On May 13, the Colorado governor signed SB19-002, the “Colorado Student Loan Servicers Act,” which requires an entity that services a student education loan owned by a Colorado resident to be licensed by the state. Under the bill, “student loan servicer” is generally defined as a person that receives a scheduled periodic payment from a student loan borrower and applies the payments of principal and interest with respect to the amounts received from such a borrower, and provides other similar administrative services. The bill requires any person seeking to act as a student loan servicer to be licensed through the state on or after January 31, 2020, and specifies the procedures for obtaining and renewing the license. Federal student loan servicers are automatically issued the license under the bill.
Among other things, the bill also specifies particular acts that are required of the student loan servicer, including (i) providing substantive responses within 30 days of receiving a written inquiry from a borrower; (ii) inquiring of borrowers as to how to apply overpayments; and (iii) applying partial payments in a manner that minimizes late fees and negative credit reporting. Additionally, the bill specifies prohibited acts, including (i) engaging in an unfair or deceptive practice toward any person or misrepresenting or omitting any material information in connection with servicing student loans; (ii) misapplying payments to the loan balance; and (iii) failing to report both favorable and unfavorable payment history to a consumer reporting agency. A violation of the bill is considered a deceptive trade practice, and the bill provides a private right of action for borrowers to seek punitive damages for violations. The bill is expected to take effect on August 2.
This content originally appeared in Buckley’s Infobytes blog, a collection of news and alerts covering the financial services industry. To read more or have the Infobytes weekly newsletter delivered to your inbox, please visit infobytesblog.com.