HF 4726

as introduced - 93rd Legislature (2023 - 2024) Posted on 03/07/2024 02:43pm

A bill for an act
relating to commerce; regulating private student loan servicers; providing for civil
penalties; amending Minnesota Statutes 2022, sections 58B.06, subdivisions 4, 5;
58B.07, subdivisions 1, 3, 4, 9, by adding subdivisions; 58B.09, by adding a
subdivision; proposing coding for new law in Minnesota Statutes, chapter 58B.

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

Section 1.

new text begin [58B.051] REGISTRATION FOR PRIVATE STUDENT LOAN
SERVICERS.
new text end

new text begin Subdivision 1. new text end

new text begin Registry. new text end

new text begin (a) Beginning ...., a private student loan servicer must register
with the commissioner as a private student loan servicer before providing services in
Minnesota. A student loan servicer must not offer or make a student loan to a resident of
Minnesota without first registering with the administrator as provided in this section.
new text end

new text begin (b) A registration application must include:
new text end

new text begin (1) the student loan servicer's name;
new text end

new text begin (2) the student loan servicer's address;
new text end

new text begin (3) the name of all officers, directors, partners, and owners of controlling interests in
the student loan servicer;
new text end

new text begin (4) the addresses of all officers, directors, partners, and owners of controlling interests
in the student loan servicer; and
new text end

new text begin (5) any other information the commissioner requires by rule.
new text end

new text begin (c) A student loan servicer must renew the student loan servicer's registration on an
annual basis and may be required to pay a fee at the time of renewal.
new text end

new text begin (d) The commissioner may adopt and enforce:
new text end

new text begin (1) registration procedures for student loan servicers, which may include using the
Nationwide Multistate Licensing System and Registry;
new text end

new text begin (2) registration fees for student loan servicers, which may include fees for using the
Nationwide Multistate Licensing System and Registry, to be paid directly by the student
loan servicer;
new text end

new text begin (3) procedures and fees to renew a student loan servicer's registration, which may include
fees for the renewed use of Nationwide Multistate Licensing System and Registry, to be
paid directly by the student loan servicer; and
new text end

new text begin (4) alternate registration procedures and fees for institutions of postsecondary education
that offer student loans.
new text end

new text begin Subd. 2. new text end

new text begin Reporting. new text end

new text begin (a) Beginning ...., a student loan servicer that secures, makes, or
extends student loans in Minnesota must report to the commissioner on the form the
commissioner provides:
new text end

new text begin (1) a list of all schools attended by borrowers who received a student loan from the
student loan servicer, resided within Minnesota at the time of the transaction, and whose
debt is still outstanding, including student loans used to refinance an existing debt;
new text end

new text begin (2) the total outstanding dollar amount owed by borrowers residing in Minnesota who
received student loans from the student loan servicer;
new text end

new text begin (3) the total number of student loans owed by borrowers residing in the state who received
student loans from the student loan servicer;
new text end

new text begin (4) the total outstanding dollar amount and number of student loans owed by borrowers
who reside in Minnesota, associated with each school identified under clause (1);
new text end

new text begin (5) the total dollar amount of student loans provided by the student loan servicer to
borrowers who resided in Minnesota during the prior fiscal year;
new text end

new text begin (6) the total outstanding dollar amount and number of student loans owed by borrowers
who resided in Minnesota, associated with each school identified under clause (1), that were
provided in the prior fiscal year;
new text end

new text begin (7) the rate of default for borrowers residing in Minnesota who obtained student loans
from the student loan servicer, if applicable;
new text end

new text begin (8) the rate of default for borrowers residing in Minnesota who obtained student loans
from the student loan servicer associated with each school identified under clause (1), if
applicable;
new text end

new text begin (9) the range of initial interest rates for student loans provided by the student loan servicer
to borrowers who resided in Minnesota during the prior fiscal year;
new text end

new text begin (10) of the total number of borrowers who received student loans under clause (9), the
percentage of borrowers who received each rate identified under clause (9);
new text end

new text begin (11) the total dollar amount and number of student loans provided during the prior fiscal
year by the student loan servicer to borrowers who resided in Minnesota at the time of the
transaction and had a cosigner for the student loans;
new text end

new text begin (12) the total dollar amount and number of student loans provided by the student loan
servicer to borrowers residing in Minnesota used to refinance a prior student loan or federal
student loan during the prior fiscal year;
new text end

new text begin (13) the total dollar amount and number of student loans for which the student loan
servicer had sued to collect from a borrower residing in Minnesota during the prior fiscal
year;
new text end

new text begin (14) a copy of any model promissory note, agreement, contract, or other instrument used
by the student loan servicer during the previous year to substantiate that a borrower owes
a new debt to the student loan servicer; and
new text end

new text begin (15) any other information considered necessary by the commissioner to assess the total
size and status of the student loan market and well-being of borrowers in Minnesota.
new text end

new text begin (b) A student loan servicer that acquires or assumes student loans in Minnesota must
report to the commissioner on the form the commissioner provides:
new text end

new text begin (1) a list of all schools attended by borrowers residing in Minnesota who used, for
attendance, any outstanding student loans assumed or acquired by the student loan servicer;
new text end

new text begin (2) the total outstanding dollar amount and number of student loans that have been
acquired or assumed by the student loan servicer and owed by borrowers who reside in
Minnesota;
new text end

new text begin (3) the total outstanding dollar amount and number of student loans owed by borrowers
who reside in Minnesota that have been assumed or acquired by the student loan servicer,
associated with each school identified under clause (1);
new text end

new text begin (4) the total dollar amount and number of student loans owed by borrowers who resided
in Minnesota that were acquired or assumed by the student loan servicer during the prior
fiscal year;
new text end

new text begin (5) the total dollar amount and number of student loans that were acquired or assumed
by the student loan servicer and owed by borrowers who resided in Minnesota during the
prior year, associated with each school identified under clause (1);
new text end

new text begin (6) the rate of default for student loans acquired or assumed by the student loan servicer,
if applicable;
new text end

new text begin (7) the rate of default for student loans acquired or assumed by the student loan servicer
associated with each school identified under clause (1) of this item, if applicable;
new text end

new text begin (8) the total outstanding dollar amount and number of student loans owed by borrowers
residing in Minnesota who had a cosigner for the student loans, if applicable;
new text end

new text begin (9) the total outstanding dollar amount and number of student loans that were acquired
or assumed by the student loan servicer and owed by borrowers residing in Minnesota to
refinance a prior student loan or federal student loan;
new text end

new text begin (10) the total dollar amount and number of student loans for which the student loan
servicer had sued to collect from borrowers residing in Minnesota during the prior fiscal
year; and
new text end

new text begin (11) any other information considered necessary by the commissioner to assess the total
size and status of the student loan market and well-being of borrowers in Minnesota.
new text end

Sec. 2.

Minnesota Statutes 2022, section 58B.06, subdivision 4, is amended to read:

Subd. 4.

Transfer of student loan.

(a) If a borrower's student loan servicer changes
pursuant to the sale, assignment, or transfer of the servicing, the original student loan servicer
must:

(1) require the new student loan servicer to honor all benefits that were made available,
or which may have become available, to a borrower from the original student loan servicer new text begin ,
including without limitation any benefits for which the student loan borrower has not yet
qualified new text end ; and

(2) transfer to the new student loan servicer all information regarding the borrower, the
account of the borrower, and the borrower's student loan, including but not limited to the
repayment status of the student loan and the benefits described in clause (1).

(b) The student loan servicer must complete the transfer under paragraph (a), clause (2),
less than 45 days from the date of the sale, assignment, or transfer of the servicing.

(c) A sale, assignment, or transfer of the servicing must be completed no less than seven
days from the date the next payment is due on the student loan.

(d) A new student loan servicer must adopt policies and procedures to verify that the
original student loan servicer has met the requirements of paragraph (a).

Sec. 3.

Minnesota Statutes 2022, section 58B.06, subdivision 5, is amended to read:

Subd. 5.

Income-driven repayment.

new text begin (a) new text end A student loan servicer must evaluate a borrower
for eligibility for an income-driven repayment program before placing a borrower in
forbearance or default.

new text begin (b) A student loan servicer must provide the following information in clear and concise
writing to a borrower:
new text end

new text begin (1) provide on the student loan servicer's website a description of any income-driven
repayment programs offered by the student loan servicer;
new text end

new text begin (2) establish policies and procedures and implement income-driven repayment programs
consistently in order to facilitate the evaluation of student loan income-driven repayment
program requests, including accurate information regarding any options that may be available
to the borrower through the promissory note or that may have been marketed to the private
education loan borrower through marketing materials; and
new text end

new text begin (3) consistently present and offer income-driven repayment options to borrowers with
similar financial circumstances.
new text end

new text begin (c) A student loan servicer must receive a signed acknowledgment from a borrower who
has been placed in an income-driven repayment program that the borrower has received the
information provided under paragraph (b).
new text end

Sec. 4.

Minnesota Statutes 2022, section 58B.07, subdivision 1, is amended to read:

Subdivision 1.

Misleading borrowers.

A student loan servicer must not directly or
indirectly new text begin employ any scheme, device, or artifice to new text end attempt to new text begin defraud or new text end mislead a borrower.

Sec. 5.

Minnesota Statutes 2022, section 58B.07, subdivision 3, is amended to read:

Subd. 3.

Misapplication of payments.

A student loan servicer must not knowingly or
negligently misapply student loan payments new text begin to the outstanding balance of a student loan new text end .

Sec. 6.

Minnesota Statutes 2022, section 58B.07, subdivision 4, is amended to read:

Subd. 4.

Inaccurate information.

A student loan servicer must not knowingly or
negligently provide inaccurate information to any consumer reporting agency new text begin in a manner
that may harm a student loan borrower's creditworthiness new text end .

Sec. 7.

Minnesota Statutes 2022, section 58B.07, subdivision 9, is amended to read:

Subd. 9.

Incorrect information regarding student deleted text begin loan forgiveness deleted text end new text begin loans new text end .

new text begin (a) new text end A
student loan servicer must not misrepresent the availability of student loan forgiveness for
which the servicer has reason to know the borrower is eligible. This includes but is not
limited to student loan forgiveness programs specific to military borrowers, borrowers
working in public service, or borrowers with disabilities.

new text begin (b) A student loan servicer must not provide incorrect information related to forbearance.
If a student loan servicer incorrectly suggests placing a borrower in forbearance and the
borrower relies on this information, the student loan servicer is subject to the penalties under
section 58B.09.
new text end

Sec. 8.

Minnesota Statutes 2022, section 58B.07, is amended by adding a subdivision to
read:

new text begin Subd. 11. new text end

new text begin Property. new text end

new text begin A student loan servicer must not obtain property by fraud or
misrepresentation.
new text end

Sec. 9.

Minnesota Statutes 2022, section 58B.07, is amended by adding a subdivision to
read:

new text begin Subd. 12. new text end

new text begin Response to commissioner. new text end

new text begin A student loan servicer must respond within 15
days or within a shorter, reasonable period of time requested by the commissioner, to
communications from the commissioner.
new text end

Sec. 10.

Minnesota Statutes 2022, section 58B.07, is amended by adding a subdivision to
read:

new text begin Subd. 13. new text end

new text begin Response to complaint. new text end

new text begin A student loan servicer must respond within 15 days
to a borrower complaint submitted to the student loan servicer by the commissioner or the
Office of the Attorney General. If necessary, the student loan servicer may request additional
time to respond to the complaint, provided that the request is accompanied by an explanation
indicating why additional time is necessary and the request does not exceed 45 days.
new text end

Sec. 11.

Minnesota Statutes 2022, section 58B.07, is amended by adding a subdivision to
read:

new text begin Subd. 14. new text end

new text begin Customer service. new text end

new text begin A student loan servicer must not allow a borrower to
remain on hold with a customer service representative for an unreasonable amount of time.
new text end

Sec. 12.

Minnesota Statutes 2022, section 58B.07, is amended by adding a subdivision to
read:

new text begin Subd. 15. new text end

new text begin Abusive acts or practices. new text end

new text begin A student loan servicer must not engage in abusive
acts or practices when servicing a student loan in Minnesota. An act or practice is abusive
in connection with the servicing of a student loan if that act or practice:
new text end

new text begin (1) materially interferes with the borrower's ability to understand a term or condition of
a student loan; or
new text end

new text begin (2) takes unreasonable advantage of any of the following:
new text end

new text begin (i) the borrower's lack of understanding regarding the material risks, costs, or conditions
of the student loan;
new text end

new text begin (ii) the borrower's inability to protect the borrower's interests when selecting or using a
student loan or feature, term, or condition of a student loan; or
new text end

new text begin (iii) the borrower's reasonable reliance on a student loan servicer to act in the borrower's
interests.
new text end

Sec. 13.

Minnesota Statutes 2022, section 58B.09, is amended by adding a subdivision to
read:

new text begin Subd. 4. new text end

new text begin Private right of action. new text end

new text begin (a) A borrower who suffers damage as a result of the
failure of a student loan servicer to comply with this chapter may bring an action on a
borrower's own behalf and on behalf of a similarly situated class of persons against that
student loan servicer to recover or obtain:
new text end

new text begin (1) actual damages, except that the total award of damages must be at least $500 per
plaintiff, per violation;
new text end

new text begin (2) an order enjoining the methods, acts, or practices;
new text end

new text begin (3) restitution of property;
new text end

new text begin (4) punitive damages;
new text end

new text begin (5) reasonable attorney fees; and
new text end

new text begin (6) any other relief that the court deems proper.
new text end

new text begin (b) In addition to any other remedies provided by this subdivision or otherwise provided
by law, if a student loan servicer is shown, by a preponderance of the evidence, to have
engaged in conduct that substantially interferes with a borrower's right to an alternative
payment arrangement; loan forgiveness, cancellation, or discharge; or any other financial
benefit established under the terms of a borrower's promissory note or under the Higher
Education Act of 1965, United States Code, title 20, section 1070a, et seq., a borrower is
entitled to damages of at least $1,500 per plaintiff, per violation.
new text end

new text begin (c) At least 45 days before bringing an action for damages or injunctive relief under this
chapter, a borrower must:
new text end

new text begin (1) provide written notice to the student loan servicer alleged to have violated this chapter
regarding the nature of the alleged violations; and
new text end

new text begin (2) demand that the student loan servicer correct and remedy the method, acts, or practices
identified in the notice under clause (1).
new text end

new text begin (d) The notice required by this subdivision must be sent by certified or registered mail,
return receipt requested, to the student loans servicer's address on file with the Department
of Commerce or to the student loan servicer's principal place of business in Minnesota.
new text end

new text begin (e) An action for damages or injunctive relief brought by a borrower only on the
individual borrower's behalf must not be maintained under paragraph (a) upon a showing
by a student loan servicer that an appropriate correction and remedy is given, or is agreed
to be given within a reasonable time, to the borrower within 30 days after the notice is
received.
new text end

new text begin (f) An action for damages brought by a borrower on both the borrower's behalf and on
behalf of a similarly situated class of persons must not be maintained under paragraph (a)
upon a showing by a student loan servicer alleged to have employed or committed methods,
acts, or practices declared unlawful if:
new text end

new text begin (1) all borrowers similarly situated have been identified or a reasonable effort to identify
other borrowers has been made;
new text end

new text begin (2) all borrowers identified have been notified that, upon the borrower's request, the
student loan servicer must make the appropriate correction and remedy;
new text end

new text begin (3) the correction and remedy requested by the borrower has been given or is given
within a reasonable amount of time; and
new text end

new text begin (4) the student loan servicer has ceased from engaging, or if immediate cessation is
impossible or unreasonably expensive under the circumstances, the student loan servicer
ceases to engage within a reasonable amount of time, in the methods, act, or practices.
new text end

new text begin (g) An attempt to comply with a demand described in paragraph (c) by a student loan
servicer that receives the demand is construed as an offer to compromise and is inadmissible
as evidence under Minnesota Rules of Evidence, Rule 408. An attempt to comply with a
demand is not an admission of engaging in an act or practice declared unlawful by paragraph
(a). Evidence of compliance or attempts to comply with this section may be introduced by
a defendant to establish good faith or to show compliance with paragraph (a).
new text end

new text begin (h) An award of damages must not be given in an action based on a method, act, or
practice in violation of paragraph (a) if the student loan servicer alleged to have employed
or committed that method, act, or practice:
new text end

new text begin (1) proves by a preponderance of the evidence that the violation was not intentional and
resulted from a bona fide error, notwithstanding the use of reasonable procedures adopted
to avoid that error; and
new text end

new text begin (2) makes an appropriate correction, repair, replacement, or other remedy under
paragraphs (e) and (f).
new text end

new text begin (i) The commissioner must administer and enforce this section and must adopt rules and
issue orders consistent with the authority under this section.
new text end

new text begin (j) The commissioner may carry over any regulations adopted in this chapter in order
to implement equivalent provisions of this act.
new text end

new text begin (k) Any rules adopted under this chapter in effect at the time of enactment of this section
remain in effect until the commissioner repeals or modifies the rules.
new text end