SB 716 — AN ACT CONCERNING THE FEDERAL STUDENT LOAN BORROWERS' BILL OF RIGHTS ACT OF 2019.

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or [(10) Fail to comply with the service standards set by the commissioner in accordance with section 59 of public act 16-65.] (10) Engage in an abusive act or practice, as described in Section 1031 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L.

(NEW) (Effective OctoberJuly 1, 2021) In servicing a private student education loan, a private student education loan servicer shall:

(1) Prior to sending the first billing statement on a private student education loan or immediately upon receipt of a private student education loan following the transfer or assignment of such private student education loan, provide to the student loan borrower, and to any cosigner of such private student education loan, information concerning the rights and responsibilities of such student loan borrower and cosigner, including information regarding (A) how such private student education loan obligation will appear on the SB716cosigner's /consumer Filereport, No.(B) how the cosigner will be notified if the private student education loan becomes delinquent, including how the cosigner can cure the delinquency in order to avoid negative credit furnishing and loss of cosigner release eligibility, and (C) eligibility for release of the cosigner's obligation on such private student education loan, including number of on-time payments and any other criteria required to approve the release of the cosigner from the loan obligation;

279(2) 4Send SB716annual Filewritten notice to all student loan borrowers and cosigners relating to information about cosigner release, including the criteria the private student education loan servicer requires to approve the release of a cosigner from a private student education loan Public Act No.

27921-190 cosigner's5 consumer report, (B) how the cosigner will be notified if the private education loan becomes delinquent, including how the cosigner can cure the delinquency in order to avoid negative credit furnishing and loss of cosigner9 releaseSenate eligibility,Bill andNo. (C) eligibility for release of the cosigner's obligation on such private education loan, including number of on-time payments and any other criteria required to approve the release of the cosigner from the loan obligation;

(2)716 Send annual written notice to all student loan borrowers and cosigners relating to information about cosigner release, including the criteria the student loan servicer requires to approve the release of a cosigner from a private education loan obligation and the process for applying for cosigner release;

Such notification and information shall be sent by either United States mail or electronic mail, provided such student loan borrower has elected to receive electronic communications from the private student education loan servicer;

If the application for cosigner release has been SB716denied, /suchwrittennotice Fileshallinformsuchstudent loanborrowerand cosigner that such student loan borrower and cosigner have the right to request all documents and information used by the private student education loan servicer in its decision to deny such application, including the credit score threshold used by the private student education loan servicer, the consumer report of such student loan borrower or cosigner, the credit score of such student loan borrower or cosigner, and any other documents that are relevant or specific to such Public Act No.

27921-190 56 SB716of File9 Senate Bill No.

279716 denied, suchwrittennotice shallinformsuchstudent loanborrowerand cosigner that such student loan borrower and cosigner have the right to requestalldocuments andinformationusedbythestudentloanservicer in its decision to deny such application, including the credit score threshold used by the student loanservicer,theconsumer report ofsuch student loan borrower or cosigner, the credit score of such student loan borrower or cosigner, and any other documents that are relevant or specific to such student loan borrower or cosigner.

The private student education loan servicershallprovidesuchstudentloanborrowerandcosignerwithany adverse action notices required under federal law if the denial of such application was based in whole or in part on any information contained in a consumer report;

Such private student education loan servicer shall consider any student loan borrower who has paid the equivalent of twelve-monthstwelve months of principal and interest during any twelve-month period to have satisfied SB716the /consecutive Fileon-time No.payment requirement, even if such student loan borrower has not made payments monthly during such twelve-month period;

279Public 6Act SB716 File No.

27921-190 theconsecutive7 on-timeof payment9 requirement,evenifsuchstudentSenate loanBill borrowerNo. has not made payments monthly during such twelve-month period;

716 (10) Upon receipt of a request by a student loan borrower or cosigner to a change that results in restarting the count of consecutive on-time payments required for cosigner release eligibility, provide to such student loan borrower and cosigner written notification of the impact of such change on cosigner release eligibility and an opportunity to withdraw or reverse such change for purposes of avoiding such impact;

(11) Provide a student loan borrower or cosigner (A) the right to request an appeal of a determination to deny a cosigner release application, (B) an opportunity to submit additional information or documentation evidencing that such student loan borrower has the ability, willingness and stability to make his or her payment obligations, and (C) the right to request that a different employee of the studentprivate loanstudenteducationloanservicerreviewandmakeadeterminationonthe servicer review and make a determination on the application for a cosigner release;

(13) In the event that a cosigner has a total and permanent disability, as determined by any federal or state agency or doctor of medicine or osteopathy legally authorized to practice in the state, and unless otherwise expressly prohibited under the terms of a private student education loan agreement, (A) release the cosigner from his or her obligation to repay the private student education loan upon receipt of notification that such cosigner has a total and permanent disability, and (B) refrain from requiring that a new cosigner be added to such private student education loan aftertheoriginalcosignerhasbeenreleasedfromsuchprivateeducationafter the original cosigner has been released from such private student education loan;

SB716Public /Act File No.

27921-190 78 SB716of File9 Senate Bill No.

279716 (14) Provide the cosigner of a private student education loan with access to the same documents and records associated with the private student education loan that are available to the student loan borrower of such private student education loan;

and (15)Ifastudentloanborrowerhaselectronicaccesstodocumentsand records associated with a private student education loan, provide equivalent electronic access to such documents and records to the cosigner of such private student education loan.

(NEW) (Effective OctoberJuly 1, 2020)2021) (a)The Anyprovisions student loan borrower, class of student loan borrowers or the legal representative of such borrower or borrowers aggrieved by aviolation of sections 36a-846 to 36a-854, inclusive, of the general statutes, as amended by this act, or section 3 of this act,act byshall anot studentapply loanto servicer, may bring an action in the Superiorfollowing Court.persons:

Upon(1) findingAny thatbank, aout-of-state studentbank loanthat servicer has committed a violationofphysical saidpresence sections,in the courtstate, mayConnecticut awardacredit prevailingunion, partyfederal actualcredit damages,union reasonableor attorneys'out-of-state feescredit andunion; court costs, and may, in its discretion, award punitive damages and restitution of property and may provide such equitable relief as it deems necessary.

(b)(2) In addition to the judicial relief permitted under subsection (a) of this section, in any civilwholly actionowned broughtsubsidiary under this section in which the student loan borrower prevails, the court shall award treble damages upon a finding that the student loan servicer has engaged in conduct that substantially interferes with (1) such student loan borrower's right to an alternative payment arrangement, loan forgiveness, cancellation or discharge of the student education loan, or (2) any other financial benefit (A) established under the terms of such studentbank loan borrower's promissory note, or (B)credit pursuantunion; to the Higher Education Act of 1965, as amended from time to time, or the regulations adopted thereunder.

(c)(3) Anyany studentoperating loansubsidiary borrower,where oreach theowner legal representative of such borrower,operating entitledsubsidiary tois bringwholly anownedby actionthesame underbank subsectionor (a)credit ofunion;and(4)theConnecticut thisHigher sectionEducation may,Supplemental pursuantLoan toAuthority. rules established by the Superior Court, bring a class action on behalf of themselves and other similarly situated student loan borrowers to recover damages.

SB716Approved /July File13, 2021 Public Act No.

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279 (d) The remedies provided under this section are in addition to any other remedies provided by state or federal law, and a student loan borrower shall not be required to exhaust any administrative remedies established pursuant to sections 36a-846 to 36a-854, inclusive, of the general statutes, as amended by this act, and section 3 of this act, prior to bringing an action under this section.

This act shall take effect as follows and shall amend the following sections:

Section 1 October 1, 2021 36a-846 Sec.

2 October 1, 2021 36a-850 Sec.

3 October 1, 2021 New section Sec.

4 October 1, 2020 New section HED Joint Favorable SB716 / File No.

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279 The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

None Municipal Impact:

None Explanation The bill, which adds requirements for private student loan servicers, is not anticipated to have any fiscal impact to the state or municipalities.

The Out Years State Impact:

None Municipal Impact:

None SB716 / File No.

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279 OLR Bill Analysis SB 716 AN ACT CONCERNING THE FEDERAL STUDENT LOAN BORROWERS' BILL OF RIGHTS ACT OF 2019.

SUMMARY This bill requires private student loan servicers to provide certain information to private student loan borrowers and cosigners regarding (1) borrower and cosigner rights and responsibilities, (2) cosigner release eligibility, and (3) the cosigner release application process.

The bill prohibits any student loan servicer licensee or control person from engaging in an abusive act or practice when servicing a student loan, as described in the federal Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L.

111-203).

It also allows student loan borrowers, classes of student loan borrowers, or legal representatives of either to bring a lawsuit against a student loan servicer for violating the state's requirements for student loan servicers.

The billalso expandsthedefinitionof"servicing" instate studentloan servicer law to include (1) maintaining account records for and communicating with a student loan borrower during the period when no scheduled loan payments are required and (2) interacting with a student loan borrower to facilitate the loan, including assisting them from defaulting on loan obligations.

Under current law, “servicing” under this law means, among other things, (1) receiving scheduled periodic payments from a student loan borrower under a student education loan’s terms or (2) applying the principal and interest payments and other payments to the amounts received from a student loan borrower, as under a student education loan’s terms.

The bill narrows this definition to require both these actions in order to be SB716 / File No.

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279 considered servicing.

EFFECTIVE DATE:

October 1, 2021 DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT The bill prohibits any student loan servicer licensee or control person from engaging in an abusive act or practice when servicing a student loan, as described in the federal Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L.

111-203, § 1031).

Under the act, an act or practice is abusive if it materially interferes with a consumer’s ability to understand a term or condition of a consumer financial product or service.

It is also abusive if it takes unreasonable advantage of (1) a lack of understanding on the consumer’s part of the material risks, costs, or conditions of the product or service;

(2) the consumer’s inability to protect his or her own interests in selecting or using a consumer financial product or service;

or (3) the consumer’s reasonable reliance on a covered person to act in his or her best interests.

PRIVATE STUDENT LOAN SERVICER NOTIFICATION REQUIREMENTS Borrower and Cosigner Rights and Responsibilities The bill requires a private loan servicer to provide certain information to student loan borrowers and cosigners about their rights and responsibilities (1) before sending the first loan billing statement or (2) immediately after receiving a transferred or assigned private education loan.

This information includes:

1.

how the loan obligation will appear on a cosigner's consumer report;

2.

how cosigners will be notified if the loan becomes delinquent, including how they can cure the delinquency to avoid a negative credit rating;

and 3.

cosigner release eligibility, including the number of on-time SB716 / File No.

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279 payments and other criteria required for release approval.

Under the bill, a "cosigner" is any individual who is liable for the obligation of another without compensation, regardless of how the contract or instrument designates the obligation.

But it does not include an obligation under a private education loan extended to consolidate a consumer's pre-existing private education loans.

A cosigner includes any person whose signature is requested as a condition to grant credit or forbear on collection but does not include an individual’s spouse whose signature is needed to perfect the security interest in a loan (15 U.S.C.

§ 1650(a)).

A "consumer report" is any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer'scredit worthiness,credit standing, credit capacity,character, general reputation, personal characteristics, or mode of living that is used or expected to be used or collected to serve as a factor in establishing the consumer's eligibility for (1) credit or insurance to be used primarily for personal, family, or household purposes;

(2) employment purposes;

or (3) any other purpose specified by federal law (15 U.S.C.

§ 1681a).

A “private education loan” is a loan provided by a private education lender that is (1) not made, insured, or guaranteed under Title IV of the Higher Education Act of 1965 and (2) expressly issued for postsecondary educational expenses to a borrower, regardless of whether it is provided through the educational institution that the student attends or directly to the borrower for the private educational lender.

It does not include a credit extension under an open end consumer credit plan, a reverse mortgage transaction, a residential mortgage, or any other loan secured by real property or dwelling (15 U.S.C.

§ 1650(a)).

Annual Notification Under the bill, a private student loan servicer must annually send written notice to all private student loan borrowers and cosigners with SB716 / File No.

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279 information on cosigner release, including the (1) criteria for release approval and (2) release application process.

Cosigner Release Eligibility.

The bill requires the private loan servicer, upon the borrower satisfying the applicable consecutive on-time payment requirement, to send in writing to the borrower and cosigner (1) a notification that the borrower satisfied the on-time payment requirement and the cosigner may be eligible for release and (2) information on the cosigner release application process and any additional criteria that a cosigner must satisfy to be eligible for release.

The loanservicer mustsendtheinformationviamail(e.g.

theU.S.Postal Service), or email if the student has elected to receive electronic communications from the servicer.

Incomplete Application.

Under the bill, the servicer must provide written notification to the student loan borrower and cosigner if the cosigner release application is incomplete and provide (1) a description of the missing or additional information required and (2) the date by which the borrower and cosigner must provide the missing information.

Approval or Denial of Application.

The bill requires the servicer, within 30 days after receiving a cosigner release application, to provide the borrower and cosigner written notice of the application's approval or denial.

If the application was denied, the notice must inform the borrower and cosigner that they can request all documents and information used in the decision, including (1) the credit score threshold the servicer used, (2) the borrower's or cosigner's consumer report and credit score, and (3) any other relevant or specific document.

The servicer must also provide the borrower and cosigner with any adverse action notices required under federal law if the denial was based on any information in a consumer report.

Under the bill, the servicer must also include information on cosigner release, including the (1) criteria for release approval and (2) release SB716 / File No.

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279 application process, in any response to a cosigner's release application.

COSIGNER RELEASE APPLICATIONS Servicer Response The bill requires private student loan servicers, when responding to a cosigner release application, to refrain from the following:

1.

imposing any restrictions on a borrower or cosigner that may permanently prevent themfromqualifying for acosigner release, including restricting the number of times a borrower or cosigner can apply, and 2.

requiring a borrower to make more than 12 consecutive on-time payments as part of the eligibility criteria for cosigner release.

Servicersmustalsorefrainfromimposingany negativeconsequences on a borrower or cosigner during the 60 days after issuing a notice for incomplete information or until a final decision for cosigner release is made.

“Negative consequences” include (1) imposing additional eligibility criteria, (2) negative credit reporting, (3) losing eligibility for cosigner release, (4) late fees, (5) interest capitalization, or (6) other financial penalties or injury.

Consecutive On-Time Payment Requirement Under the bill, a private student loan servicer must consider any borrower who paidthe equivalent of12monthsofprincipaland interest during any 12-month period as satisfying the consecutive on-time payment requirement, even if the borrower did not make monthly payments during the 12-month period.

The bill requires a servicer, upon receiving a borrower’s or cosigner’s request for a change that results in restarting the count of consecutive on-time payments required for cosigner release eligibility, to provide the borrower and cosigner (1) written notification about the change’s impact on cosigner eligibility and (2) a chance to withdraw or reverse the change to avoid it.

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279 Cosigner Appeal of Release Denial The bill requires the student loan servicer to provide a borrower or cosigner (1) the right to request an appeal of a release denial;

(2) an opportunity to submitadditionalinformationor documentationthatthe borrower has the ability, willingness, and stability to make the payment obligations;

and (3) the right to request that a different loan servicer review and make a determination on the release application.

RECORD MANAGEMENT The bill requires a student loan servicer to establish and maintain a comprehensive record management system designed to ensure the accuracy, integrity, and completeness of cosigner release application data and information.

The system must include (1) the number of applications received, (2) the application approval and denial rate, and (3) the primary reasons for application denial.

RELEASE OF DISABLED COSIGNER If a cosigner has a total and permanent disability, and unless otherwise expressly prohibited under the loan agreement terms, the bill requires a private student loan servicer to (1) release the cosigner from his or her loan repayment obligation upon receiving notification of the disability and (2) refrain from requiring a new cosigner to be added to the loan after releasing the original cosigner.

The cosigner's disability must be determined by a federal or state agency or doctor of medicine or osteopathy legally authorized to practice in the state.

ACCESS TO RECORDS AND DOCUMENTS The bill requires private student loan servicers to provide the cosigner with access to the same loan documents and records available to the borrower.

Under the bill, if the borrower has electronic access to private loan documents and records, the servicer must extend this same access to the cosigner.

CIVIL ACTION The bill allows private student loan borrowers, or their legal representative, to bring a lawsuit in Superior Court for violations of SB716 / File No.

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279 state student loan servicer requirements.

It also allows them to bring a class action lawsuit in Superior Court on behalf of themselves and other similarlysituatedborrowerstorecoverdamages.

Theborrowerdoesnot have to exhaust administrative remedies before bringing the action.

The bill allows a court, after finding that a student loan servicer committed the alleged violations, to award actual damages, reasonable attorney's fees, court costs, punitive damages, property restitution, and appropriate equitable relief.

Under the bill, the court must award treble damages to the borrower if it finds that the student loan servicer engaged in conduct that substantially interfered with (1) the borrower's right to an alternative payment arrangement, loan forgiveness, cancellation, or student loan discharge or (2) another financial benefit set out in the borrower's promissory note or the Higher Education Act of 1965 or its regulations.

The remedies are in addition to any other remedies state or federal law provide.

COMMITTEE ACTION Higher Education and Employment Advancement Committee Joint Favorable Yea 22 Nay 0 (03/18/2021) SB716 / File No.

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