SACRAMENTO –The California State Assembly has approved legislation by Assemblymember Mark Stone (D-Monterey Bay) to give the state the ability to regulate student loan servicers. Assembly Bill 38 builds upon the 2016 Student Loan Servicing Act and helps 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. But too many Californians struggle to repay loans, or even default on them altogether. The state needs tougher authority over loan servicers to ensure that student borrowers receive accurate information and effective customer service,” said Stone. “Today’s vote reaffirms the Assembly’s commitment to protecting students from predatory loan practices.”
Student loan servicers provide a critical link between borrowers and lenders: they manage accounts, process payments, and communicate directly with borrowers. But with no consistent market-wide federal standards for student loans servicing, it can be difficult for oversight entities to hold servicers accountable for providing poor customer service and misleading information to borrowers. In order to address this issue, Stone wrote the 2016 Student Loan Servicing Act to create a licensing program within the Department of Business Oversight (DBO) to license student loan servicers that are not banks or credit unions. The law gives DBO the authority to give, deny, suspend or revoke licenses, as well as the ability to conduct investigations and examinations to determine servicer compliance with the law. The 2016 law becomes operative on July 1, 2018.
In order to ensure the effectiveness of the new licensure program, AB 38 builds upon the Student Loan Servicing Act with provisions that implement federal loan servicing laws. The bill also allows the DBO Commissioner to collect student loan data that the department cannot currently access from certain servicing entities.
The national student debt currently exceeds $1.2 trillion, surpassing both credit card debt and mortgage 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.
Contact: Arianna Smith, firstname.lastname@example.org