Establishes the student loan borrower bill of rights to protect borrowers and ensure that student loan servicers act more as loan counselors than debt collectors.
This bill would create a “student loan borrower bill of rights” in the Education Law and place oversight of student loan servicing under the Department of Financial Services. It establishes a student loan ombudsperson to help borrowers resolve complaints, explain loan terms and repayment options, review loan histories with borrower consent, and provide public information and recommendations on student loan issues. The ombudsperson would also help develop a borrower education course covering key loan terms, income-based repayment, forgiveness, documentation, and disclosure requirements.
The bill also creates a licensing regime for student loan servicers operating in New York, with certain exemptions for banks and credit unions and their subsidiaries. Servicers would need to be licensed, meet fitness and financial responsibility standards, renew annually, maintain records, and comply with federal law. The measure prohibits deceptive, unfair, or misleading servicing practices, misapplication of payments, inaccurate credit reporting, refusal to communicate with authorized borrower representatives, and false statements in filings or investigations. It authorizes the commissioner to examine servicers, suspend or revoke licenses, and require annual reporting on the ombudsperson’s work.
The bill would amend the Education Law by adding a new section 684, creating new state-level oversight, licensing, enforcement, and consumer-protection requirements for student loan servicers. It would expand the Department of Financial Services’ role in regulating servicing practices, establish a new ombudsperson position, and create reporting and education obligations funded by licensing and enforcement-related fees and penalties. Borrowers, servicers, and higher education institutions would all be affected, while banks and credit unions and certain subsidiaries would remain exempt from the licensing requirement.
The bill’s caption and structure indicate a strongly borrower-protective approach, framing servicers as entities that should act more like counselors than debt collectors. Although no committee transcript or vote record is provided, the bill text suggests a policy goal of improving borrower assistance, transparency, and accountability in student loan servicing. The overall tone is consumer-oriented and regulatory, with an emphasis on complaint resolution and oversight rather than market expansion.
The main points of potential contention are the new licensing and compliance burdens on student loan servicers, the scope of DFS enforcement authority, and the extent of the exemptions for banks and credit unions. Servicers may object to recordkeeping, examination, reporting, and conduct restrictions, while consumer advocates would likely support the stronger protections and ombudsperson role. Another possible issue is whether the bill overlaps with or duplicates federal student loan servicing rules, since violations of federal law would also be treated as state violations under the bill.