HF 3820

as introduced - 89th Legislature (2015 - 2016) Posted on 04/20/2016 12:37pm

A bill for an act
relating to commerce; establishing a student loan ombudsperson; requiring the
licensure of student loan servicers; prohibiting certain practices in student loan
servicing; proposing coding for new law as Minnesota Statutes, chapter 58B.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [58B.01] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For the purposes of this chapter, the following terms have
the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Borrower. new text end

new text begin "Borrower" means a resident of this state who has received or
agreed to pay a student loan, whether the duty to pay is direct or contingent.
new text end

new text begin Subd. 3. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of commerce.
new text end

new text begin Subd. 4. new text end

new text begin Financial institution. new text end

new text begin "Financial institution" means a bank, bank and
trust, trust company with banking powers, savings bank, savings association, or credit
union, organized under the laws of this state, any other state, or the United States; an
industrial loan and thrift under chapter 53; or a regulated lender under chapter 56. The
term financial institution also includes a subsidiary or operating subsidiary of a financial
institution or of a bank holding company as defined in United States Code, title 12, section
1841 et seq., if the subsidiary or operating subsidiary can demonstrate to the satisfaction
of the commissioner that it is regulated and subject to active and ongoing oversight and
supervision by a federal banking agency, as defined in United States Code, title 12, section
1811 et seq., or the commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Person in control. new text end

new text begin "Person in control" means any member of senior
management, including owners or officers, and other persons who possess, directly or
indirectly, the power to direct or cause the direction of the management policies of an
applicant or student loan servicer under this chapter, regardless of whether the person has
any ownership interest in the applicant or student loan servicer. Control is presumed to
exist if a person, directly or indirectly, owns, controls, or holds with power to vote ten
percent or more of the voting stock of an applicant or student loan servicer or of a person
who owns, controls, or holds with power to vote ten percent or more of the voting stock
of an applicant or student loan servicer.
new text end

new text begin Subd. 6. new text end

new text begin Servicing. new text end

new text begin "Servicing" means:
new text end

new text begin (1) receiving any scheduled periodic payments from a borrower pursuant to the
terms of a student loan;
new text end

new text begin (2) applying the payments of principal, interest, and other payments with respect
to the amounts received from a borrower, as may be required pursuant to the terms of
a student loan; and
new text end

new text begin (3) performing other administrative services with respect to a student loan.
new text end

new text begin Subd. 7. new text end

new text begin Student loan. new text end

new text begin "Student loan" means a government, commercial, or
foundation loan for actual costs paid for tuition and reasonable education and living
expenses.
new text end

new text begin Subd. 8. new text end

new text begin Student loan servicer. new text end

new text begin "Student loan servicer" means any person,
wherever located, responsible for the servicing of any student loan to any borrower,
including a nonbank covered person, as defined in Code of Federal Regulations, title 12,
section 1090.101, who is responsible for the servicing of any student loan to any borrower.
new text end

Sec. 2.

new text begin [58B.02] STUDENT LOAN OMBUDSPERSON.
new text end

new text begin Subdivision 1. new text end

new text begin Designation of a student loan ombudsperson. new text end

new text begin The commissioner
must designate a student loan ombudsperson within the Department of Commerce to
provide timely assistance to any borrower.
new text end

new text begin Subd. 2. new text end

new text begin Duties. new text end

new text begin The student loan ombudsperson must:
new text end

new text begin (1) receive, review, and attempt to resolve complaints from borrowers, including
but not limited to attempts to resolve such complaints in collaboration with institutions of
higher education, student loan servicers, and any other participants in student loan lending;
new text end

new text begin (2) compile and analyze data on borrower complaints received under clause (1);
new text end

new text begin (3) help borrowers to understand their rights and responsibilities under the terms of
student loans;
new text end

new text begin (4) provide information to the public, state agencies, legislators, and relevant
stakeholders regarding the problems and concerns of borrowers;
new text end

new text begin (5) make recommendations for resolving the problems of borrowers;
new text end

new text begin (6) analyze and monitor the development and implementation of federal, state, and
local laws, regulations, and policies relating to borrowers and recommend any changes
deemed necessary;
new text end

new text begin (7) review the complete student education loan history for any borrower who has
provided written consent for such review;
new text end

new text begin (8) increase public awareness that the ombudsperson is available to assist in the
resolution of the student loan servicing concerns of potential and actual borrowers,
institutions of higher education, student loan servicers, and any other participant in
student lending; and
new text end

new text begin (9) take other actions, as necessary, to fulfill the duties of the ombudsperson set
forth in this section.
new text end

new text begin Subd. 3. new text end

new text begin Student loan education course. new text end

new text begin The ombudsperson must establish and
maintain a borrower education course. The course shall include educational presentations
and materials regarding important topics in student loans, including but not limited to:
new text end

new text begin (1) the meaning of important terminology used in student lending;
new text end

new text begin (2) documentation requirements;
new text end

new text begin (3) monthly payment obligations;
new text end

new text begin (4) income-based repayment options;
new text end

new text begin (5) the availability of state and federal loan forgiveness programs; and
new text end

new text begin (6) disclosure requirements.
new text end

new text begin Subd. 4. new text end

new text begin Reporting. new text end

new text begin By January 15 of each odd-numbered year, the ombudsperson
must report to the committees of the legislature responsible for commerce and higher
education. The report must describe the ombudsperson's implementation of this
section, the outcomes achieved by the ombudsperson in the previous two years, and
recommendations for improving the regulation of student loan servicers.
new text end

Sec. 3.

new text begin [58B.03] LICENSING OF STUDENT LOAN SERVICERS.
new text end

new text begin Subdivision 1. new text end

new text begin License required. new text end

new text begin No person shall directly or indirectly act as a
student loan servicer without first obtaining a license from the commissioner.
new text end

new text begin Subd. 2. new text end

new text begin Exempt persons. new text end

new text begin The following persons are exempt from the licensure
requirements under this section:
new text end

new text begin (1) a financial institution;
new text end

new text begin (2) a person servicing student loans made with the person's own funds, if no more
than three such student loans are made in any 12-month period;
new text end

new text begin (3) an agency of the federal government, or of a state or municipal government;
new text end

new text begin (4) a person acting in a fiduciary capacity, such as a trustee or receiver, as a result of
a specific order issued by a court of competent jurisdiction; or
new text end

new text begin (5) a person exempted by order of the commissioner.
new text end

new text begin Subd. 3. new text end

new text begin Application for licensure. new text end

new text begin (a) Any person seeking to act within the state
as a student loan servicer must apply for a license in a form and manner specified by the
commissioner. At a minimum, the application must include:
new text end

new text begin (1) a financial statement prepared by a certified public accountant or a public
accountant;
new text end

new text begin (2) the history of criminal convictions, excluding traffic violations, for persons in
control of the applicant;
new text end

new text begin (3) any information requested by the commissioner related to the history of criminal
convictions disclosed under clause (2);
new text end

new text begin (4) a nonrefundable license fee of $1,000; and
new text end

new text begin (5) a nonrefundable investigation fee of $800.
new text end

new text begin (b) The commissioner may conduct a state and national criminal history records
check of the applicant and of each person in control or employee of the applicant.
new text end

new text begin Subd. 4. new text end

new text begin Issuance of a license. new text end

new text begin Upon receipt of a complete application for an initial
license and the payment of fees for license and investigation, the commissioner must
investigate the financial condition and responsibility, character, financial and business
experience, and general fitness of the applicant. The commissioner may issue a license if
the commissioner finds that:
new text end

new text begin (1) the applicant's financial condition is sound;
new text end

new text begin (2) the applicant's business will be conducted honestly, fairly, equitably, carefully,
and efficiently within the purposes and intent of this section;
new text end

new text begin (3) each person in control of the applicant is in all respects properly qualified and
of good character;
new text end

new text begin (4) no person, on behalf of the applicant, has knowingly made any incorrect
statement of a material fact in the application, or in any report or statement made pursuant
to this section;
new text end

new text begin (5) no person, on behalf of the applicant, has knowingly omitted from an application,
report, or statement made pursuant to this section, any information required by the
commissioner;
new text end

new text begin (6) the applicant has paid the fees required under this section; and
new text end

new text begin (7) the application has met other similar requirements, as determined by the
commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Notification of a change in status. new text end

new text begin An applicant or student loan servicer
must notify the commissioner in writing of any change in the information provided in its
initial application for a license or its most recent renewal application for such a license.
This notification must be received no later than ten business days after an event that results
in the information becoming inaccurate.
new text end

new text begin Subd. 6. new text end

new text begin Term of license. new text end

new text begin Licenses issued under this chapter expire on December
31 and are renewable on January 1 of each year after that date.
new text end

Sec. 4.

new text begin [58B.04] LICENSING MULTIPLE PLACES OF BUSINESS.
new text end

new text begin (a) A person licensed to act within the state as a student loan servicer may not do so
under any other name or at any other place of business than that named in the license. Any
time a student loan servicer changes the location of the servicer's place of business, the
servicer must provide prior written notice to the commissioner. A student loan servicer may
not maintain more than one place of business under the same license. The commissioner
may issue more than one license to the same student loan servicer, provided that the
servicer complies with the application procedures in section 58B.03 for each license.
new text end

new text begin (b) A license issued under this chapter is not transferable or assignable.
new text end

Sec. 5.

new text begin [58B.05] LICENSE RENEWAL.
new text end

new text begin Subdivision 1. new text end

new text begin Term. new text end

new text begin Licenses are renewable on January 1 of each year.
new text end

new text begin Subd. 2. new text end

new text begin Timely renewal. new text end

new text begin (a) A person whose application is properly and timely filed
who has not received notice of denial of renewal is considered approved for renewal and
the person may continue to act as a student loan servicer whether or not the renewed license
has been received on or before January 1 of the renewal year. Application for renewal of a
license is considered timely filed if received by the commissioner, or mailed with proper
postage and postmarked, by December 15 of the renewal year. An application for renewal
is considered properly filed if made upon forms duly executed, accompanied by fees
prescribed by this chapter, and containing any information that the commissioner requires.
new text end

new text begin (b) A person who fails to make a timely application for renewal of a license and who
has not received the renewal license as of January 1 of the renewal year is unlicensed until
the renewal license has been issued by the commissioner and is received by the person.
new text end

new text begin Subd. 3. new text end

new text begin Contents of renewal application. new text end

new text begin Application for the renewal of an
existing license must contain the information specified in section 58B.03, subdivision
3, however, only the requested information having changed from the most recent prior
application need be submitted.
new text end

new text begin Subd. 4. new text end

new text begin Cancellation. new text end

new text begin A student loan servicer ceasing an activity or activities
regulated by this chapter and desiring to no longer be licensed shall inform the
commissioner in writing and, at the same time, surrender the license and all other symbols
or indicia of licensure. The licensee shall include a plan for the withdrawal from student
loan servicing, including a timetable for the disposition of the student loans being serviced.
new text end

new text begin Subd. 5. new text end

new text begin Renewal fees. new text end

new text begin The following fees must be paid to the commissioner for
a renewal license:
new text end

new text begin (1) a nonrefundable renewal license fee of $500; and
new text end

new text begin (2) a nonrefundable renewal investigation fee of $400.
new text end

Sec. 6.

new text begin [58B.06] PROHIBITED CONDUCT.
new text end

new text begin Subdivision 1. new text end

new text begin Misleading borrowers. new text end

new text begin A student loan servicer must not directly or
indirectly attempt to mislead a borrower.
new text end

new text begin Subd. 2. new text end

new text begin Misrepresentation. new text end

new text begin A student loan servicer must not engage in any unfair
or deceptive practice or misrepresent or omit any material information in connection with
the servicing of a student loan, including but not limited to misrepresenting the amount,
nature, or terms of any fee or payment due or claimed to be due on a student loan, the
terms and conditions of the loan agreement, or the borrower's obligations under the loan.
new text end

new text begin Subd. 3. new text end

new text begin Misapplication of payments. new text end

new text begin A student loan servicer must not knowingly
or negligently misapply student loan payments.
new text end

new text begin Subd. 4. new text end

new text begin Inaccurate information. new text end

new text begin A student loan servicer must not knowingly or
negligently provide inaccurate information to any consumer reporting agency, as defined
in section 13C.011, subdivision 4.
new text end

new text begin Subd. 5. new text end

new text begin Reporting of payment history. new text end

new text begin A student loan servicer must not fail to
report both the favorable and unfavorable payment history of the borrower to a consumer
reporting agency at least annually, if the student loan servicer regularly reports such
information.
new text end

new text begin Subd. 6. new text end

new text begin Refusal to communicate with a borrower's representative. new text end

new text begin A student
loan servicer must not refuse to communicate with a representative of the borrower who
provides a written authorization signed by the borrower, provided the student loan servicer
may adopt procedures reasonably related to verifying that the representative is in fact
authorized to act on behalf of the borrower.
new text end

new text begin Subd. 7. new text end

new text begin False statements and omissions. new text end

new text begin A student loan servicer must not
knowingly or negligently make any false statement or omission of material fact in
connection with any application, information, or reports filed with the commissioner or
any other federal, state, or local government agency.
new text end

new text begin Subd. 8. new text end

new text begin Noncompliance with applicable laws. new text end

new text begin A student loan servicer must
not violate any other federal, state, or local laws, including those related to fraudulent,
coercive, or dishonest practices.
new text end

Sec. 7.

new text begin [58B.07] EXAMINATIONS.
new text end

new text begin The commissioner has under this chapter the same powers with respect to
examinations that the commissioner has under section 46.04.
new text end

Sec. 8.

new text begin [58B.08] DENIAL, SUSPENSION, REVOCATION OF LICENSES.
new text end

new text begin Subdivision 1. new text end

new text begin Powers of commissioner. new text end

new text begin (a) The commissioner may by order
take any or all of the following actions:
new text end

new text begin (1) bar a person from engaging in student loan servicing;
new text end

new text begin (2) deny, suspend, or revoke a student loan servicer license;
new text end

new text begin (3) censure a student loan servicer;
new text end

new text begin (4) impose a civil penalty as provided for in section 45.027, subdivision 6; or
new text end

new text begin (5) revoke an exemption.
new text end

new text begin (b) In order to take the action in paragraph (a), the commissioner must find:
new text end

new text begin (1) that the order is in the public interest; and
new text end

new text begin (2) that the student loan servicer, applicant, person in control, employee, or agent has:
new text end

new text begin (i) violated any provision of this chapter or rule or order under this chapter;
new text end

new text begin (ii) violated a standard of conduct or engaged in a fraudulent, coercive, deceptive,
or dishonest act or practice, whether or not the act or practice involves student loan
servicing including but not limited to negligently making a false statement or knowingly
omitting a material fact;
new text end

new text begin (iii) engaged in an act or practice, whether or not the act or practice involves the
student loan servicing, that demonstrates untrustworthiness, financial irresponsibility, or
incompetence;
new text end

new text begin (iv) pled guilty or nolo contendere, or been convicted of a felony, gross misdemeanor,
or a misdemeanor;
new text end

new text begin (v) paid a civil penalty or been the subject of disciplinary action by the commissioner,
an order of suspension or revocation, cease and desist order, injunction order, or order
barring involvement in an industry or profession issued by the commissioner or any other
federal, state, or local government agency;
new text end

new text begin (vi) been found by a court of competent jurisdiction to have engaged in conduct
evidencing gross negligence, fraud, misrepresentation, or deceit;
new text end

new text begin (vii) refused to cooperate with an investigation or examination by the commissioner;
new text end

new text begin (viii) failed to pay any fee or assessment imposed by the commissioner; or
new text end

new text begin (ix) failed to comply with state and federal tax obligations.
new text end

new text begin Subd. 2. new text end

new text begin Orders of the commissioner. new text end

new text begin To begin a proceeding under this section,
the commissioner shall issue an order requiring the subject of the proceeding to show
cause why action should not be taken against the person according to this section. The
order must be calculated to give reasonable notice of the time and place for the hearing
and must state the reasons for entry of the order. The commissioner may by order
summarily suspend a license or exemption or summarily bar a person from engaging in
student loan servicing pending a final determination of an order to show cause. If a license
or exemption is summarily suspended or if the person is summarily barred from any
involvement in the servicing of student loans, pending final determination of an order to
show cause, a hearing on the merits must be held within 30 days of the issuance of the
order of summary suspension or bar. All hearings must be conducted under chapter 14.
After the hearing, the commissioner shall enter an order disposing of the matter as the
facts require. If the subject of the order fails to appear at a hearing after having been duly
notified, the person is considered in default, and the proceeding may be determined against
the subject of the order upon consideration of the order to show cause, the allegations of
which may be considered to be true.
new text end

new text begin Subd. 3. new text end

new text begin Actions against lapsed license. new text end

new text begin If a license or certificate of exemption
lapses, is surrendered, withdrawn, terminated, or otherwise becomes ineffective, the
commissioner may institute a proceeding under this subdivision within two years after the
license or certificate of exemption was last effective and enter a revocation or suspension
order as of the last date on which the license or certificate of exemption was in effect, and
may impose a civil penalty as provided for in this section or section 45.027, subdivision 6.
new text end