Minnesota Legislature
HF 235
as introduced - 89th Legislature (2015 - 2016) Posted on 01/22/2015 04:25pm
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A bill for an act
relating to higher education; establishing certain requirements related to private
education loans; requiring certain disclosures; proposing coding for new law
as Minnesota Statutes, chapter 141B.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
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[141B.01] DEFINITIONS.
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new text begin Subdivision 1. new text end
new text begin Words; terms; phrases. new text end
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The following words, terms, and phrases
have the meanings given them for the purposes of sections 141B.01 to 141B.06.
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new text begin Subd. 2. new text end
new text begin Borrower. new text end
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"Borrower" means a natural person who: (1) was a Minnesota
resident at the time the person applied for a private education loan that was extended to
that person; (2) obtained a private education loan for purposes of attending a covered
educational institution in Minnesota; or (3) became a Minnesota resident after obtaining a
private education loan, but before the loan was paid off.
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new text begin Subd. 3. new text end
new text begin Charge off. new text end
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"Charge off" means to write a loan as a debt and terminate
servicing activity without a release of the borrower's liability.
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new text begin Subd. 4. new text end
new text begin Covered educational institution. new text end
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"Covered educational institution"
means a covered educational institution as defined in Code of Federal Regulations, title
12, section 1026.46(b)(1).
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new text begin Subd. 5. new text end
new text begin Loss mitigation option. new text end
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"Loss mitigation option" means a loan
modification, alternate repayment plan, forbearance, deferral, consolidation, refinance, or
other temporary or permanent relief intended to allow a borrower to become or remain
current on loan payments.
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new text begin Subd. 6. new text end
new text begin Person. new text end
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"Person" means a natural person, firm, partnership, limited
liability partnership, corporation, association, limited liability company, or other form of
business organization and the officers, directors, employees, or agents of that person.
new text end
new text begin Subd. 7. new text end
new text begin Private education loan. new text end
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"Private education loan" or "loan" means a private
education loan as defined in Code of Federal Regulations, title 12, section 1026.46(b)(5),
but does not include a private education loan extended by a national bank.
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new text begin Subd. 8. new text end
new text begin Private education loan servicer. new text end
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"Private education loan servicer" or
"loan servicer" or "servicer" means a person responsible for the servicing of a private
education loan.
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new text begin Subd. 9. new text end
new text begin Servicing. new text end
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"Servicing" means receiving loan payments and performing
other administrative tasks after loan disbursement.
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Sec. 2.
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[141B.02] DISCLOSURE REQUIREMENTS.
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new text begin Subdivision 1. new text end
new text begin In-school disclosures. new text end
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After disbursement of a private education
loan and while the borrower is enrolled in a covered educational institution, the servicer
shall provide to the borrower and any cosigner of the loan, at least every 90 days, loan
statements that clearly and conspicuously state:
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(1) the initial and current loan amount, including a breakdown of principal and
interest, and any payments applied to the loan;
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(2) the current annual percentage rate, and if applicable, the limitations on interest
rate adjustments in terms of frequency and amount;
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(3) the date or event upon which the first loan payment will become due; and
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(4) the name, address, and telephone number of the person whom the borrower may
contact with loan questions or concerns.
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new text begin Subd. 2. new text end
new text begin Disclosures before first loan payment is due. new text end
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At least 30 days and not
more than 90 days before a borrower's first loan payment is due, the servicer shall clearly
and conspicuously disclose to the borrower and any cosigner of the loan, in writing:
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(1) the date on which the first loan payment is due;
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(2) the name of the servicer, the address to which communications and payments
should be sent, and a telephone number and Web site where the borrower may obtain
additional information regarding the borrower's loan;
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(3) the initial and current loan amount, including a breakdown of principal and
interest, and any payments applied to the loan;
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(4) an estimate of the total amount to repay the loan, both at the annual percentage
rate in effect on the date the first loan payment is due and at the maximum possible rate of
interest allowable under the terms of the loan;
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(5) whether the monthly payments are fixed or graduated;
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(6) the annual percentage rate in effect on the date the first loan payment is due,
whether the rate is fixed or variable, and if applicable, the limitations on interest rate
adjustments in terms of frequency and amount;
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(7) the maximum loan term;
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(8) an explanation of all consequences of late payments or default, including but not
limited to finance charges, late fees, penalties, or other adjustments to the principal;
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(9) any contractual or promotional incentives available to the borrower;
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(10) an explanation of the terms and conditions of cosigner release from the loan;
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(11) a description of all alternative repayment plans offered by the loan holder; and
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(12) a description of servicemember or veteran benefits under the Servicemembers
Civil Relief Act, United States Code, title 50, App. 501 et seq., or other federal or state law.
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new text begin Subd. 3. new text end
new text begin Disclosures at borrower's or cosigner's request. new text end
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A servicer shall make
available in writing the information listed in subdivision 2; copies of the loan application,
loan contract or promissory note and any amendments thereto; and the identity of the
original lender, servicer and all subsequent transferees, within 14 days of receipt of request
by a borrower or any cosigner of the loan. In the event that a servicer cannot reasonably
respond to the request within 14 days, the servicer shall notify the borrower or cosigner in
writing within 14 days of receipt of the request the reasons for the servicer's delay and
the date on which the servicer intends to provide the requested information, but in no
case shall the extension exceed 30 days.
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Sec. 3.
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[141B.03] LOSS MITIGATION.
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new text begin Subdivision 1. new text end
new text begin Loss mitigation information at 45 days delinquency. new text end
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When a
private education loan payment becomes 45 days past due, the servicer shall notify in
writing the borrower and any cosigner of the loan, within 14 days of:
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(1) the date on which the loan will be charged off or assigned to collections if no
payment is made, and the consequences of such a charge off or assignment to collections,
including but not limited to negative credit reporting and collection costs, including
collection agency fees, attorney fees, and court fees;
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(2) the minimum payment that must be made to avoid the loan being charged off
or assigned to collections, and the minimum payment that must be made to bring the
loan current; and
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(3) all available loss mitigation options offered by the servicer that are applicable to
the loan, as well as the terms, conditions, and fees or costs associated with each option.
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new text begin Subd. 2. new text end
new text begin Timely review of loss mitigation request. new text end
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When a servicer receives a loss
mitigation request from a borrower or any cosigner of a loan, the servicer shall:
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(1) exercise reasonable diligence in obtaining documents and information necessary
to complete review of the loss mitigation request and give the borrower and any cosigner
of the loan at least 30 days to provide any requested documents or information;
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(2) upon timely receipt of a loss mitigation application, evaluate the borrower and
any cosigner of the loan for all available loss mitigation options;
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(3) within 30 days of receipt of a loss mitigation application, enroll the borrower
and any cosigner of the loan in the requested loss mitigation program if eligible or, if not,
provide a simple and understandable explanation of the denial and offer any other loss
mitigation option offered by the servicer that is applicable to the loan and allow at least 30
days for acceptance of an alternative loss mitigation option; and
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(4) comply with any appeal period and procedures applicable to the specific loss
mitigation option.
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new text begin Subd. 3. new text end
new text begin Loss mitigation procedures. new text end
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When a borrower or any cosigner of a loan
notifies a servicer that the borrower or cosigner is having difficulty making loan payments,
the servicer shall provide the borrower or cosigner with the information referred to in
subdivision (1), clause (3).
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new text begin Subd. 4. new text end
new text begin Notice of delay. new text end
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In the event that the servicer cannot reasonably meet the
30-day period set forth in subdivision 2, clause (3), the servicer shall notify the borrower
and any cosigner of the loan as soon as possible, but not more than 30 days after receipt
of the loss mitigation application, of the reasons for the servicer's delay and the date on
which the servicer plans to complete review of the application, but in no case shall the
extension exceed 30 days.
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new text begin Subd. 5. new text end
new text begin Compliance required. new text end
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A servicer shall not refer a loan for collection
unless the servicer complies with this section.
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Sec. 4.
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[141B.04] APPLICATION OF LOAN PAYMENTS.
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new text begin Subdivision 1. new text end
new text begin Application of loan payments. new text end
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When a borrower has multiple
loans serviced by one servicer, unless the borrower instructs the servicer to apply loan
payments in a different manner, the servicer shall, upon receipt of a payment from or on
behalf of the borrower:
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(1) apply the payment first to the interest and fees owed on the payment due date,
and then to the principal balance of the loan bearing the highest annual percentage interest
rate; and
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(2) apply any remaining portion of the payment to other loans' interest and fees, and
then to the principal balance, of loans based on the loans' interest rates, from highest to
lowest annual percentage rate, until the payment is exhausted.
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new text begin Subd. 2. new text end
new text begin Application of loan payments in excess of minimum amount due. new text end
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When
a borrower has multiple loans serviced by one servicer, unless the borrower instructs the
servicer to apply loan payments in a different manner, the servicer shall, upon receipt of a
payment in excess of the minimum amount due from, or on behalf of, the borrower:
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(1) apply the excess amount first to the interest and then to the principal balance of
the loan bearing the highest annual percentage rate; and
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(2) apply any remaining portion of the excess amount to the interest and then to the
principal balance of the borrower's loans based on the loans' interest rates, from highest to
lowest annual percentage rate, until the payment is exhausted.
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Sec. 5.
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[141B.05] SALE, TRANSFER, OR ASSIGNMENT OF A PRIVATE
EDUCATION LOAN.
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new text begin Subdivision 1. new text end
new text begin Disclosure. new text end
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If a sale, transfer, or assignment of a private education
loan results in a change in the person to whom the borrower or any cosigner of the
loan must send payments or communicate with concerning the loan, the transferor and
transferee shall provide clear and conspicuous notice of the transfer to the borrower and
any cosigner of the loan, no fewer than 30 days before the transfer.
new text end
new text begin Subd. 2. new text end
new text begin Payment. new text end
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For a period of 60 days beginning on the date on which a
transferor stops accepting payment, the transferor shall immediately forward any loan
payment to the transferee, who shall accept the payment as on time and not impose any
late fee or finance charge if the transferor received the payment on or before the applicable
due date, including any grace period.
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new text begin Subd. 3. new text end
new text begin Other obligations of transferee. new text end
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For a period of 60 days beginning on
the date on which the transferor stops accepting payment, the transferee shall (1) honor
any loan promotion of benefit offered to the borrower or any cosigner of the loan by the
transferor, and (2) provide a simple, online process to transfer existing electronic fund
transfer authority and notify the borrower and any cosigner of the loan of the same.
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Sec. 6.
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[141B.06] VIOLATIONS.
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A violation of sections 141B.01 to 141B.05 shall be considered a violation for
purposes of section 8.31.
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