BILL NUMBER: S2680
SPONSOR: SANDERS
 
TITLE OF BILL:
An act to amend the financial services law, in relation to private
education debt reporting
 
PURPOSE:
This chapter amendment makes changes to the provisions of L.2024 c.627
requiring the Department of Financial Services to report on private
student creditors and publish that information for the public on its
website.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section one amends the underlying chapter in the financial services law
requiring that the Department of Financial Services (DFS) request infor-
mation on private student debt from creditors of non-federal loans and
retain that information in a publicly accessible database. The bill
requires that DFS obtain information on private education creditors and
their lending practices from licensed servicers and publish that infor-
mation on its website by December 2026.
Section two includes the effective date.
 
JUSTIFICATION:
In New York, consumer lenders are not required to be licensed unless the
loan is both smaller than $25,000 and at a rate above 16 percent.' Even
subprime loans generally have interest rates below 16 percent. As a
result, private education creditors who do not meet licensing require-
ments operate below the Department of Financial Services' radar. This
makes information related to private education debts originated to New
Yorker borrowers at rates below 16 percent scarce. Additionally, private
education creditors that are regulated by DFS are not required to
specifically report on their education debt portfolios. Further, there
is increasing national scrutiny of school-based debt collection and the
role of institutions of higher education as creditors. The federal
Consumer Financial Protection Bureau began to examine school-based lend-
ing in 2022 and determined that transcript withholding as a means of
collecting these debts is "abusive" in violation of federal consumer
protection law. New York State in 2022 prohibited the practice of tran-
script withholding at all schools in the state, which serves as a debt
collection tactic for school-based education debt but has not taken any
additional steps to study or regulate these debts themselves.
Whereas federal student loan terms are set by federal law, and whereas
data about the federal student loan market are regularly published by
the federal government, the lack of consistently available data related
to private education debt and the variety of persons that act as private
education creditors means that we do not know the full size of the
market, trends in origination, terms and conditions of debts, differ-
ences in finance costs across demographic groups, default rates, rates
of cosigning, prevalence of private student debt and repayment outcomes
among older consumers, or outcomes related to student loan servicing.
Any data that are available are extrapolations.
To address this lack of data, Colorado, Maine, California, Louisiana,
Maryland, and Illinois require private education creditors to annually
submit data to financial regulators. This bill would require New York's
servicers to report similar data.
This bill amends L.2024 c.627 to specify that the Department of Finan-
cial Services must report data from licensed student loan servicers
rather than from the creditors directly. This bill is a negotiated
change to the underlying chapter.
 
LEGISLATIVE HISTORY:
This bill amends Chapter 627 of the Laws of 2024. 5.8197 and A.A8913
passed the Senate and Assembly in June 2024.
 
FISCAL IMPLICATIONS:
To be determined.
 
EFFECTIVE DATE:
This act shall take effect on the same date and in the same manner as
chapter 627 of the laws of 2024 amending the financial services law
relating to creating a private education debt registry, as proposed in
legislative bills numbers S.8197 and A.8913, takes effect.