PRINTER'S NO. 3459
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2360
Session of
2020
INTRODUCED BY O'MARA, SCHROEDER, MADDEN, ISAACSON, MALAGARI,
McCLINTON, CIRESI, WILLIAMS, HOWARD, RYAN, KIM, SHUSTERMAN,
CONKLIN, ULLMAN, HILL-EVANS, RAVENSTAHL, HOHENSTEIN,
READSHAW, FREEMAN, DERMODY, McCARTER, SCHLOSSBERG, DONATUCCI,
KENYATTA, MARKOSEK, ROZZI, CALTAGIRONE, PASHINSKI, TOPPER,
MURT, WEBSTER, STURLA, SAMUELSON, BROOKS, CEPHAS, BURGOS,
KORTZ, OTTEN, MOUL, STRUZZI, KIRKLAND, SCHWEYER, HANBIDGE,
FRANKEL AND A. DAVIS, MARCH 13, 2020
REFERRED TO COMMITTEE ON EDUCATION, MARCH 13, 2020
AN ACT
Establishing the Office of Student Loan Ombudsman; providing for
duties of the Office of Student Loan Ombudsman and for report
by Department of Banking and Securities; establishing the
Student Loan Ombudsman Account; and providing for licensure
of student loan servicers and for duties of student loan
servicers.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Student
Borrower's Bill of Rights Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Account." The Student Loan Ombudsman Account established
under section 5.
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"Department." The Department of Banking and Securities of
the Commonwealth.
"Institution of higher education." As defined in section 118
of the act of March 10, 1949 (P.L.30, No.14), known as the
Public School Code of 1949.
"Office." The Office of Student Loan Ombudsman established
under section 3.
"Ombudsman." The Student Loan Ombudsman designated under
section 3.
"Secretary." The Secretary of Banking and Securities of the
Commonwealth.
"Servicing." As follows:
(1) Receiving a scheduled periodic payment from a
student loan borrower under the terms of a student education
loan.
(2) Applying the payments of principal and interest and
other payments with respect to the amounts received from a
student loan borrower as may be required under the terms of a
student education loan.
(3) Performing other administrative services with
respect to a student education loan.
"Student education loan." A loan primarily for personal use
to finance education or other school-related expenses.
"Student loan borrower." As follows:
(1) a resident of this Commonwealth who has received or
agreed to pay a student education loan; or
(2) a person who shares responsibility with a resident
for repaying a student education loan.
"Student loan servicer." A person responsible for the
servicing of a student education loan to a student loan
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borrower.
Section 3. Office of Student Loan Ombudsman.
(a) Designation.--The Office of Student Loan Ombudsman is
established within the department to provide timely assistance
to student loan borrowers. The secretary shall designate a
Student Loan Ombudsman to administer the office.
(b) Duties.--The office, in consultation with the secretary,
shall:
(1) Receive, review and attempt to resolve complaints
from student loan borrowers in collaboration with
institutions of higher education, student loan servicers and
other participants in student loan lending.
(2) Compile and analyze data on student loan borrower
complaints under paragraph (1).
(3) Assist student loan borrowers in understanding
student loan borrowers' rights and responsibilities under the
terms of student education loans, including information
regarding income-based repayment options.
(4) Provide information to the public, State agencies,
members of the General Assembly and others regarding the
problems and concerns of student loan borrowers and make
recommendations for resolving those problems and concerns.
(5) Analyze and monitor the development and
implementation of Federal, State and local laws, regulations
and policies relating to student loan borrowers and recommend
changes deemed necessary.
(6) Review the complete student education loan history
for a student loan borrower who has provided written consent
for the review.
(7) Disseminate information relating to the availability
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of the office to assist student loan borrowers and potential
student loan borrowers as well as public institutions of
higher education, student loan servicers and any other
participant in student education loan lending with student
loan servicing concerns.
(8) Take other actions necessary to fulfill the duties
of the office under this section.
(c) Education course.--Within 200 days of the effective date
of this subsection, the office, in consultation with the
secretary, shall establish and maintain a student loan borrower
education course that shall include educational presentations
and materials relating to student education loans. The program
shall include, but not be limited to, the following:
(1) Key loan terms.
(2) Documentation requirements.
(3) Monthly payment obligations.
(4) Income-based repayment options.
(5) Loan forgiveness.
(6) Disclosure requirements.
Section 4. Report by department.
(a) Submission.--Within one year of the effective date of
this section, the department shall submit a report to the
Governor and General Assembly relating to:
(1) The implementation of section 3.
(2) The effectiveness of the office.
(3) Additional steps that may be taken for the
department to gain regulatory control over the licensing and
enforcement of student loan servicers.
(b) Publication.--The report shall be published on the
department's publicly accessible Internet website.
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Section 5. Student Loan Ombudsman Account.
The Student Loan Ombudsman Account is established as a
separate, nonlapsing account in the State Treasury. Money in the
account shall be used by the secretary to administer the
provisions of section 3. The account shall contain licensing and
investigation fees collected under this act.
Section 6. Licensure and exemptions.
(a) License required.--Except as provided under subsection
(b), no person may act as a student loan servicer, directly or
indirectly, without first obtaining a license from the
department under this section.
(b) Exemptions.--The following persons are exempt from
student loan servicer licensing:
(1) A bank or credit union, whether in-State or out-of-
State.
(2) A wholly owned subsidiary of a bank or credit union.
(3) An operating subsidiary where each owner of the
operating subsidiary is wholly owned by the same bank or
credit union.
(c) Application for licensure.--A person seeking to act
within this Commonwealth as a student loan servicer shall make a
written application to the department for an initial license in
the form the department prescribes. The application shall be
accompanied by:
(1) A financial statement prepared by a certified public
accountant or a public accountant, the accuracy of which is
sworn to under oath before a notary public by the proprietor,
general partner, corporate officer or member duly authorized
to execute the document.
(2) All of the following:
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(i) A criminal history background check of:
(A) The applicant.
(B) Partners, if the applicant is a partnership.
(C) Members, if the applicant is a limited
liability company or association.
(D) Officers, directors and principal employees,
if the applicant is a corporation.
(ii) Sufficient information pertaining to the
criminal history background checks of the applicant,
partners, members, officers, directors and principal
employees as the department deems necessary to make the
findings under this section.
(iii) A nonrefundable fee of $1,000.
(iv) A nonrefundable investigation fee of $800.
(d) Criminal history background check.--The department may
conduct a national and State criminal history background check
of the applicant and each partner, member, officer, director and
principal employee of the applicant.
(e) Licensure.--Upon the filing of an application for an
initial license and payment of the fees under subsection (c)(2)
(iii) and (iv), the department shall investigate the financial
condition and responsibility, financial and business experience,
character and general fitness of the applicant. The department
may issue a license if the department finds that:
(1) The applicant's financial condition is sound.
(2) The applicant's business will be conducted honestly,
fairly, equitably, carefully and efficiently within the
purposes and intent of this act and in a manner commanding
the confidence and trust of the residents of this
Commonwealth.
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(3) (i) If the applicant is an individual, the
individual is properly qualified and of good character.
(ii) If the applicant is a partnership, each partner
is properly qualified and of good character.
(iii) If the applicant is a corporation or
association, the president, chairperson of the executive
committee, senior officer responsible for the
corporation's business and chief financial officer or
other person who performs similar functions as determined
by the department and each director, trustee and
shareholder owning 10% or more of each class of the
securities of the corporation is properly qualified and
of good character.
(iv) If the applicant is a limited liability
company, each member is properly qualified and of good
character.
(4) No person on behalf of the applicant has knowingly
made any incorrect statement of material fact in the
application or in any report or statement made under this
section.
(5) No person on behalf of the applicant has knowingly
failed to state any material fact to the department or from
the application or any report or statement made under this
section.
(6) The applicant has paid the investigation and
licensee fees required under subsection (c)(2)(iii) and (iv).
(7) The applicant meets any other requirements as
determined by the department.
(f) Expiration.--A license issued under this section shall
expire at the close of business on September 30 of the odd-
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numbered year following its issuance unless renewed or earlier
surrendered or suspended or revoked by the department.
(g) Surrender of license.--The following apply:
(1) Not later than 15 days after a licensee ceases to
engage in the business of student loan servicing in this
Commonwealth for any reason, including a business decision to
terminate operations in this Commonwealth, license
revocation, bankruptcy or voluntary dissolution, the licensee
shall provide written notice of surrender to the department
and surrender the license for each location in which the
licensee has ceased to engage as a student loan servicer. The
written notice of surrender shall identify the location where
the records of the licensee shall be stored and the name,
address and telephone number of an individual authorized to
provide access to the records.
(2) 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, including administrative actions undertaken by
the department to suspend or revoke a license, assessment of
a civil penalty, order of restitution or the exercise of
other authority by the department.
(h) Renewal of license.--The following apply:
(1) A license may be renewed for 24 months upon the
filing of an application containing all required
documentation and fees under subsection (c). A renewal
application shall be filed on or before September 1 of the
year in which the license expires. A renewal application
filed with the department after September 1 shall be
accompanied by a late fee of $100.
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(2) If an application for a license renewal is filed
with the department on or before the date the license
expires, the license shall continue in full force and effect
until the issuance by the department of the renewed license
or until the department has notified the licensee in writing
of the department's refusal to issue the license renewal,
together with the reason for the refusal.
(3) The department may refuse a license renewal on the
same grounds as the department may refuse to issue an initial
license.
(i) Automatic suspension.--If the department determines that
a payment submitted to the department to pay a license or
renewal fee has been dishonored, the department shall
automatically suspend the license or renewal license. The
department shall notify the licensee of the automatic suspension
pending proceeding for revocation or refusal to renew and
provide an opportunity for an appeal hearing.
(j) Change in information.--The applicant or licensee shall
notify the department in writing of any change in the
information provided in the applicant's or licensee's initial
applicant for a license or the most recent renewal application
not later than 10 business days after the occurrence of the
event that results in information becoming inaccurate.
(k) Abandoned application.--The department may deem an
application for licensure abandoned if the applicant fails to
respond to a request for information required under subsection
(c) or regulations promulgated under this act. The department
shall notify the applicant in writing that failure to submit the
requested information within 60 days of the date of the request
shall result in the application being deemed abandoned. An
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application fee paid prior to the date an application is deemed
abandoned under this subsection shall not be refunded.
Abandonment of an application under this paragraph shall not
preclude the applicant from submitting a new application for
licensure under subsection (c).
(l) Restrictions.--No person licensed in this Commonwealth
to act as a student loan servicer may do so under any other name
or place of business other than that named in the license. Any
change of location of a place of business of a licensee shall
require prior written notice to the department. No more than one
place of business shall be maintained under the same license but
the department may issue more than one license to the same
licensee upon compliance with the provisions of this section. A
license shall not be transferable or assignable.
Section 7. Violations.
A student loan servicer may not:
(1) Directly or indirectly employ a scheme, device or
artifice to defraud or mislead student loan borrowers.
(2) Engage in unfair or deceptive practices toward a
person or misrepresent or omit material information in
connection with the servicing of a student education loan,
including, but not limited to, misrepresenting:
(i) the amount, nature or terms of any fee or
payment due or claimed to be due on a student education
loan;
(ii) the terms and conditions of the loan agreement;
or
(iii) the borrower's obligations under the loan.
(3) Obtain property by fraud or misrepresentation.
(4) Knowingly misapply or recklessly apply student
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education loan payments to the outstanding balance of a
student education loan.
(5) Knowingly or recklessly provide inaccurate
information to a credit bureau, thereby harming a student
loan borrower's creditworthiness.
(6) Fail to report both the favorable and unfavorable
payment history of the student loan borrower to a nationally
recognized consumer credit bureau at least annually if the
student loan servicer regularly reports information to a
credit bureau.
(7) Refuse to communicate with an authorized
representative of the student loan borrower who provides a
written authorization signed by the student loan borrower if
the student loan servicer adopts procedures related to
verifying that the representative is authorized to act on
behalf of the student loan borrower.
(8) Negligently make a false statement or knowingly and
willfully make an omission of a material fact in connection
with information or reports filed with a governmental agency
or in connection with an investigation conducted by the
department or another governmental agency.
Section 8. Enforcement.
(a) Enforcement.--The following apply:
(1) The department shall conduct investigations and
examinations to enforce the provisions of this act,
including, but not limited to, requesting, directing and
subpoenaing books, records and the attendance of individuals
whose testimony may be required.
(2) The department may retain attorneys, auditors or
other specialists, request the assistance of staff from other
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State departments or agencies, enter into agreements,
including resource-sharing agreements, use and purchase
software and rely on reports made by other government
officials within and outside this Commonwealth.
(b) Authority.--The authority of this act remains in effect
whether a student loan servicer licensee or person subject to
this act acts or claims to act under a licensing or registration
law of this Commonwealth or claims to act without the authority
of this Commonwealth.
(c) Records.--No student loan servicer licensee or person
subject to investigation or examination under this section may
knowingly withhold, abstract, remove, mutilate, destroy or
secrete books, records, computer records or other information.
(d) Suspension, revocation, refusal to renew.--The
department may suspend, revoke or refuse to renew a license
issued under this act or take any other action in accordance
with the laws of this Commonwealth if the department finds that:
(1) the licensee has violated any provision of this act
or any regulation or order lawfully made under this act; or
(2) a fact or condition exists that, if it had existed
at the time of the original application for licensure, would
have warranted a refusal of the license. No abatement of the
license fee shall be made if the license is surrendered,
revoked or suspended prior to the expiration of the period
for which the license was issued.
(e) Actions.--If it appears to the department that a person
has violated this act or any regulation adopted under this act
or that an owner, director, officer, member, partner,
shareholder, trustee, employee or agent of the licensee has
committed fraud, engaged in dishonest activities or made a
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misrepresentation, the department may take action against the
individual or licensee or direct the Attorney General to take
action in accordance with the laws of this Commonwealth.
(f) Regulations.--The department may promulgate rules and
regulations to administer and enforce this act.
Section 9. Duties of student loan servicers.
A student loan servicer shall comply with all applicable
Federal laws and regulations relating to student loan servicing,
including, but not limited to, the Truth in Lending Act (Public
Law 90-321, 15 U.S.C. ยง 1601 et seq.) and regulations
promulgated under that act. In addition to any other remedies
provided by law, a violation of Federal law or regulation shall
be deemed a violation of this act, and the department may take
enforcement action under this act.
Section 10. Effective date.
This act shall take effect as follows:
(1) Sections 6, 7 and 8(d) of this act shall take effect
in one year.
(2) The remainder of this act shall take effect
immediately.
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