On April 22, the Virginia legislature enacted SB 77, which requires entities servicing student loans in the Commonwealth to be licensed by the State Corporation Commission (SCC). Notably, banks, savings institutions, credit unions, and financial institutions regulated under 12 U.S.C. § 2002 are exempt from the licensing requirements. In addition to outlining specific licensing requirements, SB 77 states that non-exempt student loan servicers must also refrain from, among other things, (i) engaging in any unfair or deceptive act or practice in connection with the servicing of a qualified education loan by misrepresenting the amount, nature, or terms of any loan fees or payments, the terms and conditions of the loan agreement, or the borrower’s loan obligations; (ii) misapplying loan payments to an outstanding balance; (iii) failing to report both the favorable and unfavorable payment history of a borrower to a nationally recognized consumer credit bureau at least once a year provided the loan servicer regularly reports such information; (iv) failing to communicate with a borrower’s authorized representative; and (v) making false statements or omitting material facts in connection with information provided to the SCC or another government authority. Student loan servicers must also comply with other requirements, such as evaluating qualified borrowers for income-driven repayment programs, and responding to borrowers’ written inquiries within 30 days.
Additionally, SB 77 creates a private cause of action available to “[a]ny person who suffers damage as a result of the failure of a qualified education loan servicer to comply” with the bill’s requirements or with applicable federal student loan servicing laws and regulations. The bill further provides that violations are subject to a civil penalty not exceeding $2,500 and are considered prohibited practices under the Virginia Consumer Protection Act. SB 77 has a delayed effective date of July 1, 2021; however, the SCC will begin accepting applications starting on or before March 1, 2021.
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.