2017 -- H 6056

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LC002306

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2017

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A N   A C T

RELATING TO EDUCATION -- THE STUDENT LOAN BILL OF RIGHTS

     Introduced By: Representatives McNamara, Amore, Regunberg, Casimiro, and Vella-
Wilkinson

     Date Introduced: March 31, 2017

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

     SECTION 1. Title 16 of the General Laws entitled "EDUCATION" is hereby amended

by adding thereto the following chapter:

CHAPTER 59.1

THE STUDENT LOAN BILL OF RIGHTS

     16-59.1-1. Definitions.

     As used in this chapter:

     (1) "Commissioner" means the commissioner of postsecondary education.

     (2) "Department" means the department of business regulation established pursuant to the

provisions of chapter 14 of title 42.

     (3) "Director" means the director of the department of business regulation.

     (4) "Division" means the banking division of the department of business regulation.

     (5) "Ombudsman" means the student loan ombudsman established pursuant to the

provisions of this chapter.

     (6) "Student loan borrower" means:

     (i) Any resident of this state who has received or agreed to pay a student education loan;

or

     (ii) Any person who shares responsibility with such resident for repaying the student

education loan.

     (7) "Student loan servicer" means any person, wherever located, responsible for the

servicing of any student education loan to any student loan borrower.

     (8) "Servicing" means:

     (i) Receiving any scheduled periodic payments from a student loan borrower pursuant to

the terms of a student education loan;

     (ii) Applying the payments of principal and interest and such other payments with respect

to the amounts received from a student loan borrower, as may be required pursuant to the terms of

a student education loan; and

     (iii) Performing other administrative services with respect to a student education loan.

     (9) "Student education loan" means any loan primarily for personal use to finance

education or other school-related expenses.

     16-59.1-2. Appointment of student loan ombudsman.

     The director of the department of business regulation shall, within available

appropriations, designate a student loan ombudsman within the banking division to provide

timely assistance and support to any student loan borrower of any student education loan.

     16-59.1-3. Powers and duties of student loan ombudsman.

     (a) The student loan ombudsman, in consultation with the commissioner of postsecondary

education, shall:

     (1) Receive, review and attempt to resolve any complaints from student loan 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,

including, but not limited to, the University of Rhode Island, Rhode Island College, the

Community College of Rhode Island, the council on postsecondary education, the office of the

postsecondary commissioner, the board of education, the office of higher education, the Rhode

Island student loan authority, and the Rhode Island division of higher education assistance;

     (2) Compile and analyze data on student loan borrower complaints as described in

subsection (b)(1) of this section;

     (3) Assist student loan borrowers to understand their rights and responsibilities under the

terms of student education loans;

     (4) Provide information to the public, agencies, legislators and others regarding the

problems and concerns of student loan borrowers and make recommendations for resolving those

problems and concerns;

     (5) Analyze and monitor the development and implementation of federal, state and local

laws, regulations and policies relating to student loan borrowers and recommend any changes that

the student loan ombudsman deems necessary;

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     (6) Review the complete student education loan history for any student loan borrower

who has provided written consent for such review;

     (7) Disseminate information concerning the availability of the student loan ombudsman

to assist student loan borrowers and potential student loan borrowers, as well as public

institutions of higher education, student loan servicers and any other participant in student

education loan lending, with any student loan servicing concerns; and

     (8) Take any other actions necessary to fulfill the duties of the student loan ombudsman

as set forth in this subsection.

     (b) On or before October 1, 2017, the student loan ombudsman, in consultation with the

director and the commissioner, shall, within available appropriations, establish and maintain a

student loan borrower education course that shall include educational presentations and materials

regarding student education loans. Such program shall include, but not be limited to, key loan

terms, documentation requirements, monthly payment obligations, income-based repayment

options, loan forgiveness and disclosure requirements.

     16-59.1-4. Report by director of business regulation to the general assembly.

     On or before January 1, 2018, and annually thereafter, the director shall submit a report to

the general assembly, in which the director shall report on:

     (1) The implementation of this chapter;

     (2) The overall effectiveness of the student loan ombudsman position; and

     (3) Additional steps that need to be taken for the division of higher education assistance

to gain regulatory control over the licensing and enforcement of student loan servicers.

     16-59.1-5. Student loan ombudsman account.

     (a)(1) There is established an account to be known as the "student loan ombudsman

account" which shall be a separate, non-lapsing account within the department of business

regulation. The account shall contain the monies described in this section and any other monies

required by law to be deposited in the account. Monies in the account shall be expended by the

ombudsman for the purpose of administering the provisions of this section.

     (2) The account established under this section shall contain any licensing or investigation

fees collected pursuant to this chapter.

     16-59.1-6. Licensing of student loan servicers.

     (a)(1) Effective July 1, 2018, no person shall act as a student loan servicer, directly or

indirectly, without first obtaining a license from the director of business regulation pursuant to the

provisions of this section, unless such person is exempt from licensure pursuant to the provisions

of subsection (a)(2) of this section.

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     (2) The following persons are exempt from student loan servicer licensing requirements:

     (i) Any Rhode Island bank, out-of-state bank, Rhode Island credit union, federal credit

union or out-of-state credit union;

     (ii) Any wholly owned subsidiary of any such bank or credit union; and

     (iii) Any operating subsidiary where each owner of such operating subsidiary is wholly

owned by the same bank or credit union.

     (b) Any person seeking to act within this state as a student loan servicer shall make a

written application to the commissioner for an initial license in such form as the commissioner

prescribes. Such application shall be accompanied by:

     (1) A financial statement prepared by a certified public accountant or a public accountant,

the accuracy of which is sworn to under oath before a notary public by the proprietor, a general

partner or a corporate officer or a member duly authorized to execute such documents;

     (2) The history of criminal convictions of the:

     (i) Applicant;

     (ii) Partners, if the applicant is a partnership;

     (iii) Members, if the applicant is a limited liability company or association; or

     (iv) Officers, directors and principal employees, if the applicant is a corporation;

     (3) Sufficient information pertaining to the history of criminal convictions of such

applicant, partners, members, officers, directors or principal employees as the director deems

necessary to make the findings required under this section;

     (4) A nonrefundable license fee of one thousand dollars ($1,000); and

     (5) A nonrefundable investigation fee of eight hundred dollars ($800).

     (c) The director may conduct a state and national criminal history records check or BCI

of the applicant and of each partner, member, officer, director and principal employee of such

applicant.

     16-59.1-7. Investigation of applicants.

     (a) Upon the filing of an application for an initial license and the payment of the fees for

license and investigation, the director shall investigate the financial condition and responsibility,

financial and business experience, character and general fitness of the applicant. The director may

issue a license if the director finds that:

     (1) The applicant's financial condition is sound;

     (2) The applicant's business will be conducted honestly, fairly, equitably, carefully and

efficiently within the purposes and intent of this chapter, and in a manner commanding the

confidence and trust of the community;

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     (3)(i) If the applicant is an individual, such individual is in all respects properly qualified

and of good character;

     (ii) If the applicant is a partnership, each partner is in all respects properly qualified and

of good character;

     (iii) If the applicant is a corporation or association, the president, chairperson of the

executive committee, senior officer responsible for the corporation's business and chief financial

officer or any other person who performs similar functions as determined by the commissioner,

each director, each trustee and each shareholder owning ten percent (10%) or more of each class

of the securities of such corporation is in all respects properly qualified and of good character; or

     (iv) If the applicant is a limited liability company, each member is in all respects properly

qualified and of good character;

     (4) No person on behalf of the applicant knowingly has made any incorrect statement of a

material fact in the application, or in any report or statement made pursuant to the provisions of

this chapter;

     (5) No person on behalf of the applicant knowingly has omitted to state any material fact

necessary to give the director any information lawfully required by the director;

     (6) The applicant has paid all investigation fees and the license fees required under this

section; and

     (7) The applicant has met any other similar requirements as determined by the

commissioner.

     16-59.1-8. License expiration and renewal.

     (a) A license issued pursuant to this chapter shall expire at the close of business on

September 30 of the odd numbered year following its issuance, unless renewed or earlier

surrendered, suspended or revoked pursuant to the provisions of this chapter. Not later than

fifteen (15) days after a licensee ceases to engage in the business of student loan servicing in this

state for any reason, including a business decision to terminate operations in this state, license

revocation, bankruptcy or voluntary dissolution, such licensee shall provide written notice of

surrender to the director and shall surrender to the director its license for each location in which

such licensee has ceased to engage in such business. The written notice of surrender shall identify

the location where the records of the licensee will be stored and the name, address and telephone

number of an individual authorized to provide access to the records. The surrender of a license

does not reduce or eliminate the licensee's civil or criminal liability arising from acts or omissions

occurring prior to the surrender of the license, including any administrative actions undertaken by

the director to revoke or suspend a license, assess a civil penalty, order restitution or exercise any

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other authority provided to the director.

     (b) A license may be renewed for the ensuing twenty-four (24) month period upon the

filing of an application containing all required documents and fees as provided in this chapter.

Such renewal application shall be filed on or before September 1 of the year in which the license

expires. Any renewal application filed with the director after September 1 shall be accompanied

by a one hundred dollar ($100) late fee.

     (c) If an application for a renewal license has been filed with the director on or before the

date the license expires, the license sought to be renewed shall continue in full force and effect

until the issuance by the director of the renewal license applied for or until the director has

notified the licensee in writing of the director's refusal to issue such renewal license together with

the grounds upon which such refusal is based. The director may refuse to issue a renewal license

on any ground on which the director might refuse to issue an initial license.

     (d) If the director determines that a check filed with the director to pay a license or

renewal fee has been dishonored, the director shall automatically suspend the license or the

renewal license that has been issued but is not yet effective. The director shall give the licensee

notice of the automatic suspension pending proceedings for revocation or refusal to renew and an

opportunity for a hearing on such actions in accordance with the provisions of this chapter.

     (e) The applicant or licensee shall notify the director, in writing, of any change in the

information provided in its initial application for a license or its most recent renewal application

for such license, as applicable, not later than ten (10) business days after the occurrence of the

event that results in such information becoming inaccurate.

     (f) The director may deem an application for a license abandoned if the applicant fails to

respond to any request for information required under this chapter, or any regulations adopted

pursuant to said sections. The director shall notify the applicant, in writing, that if the applicant

fails to submit such information not later than sixty (60) days after the date on which such request

for information was made, the application shall be deemed abandoned. An application filing fee

paid prior to the date an application is deemed abandoned pursuant to this subsection shall not be

refunded. Abandonment of an application pursuant to this subsection shall not preclude the

applicant from submitting a new application for a license under the provisions of this chapter.

     16-59.1-9. Licensee to act under license.

     No person licensed to act within this state as a student loan servicer shall do so under any

other name or at any other place of business than that named in the license.

     Any change of location of a place of business of a licensee shall require prior written

notice to the director. Not more than one place of business shall be maintained under the same

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license but the director may issue more than one license to the same licensee upon compliance

with the provisions of this chapter as to each new licensee. A license shall not be transferable or

assignable.

     16-59.1-10. Maintenance of records.

     (a) Each student loan servicer licensee and persons exempt from licensure pursuant to

this chapter shall maintain adequate records of each student education loan transaction for not less

than two (2) years following the final payment on such student education loan or the assignment

of such student education loan, whichever occurs first, or such longer period as may be required

by any other provision of law.

     (b) If requested by the director, each student loan servicer shall make such records

available or send such records to the director by registered or certified mail, return receipt

requested, or by any express delivery carrier that provides a dated delivery receipt, not later than

five (5) business days after requested by the director to do so. Upon request, the director may

grant a licensee additional time to make such records available or send the records to the director.

     16-59.1-11. Prohibited conduct.

     (a) No student loan servicer shall:

     (1) Directly or indirectly employ any scheme, device or artifice to defraud or mislead

student loan borrowers;

     (2) Engage in any unfair or deceptive practice toward any person or misrepresent or omit

any material information in connection with the servicing of a student education 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 education loan, the terms and conditions of the loan agreement or

the borrower's obligations under the loan;

     (3) Obtain property by fraud or misrepresentation;

     (4) Knowingly misapply or recklessly apply student education loan payments to the

outstanding balance of a student education loan;

     (5) Knowingly or recklessly provide inaccurate information to a credit bureau, thereby

harming a student loan borrower's creditworthiness;

     (6) Fail to report both the favorable and unfavorable payment history of the student loan

borrower to a nationally recognized consumer credit bureau at least annually if the student loan

servicer regularly reports information to a credit bureau;

     (7) Refuse to communicate with an authorized representative of the student loan borrower

who provides a written authorization signed by the student loan borrower, provided the student

loan servicer may adopt procedures reasonably related to verifying that the representative is in

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fact authorized to act on behalf of the student loan borrower; or

     (8) Negligently make any false statement or knowingly and willfully make any omission

of a material fact in connection with any information or reports filed with a governmental agency

or in connection with any investigation conducted by the director or another governmental

agency.

     16-59.1-12. Conduct of investigations.

     (a) In addition to any authority provided under this chapter, the director shall have the

authority to conduct investigations and examinations as follows:

     (1) For purposes of initial licensing, license renewal, license suspension, license

revocation, or termination, or general or specific inquiry or investigation to determine compliance

with this chapter, the director may access, receive and use any books, accounts, records, files,

documents, information or evidence including, but not limited to:

     (i) Criminal, civil and administrative history information;

     (ii) Personal history and experience information, including independent credit reports

obtained from a consumer reporting agency described in the Fair Credit Reporting Act, 15 U.S.C.

§1681a; and

     (iii) Any other documents, information or evidence the director deems relevant to the

inquiry or investigation regardless of the location, possession, control or custody of such

documents, information, or evidence.

     (2) For the purposes of investigating violations or complaints arising under this chapter,

or for the purposes of examination, the director may review, investigate or examine any student

loan servicer licensee or person subject to said chapter as often as necessary in order to carry out

the purposes of this chapter. The director may direct, subpoena or order the attendance of and

examine under oath all persons whose testimony may be required about the student education

loan or the business or subject matter of any such examination or investigation, and may direct,

subpoena or order such person to produce books, accounts, records, files, and any other

documents the director deems relevant to the inquiry.

     (b) In making any examination or investigation authorized by this section, the director

may control access to any documents and records of the student loan servicer licensee or person

under examination or investigation. The director may take possession of the documents and

records or place a person in exclusive charge of the documents and records in the place where

they are usually kept. During the period of control, no person shall remove or attempt to remove

any of the documents and records except pursuant to a court order or with the consent of the

director. Unless the director has reasonable grounds to believe the documents or records of the

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student loan servicer licensee or person have been, or are at risk of being, altered or destroyed for

purposes of concealing a violation of this chapter, the student loan servicer licensee or owner of

the documents and records shall have access to the documents or records as necessary to conduct

its ordinary business affairs.

     (c) In order to carry out the purposes of this section, the director may:

     (1) Retain attorneys, accountants or other professionals and specialists as examiners,

auditors, or investigators to conduct or assist in the conduct of examinations or investigations;

     (2) Enter into agreements or relationships with other government officials or regulatory

associations in order to improve efficiencies and reduce regulatory burden by sharing resources,

standardized or uniform methods or procedures, and documents, records, information or evidence

obtained under this section;

     (3) Use, hire, contract or employ public or privately available analytical systems,

methods or software to examine or investigate the student loan servicer licensee or person subject

to the provisions of this chapter;

     (4) Accept and rely on examination or investigation reports made by other government

officials, within or without this state; and

     (5) Accept audit reports made by an independent certified public accountant for the

student loan servicer licensee or person subject to the provisions of this chapter in the course of

that part of the examination covering the same general subject matter as the audit and may

incorporate the audit report in the report of examination, report of investigation or other writing

of the director.

     (d) The authority of this section shall remain in effect, whether such student loan servicer

licensee or person subject to the provisions of this chapter, acts or claims to act under any

licensing or registration law of this state, or claims to act without such authority.

     (e) No student loan servicer licensee or person subject to investigation or examination

under this section may knowingly withhold, abstract, remove, mutilate, destroy or secrete any

books, records, computer records or other information.

     16-59.1-13. Suspension or revocation of license.

     (a) The director may suspend, revoke or refuse to renew any license issued under the

provisions of this chapter, or take any other action provided for in this chapter, if the director

finds that:

     (1) The licensee has violated any provision of this chapter or any regulation or order

lawfully made pursuant to and within the authority of this chapter; or

     (2) Any fact or condition exists which, if it had existed at the time of the original

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application for the license, clearly would have warranted a denial of such license. No abatement

of the license fee shall be made if the license is surrendered, revoked or suspended prior to the

expiration of the period for which it was issued.

     (b) Whenever it appears to the director that any person has violated, is violating or is

about to violate any of the provisions of this chapter, or any regulation adopted pursuant to said

sections, or any licensee or any owner, director, officer, member, partner, shareholder, trustee,

employee, or agent of such licensee has committed any fraud, engaged in dishonest activities or

made any misrepresentation, the director may take action against such person or licensee in

accordance with the provisions of this chapter.

     16-59.1-14. Student loan servicer compliance.

     A student loan servicer shall comply with all applicable federal laws and regulations

relating to student loan servicing, including, but not limited to, the Truth-in-Lending Act, 15

U.S.C. §1601 et seq., as from time to time amended, and the regulations promulgated thereunder.

In addition to any other remedies provided by law, a violation of any such federal law or

regulation shall be deemed a violation of this section and a basis upon which the commissioner

may take enforcement action pursuant to the provisions of this chapter.

     16-59.1-15. Rules and regulations.

     The director of business regulation may promulgate rules and regulations to implement

the provisions of this chapter.

     SECTION 2. This act shall take effect on July 1, 2017.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO EDUCATION -- THE STUDENT LOAN BILL OF RIGHTS

***

     This act would authorize the creation of the position of student loan ombudsman within

the department of business regulation.

     The duties of the ombudsman would be to attempt to resolve complaints from student

loan borrowers, compile and analyze data on such complaints, and to otherwise assist student loan

borrowers. The act would also provide that the department of business regulation would review

and evaluate applications for licensure as a student loan issuer.

     This act would take effect on July 1, 2017.

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