On January 14, the Massachusetts governor signed H. 5250, which provides new requirements for student loan servicers. Among other things, these provisions stipulate that servicers are not required to (i) be licensed as a debt collector, or (ii) be registered as a third-party loan servicer provided the servicer does not act, represent, operate, or hold itself out as a third-party loan servicer or a debt collector outside the scope of specified provisions. The bill also requires entities servicing student loans in the Commonwealth to be licensed, but exempts from the licensing requirement banks, credit unions, wholly-owned subsidiaries of banks and credit unions, and nonprofit or public institutions of higher education. H. 5250 also establishes a student loan ombudsman within the office of the attorney general who will be tasked with resolving complaints from student loan borrowers, and assisting student loan borrowers with repayment options, applying for loan discharges and forgiveness, and resolving billing disputes, among other things. Additionally, H. 5250 states that non-exempt student loan servicers must comply with all applicable state and federal regulations, and stipulates that the commissioner may conduct investigations and examinations and suspend licensure should a servicer be found to be in violation of the outlined provisions. In addition, should the commissioner determine that a servicer has committed fraud or engaged in unfair, deceptive, or dishonest actions, the commissioner may take action, including notifying the state attorney general or the student loan ombudsman, suspending or revoking the servicer’s license, and/or imposing an administrative penalty of no more than $50,000 per incident.
This content originally appeared in the InfoBytes blog, a collection of news and alerts covering legal and regulatory developments for the financial services industry. To read more or have the InfoBytes weekly newsletter delivered to your inbox, please visit infobytesblog.com.