SACRAMENTO –Governor Brown has signed into law a bill by Assemblymember Mark Stone (D-Monterey Bay) to create a Student Loan Servicing Act. Assembly Bill 2251 will help ensure that student borrowers have reliable information, receive quality customer service, and have meaningful access to repayment and loan forgiveness programs.
“Higher education degrees and certificates should help secure California families’ futures, not send more of them into poverty. With so many Californians struggling to repay loans or even defaulting on them, it is critical that loan servicers communicate loan terms effectively with their customers,” said Stone. “This new law will require accountability and oversight of the loan servicer industry by creating needed protections to student loan borrowers.”
AB 2251 creates a licensing program within the Department of Business Oversight (DBO) to license student loan servicers that are not banks or credit unions. The new law provides increased accountability for student loan servicers in California by giving DBO the authority to give, deny, suspend or revoke licenses. DBO may conduct investigations and examinations to determine servicer compliance.
“Students in California, and nationwide, suffer from a lack of transparency and oversight in the student loan industry,” said Attorney General Kamala Harris, a sponsor of the measure. “The Student Loan Servicing Act builds on the legacy we achieved for homeowners and creates strong student loan servicing standards to protect our students with mounting debt as they pursue higher education.”
Current law does not include sufficient requirements that servicers provide accurate information to the consumers. Further, a lack of oversight and consumer accountability is creating barriers for consumers trying to find ways to pay their student loan debt. By creating a licensure program within California under AB 2251, consumers will be better protected from servicer errors, and there will be increased transparency and accountability within the servicing industry.
The national student debt currently exceeds $1.2 trillion, surpassing both credit card debt and student loans. In California alone, nearly 4.2 million student loan borrowers owe a total student loan debt of $1.2 billion. Student loan debt can hinder retirement security, entrepreneurship, interest in careers that require extra schooling, or an ability to return to rural areas after graduation.
AB 2251 becomes operative on July 1, 2018.