California Publishes Final Student Loan Servicer Regulations; California Bill Introduced to Require Additional Information in Annual Borrower Benefits Notices
The California Department of Business Oversight has sent an email to servicers notifying them of the publication of its final student loan servicer regulations, which became effective March 28, 2019. The DBO published its initial rules on September 8, 2017 and modified the proposed rules three times. Servicers have been operating without final rules since the Student Loan Servicing Act became effective on July 1, 2018. The rules create seven new articles under a new chapter of the California Code of Regulations. The final rules contain no substantive changes to the DBO’s last round of proposed rules.
Additional compliance requirements for servicers, however, may be on the horizon. Assemblymember Chris Holden has introduced a bill, AB 796, which would amend the California Student Loan Servicing Act to require servicers to provide additional loan benefits information to borrowers. The bill modifies Section 28130 and proposes a new Section 28130.5. Currently, Section 28130 requires servicers to provide information “regarding repayment and loan forgiveness options that may be available to borrowers” free of charge on their websites and, additionally, in correspondence or email at least once per year.
The new Section 28130.5 would require that servicers provide, in correspondence or email at least once per year, “a detailed description of the terms and conditions under which a borrower may obtain full or partial forgiveness or discharge of principal and interest, defer repayment of principal or interest, or be granted forbearance on a federal Title IV loan, including forgiveness benefits or discharge benefits available to a Federal Family Education Loan (FFEL) borrower who consolidates their loan into the federal Direct Loan program.” More specifically, servicers would be required to provide:
- The difference between forgiveness, cancellation, and discharge.
- The different forgiveness, cancellation, and discharge programs available and how to qualify for them.
- The types of loans that can be forgiven or discharged.
- The impact of consolidation, enrollment status, and new loans on forgiveness.
- The forms required under federal law, including employment certification forms.
The modifications to Section 28130 would require that servicers post this detailed information on their websites along with the availability of benefits information currently being provided.