SB0085

SENATE BILL 85

53rd legislature - STATE OF NEW MEXICO - second session, 2018

INTRODUCED BY

Bill Tallman

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

SECTION 2. [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 any 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 any loan primarily for personal use to finance education or other school-related expenses;

E. "student loan borrower" means:

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

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

F. "student loan servicer" means any person responsible for the servicing of student education loans to a student loan borrower.

SECTION 3. [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, including attempts to resolve student loan borrower complaints;

(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 actions deemed necessary to fulfill the duties of the student loan ombudsman as set forth in this subsection.

C. On or before July 1, 2019, the student loan ombudsman shall establish and maintain a student loan borrower education course that shall include educational presentations and materials regarding student education loans. Such program shall include key loan terms, documentation requirements, monthly payment obligations, income-based repayment options, loan forgiveness and disclosure requirements.

D. On or before January 1, 2020, and annually thereafter, the director shall submit a report to the legislature addressing 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) additional steps that may need to be taken for the division to gain appropriate regulatory control over the licensing of student loan servicers and the enforcement of the provisions of the Student Loan Bill of Rights Act.

SECTION 4. [NEW MATERIAL] LICENSE REQUIRED--EXEMPTIONS.--

A. No person shall 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 such 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 5. [NEW MATERIAL] LICENSE APPLICATION--INVESTIGATION--LICENSE ISSUANCE.--

A. Any person seeking to act as a student loan servicer shall make a written application to the director for an initial license in such form as the director may prescribe. Such application shall be accompanied by:

(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'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 the Student Loan Bill of Rights Act and in a manner commanding the confidence and trust of the community;

(3) 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 Student Loan Bill of Rights Act;

(4) no person on behalf of the applicant has knowingly omitted to state any material fact necessary to give the director any information lawfully required by the director pursuant to the Student Loan Bill of Rights Act;

(5) the applicant has paid the license fee and investigation fee required pursuant to Paragraphs (4) and (5) of Subsection A of this section; and

(6) the applicant has met all other requirements as determined by the director; and 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 president, chair 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 director, each director, each trustee and each shareholder owning ten percent or more of each class of the securities of such corporation are in all respects properly qualified and of good character; or

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

SECTION 6. [NEW MATERIAL] LICENSE EXPIRATION--LICENSE SURRENDER--LICENSE RENEWAL--LICENSE SUSPENSION--INFORMATION UPDATE--LICENSE ABANDONMENT--NO ABATEMENT OF FEES.--

A. A license issued pursuant to Section 5 of the Student Loan Bill of Rights Act 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 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, including a business decision to terminate operations in New Mexico, license revocation, bankruptcy or voluntary dissolution, the 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 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 any administrative actions undertaken 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. A license may be renewed for the ensuing twenty-four-month period upon the filing of an application containing all required documents and fees as required by Subsection A of Section 5 of the Student Loan Bill of Rights Act. 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 of the year in which the license expires shall be accompanied by a one-hundred-dollar ($100) late fee, and any such filing 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 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 a check filed with the director to pay a 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.

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 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 pursuant to the Student Loan Bill of Rights Act or any regulations adopted pursuant to that act. The director shall notify the applicant, in writing, that if the applicant fails to submit such 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 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 pursuant to the Student Loan Bill of Rights Act.

G. 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.

SECTION 7. [NEW MATERIAL] LICENSEE NAMES AND LOCATIONS--TRANSFERABILITY--ASSIGNABILITY.--

A. No person licensed as a student loan servicer shall service student education loans under a name or at a place of business than that as 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 license, but the director may issue more than one license to the same licensee upon compliance with the provisions of the Student Loan Bill of Rights Act.

B. A license for a student loan servicer shall not be transferable or assignable.

SECTION 8. [NEW MATERIAL] RECORD RETENTION.--

A. A student loan servicer licensee, and persons exempt from licensure pursuant to Subsection B of Section 4 of the Student Loan Bill of Rights Act, shall maintain adequate records of each student education loan transaction for not less than two years following the final payment on a student education loan or the assignment of a student education loan, whichever occurs first, or such longer period as may be required by the director.

B. If requested by the director, a student loan servicer shall make student education loan records available to the director, or shall send student education loan 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 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.

SECTION 9. [NEW MATERIAL] PROHIBITED ACTS--UNFAIR TRADE PRACTICE.--

A. A student loan servicer shall not:

(1) directly or indirectly employ any scheme, device or artifice intended 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 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 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 in fact authorized to act on behalf of the student loan borrower; or

(8) negligently make any false statement or knowingly and wilfully 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.

B. A violation of Subsection A of this section constitutes an unfair or deceptive trade practice pursuant to the Unfair Practices Act.

SECTION 10. [NEW MATERIAL] POWERS OF THE DIRECTOR.--

A. The director has the authority to 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 books, accounts, records, files, documents, information or evidence, including:

(1) criminal, civil and administrative history information;

(2) personal history and experience information, including independent credit reports obtained from a consumer reporting agency described in Section 603(p) of the federal Fair Credit Reporting Act, 15 U.S.C. 1681a; and

(3) 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.

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 any student loan servicer licensee or person subject to said sections as often as necessary in order to carry out the purposes of said sections. 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.

C. In making any examination or investigation authorized by the Student Loan Bill of Rights Act, 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 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. In order 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 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 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 such 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. 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.

SECTION 11. [NEW MATERIAL] ENFORCEMENT BY DIRECTOR.--

A. In order to ensure the effective supervision and enforcement of the Student Loan Bill of Rights 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 or rules issued pursuant to that act or an order or a directive entered pursuant to that act;

(2) deny, suspend, revoke or decline to renew a license if an applicant or student loan servicer:

(a) fails at any time to meet the requirements of Subsection D of Section 5 of the Student Loan Bill of Rights Act; or

(b) withholds information or makes a material misstatement in an application for a license or renewal of a license;

(3) order restitution against a student loan servicer for violations of the Student Loan Bill of Rights Act;

(4) impose fines on a student loan servicer pursuant to Subsections C and D of this section;

(5) order or direct such other affirmative action as the director deems necessary;

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

(7) issue orders or directives pursuant to the Student Loan Bill of Rights Act as follows:

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

(b) order or direct student loan servicers to cease any harmful activities or violations of the Student Loan Bill of Rights Act, including issuing an immediate temporary order to cease and desist; and

(c) enter immediate temporary orders to cease business pursuant to a license issued pursuant to the authority granted 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 a civil 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.

C. The maximum amount of penalty for each act or omission described in this section shall be five thousand dollars ($5,000).

D. Each violation or failure to comply with any directive or order of the director is a separate and distinct violation or failure.

SECTION 12. [NEW MATERIAL] NOTICE OF CONTEMPLATED ACTION--HEARINGS.--

A. When the director contemplates taking any action specified in Section 11 of the Student Loan Bill of Rights Act, the director shall serve upon the applicant or licensed student loan servicer a written notice containing a statement:

(1) that the director has sufficient evidence that, if not rebutted or explained, will justify the director in taking the contemplated action;

(2) indicating the general nature of the evidence; and

(3) that unless the applicant or licensed student loan servicer within twenty days after service of the notice deposits in the mail a certified return receipt requested letter addressed to the director containing a request for a hearing, the director will take the contemplated action.

B. If the applicant or licensed student loan servicer does not mail a request for a hearing within the time and in the manner required by this section, the director may take the action contemplated in the notice, and such action shall be final and not subject to judicial review.

C. If the applicant or licensed student loan servicer mails a request for a hearing as required by this section, the director shall, within thirty days of receipt of the request, notify the applicant or licensed student loan servicer of the time and place of the hearing, the name of the person who shall conduct the hearing for the director and the statutes and regulations authorizing the director to take the contemplated action.

SECTION 13. [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 to grant, the court shall consider enforcement actions taken and sanctions imposed by the director pursuant to Section 11 of 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 14. [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 15. [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 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 the Student Loan Bill of Rights Act and a basis upon which the director may take enforcement action pursuant to Section 11 of the Student Loan Bill of Rights Act.

SECTION 16. [NEW MATERIAL] PROMULGATION OF RULES.--The director shall make reasonable rules necessary for the implementation of the Student Loan Bill of Rights Act; provided that promulgated rules shall be subject to judicial review in the manner set forth in Section 12-8-8 NMSA 1978.

SECTION 17. EFFECTIVE DATE.--The effective date of the provisions of this act is January 1, 2019.

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