Collector- June 2018 - 52

COMPLIANCE

School is in Session
A new California law requiring student loan servicers to be licensed, among other things, goes into effect July 1, 2018.
By Laura Dadd

I

f you service student loans in California,
be prepared for changes coming soon.
In 2016, California passed A.B. 2251 to
enact the Student Loan Servicing Act. The law
goes into effect on July 1, 2018, and those who
service student loans directly or indirectly
will be subject to licensing, oversight by the
Commissioner of Business Oversight, as well
as other requirements.
The Student Loan Servicing Act outlines
three distinct activities that meet its definition
of servicing. The first includes servicers that
receive any scheduled periodic payments
from a borrower or any notification that the
borrower made a scheduled payment and
apply payments to the borrower's account
pursuant to the student loan or the contract
governing servicing.
The second applies to activities during
a grace period in which a party maintains
account records and communicates with
borrowers regarding the student loan on
behalf of the owner of the student loan
promissory note.
The third activity that meets the definition
of servicing is interacting with borrowers
in relation to their loan, with the goal of

52

helping borrowers avoid default on their
student loan or facilitating the activities
previously described.
If your business practices include any
of the above activities, you will likely need
to obtain a license in order to continue to
perform student loan servicing activities
in California.
California's Department of Business
Oversight began accepting applications
for licenses on Jan. 2, 2018, though
the Nationwide Multistate Licensing
System and Registry (NMLS). To apply
for a license all of the following must be
submitted: an application for a license
through NMLS; a $100 investigation fee;
the cost of fingerprint processing and the
criminal history record check; and a $300
application fee.
Applicants must also submit audited
financial statements to the commissioner
indicating a net worth of at least $250,000
and maintain a surety bond based on
the dollar amount of servicing activities
conducted by the licensee.
In addition to a license requirement, the
act also sets forth additional requirements

for servicing student loans, including, but
not limited to, informational disclosures
which must be listed on the servicer's
website, restrictions on furnishing adverse
information to a consumer reporting
agency, requirements for handling consumer
disputes, and certain prohibited practices.
Licensees will need to develop policies and
procedures reasonably intended to promote
compliance with these provisions.
Those who currently service student loans
in California should review their business
practices to determine whether or not they
will need to procure a license before the July 1,
2018, effective date. In a case where a license
is required, student loan servicers should read
the act in full and adjust their practices to be in
compliance with the new laws.
The California Department of Business
Oversight provides useful information
about these new requirements for student
loan servicers on its website at http://
www.dbo.ca.gov/Licensees/Student_Loan_
Servicers/default.asp.
Laura Dadd is ACA International's
compliance analyst.

ACAINTERNATIONAL.ORG


http://www.dbo.ca.gov/Licensees/Student_Loan_Servicers/default.asp http://www.dbo.ca.gov/Licensees/Student_Loan_Servicers/default.asp http://www.dbo.ca.gov/Licensees/Student_Loan_Servicers/default.asp http://www.ACAINTERNATIONAL.ORG

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