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Senate Bill 164 (SB 164) enacts the Student Loan Bill of Rights Act. SB 164 provides for a student loan servicer’s license and delineates the duties of a student loan service. SB 164 gives administrative responsibility and enforcement power to the financial institutions division the regulation and licensing department. SB 164 provides for discharge of private education loans upon a showing of permanent disability. SB 164 requires that alternative repayment options be offered to borrowers equally; provides for right for cosigners, including notice and access to information; provides for cosigner release; and prohibits certain acceleration of private education loans. SB 164 creates the position of ombudsman. Defines certain violations of the Student Bill of Rights as unfair and unconscionable trade practices; creates a private right of action; and provides penalties. SB 164 creates the Student Loan Bill of Rights Fun. Makes an appropriation.
Senate Bill 164 (SB 164) enacts the Student Loan Bill of Rights Act. SB 164 provides for a student loan servicer’s license and delineates the duties of a student loan service. SB 164 gives administrative responsibility and enforcement power to the financial institutions division the regulation and licensing department. SB 164 provides for discharge of private education loans upon a showing of permanent disability. SB 164 requires that alternative repayment options be offered to borrowers equally; provides for right for cosigners, including notice and access to information; provides for cosigner release; and prohibits certain acceleration of private education loans. SB 164 creates the position of ombudsman. Defines certain violations of the Student Bill of Rights as unfair and unconscionable trade practices; creates a private right of action; and provides penalties. SB 164 creates the Student Loan Bill of Rights Fun. Makes an appropriation. SECTION 1. SHORT TITLE.--Sections 1 through 27 of this act may be cited as the Student Loan Bill of Rights Act (Act). SECTION 2. DEFINITIONS.--As used in the Act. SECTION 3. LICENSE REQUIRED--EXEMPTIONS.-- A. A person shall not act as a student loan servicer (servicer) without first obtaining a license from the division pursuant to the Student Act, unless that person is exempt from licensure pursuant to Subsection B of this section. B. The following persons are exempt from licensing requirements pursuant to the Student Loan Bill of Rights Act: (1) a bank or credit union; (2) a wholly owned subsidiary of a bank or credit union; (3) an operating subsidiary of a bank or credit union where each owner of the operating subsidiary is wholly owned by the same bank or credit union; and (4) the higher education department. SECTION 4. LICENSE APPLICATION-- INVESTIGATION--LICENSE ISSUANCE.-- A. A person seeking to act as a servicer shall make a written application to the director for an initial license in a form prescribed by the director. The application shall include the information specified in this subsection. B. The director may periodically change the amount of one or more of the fees in Subsection A of this section, but in no case more than the initial fees. C. The director may require or allow applications to be made electronically through the nationwide multi-state licensing system and registry. An applicant using that system shall pay all required processing fees for the system. D. Upon the filing of an application for an initial license and the payment of required fees, the director shall investigate the financial condition and responsibility, the financial and business experience and the character and general fitness of the applicant. E. The director may conduct a state and national criminal history records check of the applicant and of each partner, member, officer, director, trustee, fiduciary and principal employee of the applicant. F. The director shall issue a license for a student loan servicer pursuant to the Student Loan Bill of Rights Act if the director finds that all qualifications indicated in this subsection are met. SECTION 5. AUTOMATIC ISSUANCE OF LICENSE FOR FEDERAL STUDENT LOAN SERVICING CONTRACTORS.-- A. A person seeking to act as a servicer is excepted from the application procedures described in Subsection A of Section 4 of the Act upon a determination by the director that the person's student loan servicing performed in this state is conducted pursuant to a contract awarded by the United States secretary of education pursuant to 20 U.S.C. Section 1087f (Contract). The director shall prescribe the procedure to document eligibility for the exception. B. A person deemed excepted by the director pursuant to this section shall, upon payment of the fees required by Act, automatically be issued a license by the director and shall be considered by the director to have met all requirements set forth in the Act. C. A person issued a license pursuant to this section is excepted from the requirements of the Act as described in this subsection. A person licensed pursuant to this section shall comply with the record retention requirements of the Act except to the extent that the requirements are inconsistent with federal law. D. A person issued a license pursuant to this section shall provide the director with written notice within seven days following notification of the expiration, revocation or termination of a Contract. The person has 30 days following notification to satisfy all requirements established under the Act in order to continue to act as a servicer. At the expiration of the 30 day period if the requirements have not been satisfied, the director shall immediately suspend a license granted to the person pursuant to this section. E. With respect to student loan servicing not conducted pursuant to a Contract, nothing in this section prevents the director from issuing or filing a civil action for an order to temporarily or permanently bar a person from acting as a student loan servicer or violating applicable law. SECTION 6. LICENSE EXPIRATION--LICENSE SURRENDER--LICENSE RENEWAL--LICENSE SUSPENSION--INFORMATION UPDATE--LICENSE ABANDONMENT--NO ABATEMENT OF FEES.-- A. A license issued pursuant to the Act shall expire at midnight on December 31 of the year following its issuance, unless renewed or earlier surrendered, suspended or revoked. B. Not later than 15 days after a licensee ceases to engage in the business of student loan servicing, the licensee shall provide written notice of surrender to the director and shall surrender to the director its license for each location in which the licensee has ceased to engage in the business of student loan servicing and containing the information specified in this subsection. The surrender of a license does not reduce or eliminate the licensee's civil or criminal liability arising from acts or omissions occurring prior to the surrender of the license. C. A license may be renewed for the next twelvemonth period upon the filing of an application containing all required documents and fees required by the Act as for an initial license. If an application for a renewal license has been filed with the director on or before the date the license expires, the license sought to be renewed shall continue in full force and effect until the director issues the renewed license or the director has notified the licensee in writing of the director's refusal to renew the license. The director may refuse to renew a license on any ground upon which the director may refuse to issue an initial license. D. If the director determines that a check to pay a renewal fee has been dishonored, the director shall automatically suspend the license. The director immediately shall give the licensee notice of the automatic suspension by any practicable means and initiate proceedings for revocation or refusal to renew and an opportunity for a hearing on that action pursuant to the Uniform Licensing Act. E. The applicant or licensee shall notify the director, in writing, of any change in the information provided in its initial application for a license or its most recent renewal application for that license not later than ten business days after the occurrence of the event that results in that information becoming inaccurate. F. The director shall deem an application for a license abandoned if the applicant fails to respond to a request for information required by the Act. The director shall notify the applicant, in writing with a deadline as specified when the application shall be deemed abandoned. An application filing fee paid before the date an application is deemed abandoned pursuant to this subsection shall not be refunded. Abandonment of an application does not preclude the applicant from submitting a new application for a license pursuant to the Act. G. A license fee paid pursuant to the Student Loan Bill of Rights Act shall not be abated. SECTION 7. LICENSEE NAMES AND LOCATIONS-- TRANSFERABILITY--ASSIGNABILITY.-- A. A servicer shall not service student education loans under a name or at a place of business other than as listed in the license. A change of a place of business shall require prior written notice to the director. Not more than one place of business shall be maintained under the same license, but the director may issue more than one license to the same licensee that is in compliance with the provisions of the Act. B. A license for a servicer is not transferable or assignable. SECTION 8. RECORD RETENTION.— A. All private education lenders and servicers shall maintain adequate records of each student education loan transaction for at least six years following the final payment on a student education loan or the assignment of a student education loan, whichever occurs first, or a longer period the director may require. B. Within five business days of receipt of a request for student education loan records from the director, a private education lender or student loan servicer shall make the records available to the director, or shall send the records to the director by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt. Upon request, the director may grant a licensee additional time to make the records available or send the records to the director. SECTION 9. STUDENT LOAN SERVICERS.--Except as otherwise provided in federal law, a federal student education loan agreement or a contract between the federal government and a servicer, a servicer shall comply with the requirements specified in this section. A. upon receipt of a written inquiry from a student loan borrower (borrower) or the representative of a student loan borrower, a servicer shall respond as specified in this subsection. B. a servicer shall inquire of a borrower how to apply an overpayment or prepayment to a student education loan and follow other directions as in this subsection. For purposes of this subsection, "overpayment" or "prepayment" means a payment on a student education loan in excess of the monthly amount due from a borrower on a student education loan; C. in the absence of a direction provided by a borrower pursuant to Subsection B of this section, a servicer shall allocate an overpayment on a student loan account in a manner that is in the best financial interest of a borrower. D. in the absence of a direction provided by a borrower pursuant to Subsection B of this section, a servicer shall apply a partial payment or underpayment in a manner that minimizes late fees and negative credit reporting. E. as a condition of the sale, assignment or transfer, the servicer shall require the new student loan servicer to honor all benefits originally represented as available to the borrower during the repayment of the student education loan and preserve the availability of those benefits. F. a servicer that obtains the right to service a student education loan shall adopt policies and procedures to verify that the servicer has received all information regarding the borrower, the account of the borrower and the student education loan of the borrower. The director may investigate these policies and procedures; and G. a servicer shall inform the borrower about the availability of a repayment program based on income prior to placing the borrower in forbearance or default, if a repayment program based on income is available to the borrower. SECTION 10. STUDENT LOAN SERVICERS-- PROHIBITED ACTS--UNFAIR TRADE PRACTICE--LIABILITY.-- A. A servicer shall not defraud or mislead the borrower; engage in unfair or deceptive trade practice; or engage in abusive acts or practices as listed in this subsection. B. A violation of this section is an unfair or deceptive trade practice and an unconscionable trade practice pursuant to the Unfair Practices Act and is subject to the enforcement and penalty provisions contained in that act. C. A servicer that commits an act prohibited by this section with respect to a borrower is liable in an amount as specified in this subsection. D. The remedies provided in this section are not the exclusive remedies available to a borrower, nor must the borrower exhaust any administrative remedies provided in this section or any other applicable law before proceeding pursuant to this section. SECTION 11. DISABILITY DISCHARGE.-- A. A private education lender or servicer acting on behalf of a private education lender, when notified of the total and permanent disability of a borrower or cosigner, shall release any cosigner from the obligations under a private education loan. The lender shall not attempt to collect a payment from a cosigner upon notice of total and permanent disability of the cosigner or borrower. B. A lender shall notify a borrower and cosigner for a private education loan if either the cosigner or borrower is released from the obligations of the private education loan under this section within 30 days of the release. C. Any lender that extends a private education loan shall provide the borrower an option to designate an individual to have the legal authority to act on behalf of the borrower with respect to the private education loan in the event of the total and permanent disability of the borrower. D. In the event a cosigner is released from the obligations of a private education loan pursuant to Subsection A of this section, the lender shall not require the borrower to obtain another cosigner on the loan obligation. E. A lender shall not declare a default or accelerate the debt against the borrower on the sole basis of the release of the cosigner from the loan obligation. F. A lender shall, when notified of the total and permanent disability of a borrower, discharge the liability of the borrower and cosigner on the loan. G. After receiving a notification described in Subsection F of this section, the lender shall not attempt to collect on the outstanding liability of the borrower or cosigner or monitor the disability status of the borrower at any point after the date of discharge. SECTION 12. AVAILABILITY OF ALTERNATIVE REPAYMENT OPTIONS.-- A. If a private education lender offers any borrower flexible or modified repayment options in connection with a private education loan, those flexible repayment options shall be made available to all borrowers of loans by the lender and shall make that information available as required in this subsection. B. A private education lender or a servicer acting on behalf of a private education lender shall consistently present and offer flexible or modified private education loan repayment options to borrowers with similar financial circumstances if the lender offers such repayment options. SECTION 13. NOTICES REQUIRED AT ORIGINATION.-- A. Prior to the extension of a private education loan that requires a cosigner, a private education lender shall deliver the information to the cosigner as specified in this subsection.: B. Prior to offering a person a private education loan that is being used to refinance an existing education loan, a private education lender shall provide the person a disclosure that benefits and protections applicable to the existing loan may be lost due to the refinancing. C. The information provided pursuant to this section shall be provided on a one-page information sheet in a twelve-point font and shall be written in simple, clear, understandable and easily readable language as provided in P.L.1980, c.125 (C.56:12-1 et seq.). SECTION 14. COSIGNER RELEASE.-- This section provides that a lender shall provide the borrower and the cosigner an annual written notice containing information about cosigner release, including the administrative, non-judgmental criteria the lender requires to approve the release of the cosigner from the loan obligation and the process for applying for cosigner release. The subsections provide specific details of the requirements for the lender’s communications and actions dealing with a cosigner’s release, including when the payment requirement to be eligible for a cosigner release has been met. Also provides that a lender shall not cause harm or abuse to a student loan borrower. Provides for records management. SECTION 15. INFORMATION AVAILABLE TO COSIGNERS.-- A. A lender shall provide a cosigner with access to all documents or records related to the cosigned private education loan that are available to the borrower. B. If a lender provides electronic access to documents and records for a borrower, the lender shall provide equivalent electronic access to the cosigner. C. Upon written notice from the borrower or cosigner, the lender shall redact or withhold contact information for the borrower and cosigner. SECTION 16. PROHIBITIONS ON THE ACCELERATION OF PRIVATE EDUCATION LOANS.-- Prohibits a private education lender from accelerating the payments on a loan except in cases of payment default, and only if the accredited payments are explicitly authorized in the agreement and only for the reasons stated in the agreement. This section provides that a lender shall not attempt to collect against a cosigner’s estate. Also provides that the lender shall not change any terms under the note, repayment schedule, or monthly payment amount. A lender shall not place any private loan or account into default or accelerate a private loan while a borrower is seeking a private loan modification or enrollment in a flexible repayment plan, except that a lender may place a private loan or account into default or accelerate a private loan for payment default ninety days following the borrower's default. SECTION 17. PRIVATE EDUCATION LENDERS-- PROHIBITED ACTS.-- A. A private education lender shall not: offer any private education loan that is not in conformity with the Act or that is in violation of any other state or federal law and shall not engage in the list of practices in this subsection. B. A violation of this section is an unfair or deceptive trade practice and an unconscionable trade practice pursuant to the Unfair Practices Act and is subject to the enforcement and penalty provisions contained in that act. C. A private education lender that commits an act prohibited by this section with respect to a student loan borrower is liable in an amount as specified in this subsection. D. The remedies provided in this section are not the exclusive remedies available to a student loan borrower or cosigner, nor must the borrower exhaust any administrative remedies provided in this section or any other applicable law before proceeding pursuant to this section. SECTION 18. POWERS OF THE DIRECTOR.— A. The director may conduct investigations and examinations for purposes of initial licensing, license renewal, license suspension, license revocation or termination, or for general or specific inquiry or investigation, to determine compliance with the Act. The director may access, receive and use any documents, information or evidence the director deems relevant to the inquiry or investigation regardless of the location, possession, control or custody of those documents or that information or evidence. B. For the purposes of investigating violations or complaints arising pursuant to the Act or for the purposes of examination, the director may review, investigate or examine the activities of any private education lender or servicer as often as necessary to carry out the purposes of that act. The director may direct, subpoena or order the attendance of and examine under oath a person whose testimony may be required about the student education loan or the business or subject matter of the examination or investigation and may direct, subpoena or order the person to produce books, accounts, records, files and any other documents the director deems relevant to the inquiry. C. In making an examination or investigation authorized by the Act, the director may control access to any documents or records of the servicer licensee or person under examination or investigation related to the student education loan. The director may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where the documents and records are usually kept. During the period of control, a person shall not remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the director. Nothing in this subsection shall be construed as limiting the student loan borrower's access to the borrower's own account records. D. To fulfill the duties imposed by this section and to carry out the purposes of this section, the director may employ any professionals needed; enter into agreements with other government officials or regulatory associations; use or employ available analytical systems; and accept audit reports made by an independent certified public accountant for the student loan servicer, private education lender or person subject to the Act . E. A servicer, private education lender or person subject to investigation or examination under this section shall not knowingly withhold, abstract, remove, mutilate, destroy or secrete any books, records, computer records or other information. F. The costs of an investigation conducted by the director shall be paid by the servicer, private education lender or person being investigated. SECTION 19. ENFORCEMENT BY DIRECTOR.-- A. To ensure the effective supervision and enforcement of the Act and in accordance with the procedures provided in the Uniform Licensing Act, the director may: deny suspend, revoke or decline to renew a license and issue orders or directives as specified in this subsection. B. The director may impose an administrative penalty on a servicer if the director finds that the servicer has violated or failed to comply with any requirement of the Act or any rule promulgated by the director pursuant to that Act or any order issued pursuant to that act. The maximum amount of penalty for each act or omission shall be $5,000. SECTION 20. JUDICIAL ENFORCEMENT.-- A. Upon a showing by the director that a person has violated, or is about to violate, the Act or any rule or order of the director pursuant to that act, the district court of the first judicial district or other appropriate district court in the state may grant or impose one or more of the following: (1) a temporary restraining order, permanent or temporary prohibitory or mandatory injunction or a writ of prohibition or mandamus; (2) a civil penalty up to a maximum of $5,000 for each violation; (3) declaratory judgment; (4) restitution to student loan borrowers or cosigners; (5) recovery by the director of all costs and expenses for conducting an investigation or the bringing of any enforcement action pursuant to the Act; or (6) other relief as the court deems proper. B. In determining the appropriate relief, the court shall consider administrative enforcement actions taken and imposed by the director pursuant to the Act in connection with the transactions constituting violations of that act. C. The court shall not require the director to post bond in an action pursuant to this section. SECTION 21. CRIMINAL PENALTIES.-- A. An individual who acts as a servicer without being properly licensed pursuant to the Act is, for a first offense, guilty of a misdemeanor and upon conviction shall be sentenced in accordance with the provisions of Subsection A of Section 31-19-1 NMSA 1978. B. In the case of a conviction pursuant to Subsection A of this section, the court may impose a deferred sentence in accordance with Section 31-20-6 NMSA 1978. C. An individual who violates Subsection A of this section is, for a second or subsequent offense, guilty of a fourth degree felony and upon conviction shall be sentenced in accordance with the provisions of Section 31-18-15 NMSA 1978. SECTION 22. COMPLIANCE WITH FEDERAL LAW.-- A servicer licensee shall comply with all applicable federal laws and regulations relating to federal student loan servicing. B. A private education lender shall comply with all applicable federal laws and regulations relating to the lending of servicing of private education loans. SECTION 23. PROMULGATION OF RULES.— The director may promulgate rules and make reasonable orders necessary to implement the Act. A copy of every rule and of every order containing requirements of general application shall be mailed to each licensee not less than 15 days before the effective date of the rule or order. SECTION 24. STUDENT LOAN OMBUDSMAN-- DUTIES--ANNUAL REPORT.-- A. The director shall designate a student loan ombudsman within the division to provide timely assistance to student loan borrowers. B. The student loan ombudsman, in collaboration with the office of the attorney general and the Higher Education Department (HED) perform the duties as specified in this subsection. C. The division, including the student loan ombudsman, the office of the attorney general and the HED, or their designees, shall meet at least once per quarter to coordinate their efforts under Subsection B of this section. D. On or before July 1, 2022, the student loan ombudsman, in collaboration with the office of attorney general and the HED, shall establish and maintain a student loan borrower education course that includes educational presentations and materials regarding student education loans, including specifics as specified in this subsection. E. On or before December 1, 2023, and annually thereafter, the director shall submit a report to the appropriate legislative interim committee. Annual reports shall be made available to interested parties and the general public and published on the division's website and on the sunshine portal. Consistent with state law, the report shall include, at a minimum, non-identifying consumer data from the preceding calendar year, including the information specified in this subsection. SECTION 25. INFORMATION SHARING.--By July 31, 2022, the division, the student loan ombudsman, the office of the attorney general and the HED shall enter into an agreement to allow for the sharing of all necessary information. SECTION 26. PRIVATE ACTION.-- A. A person who suffers damage as a result of the failure of a servicer to comply with a provision of the Act may bring an action in district court against that servicer. B. In addition to any other remedies provided by this section or otherwise provided by law, whenever it is proven that a servicer has engaged in conduct that substantially interferes with a borrower's right to an alternative payment arrangement; loan forgiveness, cancellation or discharge; or any other financial benefit as established under the terms of a borrower's promissory note or under the federal Higher Education Act of 1965, the court shall award treble actual damages to the plaintiff, but in no case shall the award of damages be less than one $1,500 per violation. C. The remedies provided in the Act are not intended to be the exclusive remedies available to a person suffering damage due to the non-compliance of a student loan servicer, and the person shall not be required to exhaust administrative remedies established pursuant to the Act or any other applicable law prior to bringing a private right of action. SECTION 27. STUDENT LOAN BILL OF RIGHTS FUND--CREATED--PURPOSE--APPROPRIATION.-- A. The Student Loan Bill of Rights Fund (Fund) is created as a nonreverting fund in the state treasury and shall be administered by the division. The Fund consists of fees collected by the division pursuant to the Act and money that is appropriated or donated or that otherwise accrues to the fund. Income from investment of the Fund shall be credited to the Fund. B. Money in the Fund is appropriated to the division to carry out the provisions of the Act. C. Expenditures from the Fund shall be made on warrants drawn by the secretary of finance and administration pursuant to vouchers signed by the director or the director's authorized representative. SECTION 28. Amends Section 57-12-2 NMSA 1978 (being Laws 1967, Chapter 268, Section 2, as amended) DEFINITIONS.--as used in the Unfair Practices Act. Subsection D inserts: or (20) violating Section 17 of the Student Loan Bill of Rights Act; and Subsection E inserts: (3) violates Section 17 of the Student Loan Bill of Rights Act." SECTION 29. APPLICABILITY.--The provisions of Section 11 of this act apply to private education loans issued on or after January 1, 2022. SECTION 30. EFFECTIVE DATE.--The effective date of the provisions of this act is January 1, 2022.