AB 948

This bill creates an Office of the Student Loan Ombudsman (office) in the

Department of Financial Institutions and requires student loan servicers to be

licensed by this office. The bill contains a variety of provisions governing student

education loans, student loan borrowers, and student loan servicers. Under the bill,

a “student education loan" means a loan that is extended to a student loan borrower

expressly for postsecondary education expenses or related expenses. A “student loan

borrower" means a resident of this state who has received or agreed to pay a student

education loan or a person who shares legal responsibility for repaying the loan. A

“student loan servicer" means a person responsible for the servicing of a student

education loan, but excludes certain state-regulated financial service providers.

“Servicing” means receiving scheduled periodic payments from a student loan

borrower; applying payments received from a student loan borrower; and performing

other administrative services with respect to a student education loan.

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