Legislation Requires Companies Servicing Student Loans in New York to Obtain a New York State License
Approximately 2.8 Million Student Loan Borrowers in New York State
Governor Andrew M. Cuomo, Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie today announced that the FY 2020 Enacted Budget includes legislation that will provide sweeping new protections for student loan borrowers. The protections require companies servicing student loans held by New Yorkers to obtain a state license and meet standards consistent with the laws and regulations governing other significant lending products, such as mortgages. This is the latest step in Governor Cuomo's historic commitment to protecting the approximately 2.8 million student loan borrowers in New York State.
"For too long student loan servicers have gone unchecked and unregulated, and the growing student loan debt crisis threatens New York's future economic viability," Governor Cuomo said. "As Washington continues to strip away important consumer protections at every turn, legislation in this year's enacted budget will protect student borrowers from predatory practices that could derail their dreams and harm their futures."
Senate Majority Leader Andrea Stewart-Cousins said, "The Senate Majority has been at the forefront of standing up for New York students of all ages. We understand that massive student loan debt has stifled economic progress and has been an impediment to more New Yorkers pursuing and earning advanced degrees. The Senate Majority was proud to support more protections for student loan borrowers, and we will continue to work tirelessly to remove barriers to higher education."
Assembly Speaker Carl Heastie said, "The Assembly Majority has long been committed to making college accessible and affordable to every New Yorker. For many students, higher education would be out of reach without student loans. But as student debt continues to rise both nationally and here in New York State, our students need protection from predatory lending and unscrupulous practices that put profits over people. I am proud that this measure offers students the protections they need and deserve so that they can focus on what really matters - using their education to improve their lives and communities."
"We're committed to ensuring all New Yorkers have the opportunity to pursue an affordable, quality education," said Lieutenant Governor Kathy Hochul. "The student loan crisis is a real issue, and working to protect those who are the most financially vulnerable is always a top priority. This new measure will require companies to meet standards and regulations to best serve the millions of loan borrowers across the state."
This legislation will ensure that no student loan servicer can mislead a borrower or engage in any predatory act or practice, misapply payments, provide credit reporting agencies with inaccurate information or engage in other practices that may harm the borrower. Moreover, it authorizes DFS to regulate and license student loan servicers that serve New York borrowers, and subjects all providers to regular examinations by DFS to ensure they meet standards consistent with the laws and regulations governing other significant lending products.
Based on complaints received and investigations conducted by DFS's Student Protection Unit, established by Governor Cuomo as part of his 2014-15 Executive Budget to serve as a consumer watchdog for New York's students, DFS became aware of significant problems facing New York consumers when dealing with student loan servicers. The difficulties borrowers experience with student loan servicers are nearly identical to those uncovered and remedied by DFS in the mortgage loan servicing industry and include: problems with how servicers handle borrowers' payments, what information or notices are given to borrowers, the kinds of relief available to borrowers experiencing financial distress and poor customer service.
Acting Financial Superintendent Lacewell said, "New York is tackling the growing student debt crisis head on. This legislation provides sweeping new protections for millions of student loan borrowers, cracks down on unscrupulous lending practices, and helps ease the financial burden that New Yorkers take on to further their education."
Senator Kevin Thomas said, "New Yorkers deserve a fair and equal opportunity to further their education. In my former role as an attorney, I saw far too many students victimized by predatory lenders while trying to pursue a better life. This legislation represents a major success in securing much-needed consumer protections for student loan borrowers."
Assembly Member Kenneth Zebrowski said, "Nearly everyone you meet is struggling with student loan debt, myself included. As Chair of the Banks Committee, this crisis is something that I have worked tirelessly on and I am thankful for Governor Cuomo's leadership on this issue. Now more than ever, it is imperative that New York State leads the charge in protecting student loan borrowers and holding bad actors accountable. These new protections will ensure student loan servicers act in the best interest of the borrower and will provide critical consumer protections to millions of New Yorkers."
Seth Frotman, Executive Director of the Student Borrower Protection Center and former student loan ombudsman at the Consumer Financial Protection Bureau said, "Governor Cuomo is demanding accountability from student loan servicers and giving the more than two million New York student loan borrowers a powerful ally in the fight to reclaim their financial futures. The deck was already stacked against student loan borrowers when Washington turned its back on them and I applaud the State of New York for taking on this critical fight."
Chuck Bell, Programs Director for Consumer Reports said, "New York State's new student loan protections are urgently needed to protect student loan borrowers against unfair and predatory practices. This important new law will help ensure that student loan servicers do not mislead borrowers, misapply payments, or provide credit reporting agencies with inaccurate information."
Evan Denerstein, Senior Staff Attorney at Mobilization for Justice, Inc. said, "We commend Governor Cuomo and the New York State legislature for passing legislation that will empower DFS to protect New York student loan borrowers and rein in rampant student loan servicing abuses. With the nation facing a student debt crisis and the federal government abdicating its responsibility to student loan borrowers, this is an issue that is in urgent need of state action. We look forward to working with the Department to ensure that borrowers receive and have access to accurate information about their loans, that their payments are properly allocated, and that they are informed of the repayment and forgiveness options that best suit their needs."
Since taking office in 2011, Governor Cuomo has been a leading voice in protecting access to higher education, most notably through the first-in-the nation Excelsior Scholarship, a program that allows eligible full-time students to attend a SUNY or CUNY two-year or four-year college tuition-free. The Governor has also been a champion for increasing protections for the approximately 2.8 million student loan borrowers in New York. Additionally, the Governor created the Get on Your Feet Loan Forgiveness Program that provides up to 24 months of federal student loan debt relief to recent New York State college graduates who make $50,000 or less a year.
In 2018, Governor Cuomo included legislation in the state's 2019 Budget expressly prohibiting the suspension of professional licenses of individuals behind or in default on their student loans. This practice severely limits the ability of people to support themselves and their families, and ultimately to pay back their student loans, creating a further financial death spiral. By expressly prohibiting the practice, the legislation protects current and future New Yorkers.
As New York's Attorney General, Andrew Cuomo spearheaded a nationwide reform of the student loan industry. His nationwide investigation into the student loan industry resulted in settlements with the largest student lenders in America and nearly 30 schools, returning millions of dollars to students and their families and the establishment of a multimillion dollar National Education Fund dedicated to educating and assisting the country's high school students and their families about the financial aid process. Furthermore, Attorney General Cuomo's groundbreaking Code of Conduct became New York State law as the Student Lending Accountability, Transparency, and Enforcement (SLATE) Act of 2007 and became national law as the federal Higher Education Opportunity Act of 2008.