SB0160

SENATE BILL 160

54th legislature - STATE OF NEW MEXICO - first session, 2019

INTRODUCED BY

Bill Tallman and Dayan Hochman-Vigil

AN ACT

RELATING TO FINANCIAL INSTITUTIONS; ENACTING THE STUDENT LOAN BILL OF RIGHTS ACT; PROVIDING PENALTIES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Student Loan Bill of Rights Act"."

SECTION 2. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] DEFINITIONS.--As used in the Student Loan Bill of Rights Act:

A. "director" means the director of the division;

B. "division" means the financial institutions division of the regulation and licensing department;

C. "servicing" means:

(1) receiving scheduled periodic payments from a student loan borrower pursuant to the terms of a student education loan;

(2) applying 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

(3) performing other administrative services with respect to student education loans;

D. "student education loan" means a loan primarily for personal use to finance higher-education-related expenses, but does not include an isolated personal loan made by an individual to another for higher-education-related expenses;

E. "student loan borrower" means:

(1) a resident of New Mexico who has received or agreed to pay a student education loan; or

(2) a person who shares responsibility with a resident of New Mexico for repaying a student education loan; and

F. "student loan servicer" means a person engaged in the business of servicing of student education loans to a student loan borrower."

SECTION 3. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] LICENSE REQUIRED--EXEMPTIONS.--

A. A person shall not act directly or indirectly as a student loan servicer without first obtaining a license from the division pursuant to the Student Loan Bill of Rights Act, unless that person is exempt from licensure pursuant to Subsection B of this section.

B. The following persons are exempt from licensing requirements pursuant to the Student Loan Bill of Rights Act:

(1) a bank or credit union;

(2) a wholly owned subsidiary of a bank or credit union; and

(3) an operating subsidiary of a bank or credit union where each owner of the operating subsidiary is wholly owned by the same bank or credit union."

SECTION 4. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] LICENSE APPLICATION--INVESTIGATION--LICENSE ISSUANCE.--

A. A person seeking to act as a student loan servicer shall make a written application to the director for an initial license in a form prescribed by the director. The application shall include:

(1) a financial statement prepared by a certified or registered 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:

(a) applicant;

(b) partners, if the applicant is a partnership;

(d) officers, directors and principal employees, if the applicant is a corporation;

(3) sufficient information pertaining to the history of criminal convictions of the applicant, partners, members, officers, directors or principal employees as the director deems necessary to make the findings required pursuant to Subsection D of this section;

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

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

B. Upon the filing of an application for an initial license and the payment of required fees, the director shall investigate the financial condition and responsibility, the financial and business experience and the character and general fitness of the applicant.

C. The director may conduct a state and national criminal history records check of the applicant and of each partner, member, officer, director and principal employee of the applicant.

D. The director shall issue a license for a student loan servicer pursuant to the Student Loan Bill of Rights Act if the director finds that:

(1) the applicant has submitted a completed application;

(2) the applicant's financial condition is sound;

(3) the applicant's business will be conducted honestly, fairly, equitably, carefully and efficiently within the purposes and intent of the Student Loan Bill of Rights Act and in a manner commanding the confidence and trust of the community;

(4) a person has not made an incorrect statement of a material fact on behalf of the applicant either in the application or in a report or statement made pursuant to the Student Loan Bill of Rights Act;

(5) a person on behalf of the applicant has not knowingly omitted to state a material fact on behalf of the applicant necessary to give the director information lawfully required by the director pursuant to the Student Loan Bill of Rights Act;

(6) the applicant has paid the license fee and investigation fee required pursuant to this section;

(7) the applicant has met all other requirements pursuant to the Student Loan Bill of Rights Act as determined by the director; and

(8) if the applicant is:

(a) an individual, that the individual is in all respects properly qualified and of good character;

(b) a partnership, that each partner is in all respects properly qualified and of good character;

(c) a corporation or association, that the following are in all respects properly qualified and of good character, including the corporation's or association's: 1) president; 2) executive committee chair; 3) senior officer responsible for the corporation's business; 4) chief financial officer; or 5) or any other person who performs functions similar to those described in Items 1) through 4) of this subparagraph and as determined by the director; and 6) each director, each trustee and each shareholder owning ten percent or more of each class of the securities of the corporation or association; or

(d) a limited liability company, that each member is in all respects properly qualified and of good character."

SECTION 5. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] LICENSE EXPIRATION--LICENSE SURRENDER--LICENSE RENEWAL--LICENSE SUSPENSION--INFORMATION UPDATE--LICENSE ABANDONMENT--NO ABATEMENT OF FEES.--

A. A license issued pursuant to the Student Loan Bill of Rights Act shall expire at the close of business on September 30 of the year following its issuance, unless renewed or earlier surrendered, suspended or revoked pursuant to the Student Loan Bill of Rights Act.

B. Not later than fifteen days after a licensee ceases to engage in the business of student loan servicing in New Mexico for any reason, the licensee shall provide written notice of surrender to the director and shall surrender to the director its license for each location in which the licensee has ceased to engage in the business of student loan servicing. 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 administrative actions by the director to revoke or suspend a license, assess a civil penalty, order restitution or exercise any other authority provided to the director pursuant to the Student Loan Bill of Rights Act.

C. After notice of surrender of a license is provided to the director in accordance with this section, the license may be renewed for the next twenty-four-month period upon the filing of an application containing all required documents and fees required by the Student Loan Bill of Rights Act. The renewal application shall be filed on or before September 1 of the year in which the license expires. A renewal application filed with the director after September 1 of the year in which the license expires, but that is accompanied by a one-hundred-dollar ($100) late fee, shall be deemed to be timely. 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 director issues the renewed license or the director has notified the licensee in writing of the director's refusal to renew the license, including the grounds for the refusal. The director may refuse to renew a license on any ground upon which the director may refuse to issue an initial license.

D. If the director determines that a check filed with the director to pay a renewal fee has been dishonored, the director shall automatically suspend the license. 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 pursuant to the Uniform Licensing Act.

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 business days after the occurrence of the event that results in that information becoming inaccurate.

F. The director shall deem an application for a license abandoned if the applicant fails to respond to a request for information required pursuant to the Student Loan Bill of Rights Act or any rules adopted pursuant to that act. The director shall notify the applicant, in writing, that if the applicant fails to submit that information not later than sixty days after the date on which such request for information was made, the application shall be deemed abandoned. An application filing fee paid before the date an application is deemed abandoned pursuant to this subsection shall not be refunded. Abandonment of an application does not preclude the applicant from submitting a new application for a license pursuant to the Student Loan Bill of Rights Act.

G. A license fee paid pursuant to the Student Loan Bill of Rights Act shall not be abated."

SECTION 6. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] LICENSEE NAMES AND LOCATIONS--TRANSFERABILITY--ASSIGNABILITY.--

A. A licensed student loan servicer shall not service student education loans under a name or at a place of business other than as listed in the license. A change of a place of business shall require prior written notice to the director. Not more than one place of business shall be maintained under the same license, but the director may issue more than one license to the same licensee that is in compliance with the provisions of the Student Loan Bill of Rights Act.

B. A license for a student loan servicer is not transferable or assignable."

SECTION 7. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] RECORD RETENTION.--

A. A student loan servicer shall maintain adequate records of each student education loan transaction for at least two years following the final payment on a student education loan or the assignment of a student education loan, whichever occurs first, or a longer period the director may require.

B. Within five business days of receipt of a request for student loan education records from the director, a student loan servicer shall make the records available to the director, or shall send the records to the director by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt. Upon request, the director may grant a licensee additional time to make the records available or send the records to the director."

SECTION 8. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] STUDENT LOAN SERVICERS--PROHIBITED ACTS.-- A student loan servicer shall not:

A. directly or indirectly employ a scheme, device or artifice intended to defraud or mislead a student loan borrower;

B. engage in an unfair or deceptive practice toward a person or misrepresent or omit material information in connection with the servicing of a student education loan, including misrepresenting the amount, nature or terms of a fee or payment due or claimed to be due on a student education loan, the terms and conditions of the loan agreement or the student loan borrower's obligations under the loan;

C. obtain property by fraud or misrepresentation;

D. knowingly misapply or recklessly apply student education loan payments to the outstanding balance of a student education loan;

E. knowingly or recklessly provide inaccurate information to a credit bureau;

F. fail to report a favorable or unfavorable payment history of a 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;

G. refuse to communicate with an authorized representative of a student loan borrower who provides a written authorization signed by the student loan borrower; provided that the student loan servicer may adopt procedures reasonably related to verifying that the representative is authorized to act on behalf of the student loan borrower; or

H. negligently make a false statement or knowingly and wilfully make an omission of a material fact in connection with any information or report filed with a governmental agency or in connection with an investigation conducted by the director or another governmental agency."

SECTION 9. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] POWERS OF THE DIRECTOR.--

A. The director may conduct investigations and examinations for purposes of initial licensing, license renewal, license suspension, license revocation or termination, or for general or specific inquiry or investigation, to determine compliance with the Student Loan Bill of Rights Act. The director may access, receive and use any 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.

B. For the purposes of investigating violations or complaints arising pursuant to the Student Loan Bill of Rights Act or for the purposes of examination, the director may review, investigate or examine the activities of any student loan servicer as often as necessary to carry out the purposes of that act. The director may direct, subpoena or order the attendance of and examine under oath a person whose testimony may be required about the student education loan or the business or subject matter of the examination or investigation and may direct, subpoena or order the person to produce books, accounts, records, files and any other documents the director deems relevant to the inquiry.

C. In making an examination or investigation authorized by the Student Loan Bill of Rights Act, the director may control access to any documents or records of the student loan servicer licensee or person under examination or investigation related to the student education loan. 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, a person shall not 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 student loan servicer licensee or person have been, or are at risk of being, altered or destroyed for purposes of concealing a violation of the Student Loan Bill of Rights Act, 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.

D. To fulfill the duties imposed by this section and 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 to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures and documents, records, information or evidence obtained pursuant to 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 Student Loan Bill of Rights Act;

(4) accept and rely on examination or investigation reports made by other government officials, whether in or outside of New Mexico; and

(5) accept audit reports made by an independent certified public accountant for the student loan servicer licensee or person subject to the Student Loan Bill of Rights Act 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.

E. The authority of this section shall remain in effect, whether a student loan servicer licensee or person subject to the provisions of the Student Loan Bill of Rights Act acts or claims to act under any licensing or registration law of New Mexico or claims to act without such authority.

F. A student loan servicer licensee or person subject to investigation or examination under this section shall not knowingly withhold, abstract, remove, mutilate, destroy or secrete any books, records, computer records or other information."

SECTION 10. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] ENFORCEMENT BY DIRECTOR.--

A. To ensure the effective supervision and enforcement of the Student Loan Bill of Rights Act and in accordance with the procedures provided in the Uniform Licensing Act, the director may:

(1) deny, suspend, revoke or decline to renew a license for a violation of the Student Loan Bill of Rights Act, rules issued pursuant to that act or an order or directive entered pursuant to that act;

(2) deny, suspend, revoke or decline to renew a license if an applicant or student loan servicer fails at any time to meet the requirements of Subsection D of Section 4 of the Student Loan Bill of Rights Act;

(3) impose fines on a student loan servicer pursuant to Subsection B of this section;

(4) bar or suspend a student loan servicer from licensure in New Mexico as a student loan servicer; and

(5) issue orders or directives as follows:

(a) order or direct student loan servicers to cease and desist from conducting business related to student loans, including issuing an immediate temporary order to cease and desist;

(b) order or direct student loan servicers to cease any violations of the Student Loan Bill of Rights Act; and

(c) enter immediate temporary orders to cease any business licensed pursuant to the Student Loan Bill of Rights Act if the director determines that the license was erroneously granted or the licensed student loan servicer is currently in violation of that act.

B. The director may impose an administrative penalty on a student loan servicer if the director finds, on the record after notice and opportunity for hearing, that the student loan servicer has violated or failed to comply with any requirement of the Student Loan Bill of Rights Act or any rule promulgated by the director pursuant to that act or any order issued pursuant to authority of that act. The maximum amount of penalty for each act or omission shall be five thousand dollars ($5,000)."

SECTION 11. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] JUDICIAL ENFORCEMENT.--

A. Upon a showing by the director that a person has violated, or is about to violate, the Student Loan Bill of Rights Act or any rule or order of the director pursuant to that act, the district court of the first judicial district or other appropriate district court in the state may grant or impose one or more of the following appropriate legal or equitable remedies:

(1) a temporary restraining order, permanent or temporary prohibitory or mandatory injunction or a writ of prohibition or mandamus;

(2) a civil penalty up to a maximum of five thousand dollars ($5,000) for each violation;

(3) declaratory judgment;

(4) restitution to student loan borrowers;

(5) recovery by the director of all costs and expenses for conducting an investigation or the bringing of any enforcement action under the Student Loan Bill of Rights Act; or

(6) other relief as the court deems just.

B. In determining the appropriate relief, the court shall consider enforcement actions taken and imposed by the director pursuant to the Student Loan Bill of Rights Act in connection with the transactions constituting violations of that act.

C. The court shall not require the director to post bond in an action pursuant to this section."

SECTION 12. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] CRIMINAL PENALTIES.--

A. An individual who acts as a student loan servicer without being properly licensed pursuant to the Student Loan Bill of Rights Act is, for a first offense, guilty of a misdemeanor and upon conviction shall be sentenced in accordance with the provisions of Subsection A of Section 31-19-1 NMSA 1978.

B. In the case of a conviction pursuant to Subsection A of this section, the court may impose a deferred sentence in accordance with Section 31-20-6 NMSA 1978.

C. An individual who violates Subsection A of this section is, for a second or subsequent offense, guilty of a fourth degree felony and upon conviction shall be sentenced in accordance with the provisions of Section 31-18-15 NMSA 1978."

SECTION 13. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] COMPLIANCE WITH FEDERAL LAW.--A student loan servicer shall comply with all applicable federal laws and regulations relating to student loan servicing, including the Truth in Lending Act, 15 U.S.C. Section 1601 et seq., as amended, and the regulations promulgated under that act. In addition to any other remedies provided by law, a violation of the federal law or regulation is a violation of the Student Loan Bill of Rights Act."

SECTION 14. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] PROMULGATION OF RULES.--The director shall promulgate rules necessary to implement the Student Loan Bill of Rights Act. The rules shall be subject to judicial review in the manner set forth in Section 12-8-8 NMSA 1978."

SECTION 15. A new section of Chapter 61 NMSA 1978 is enacted to read:

"[NEW MATERIAL] STUDENT LOAN OMBUDSMAN--DUTIES--ANNUAL REPORT.--

A. The director shall designate a student loan ombudsman within the division to provide timely assistance to student loan borrowers.

B. The student loan ombudsman shall:

(1) receive, review and attempt to resolve complaints from student loan borrowers;

(2) compile and analyze data regarding student loan borrower complaints as described in Paragraph (1) of this subsection;

(3) assist student loan borrowers in understanding their rights and responsibilities under the terms of student education loans;

(4) provide information to the public, state agencies, state 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 make recommendations for any changes deemed necessary;

(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, public institutions of higher education, student loan servicers and other participants in student education loan lending with student loan servicing concerns; and

(8) take any other action deemed necessary to fulfill the duties of the student loan ombudsman.

C. On or before July 1, 2020, the student loan ombudsman shall establish and maintain a student loan borrower education course that includes educational presentations and materials regarding student education loans. The student loan borrower education course shall review key loan terms, documentation requirements, monthly payment obligations, income-based repayment options, loan forgiveness and disclosure requirements. Any license, renewal, late filing or investigation fees imposed pursuant to the Student Loan Bill of Rights Act shall be distributed to the division for the administration and expenses incurred for offering the course.

D. On or before December 1, 2021, and annually thereafter, the director shall submit a report to the appropriate legislative interim committee and address the following:

(1) the implementation of the Student Loan Bill of Rights Act;

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

(3) any recommendations pertaining to the division's regulation of student loan servicers and the enforcement of the provisions of the Student Loan Bill of Rights Act."

SECTION 16. EFFECTIVE DATE.--The effective date of the provisions of this act is January 1, 2020.

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