Final Regulations Implementing New York Student Loan Servicing Law Take Effect

New licensing and requirements to provide notice of loan servicing to the state are part of the law.

10/31/2019 9:30 AM

NewsStateAdvocacy
Final Regulations Implementing New York Student Loan Servicing Law Take Effect

By John L. Culhane Jr.

Partner, Ballard Spahr LLP

Final regulations adopted by the New York Department of Financial Services (NYDFS) to implement the state’s new student loan servicing law became effective on Oct. 16, 2019 upon the publication by the NYDFS of a Notice of Adoption in the State Register. 

The new law, known as Article 14-A, was enacted on April 1, 2019.  In addition to imposing new licensing requirements, even servicers that are exempt from licensing or deemed licensed must provide notice of their loan servicing to the NYDFS and comply with certain provisions of the law, including those pertaining to nonconforming payments, credit reporting, prohibited practices, and recordkeeping.

The NYDFS rejected most of the suggestions for changes to its proposed regulations made by commentators.  That included rejecting a request for a delayed effective date, an entirely reasonable request, given that that the proposed regulations significantly expanded on various statutory requirements, given that further changes from the proposed regulations were made in the final regulations, as noted below, and given that the final regulations were ultimately issued a week after Article 14-A became effective.

Provisions that were changed in the final regulations include:

  • Definition of “servicing.”  The proposal provided that “servicing” did not include collecting, or attempting to collect, on a defaulted student loan for which no payment has been received for 270 days or more.  The final regulations provides that “servicing” does not include collecting, or attempting to collect, on “a Direct Loan or FFELP Loan for which no payment has been received for more than 270 days or more, a Perkins Loan in default, or on a private student loan in default according to the terms of the loan documents.”  (A corresponding change was made to the definition of a “debt collector” in the final regulations.)
  • Definition of “student loan.”  The proposal defined a “student loan” as “any loan to a borrower to finance postsecondary education or expenses related to postsecondary education.”  The final regulations define a “student loan” as “any loan to a borrower to finance postsecondary education or expenses related to postsecondary education. The term shall not include an extension of credit under an open-end consumer credit plan, a reverse mortgage transaction, or any other loan that is secured by real property or a dwelling.”Handling of nonconforming payments.  The final regulations, unlike the proposal, require a servicer to give a borrower “not less than ten business days to provide instructions” as to how to apply a nonconforming payment.
  • Annual notice of information on repayment options and forgiveness.  The proposal required the annual notice to contain information or links to information regarding repayment and loan forgiveness options. The final regulations require the notice to also include information or links to information regarding discharge options.
  • Hard copies. The final regulations include a requirement for a servicer to “adopt policies and procedures permitting borrowers to obtain hard copies of information required to be disclosed by the student loan servicer, with particular focus on meeting the needs of borrowers without access to the internet.”

Editor’s note: This content is republished with permission from Ballard Spahr LLP.

ACA International members may also find helpful compliance tips through the online ACA SearchPoint® library, including the Student Loans tab. Members must be logged in to the ACA website to access the library.

If you are interested in sharing articles and analysis on legal cases, industry laws and regulations or other relevant topics for possible publication with ACA International, email our Communications Department at comm@acainternational.org.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

Final Regulations Implementing New York Student Loan Servicing Law Take Effect

By John L. Culhane Jr.

Partner, Ballard Spahr LLP

Final regulations adopted by the New York Department of Financial Services (NYDFS) to implement the state’s new student loan servicing law became effective on Oct. 16, 2019 upon the publication by the NYDFS of a Notice of Adoption in the State Register. 

The new law, known as Article 14-A, was enacted on April 1, 2019.  In addition to imposing new licensing requirements, even servicers that are exempt from licensing or deemed licensed must provide notice of their loan servicing to the NYDFS and comply with certain provisions of the law, including those pertaining to nonconforming payments, credit reporting, prohibited practices, and recordkeeping.

The NYDFS rejected most of the suggestions for changes to its proposed regulations made by commentators.  That included rejecting a request for a delayed effective date, an entirely reasonable request, given that that the proposed regulations significantly expanded on various statutory requirements, given that further changes from the proposed regulations were made in the final regulations, as noted below, and given that the final regulations were ultimately issued a week after Article 14-A became effective.

Provisions that were changed in the final regulations include:

  • Definition of “servicing.”  The proposal provided that “servicing” did not include collecting, or attempting to collect, on a defaulted student loan for which no payment has been received for 270 days or more.  The final regulations provides that “servicing” does not include collecting, or attempting to collect, on “a Direct Loan or FFELP Loan for which no payment has been received for more than 270 days or more, a Perkins Loan in default, or on a private student loan in default according to the terms of the loan documents.”  (A corresponding change was made to the definition of a “debt collector” in the final regulations.)
  • Definition of “student loan.”  The proposal defined a “student loan” as “any loan to a borrower to finance postsecondary education or expenses related to postsecondary education.”  The final regulations define a “student loan” as “any loan to a borrower to finance postsecondary education or expenses related to postsecondary education. The term shall not include an extension of credit under an open-end consumer credit plan, a reverse mortgage transaction, or any other loan that is secured by real property or a dwelling.”Handling of nonconforming payments.  The final regulations, unlike the proposal, require a servicer to give a borrower “not less than ten business days to provide instructions” as to how to apply a nonconforming payment.
  • Annual notice of information on repayment options and forgiveness.  The proposal required the annual notice to contain information or links to information regarding repayment and loan forgiveness options. The final regulations require the notice to also include information or links to information regarding discharge options.
  • Hard copies. The final regulations include a requirement for a servicer to “adopt policies and procedures permitting borrowers to obtain hard copies of information required to be disclosed by the student loan servicer, with particular focus on meeting the needs of borrowers without access to the internet.”

Editor’s note: This content is republished with permission from Ballard Spahr LLP.

ACA International members may also find helpful compliance tips through the online ACA SearchPoint® library, including the Student Loans tab. Members must be logged in to the ACA website to access the library.

If you are interested in sharing articles and analysis on legal cases, industry laws and regulations or other relevant topics for possible publication with ACA International, email our Communications Department at comm@acainternational.org.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

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