to notify borrowers and cosigners if a cosigner or borrower is released from the obligations of the postsecondary education debt, within 30 days of the release.  The bill requires postsecondary education debt creditors that extend postsecondary education debt to provide the borrower the option to designate an individual to have the legal authority to act on behalf of the borrower with respect to the postsecondary education debt in the event of the total and permanent disability of the borrower.  In the event a cosigner is released from the obligations of a postsecondary education debt, a postsecondary education debt creditor may not require the borrower to obtain another cosigner on the debt obligation.  The bill provides that postsecondary education debt creditors may not declare a default or accelerate the debt against the borrower on the sole basis of the release of the cosigner from the postsecondary education debt.  After making the determination of the total and permanent disability of a borrower, a postsecondary education debt creditor may not attempt to collect on the outstanding liability of the borrower or cosigner or monitor the disability status of the borrower after the date of discharge.         The bill requires the postsecondary education debt creditor to deliver a statement that benefits and protections applicable to existing postsecondary education debt may be lost due to refinancing before offering a person a postsecondary education debt that is being used to refinance an existing postsecondary education debt.  If a postsecondary education debt creditor offers any borrower flexible repayment options in connection with a postsecondary education debt, those flexible repayment options are to be made available to all borrowers of the postsecondary education debt creditor.

The bill requires postsecondary education debt creditors to publish the criteria used to determine borrower interest rates in all places where the interest rate is published, if the postsecondary education debt creditor does not offer the same interest rate to all borrowers.

      The bill provides that a postsecondary education debt creditor may not:

offer any postsecondary education debt that is not in conformity with the bill, or that is in violation of any other State or federal law;

engage in any unfair, deceptive, or abusive act or practice;

or make, advertise, print, display, publish, distribute, electronically transmit, telecast, or broadcast, in any manner, any statement or representation which is false, misleading, or deceptive.        The bill provides that a postsecondary education debt creditor or debt collector attempting to collect a postsecondary education debt is to provide certain documentation related to the debt in the first debt collection communication with the borrower and at any other time the borrower requests the documentation.  The bill also prohibits postsecondary education debt creditors or debt collector from collecting or attempting to collect a postsecondary education debt unless the postsecondary education debt creditor or debt collector possesses certain information and documentation related to the debt.

      Following a payment default on postsecondary education debt by a borrower, and before a postsecondary education debt creditor may accelerate the maturity of the postsecondary education debt or commence a legal action against the borrower, a postsecondary education debt creditor is required to provide to the borrower a notice of intention to accelerate the postsecondary education debt.  The postsecondary education debt creditor must provide the notice at least 30 days, but not more than 180 days, in advance of the action, and must provide a copy of the notice to the department at the same time it is provided to the borrower.

      The bill provides that an action to enter a default judgment against a borrower must be commenced within six years of the date the borrower failed to make a payment.  The bill requires a postsecondary education debt creditor seeking to commence legal action against a borrower to attach certain documentation and information to a complaint filed in a court of competent jurisdiction.  If a postsecondary education debt creditor fails to comply with the filing requirements of the bill, a borrower may bring an action, including a counterclaim, against the postsecondary education debt creditor to recover or obtain certain relief and damages.

      The bill also provides that a borrower or cosigner who suffers damage as a result of a violation may bring an action in a court of competent jurisdiction to recover certain relief and damages.