Bill Summary – FastDemocracy

Councilmember Anita Bonds                                  Councilmember David Grosso

Councilmember Mary M,                                      Councilmember Brianne K. Nadeau

Councilmember Elissa Silverman

                                            A BILL

                   IN THE COUNCIL OF THE DISTRICT OF COLUMBIA

To amend the DepartmentofInsurance and Securities Regulation Establishment Act of 1996 to

       prevent abusive acts or practices on the partofstudent loan servicers, to clarify that

       student loan servicers under contractwith the United States Department of Education

       shall automatically be issued a limited student loan servicing license upon meeting

       certain criteria; to clarify denials of applications for approval; to proscribe prohibited

       conduct on the partofstudent loan servicers; to assign affirmative duties to student loan

       servicers; to assign the Attorney General of the District of Columbia the power to enforce

       the Act; to transfer the Student Loan Ombudsperson from the Department of Insurance,

       Securities and Banking to the Officeofthe Attorney General for the District of

       Columbia; and require the creation ofa Student Loan Borrower Bill ofRights by October

       1, 2021.

       BE IT ENACTED BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this

act may be cited as the Student Loan Borrower Bill of Rights Amendment Act of 2020.

         Sec, 2. The Department of Insurance and Securities Regulation Establishment Act of

  1996, effective May 21, 1997 (D.C. Law 11-268; D.C. Official Code  31-101 et seq.), is

 amended as follows:

         (a) Section 2 (D.C. Official Code  31-101) is amended as follows:

                 (1) A new paragraph (1A) is added to read as follows:

                 (1A) Abusive act or practice means an act or practice that:

                        (A) Materially interferes with the ability ofa student loan borrower to

  understand a term or conditionof a student education loan;

                        (B) Takes unreasonable advantage of:

                                (i) A lackof understanding on the partof a student loan borrower

ofthe material risks, costs, or conditions of

                                               a student loan;

                                (ii) The inability ofa student loan borrower to protect the interests

ofthe borrower when selecting or using eitherof the following:

                                        (DA student education loan; or

                                        (I1)A feature, term, or conditionof a student education

  loan; or

                                (iii) The reasonable reliance by the student loan borrower on a

  person engaged in servicing a student education loan to act in the interests of the borrower; or

                        (C) Misrepresents the amount, nature, or termsofany fee or payment due

 or claimed to be due on astudent education loan, the terms and conditions of the student

 education loan agreement or the borrower's obligations under the student education loan.

                 (2) Paragraph (6B) is amended to read as follows:

                 (6B) Ombudsperson means the position of Student Loan Ombudsperson

 established within the Office of the Attomey General of the District of Columbia by section 108g

 ofthe Attorney General for the District of Columbia Certification and Elected Term Amendment

 Act of 2010, as introduced on March 3, 2020 (B23-__).;

                 (3) New paragraphs (6C) and (6D) are added to read as follows:

                 (6C) Overpayment or prepayment means a payment ona student education

 Joan in excess of the monthly amount due from the student loan borrower on a student education

 loan.

                  (6D) Partial payment or underpayment means a payment on a student

 education loan account that contains multiple individual loans in an amount less than the amount

 necessary to satisfy the outstanding payment due on all Joans in the student education loan

 account.

          (b) Section 7a (D.C. Official Code  31-106.01) is repealed.

          () Section 7b (D.C. Official Code  31-106.02) is amended as follows:

                 (1) Subsection () is amended as follows:

                         (A) Paragraph (1)(B) is amended by striking the phrase Application fees

  and other fees and inserting the phrase Application fees, investigation fees, and other fees in

  its place.

                         (B) A new paragraph (c)(3) is inserted as follows:

                 (3) The Commissioner shall automatically issue a limited, irrevocable license to

  any person servicing a student education loan under contract with the United States Department

  of Education as follows:

                         (A) Any person seeking to act within the District of Columbia as a

 student loan servicer is exempt from the application procedures established pursuant to this

 subsection, other than the requirements of paragraphs (1)(B) and (D)ofthis subsection, to the

 extent that the student loan servicing performed is conducted pursuant to a contract awarded by

 the United States Secretary of Education under 20 U.S.C.  1087f. The procedure to document

 eligibility for the exemption shall be prescribed by the Commissioner.

 o1                          (B) Any person meeting the criteria set forth in subparagraph (A)ofthis

 paragraph shall be issuedalicense by the Commissioner for the student loan servicing of student

 education loans under contract with the United States Departmentof Education and shall be

 considered by the Commissioner to have met all requirements established in by paragraph (1)(A)

 and (C) of this subsection.

                        (C) The provisions of subsection (h) of this section shall not apply to a

 person issued a limited license pursuant to this section to the extent that the person is servicing

 federal student education loans.

                        (D) Any person issuedalicense pursuant to this section shall provide the

 Commissioner with written notice within seven days following the notification of the expiration,

 revocation, or termination of any contract awarded by the United States Secretary of Education

 under 20 U.S.C  1087f. Thereafter, the person shall have 30 days to satisfy all requirements

 established under this act in order to continue to act within the District of Columbia as a student

 loan servicer for federal student education loans. At the expiration of the 30-day period,ifthe

 person has not satisfied the requirements established pursuant to this act, the Commissioner shall

 immediately suspend any license granted under this section.

                        (E) In the case of student loan servicing that is not conducted pursuant to

 a contract awarded by the United States Secretary of Education under 20 U.S.C.  1087f, nothing

 in this section shall prevent the Commissioner from issuing an order to temporarily or

 permanently prohibit any person from acting as a student loan servicer.

                         (F) In the caseof student loan servicing conducted pursuant to a contract

 awarded by the United States Secretary of Education under 20 U.S.C  1087f, nothing in this

 section shall prevent the commissioner from issuing a cease-and-desist order or injunction

 against any student loan servicer to cease activities in violation of this act or D.C. Official Code

  28-3901 et seq.

                (2) Subsection (g)(1)(C) is amended by striking The Commissioner may deny an

 application for renewal and inserting Except as provided for under subsection (c)(3)ofthis

 section, the Commissioner may deny an application for renewal in its place.

        (d) New sections 7b-1, 7b-2, and 7b-3 are added to read as follows:

        Sec. 7b-1. Prohibited Conduct.

        (a) No student loan servicer shall:

                (1) Directly or indirectly employ any scheme, device, or artifice to defraud or

 mislead student loan borrowers;

                (2) Engage in any unfair or deceptive practice toward any person or misrepresent

 or omit any material information in connection with the servicing of a student education loan,

 including, abusive acts and practices;

                (3) Obtain property by fraud or misrepresentation;

                (4) Misapply student education loan payments to the outstanding balance of a

 student education loan;

                (5) 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 historyofthe

 student loan borrower to a nationally recognized consumer credit bureau at least annuallyif 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, provided the

 student loan servicer may adopt procedures reasonably related to verifying that the representative

 is in fact authorized to act onbehalf of the student loan borrower;

                (8) Make any false statement or make any omissionof a material fact in

 connection with any information or reports filed with a governmental agency or in connection

 with any investigation conducted by the Commissioner or another governmental agency;

                (9) Fail to respond within 15 business days to communications from the

 Department of Insurance, Securities and Banking, or within such shorter, reasonable period of

 time as may be requested by the Department; or

                (10) Fail to respond within 15 business days to a consumer complaint submitted

 to the student loan servicer by the Department or Officeof the Attorney General.Ifnecessary,

 the student loan servicer may request additional time to respond to the complaint, up to a

 maximumof45 business days, provided that the request is accompanied by an explanation on

 why additional time is reasonable and necessary.

         Sec. 7b-2. Affirmative Duties

        (a) Except as otherwise provided pursuant to federal law, a student loan servicer shall:

                 (1) Respond to any written inquiry from a student loan borrower or the

 representative of a student loan borrower by:

                         (A) Acknowledging receiptofthe inquiry within 10 business days; and

                         (B) Providing information relating to the inquiry, and,if applicable, the

  action the student loan servicer will take to correct the account, or an explanation of the student

  loan servicer's position that the borrower's account is correct, within 30 business days.

                 (2) Inquireof a student loan borrower how to apply an overpayment to a student

  education loan. A borrower's instruction on how to apply an overpayment to a student education

  Joan shall stay in effect for any future overpayments during the term of the student education

  loan until the borrower provides different instructions.

                 (3) Apply partial payments in a manner that minimizes late fees and negative

  credit reporting. If there are multiple loans on a borrower's account with an equal stage of

  delinquency, a student loan servicer shall satisfy the requirements of this subsection by applying

  partial payments to satisfy as many individual loan payments as possible on a borrower's

  account.

         (b) The following requirements shall be applicable to a student loan servicer in the event

  of the sale, assignment, or other transfer of the servicing of

                                                                    a student education loan that results

  in a change in the identity of the person to whom a student loan borrower is required to send

  payments or direct any communication concerning the student education loan:

                 (1) As a conditionof a sale, an assignment, or any other transfer of the servicing

ofa student education loan, a student loan servicer shall require the new student loan servicer to

  honor all benefits originally represented as available to a student loan borrower during the

 repayment of the student education loan and preserve the availability of those benefits, including

 any benefits for which the student loan borrower has not yet qualified;

                (2) A student loan servicer shall transfer to the new student loan servicer for the

 student education loan all information regarding the student loan borrower, the account of the

 borrower, and the student education loan of the borrower. The information shall include the

 repayment statusof the student loan borrower and any benefits associated with the student

 education loanofthe borrower;

                (3) The student loan servicer shall complete the transferofinformation required

 pursuant to section 7b-2(b)(2) within 45 calendar days after the sale, assignment, or other

 transfer of the servicing of the student education loan; and

        (c) A student loan servicer who obtains the right to service a student education loan shall

 adopt policies and procedures to verify that the student loan servicer has received all information

 regarding the student loan borrower, the accountofthe student loan borrower, and the student

 education loan ofthe student loan borrower including, but not limited to, the repayment status of

 the student loan borrower and any benefits associated with the student education loan of the

 student loan borrower.

        (d) A student loan servicer shall evaluate a student loan borrower for eligibility for an

 income-driven repayment program prior to placing the borrower in forbearance or default,if an

 income-driven repayment program is available to the borrower.

        Sec. 7b-3. Enforcement

        (a) In addition to complying with the requirements of this act, a student loan servicer

 shall comply with all applicable federal laws relating to student loan servicing, as from time to

 time amended, and the regulations promulgated thereunder.

         (b) Any person who suffers damage as a result of the failureof a student loan servicer to

 comply with sections 7b, 7b-1, 7b-2, or 7b-3(a) may bring an action on their own behalf and on

 behalf

          ofa similarly situated class of consumers against that student loan servicer to recover or

 obtain anyofthe following:

                 (1) Actual damages, but in no case, shall the total award of damages be less than

 five hundred dollars ($500) per plaintiff, per violation;

                 (2) An order enjoining the methods, acts, or practices;

                 (3) Restitution of property;

                 (4) Punitive damages;

                 (5) Attorneys fees; or

                 (6) Any otherrelief that the court deems proper.

         (c) In addition to any other remedies provided by this section or otherwise provided by

 law, whenever it is proven by a preponderanceofthe evidence that a student loan servicer has

 engaged in conduct that substantially interferes with a borrowers right to an alternative payment

 arrangement; loan forgiveness, cancellation, or discharge; or any other financial benefit as.

 established under the termsof a borrower's promissory note or under the Higher Education Act

 of 1965 (20 U.S.C.  1070a ef seq.), as from time to time amended, and the regulations

 promulgated thereunder, the court shall award treble actual damages to the plaintiff, but in no

 case shall the award of damages be less than one thousand five hundred dollars ($1,500) per

 plaintiff, per violation.

         (d) The attorney general may bring an action in the name of the peopleofthe District of

 Columbia to restrain or prevent any violation of sections 7b, 7b-1, 76-2, or 7b-3(a) or any

 continuance of any such violation.

        (e) The Department shall share information on a quarterly basis related to the

 implementation, execution, and enforcement of sections 7b, 7b-1, 7b-2, and 7b-3(a) with the

 Office of the Attorney Generalofthe District of Columbia, and the Student Loan Ombudsperson

 within the Office of the Attorney General established pursuant to section 108g of the Attorney

 General for the District of Columbia Certification and Elected Term Amendment Actof 2010, as

 introduced on March 3, 2020 (B23-____).;

         (e) Section 7c is amended by striking the phrase sections 7a and 7b. and inserting

 sections 7b, 7b-1, 7b-2, and 7b-3(a). in its place.

         Sec 3. The Attorney General for the District of Columbia Certification and Elected Term

 Amendment Actof 2010, effective May 27, 2010 (D.C. Law 18-160; D.C. Official Code  1-

 301.81 ef seq) is amended by inserting a new section 108g as follows:

         Student Loan Ombudsperson.

         (a) There is established within the Office of the Attorney General for the District of

 Columbia the position of the Student Loan Ombudsperson (Ombudsperson).

         (b)(1) The Ombudsperson shall be:

                        (A) Appointed by the Attorney General;

                        (B) A District resident within 180 days of appointment; and

                        (C) Experienced in consumer finance, including student loan servicing

 and debt collection.

                (2) Ifa vacancy in the position of Ombudsperson occurs as a consequence of

 removal, resignation, disability, death, or other reason, the Attorney General shall appoint an

 Ombudsperson to fill the vacancy within 90 days of the occurrence of the vacancy.

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        (c) The Ombudsperson, in consultation with the Attorney General and Commissioner of

 the Deparment of Insurance, Securities, and Banking, shall:

                  (1) Assist in the enforcementofthe provisionsofsection 7b, 7b-1, 7b-2, and 7b-

 3(a) of the Department of Insurance and Securites Regulation Establishment Act of 1996,

 effective May 21, 1997 (D.C. Law 11-268; D.C. Official Code  31-101 ef seq.), including the

 referralofactions to the Office of the Attorney General for the District of Columbia for the

 enforcement ofan orderofthe Commissionerofthe Deparmentof Insurance, Securities, and

 Banking pursuant to section 7b, 7b-1, 7b-2, and 7b-3(a) of the DepartmentofInsurance and

 Securites Regulation Establishment Act of 1996, effective May 21, 1997 (D.C. Law 11-268;

 D.C. Official Code  31-101 ef seg.) or other authority of the Commissionerof the Deparment of

2s2   Insurance, Securities, and Banking related to a licensee or a person required to have a license

 under the act;

                  (2) Receive, review, and attempt to resolve any complaints from a student loan

 borrower as defined by  31-101(9), including attempts to resolve such complaints in

 collaboration with student loan servicers, and any other participants in student-loan lending ,

 including those entities engaging student loan borrowers abo