SENATE BILL 164
55th legislature - STATE OF NEW MEXICO - first session, 2021
INTRODUCED BY
Katy Duhigg and Patricia Roybal Caballero
AN ACT
RELATING TO FINANCIAL INSTITUTIONS; ENACTING THE STUDENT LOAN BILL OF RIGHTS ACT; PROVIDING FOR A STUDENT LOAN SERVICER'S LICENSE; DELINEATING THE DUTIES OF A STUDENT LOAN SERVICER; GIVING ADMINISTRATIVE RESPONSIBILITY AND ENFORCEMENT POWER TO THE FINANCIAL INSTITUTIONS DIVISION OF THE REGULATION AND LICENSING DEPARTMENT; PROVIDING FOR DISCHARGE OF PRIVATE EDUCATION LOANS UPON A SHOWING OF PERMANENT DISABILITY; REQUIRING THAT ALTERNATIVE REPAYMENT OPTIONS BE OFFERED TO BORROWERS EQUALLY; PROVIDING RIGHTS FOR COSIGNERS, INCLUDING NOTICE AND ACCESS TO INFORMATION; PROVIDING FOR COSIGNER RELEASE; PROHIBITING CERTAIN ACCELERATION OF PRIVATE EDUCATION LOANS; CREATING THE POSITION OF OMBUDSMAN; DEFINING CERTAIN VIOLATIONS OF THE STUDENT BILL OF RIGHTS AS UNFAIR AND UNCONSCIONABLE TRADE PRACTICES; CREATING A PRIVATE RIGHT OF ACTION; PROVIDING PENALTIES; CREATING THE STUDENT LOAN BILL OF RIGHTS FUND; MAKING AN APPROPRIATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 27 of this act may be cited as the "Student Loan Bill of Rights Act".
SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Student Loan Bill of Rights Act:
A. "cosigner":
(1) means an individual who is liable for the obligation of another without compensation, regardless of how the individual is designated in the contract or instrument with respect to that obligation, including an obligation under a private education loan extended to consolidate a borrower s preexisting student loans;
(2) includes any person whose signature is requested as a condition to grant credit or to forbear on collection; and
(3) does not include a spouse of an individual described in Paragraph (1) of this subsection, the signature of whom is needed to perfect the security interest in a loan;
B. "director" means the director of the division;
C. "division" means the financial institutions division of the regulation and licensing department;
D. "person" includes legal representatives, unincorporated organizations, trustees, fiduciaries and public entities;
E. "post-secondary education expense" means any expense associated with attendance at or enrollment in a public or non-publicly funded post-secondary educational institution as defined by Subsections F and G of Section 21-23-3 NMSA 1978 for expenses related to courses, instruction, training or education;
F. "private education lender" or "lender" means any person engaged in the business of securing, making or extending private education loans or any holder of a private education loan. "Private education lender" shall not include the following persons, only to the extent that state regulation is preempted by federal law:
(1) a bank or credit union;
(2) a wholly owned subsidiary of a bank or credit union;
(3) an operating subsidiary of a bank or credit union where each owner of the operating subsidiary is wholly owned by the same bank or credit union; and
(4) the higher education department;
G. "private education loan":
(1) means an extension of credit that is not made, insured or guaranteed under Title IV of the federal Higher Education Act of 1965;
(2) means an extension of credit that is extended to a consumer expressly, in whole or in part, for post-secondary education expenses, regardless of whether the loan is provided by the educational institution that the student attends;
(3) does not include open-end credit or any loan that is secured by real property or a dwelling; and
(4) does not include an extension of credit in which the covered educational institution is the creditor if:
(a) the term of the extension of credit is ninety days or less; or
(b) an interest rate shall not be applied to the credit balance and the term of the extension of credit is one year or less, even if the credit is payable in more than four installments;
H. "servicing" includes:
(1) receiving scheduled periodic payments from a student loan borrower pursuant to the terms of a student education loan;
(2) applying payments of principal and interest and other payments with respect to the amounts received from a student loan borrower, as may be required pursuant to the terms of a student education loan;
(3) maintaining account records for a student education loan and communicating with a student loan borrower regarding a loan on behalf of the loan's holder during a period when no payment is required on the loan; and
(4) interacting with a student loan borrower to help prevent default on obligations arising from a student education loan;
I. "student education loan" means a loan primarily for personal use to finance a student loan borrower's post-secondary education expenses, but does not include an isolated personal loan made by an individual to another for post-secondary education expenses;
J. "student loan borrower" means:
(1) a resident of New Mexico who has received or agreed to pay a student education loan; or
(2) a person who shares responsibility with a resident of New Mexico for repaying a student education loan;
K. "student loan servicer" means a person engaged in the business of servicing student education loans in New Mexico; and
L. "total and permanent disability" means the condition of an individual who:
(1) has been determined by the United States secretary of veterans affairs to be unemployable due to a service-connected disability; or
(2) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, has lasted for a continuous period of not less than twelve months or can be expected to last for a continuous period of not less than twelve months."
SECTION 3. [NEW MATERIAL] LICENSE REQUIRED--EXEMPTIONS.--
A. A person shall not act directly or act indirectly as a student loan servicer without first obtaining a license from the division pursuant to the Student Loan Bill of Rights Act, unless that person is exempt from licensure pursuant to Subsection B of this section.
B. The following persons are exempt from licensing requirements pursuant to the Student Loan Bill of Rights Act:
(1) a bank or credit union;
(2) a wholly owned subsidiary of a bank or credit union;
(3) an operating subsidiary of a bank or credit union where each owner of the operating subsidiary is wholly owned by the same bank or credit union; and
(4) the higher education department.
SECTION 4. [NEW MATERIAL] LICENSE APPLICATION-- INVESTIGATION--LICENSE ISSUANCE.--
A. A person seeking to act as a student loan servicer shall make a written application to the director for an initial license in a form prescribed by the director. The application shall include:
(1) a financial statement of the person applying, prepared by a certified or registered public accountant, the accuracy of which is sworn to under oath before a notary public by the proprietor, a general partner or a corporate officer or a member duly authorized to execute such documents;
(2) sufficient information pertaining to the history of any criminal conviction of the applicant, whether an individual or partner, member, officer, director or principal employee of the applicant, as the director deems necessary to make the findings required pursuant to Subsection F of this section;
(3) a nonrefundable initial license fee not to exceed five thousand dollars ($5,000); and
(4) a nonrefundable investigation fee not to exceed five thousand dollars ($5,000).
B. The director may periodically reduce or increase the amount of one or more of the fees in Subsection A of this section, but in no case more than the initial fees.
C. The director may require or allow applications to be made electronically through the nationwide multistate licensing system and registry. An applicant using that system shall pay all required processing fees for the system.
D. Upon the filing of an application for an initial license and the payment of required fees, the director shall investigate the financial condition and responsibility, the financial and business experience and the character and general fitness of the applicant.
E. The director may conduct a state and national criminal history records check of the applicant and of each partner, member, officer, director, trustee, fiduciary and principal employee of the applicant.
F. The director shall issue a license for a student loan servicer pursuant to the Student Loan Bill of Rights Act if the director finds that:
(1) the applicant has submitted a completed application;
(2) the applicant's financial condition is sound;
(3) the applicant's business will be conducted honestly, fairly, equitably, carefully, efficiently and in a manner commanding the confidence and trust of the community;
(4) the applicant or a partner, member, officer, director, trustee, fiduciary or principal employee of the applicant has not been convicted of a crime that relates to money lending, financing, financial matters, fiduciary status, trustee status, fraud or another matter that substantially relates to the qualifications, functions or duties of a student loan servicer;
(5) a person has not made an incorrect statement of a material fact on behalf of the applicant either in the application or in a report or statement made pursuant to the Student Loan Bill of Rights Act;
(6) a person on behalf of the applicant has not knowingly omitted to state a material fact on behalf of the applicant necessary to give the director information lawfully required by the director pursuant to the Student Loan Bill of Rights Act;
(7) the applicant has paid the license fee and investigation fee required by this section;
(8) the applicant has met all other requirements of the Student Loan Bill of Rights Act as determined by the director; and
(9) if the applicant is:
(a) an individual, the individual is in all respects properly qualified and of good character;
(b) a partnership, each partner is in all respects properly qualified and of good character;