SF 4735

1st Engrossment - 93rd Legislature (2023 - 2024) Posted on 03/26/2024 10:03am

A bill for an act
relating to commerce; regulating private student loan servicers and lenders;
providing for civil penalties; amending Minnesota Statutes 2022, sections 58B.02,
subdivision 8, by adding a subdivision; 58B.03, by adding a subdivision; 58B.06,
subdivisions 4, 5; 58B.07, subdivisions 1, 3, 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.

Minnesota Statutes 2022, section 58B.02, subdivision 8, is amended to read:

Subd. 8.

Student loan.

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

Sec. 2.

Minnesota Statutes 2022, section 58B.02, is amended by adding a subdivision to
read:

new text begin Subd. 8a. new text end

new text begin Lender. new text end

new text begin "Lender" means an entity engaged in the business of securing, making,
or extending student loans. Lender does not include, to the extent that state regulation is
preempted by federal law:
new text end

new text begin (1) a bank, savings banks, savings and loan association, or credit union;
new text end

new text begin (2) a wholly owned subsidiary of a bank or credit union; or
new text end

new text begin (3) an operating subsidiary where each owner is wholly owned by the same bank or
credit union.
new text end

Sec. 3.

Minnesota Statutes 2022, section 58B.03, is amended by adding a subdivision to
read:

new text begin Subd. 10. new text end

new text begin Reporting. new text end

new text begin (a) Beginning January 31, 2025, a student loan servicer that secures,
makes, or extends student loans in the state 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 and resided within the state 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 the state 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 the state, 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 the state in the prior calendar year;
new text end

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

new text begin (7) the rate of default for borrowers residing in the state 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 the state 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 the state in the prior calendar year;
new text end

new text begin (10) of the total number of borrowers who received student loans under clause (9), and
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 in the prior calendar
year by the student loan servicer to borrowers who resided in the state 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 the state used to refinance a prior student loan or federal
student loan in the prior calendar 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 the state in the prior calendar 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 in 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 the state.
new text end

new text begin (b) A student loan servicer that acquires or assumes student loans in the state 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 the state 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 the
state;
new text end

new text begin (3) the total outstanding dollar amount and number of student loans owed by borrowers
who reside in the state 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 the state that were acquired or assumed by the student loan servicer in the prior calendar
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 the state in 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), if applicable;
new text end

new text begin (8) the total outstanding dollar amount and number of student loans owed by borrowers
residing in the state 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 the state 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 the state in the prior calendar 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 the state.
new text end

Sec. 4.

new text begin [58B.051] REGISTRATION FOR LENDERS.
new text end

new text begin (a) Beginning January 1, 2025, a lender must register with the commissioner as a lender
before providing services in Minnesota. A lender must not offer or make a student loan to
a resident of Minnesota without first registering with the commissioner 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 lender's name;
new text end

new text begin (2) the lender's address;
new text end

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

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

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

new text begin (c) A lender must renew the lender'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 lenders, which may include using the Nationwide
Multistate Licensing System and Registry;
new text end

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

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

Sec. 5.

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. 6.

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 on the student loan
servicer's website:
new text end

new text begin (1) a description of any income-driven repayment programs offered by the student loan
servicer; and
new text end

new text begin (2) information on the policies and procedures the student loan servicer implements 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 borrower through marketing
materials.
new text end

Sec. 7.

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. 8.

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. 9.

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 shall be subject to the penalties
provided under section 58B.09.
new text end

Sec. 10.

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. 11.

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 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 more than two hours.
new text end

Sec. 12.

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 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 this state. 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 ability of a borrower 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) a lack of understanding on the part of a borrower of the material risks, costs, or
conditions of the student loan;
new text end

new text begin (ii) the inability of a borrower to protect the interests of the borrower 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 reasonable reliance by the borrower on a student loan servicer to act in the
interests of the borrower.
new text end

Sec. 13.

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 Violations. new text end

new text begin A violation of this section is an unlawful practice under section
325D.44.
new text end

Sec. 14.

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, act, or practice
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 loan 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 a method,
act, or practice 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 method, act, or practice.
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

Sec. 15. new text begin EFFECTIVE DATE.
new text end

new text begin This act is effective August 1, 2024.
new text end