On July 30, the New Jersey governor signed S1149 to, among other things, establish the Office of the Student Loan Ombudsman within the Department of Banking and Insurance and provide licensing requirements for student loan servicers. Notably, federal or state chartered banks, savings banks, savings and loan associations, and credit unions, as well as their wholly owned subsidiaries, are exempt from the bill’s licensure requirements
The appointed ombudsman’s responsibilities will include (i) reviewing, analyzing, and resolving borrower complaints; (ii) providing information to the public, agencies, legislators, and others regarding borrower concerns; (iii) reviewing complete student loan histories for borrowers who have provided written consent; (iv) establishing and maintaining a student loan borrower education course, including providing information on “monthly payment obligations, income-based repayment options, loan forgiveness, and disclosure requirements”; and (v) providing a report 12 months following the date of appointment to the Commissioner of Banking and Insurance (Commissioner) conveying any additional steps that may be necessary to address the licensing and enforcement of student loan servicers.
Additionally, the bill establishes licensing provisions for student loan servicers, and requires all servicers and certain other exempt entities to maintain student loan records for at least two years after the final payment or assignment of the loan, whichever comes first.
The bill also gives the Commissioner authority to conduct investigations and examinations of licensed servicers, as well as impose fines of not more than $10,000 for the first violation, and $20,000 for the second and for offenses thereafter. Student loan servicers must also comply with applicable federal laws, including the Truth in Lending Act. The bill notes that “any violation of any federal law or regulation shall be deemed a violation of this section and a basis upon which the [C]ommissioner may take enforcement action.”
The bill will take effect November 27.
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.