Student loans for postsecondary education, requirements related to student loan servicers, creating an office of the student loan ombudsman in the Department of Financial Institutions, and granting rule-making authority. (FE)

The bill requires a student loan servicer, wherever located, to be licensed by the office before directly or indirectly engaging in servicing student education loans in this state. A student loan servicer must hold a separate license for each of its places of business and the student loan servicer may not act under any name or at any place of business that is not identified in the license.

The bill imposes numerous requirements on student loan servicers, including requirements relating to all of the following:

1. Responding to written inquiries from student loan borrowers.

2. Handling and applying “nonconforming payments," defined as payments on student education loans that are different from the required payments.

3. Responsibilities if there is a sale, assignment, or other transfer of the servicing of a student education loan.

4. Maintaining and making available to the office records related to student education loan transactions.

The bill also prohibits a student loan servicer from engaging in certain conduct or activity, including the following:

1. Defrauding or misleading a student loan borrower.

2. Engaging in an unfair or deceptive practice or misrepresenting or omitting material information in connection with the servicing of a student education loan.

3. Misapplying student education loan payments.

4. Providing inaccurate information to a credit bureau related to a student loan borrower's creditworthiness.

5. Refusing to communicate with an authorized representative of a student loan borrower.

6. Failing to evaluate a student loan borrower for an income-based repayment program prior to placing the student loan borrower in default.

The bill also specifies the authority of the office to conduct investigations and examinations and take administrative action and also provides a private right of action for violations of the requirements or prohibitions under the bill.

The bill requires the office to perform certain functions, including: 1) assisting student loan borrowers; 2) receiving and attempting to resolve complaints from student loan borrowers and others; 3) compiling and analyzing data about these complaints; 4) assisting student loan borrowers in various ways; 5) providing information to the public and others regarding the problems and concerns of student loan borrowers; and 6) analyzing and monitoring the development and implementation of laws and policies relating to student loan borrowers.

Although the bill exempts certain state-regulated financial service providers, primarily state-chartered financial institutions, from licensing and most other requirements applicable to student loan servicers, the bill requires these exempt organizations to cooperate with the office and provide information requested by the office necessary to investigate and resolve student loan borrower complaints.