Student Loan Borrower Bill of Rights - Amends the Truth in Lending Act to require private educational lenders to disclose to borrowers at least 30 days before the first fully amortized payment on their loan is due:
Requires private educational lenders to disclose to borrowers who become 30 days delinquent on their loan:
Requires a private educational lender, when a borrower becomes 60 days delinquent or provides notice that he or she is having difficulty making payment, to:
Requires private educational lenders in all these situations to notify the borrower that a Servicemember and Veterans Liaison is available to answer inquiries about servicemember and veteran benefits related to private education loans.
Provides that if such a borrower notifies a private educational lender that a long-term alternative repayment plan is not needed, the lender may provide the borrower with information about forbearance or deferment options instead. Requires lenders to establish a process that enables borrowers to provide such notice.
Requires the Director of the Consumer Financial Protection Bureau (CFPB) to develop and issue model forms to allow borrowers to compare their private education loan repayment plan with alternative repayment plans and forbearance and deferment options.
Establishes a student loan borrower bill of rights under the Truth in Lending Act and the Higher Education Act of 1965 (HEA).
Imposes specified notification and payment transfer and receipt obligations on transferors and transferees of student loans if the transfer of those loans results in a change of the party to whom the borrower must direct communications or send payments.
Prohibits student loan servicers from imposing late payment fees or finance charges on borrowers whose late payment is due to a change in the servicer's mailing address, office, or payment handling procedures.
Requires private education loan servicers, absent alternative instructions from the borrower, to apply payments first to the interest and fees a borrower owes on the payment due date and then to the principal of the borrower's private education loan that bears the highest interest rate.
Considers a private education loan to be rehabilitated if the borrower: (1) makes 9 payments of amounts owed on the loan within 20 days of the due date for 10 consecutive months, or (2) otherwise brings the loan current after it has been charged-off.
Requires student loan servicers to: (1) designate an employee who is specially trained on servicemember and veteran benefits to act as the servicemember and veterans liaison responsible for answering inquiries from servicemembers and veterans, and (2) provide servicemembers and veterans with a toll-free number to access that liaison.
Prohibits student loan lenders or servicers from charging-off or reporting a student loan as delinquent, assigned to collection, or charged-off to a credit reporting agency if the borrower is on active duty in a combat zone.
Requires student loan servicers to make available to borrowers: (1) through a secure website or in writing upon request, their loan history; and (2) upon request and at no charge, copies of the original loan documents.
Requires the Director of the CFPB to promulgate rules requiring student loan servicers to establish error resolution procedures.
Requires consumer credit information that is required to be disclosed to borrowers under the Truth in Lending Act to be available at no charge to such borrowers.
Requires the Director of the CFPB, under the HEA, to issue rules: (1) requiring lenders and servicers to contact borrowers who may be eligible to have their student loans discharged by the Secretary of Education and to provide them with information and a streamlined process for doing so, and (2) for the application of student loan payments in a manner that best benefits borrowers and is compatible with existing repayment options.
Amends the Federal Family Education Loan (FFEL) program to require eligible lenders to provide borrowers, before repayment, when they are having difficulty making payments, and when they are delinquent, a statement that: (1) they may be entitled to servicemember and veteran benefits, and (2) a Servicemember and Veterans Liaison is available to answer their inquiries about those benefits.
Requires eligible lenders, under the FFEL program, and the Secretary, under the William D. Ford Federal Direct Loan program, to inform borrowers of alternative repayment options and offer to enroll them in alternative repayment plans.
Amends the Truth in Lending Act to require a lender, before issuing a private education loan for a student attending an institution of higher education (IHE), to obtain the IHE's certification of: (1) the student's enrollment status, (2) the student's cost of attendance, and (3) the difference between that cost and the student's estimated financial assistance. Eliminates the requirement that such lenders obtain a self-certification form from the private education loan applicant.
Allows a lender to issue such a loan without a certification if the relevant IHE does not notify the lender, within 15 business days of the creditor's request for such certification, that it refuses to issue the certification or that it needs more time to comply with the request.
Requires private educational lenders to: (1) send loan statements to borrowers at least once every three months a student is enrolled at an IHE; (2) notify the relevant IHE, in writing, of the loan amount and the student to whom it applies no later than the date funds are issued; and (3) submit an annual report to the CFPB containing information the CFPB requires concerning private student loans.
Amends the HEA to require IHEs, before providing lenders with certifications or notice of their refusal to do so, to determine whether students have exhausted their options for assistance under title IV (Student Assistance) of the HEA and notify borrowers of: (1) the availability of such assistance, (2) their ability to choose their own private educational lender, (3) the impact of the proposed private education loan on their eligibility for other financial assistance, and (4) their right to accept or reject a private education loan within 30 days of the lender's approval of their application and to cancel the loan within 3 business days of its consummation.
Prohibits an IHE from providing a private lender with a certification unless: (1) the loan provides the borrower with alternative repayment plans, including loan consolidation or refinancing; and (2) loan liability is cancelled upon the death or disability of the borrower or co-borrower.
Treats lenders that receive a certification from an IHE as being in a preferred lender arrangement with that IHE.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 1803 Introduced in Senate (IS)]
113th CONGRESS
1st Session
S. 1803
To require certain protections for student loan borrowers, and for
other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 11, 2013
Mr. Durbin (for himself, Ms. Warren, Mrs. Boxer, and Mr. Reed)
introduced the following bill; which was read twice and referred to the
Committee on Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To require certain protections for student loan borrowers, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Student Loan Borrower Bill of
Rights''.
SEC. 2. TRUTH IN LENDING ACT AMENDMENTS.
The Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended--
(1) in section 128 (15 U.S.C. 1638)--
(A) in subsection (e)--
(i) in paragraph (1)(O), by striking
``paragraph (6)'' and inserting ``paragraph
(9)'';
(ii) in paragraph (2)(L), by striking
``paragraph (6)'' and inserting ``paragraph
(9)'';
(iii) in paragraph (4)(C), by striking
``paragraph (7)'' and inserting ``paragraph
(10)'';
(iv) by redesignating paragraphs (5)
through (11) as paragraphs (8) through (14),
respectively;
(v) by inserting after paragraph (4) the
following:
``(5) Disclosures before first fully amortized payment.--
Not fewer than 30 days and not more than 150 days before the
first fully amortized payment on a private education loan is
due from the borrower, the private educational lender shall
disclose to the borrower, clearly and conspicuously--
``(A) the information described in--
``(i) paragraph (2)(A) (adjusted, as
necessary, for the rate of interest in effect
on the date the first fully amortized payment
on a private education loan is due);
``(ii) subparagraphs (B) through (G) of
paragraph (2);
``(iii) paragraph (2)(H) (adjusted, as
necessary, for the rate of interest in effect
on the date the first fully amortized payment
on a private education loan is due);
``(iv) paragraph (2)(K); and
``(v) subparagraphs (O) and (P) of
paragraph (2);
``(B) the scheduled date upon which the first fully
amortized payment is due;
``(C) the name of the lender and servicer, and the
address to which communications and payments should be
sent including a telephone number and website where the
borrower may obtain additional information;
``(D) a description of alternative repayment plans,
including loan consolidation or refinancing, and
servicemember or veteran benefits under the
Servicemembers Civil Relief Act (50 U.S.C. App. 501 et
seq.) or other Federal or State law related to private
education loans; and
``(E) a statement that a Servicemember and Veterans
Liaison designated under paragraph (15)(F) is available
to answer inquiries about servicemember and veteran
benefits related to private education loans, including
the toll-free telephone number to contact the Liaison
pursuant to paragraph (15)(F).
``(6) Disclosures when borrower is 30 days delinquent.--Not
fewer than 5 days after a borrower becomes 30 days delinquent
on a private education loan, the private educational lender
shall disclose to the borrower, clearly and conspicuously--
``(A) the date on which the loan will be charged-
off (as defined in paragraph (15)(A)) or assigned to
collections, including the consequences of such charge-
off or assignment to collections, if no payment is
made;
``(B) the minimum payment that the borrower must
make to avoid the loan being charged off (as defined in
paragraph (15)(A)) or assigned to collection, and the
minimum payment that the borrower must make to bring
the loan current;
``(C) a statement informing the borrower that a
payment of less than the minimum payment described in
subparagraph (B) could result in the loan being charged
off (as defined in paragraph (15)(A)) or assigned to
collection; and
``(D) a statement that a Servicemember and Veterans
Liaison designated under paragraph (15)(F) is available
to answer inquiries about servicemember and veteran
benefits related to private education loans, including
the toll-free telephone number to contact the Liaison
pursuant to paragraph (15)(F).
``(7) Disclosures when borrower is having difficulty making
payment or is 60 days delinquent.--
``(A) In general.--Not fewer than 5 days after a
borrower notifies a private educational lender that the
borrower is having difficulty making payment or a
borrower becomes 60 days delinquent on a private
education loan, the private educational lender shall--
``(i) complete a full review of the
borrower's private education loan and make a
reasonable effort to obtain the information
necessary to determine--
``(I) if the borrower is eligible
for an alternative repayment plan,
including loan consolidation or
refinancing; and
``(II) if the borrower is eligible
for servicemember or veteran benefits
under the Servicemembers Civil Relief
Act (50 U.S.C. App. 501 et seq.) or
other Federal or State law related to
private education loans;
``(ii) provide the borrower, in writing, in
simple and understandable terms, information
about alternative repayment plans and benefits
for which the borrower is eligible, including
all terms, conditions, and fees or costs
associated with such repayment plan, pursuant
to paragraph (8)(D);
``(iii) allow the borrower not less than 30
days to apply for an alternative repayment plan
or benefits, if eligible; and
``(iv) notify the borrower that a
Servicemember and Veterans Liaison designated
under paragraph (15)(F) is available to answer
inquiries about servicemember and veteran
benefits related to private education loans,
including the toll-free telephone number to
contact the Liaison pursuant to paragraph
(15)(F).
``(B) Forbearance or deferment.--If a borrower
notifies the private educational lender that a long-
term alternative repayment plan is not needed, the
private educational lender may comply with this
paragraph by providing the borrower, in writing, in
simple and understandable terms, information about
forbearance or deferment options, including all terms,
conditions, and fees or costs associated with such
options pursuant to paragraph (8)(D).
``(C) Notification process.--
``(i) In general.--Each private educational
lender shall establish a process, in accordance
subparagraph (A), for a borrower to notify the
lender that--
``(I) the borrower is having
difficulty making payments on a private
education loan; and
``(II) a long-term alternative
repayment plan is not needed.
``(ii) Consumer financial protection bureau
requirements.--The Director of the Consumer
Financial Protection Bureau, in consultation
with the Secretary of Education, shall
promulgate rules establishing minimum standards
for private educational lenders in carrying out
the requirements of this paragraph and a model
form for borrowers to notify private
educational lenders of the information under
this paragraph.'';
(vi) in paragraph (8), as redesignated by
clause (iv), by adding at the end the
following:
``(D) Model disclosure form for alternative
repayment plans, forbearance, and deferment options.--
Not later than 2 years after the date of enactment of
the Student Loan Borrower Bill of Rights, the Director
of the Consumer Financial Protection Bureau, in
consultation with the Secretary of Education, shall
develop and issue model forms to allow borrowers to
compare alternative repayment plans, forbearance, and
deferment options with the borrower's existing
repayment plan with respect to a private education
loan. Such forms shall include the following:
``(i) The total amount to be paid over the
life of the loan.
``(ii) The total amount in interest to be
paid over the life of the loan.
``(iii) The monthly payment amount.
``(iv) The expected pay-off date.
``(v) Related fees and costs.
``(vi) Eligibility requirements, and how
the borrower can apply for the alternative
repayment plan, forbearance, or deferment
option.
``(vii) Any consequences, including the
loss of eligibility for alternative repayment
plans, forbearance, or deferment options.'';
(vii) in paragraph (11), as redesignated by
clause (iv), by striking ``paragraph (7)'' and
inserting ``paragraph (10)'';
(viii) in paragraph (14), as redesignated
by clause (iv), by striking ``paragraph (5)''
and inserting ``paragraph (8)''; and
(ix) by adding at the end the following:
``(15) Student loan borrower bill of rights.--
``(A) Definitions.--In this paragraph:
``(i) Borrower.--The term `borrower' means
the person to whom a private education loan is
extended.
``(ii) Charge off.--The term `charge off'
means charge to profit and loss, or subject to
any similar action.
``(iii) Private education loan.--The term
`private education loan' has the meaning given
the term in section 140(a).
``(iv) Servicer.--The term `servicer' means
the person responsible for the servicing of a
private education loan, including any agent of
such person or the person who makes, owns, or
holds a loan if such person also services the
loan.
``(v) Servicing.--The term `servicing'
means--
``(I) receiving any scheduled
periodic payments from a borrower
pursuant to the terms of a private
education loan;
``(II) making the payments of
principal and interest and such other
payments with respect to the amounts
received from the borrower, as may be
required pursuant to the terms of the
loan; and
``(III) performing other
administrative services with respect to
the loan.
``(B) Sale, transfer, or assignment.--If the sale,
other transfer, or assignment of a private education
loan results in a change in the identity of the party
to whom the borrower must send subsequent payments or
direct any communications concerning the loan--
``(i) the transferor shall--
``(I) notify the borrower, in
writing, in simple and understandable
terms, not fewer than 45 days before
transferring a legally enforceable
right to receive payment from the
borrower on such loan, of--
``(aa) the sale or other
transfer;
``(bb) the identity of the
transferee;
``(cc) the name and address
of the party to whom subsequent
payments or communications must
be sent;
``(dd) the telephone
numbers and websites of both
the transferor and the
transferee;
``(ee) the effective date
of the sale, transfer, or
assignment;
``(ff) the date on which
the transferor servicer will
stop accepting payment; and
``(gg) the date on which
the transferee servicer will
begin accepting payment; and
``(II) forward any payment from a
borrower with respect to such private
education loan to the transferee
servicer, immediately upon receiving
such payment, during the 60-day period
beginning on the date on which the
transferor servicer stops accepting
payment of such private education loan;
and
``(ii) the transferee shall--
``(I) notify the borrower, in
writing, in simple and understandable
terms, not fewer than 45 days before
acquiring a legally enforceable right
to receive payment from the borrower on
such loan, of--
``(aa) the sale or other
transfer;
``(bb) the identity of the
transferee;
``(cc) the name and address
of the party to whom subsequent
payments or communications must
be sent;
``(dd) the telephone
numbers and websites of both
the transferor and the
transferee;
``(ee) the effective date
of the sale, transfer, or
assignment;
``(ff) the date on which
the transferor will stop
accepting payment; and
``(gg) the date on which
the transferee will begin
accepting payment;
``(II) accept as on-time and may
not impose any late fee or finance
charge for any payment from a borrower
with respect to such private education
loan that is forwarded from the
transferor servicer during the 60-day
period beginning on the date on which
the transferor servicer stops accepting
payment, if the transferor servicer
receives such payment on or before the
applicable due date, including any
grace period;
``(III) provide borrowers a simple,
online process for transferring
existing electronic fund transfer
authority; and
``(IV) honor any promotion or
benefit offered to the borrower or
advertised by the previous owner or
transferor servicer of such private
education loan.
``(C) Material change in mailing address or
procedure for handling payments.--If a servicer makes a
change in the mailing address, office, or procedures
for handling payments with respect to any private
education loan, and such change causes a delay in the
crediting of the account of the borrower made during
the 60-day period following the date on which such
change took effect, the servicer may not impose any
late fee or finance charge for a late payment on such
private education loan.
``(D) Application of payments.--
``(i) In general.--Unless otherwise
directed by the borrower, upon receipt of a
payment, the servicer shall apply amounts first
to the interest and fees owed on the payment
due date, and then to the principal balance of
the private education loan bearing the highest
annual percentage rate, and then to each
successive interest and fees and then principal
balance bearing the next highest annual
percentage rate, until the payment is
exhausted. A borrower may instruct or expressly
authorize the servicer to apply payments in a
different manner.
``(ii) Application of excess amounts.--
Unless otherwise directed by the borrower, upon
receipt of a payment, the servicer shall apply
amounts in excess of the minimum payment amount
first to the interest and fees owed on the
payment due date, and then to the principal
balance of the private education loan balance
bearing the highest annual percentage rate, and
then to each successive interest and fees and
principal balance bearing the next highest
annual percentage rate, until the payment is
exhausted. A borrower may instruct or expressly
authorize the servicer to apply such excess
payments in a different manner.
``(iii) Apply payment on date received.--
Unless otherwise directed by the borrower, a
servicer shall apply payments to a borrower's
account on the date the payment is received.
``(iv) Promulgation of rules.--The Director
of the Consumer Financial Protection Bureau, in
consultation with the Secretary of Education,
may promulgate rules for the application of
payments that--
``(I) minimizes the amount of fees
and interest incurred by the borrower
and the total loan amount paid by the
borrower;
``(II) minimizes delinquencies,
assignments to collection, and charge-
offs;
``(III) requires servicers to apply
payments on the date received; and
``(IV) allows the borrower to
instruct the servicer to apply payments
in a manner preferred by the borrower.
``(E) Rehabilitation of loans.--If a borrower
successfully and voluntarily makes 9 payments within 20
days of the due date during 10 consecutive months of
amounts owed on a private education loan, or otherwise
brings a private education loan current after the loan
is charged-off, the loan shall be considered
rehabilitated, and the lender or servicer shall request
that any consumer reporting agency to which the charge-
off was reported remove the delinquency that led to the
charge-off and the charge-off from the borrower's
credit history.
``(F) Servicemembers, veterans, and private
education loans.--
``(i) Servicemember and veterans liaison.--
Each servicer shall designate an employee to
act as the servicemember and veterans liaison
who is responsible for answering inquiries from
servicemembers and veterans, and is specially
trained on servicemember and veteran benefits
under the Servicemembers Civil Relief Act (50
U.S.C. App. 501 et seq.) and other Federal or
State laws related to private education loans.
``(ii) Toll-free telephone number.--Each
servicer shall maintain a toll-free telephone
number that shall--
``(I) connect directly to the
servicemember and veterans liaison
designated under clause (i); and
``(II) be made available on the
primary internet website of the
servicer and on monthly billing
statements.
``(iii) Prohibition on charge offs.--A
lender or servicer may not charge off or report
a private education loan as delinquent,
assigned to collection (internally or by
referral to a third party), or charged-off to a
credit reporting agency if the borrower is on
active duty in the Armed Forces (as defined in
section 101(d)(1) of title 10, United States
Code) serving in a combat zone (as designated
by the President under section 112(c) of the
Internal Revenue Code of 1986).
``(G) Borrower's loan history.--
``(i) In general.--A servicer shall make
available through a secure website, or in
writing upon request, the loan history of each
borrower for each private education loan,
separately designating--
``(I) payment history;
``(II) loan history, including any
forbearances, deferrals, delinquencies,
assignment to collection, and charge
offs;
``(III) annual percentage rate
history; and
``(IV) key loan terms, including
application of payments to interest,
principal, and fees, origination date,
principal, capitalized interest, annual
percentage rate, including any cap,
loan term, and any contractual
incentives.
``(ii) Original documentation.--A servicer
shall make available to the borrower, if
requested, at no charge, copies of the original
loan documents and the promissory note for each
private education loan.
``(H) Error resolution.--The Director of the
Consumer Financial Protection Bureau, in consultation
with the Secretary of Education, shall promulgate rules
requiring servicers to establish error resolution
procedures to allow borrowers to inquire about errors
related to their private education loans and obtain
timely resolution of such errors.
``(I) Additional servicing standards.--The Director
of the Consumer Financial Protection Bureau, in
consultation with the Secretary of Education, may
establish additional servicing standards to reduce
delinquencies, assignment to collections, and charge-
offs, and to ensure borrowers understand their rights
and obligations related to their private education
loans.
``(J) Arbitration.--
``(i) Waiver of rights and remedies.--Any
rights and remedies available to borrowers
against servicers may not be waived by any
agreement, policy, or form, including by a
predispute arbitration agreement.
``(ii) Predispute arbitration agreements.--
No predispute arbitration agreement shall be
valid or enforceable by a servicer, including
as a third-party beneficiary or by estoppel, if
the agreement requires arbitration of a dispute
with respect to a private education loan. This
subparagraph applies to predispute arbitration
agreements entered into before the date of
enactment of the Student Loan Borrower Bill of
Rights, as well as on and after such date of
enactment, if the violation that is the subject
of the dispute occurred on or after such date
of enactment.
``(K) Enforcement.--The provisions of this
paragraph shall be enforced by the agencies specified
in subsections (a) through (d) of section 108, in the
manner set forth in that section or under any other
applicable authorities available to such agencies by
law.
``(L) Preemption.--Nothing in this paragraph may be
construed to preempt any provision of State law
regarding private education loans where the State law
provides stronger consumer protections.
``(M) Civil liability.--A servicer that fails to
comply with any requirement imposed under this
paragraph shall be deemed a creditor that has failed to
comply with a requirement under this chapter for
purposes of liability under section 130 and such
servicer shall be subject to the applicable liability
provisions under such section.''; and
(B) by adding at the end the following:
``(g) Information To Be Available at No Charge.--The information
required to be disclosed under this section shall be made available at
no charge to the borrower.''; and
(2) in section 130(a)--
(A) in paragraph (3), by striking ``128(e)(7)'' and
inserting ``128(e)(10)''; and
(B) in the flush matter at the end, by striking
``or paragraph (4)(C), (6), (7), or (8) of section
128(e),'' and inserting ``or paragraph (4)(C), (9),
(10), or (11) of section 128(e),''.
SEC. 3. STUDENT LOAN BORROWER BILL OF RIGHTS.
The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is
amended--
(1) in part G of title IV (20 U.S.C. 1088 et seq.) by
adding at the end the following:
``SEC. 493E. STUDENT LOAN BORROWER BILL OF RIGHTS.
``(a) Definitions.--In this section:
``(1) Servicer.--The term `servicer' means the person
responsible for the servicing of any student loan, including
any agent of such person or the person who makes, owns, or
holds a loan if such person also services the loan.
``(2) Servicing.--The term `servicing' means--
``(A) receiving any scheduled periodic payments
from a borrower pursuant to the terms of a student
loan;
``(B) making the payments of principal and interest
and such other payments with respect to the amounts
received from the borrower, as may be required pursuant
to the terms of the loan; and
``(C) performing other administrative services with
respect to the loan.
``(3) Student loan.--The term `student loan' means a loan
made, insured, or guaranteed under this title.
``(b) Transfer of Lender or Servicer.--If the sale, other transfer,
or assignment of a student loan results in a change in the identity of
the party to whom the borrower must send subsequent payments or direct
any communications concerning the loan--
``(1) the transferor shall--
``(A) notify the borrower in writing not fewer than
45 days before transferring a legally enforceable right
to receive payment from the borrower on such loan, of--
``(i) the sale, transfer, or assignment;
``(ii) the identity of the transferee;
``(iii) the name and address of the party
to whom subsequent payments or communications
must be sent;
``(iv) the telephone numbers and websites
of both the transferor and the transferee;
``(v) the effective date of the sale,
transfer, or assignment;
``(vi) the date on which the current
servicer will stop accepting payments; and
``(vii) the date on which the transferee
servicer will begin accepting payment; and
``(B) forward to the transferee servicer any
payment with respect to such student loan, immediately
upon receiving such payment, from a borrower during the
60-day period beginning on the date on which the
transferor servicer stops accepting payment for such
student loan; and
``(2) the transferee shall--
``(A) notify the borrower in writing not fewer than
45 days before transferring a legally enforceable right
to receive payment from the borrower on such loan, of--
``(i) the sale, transfer, or assignment;
``(ii) the identity of the transferor;
``(iii) the name and address of the party
to whom subsequent payments or communications
must be sent;
``(iv) the telephone numbers and websites
of both the transferor and the transferee;
``(v) the effective date of the sale,
transfer, or assignment;
``(vi) the date on which the current
servicer will stop accepting payments; and
``(vii) the date on which the transferee
servicer will begin accepting payment;
``(B) accept as on-time and may not impose any late
fee or finance charge with respect to such student loan
for any payment forwarded from the transferor servicer
during the 60-day period beginning on the date on which
the transferor servicer stops accepting payment, if the
transferor servicer received such payment from the
borrower on or before the applicable due date,
including any grace period;
``(C) provide borrowers a simple, online process
for transferring existing electronic fund transfer
authority; and
``(D) honor any promotion or benefit offered to the
borrower or advertised by the previous owner or
transferor servicer of such student loan.
``(c) Material Change in Mailing Address or Procedure for Handling
Payments.--If a servicer makes a change in the mailing address, office,
or procedures for handling payments with respect to any student loan,
and such change causes a delay in the crediting of the account of the
borrower made during the 60-day period following the date on which such
change took effect, the servicer may not impose any late fee or finance
charge for a late payment on such student loan.
``(d) Eligibility for Discharge.--The Director of the Consumer
Financial Protection Bureau, in consultation with the Secretary, shall
promulgate rules requiring lenders and servicers to--
``(1) identify and contact borrowers who may be eligible
for student loan discharge by the Secretary;
``(2) provide the borrower, in writing, in simple and
understandable terms, information about obtaining such
discharge; and
``(3) create a streamlined process for eligible borrowers
to apply for and receive such discharge.
``(e) Application of Payments.--
``(1) In general.--Notwithstanding any other provision of
this Act, the Director of the Consumer Financial Protection
Bureau, in consultation with the Secretary, shall issue rules
for the application of student loan payments that--
``(A) minimizes the amount of fees and interest
incurred by the borrower and the total loan amount paid
by the borrower;
``(B) minimizes delinquencies, assignments to
collection, and charge offs;
``(C) requires servicers to apply payments on the
date received; and
``(D) allows the borrower to direct the servicer to
apply payments in a manner preferred by the borrower.
``(2) Method that best benefits borrower.--In issuing the
rules under paragraph (1), the Director of the Consumer
Financial Protection Bureau shall choose the application method
that best benefits the borrower and is compatible with existing
repayment options.
``(f) Servicemembers, Veterans, and Student Loans.--
``(1) Servicemember and veterans liaison.--Each servicer of
a student loan shall designate an employee to act as the
servicemember and veterans liaison who is responsible for
answering inquiries from servicemembers and veterans, and is
specially trained on servicemember and veteran benefits and
options under the Servicemembers Civil Relief Act (50 U.S.C.
App. 501 et seq.) and other Federal or State laws related to
student loans.
``(2) Toll-free telephone number.--Each servicer of a
student loan shall maintain a toll-free telephone number for
the servicemember and veterans liaison designated under
paragraph (1), which shall be made available on the primary
Internet website of the servicer and on monthly billing
statements.
``(3) Prohibition on default.--Notwithstanding any other
provision of this Act, a servicer may not report a student loan
as delinquent, assigned to collection (internally or by
referral to a third party), charged off, or in default, to a
credit reporting agency if the borrower is on active duty in
the Armed Forces (as defined in section 101(d)(1) of title 10,
United States Code) serving in a combat zone (as designated by
the President under section 112(c) of the Internal Revenue Code
of 1986).
``(4) Additional liaisons.--The Secretary shall determine
additional entities with whom borrowers interact, including
guaranty agencies, that shall designate an employee to act as
the servicemember and veterans liaison who is responsible for
answering inquiries from servicemembers and veterans, and is
specially trained on servicemember and veteran benefits and
options under the Servicemembers Civil Relief Act (50 U.S.C.
App. 501 et seq.) and other Federal or State laws related to
student loans.
``(g) Borrower's Loan History.--
``(1) In general.--A servicer of a student loan shall make
available through a secure website, or in writing upon request,
the loan history of each borrower for each student loan,
separately designating--
``(A) payment history;
``(B) loan history, including any forbearances,
deferrals, delinquencies, and defaults;
``(C) annual percentage rate history; and
``(D) key loan terms, including application of
payments to interest, principal, and fees, origination
date, principal, capitalized interest, annual
percentage rate, including any cap, loan term, and any
contractual incentives.
``(2) Original documentation.--A servicer shall make
available to the borrower, if requested, at no charge, copies
of the original loan documents and the promissory note for each
student loan.
``(h) Error Resolution.--The Director of the Consumer Financial
Protection Bureau, in consultation with the Secretary, shall promulgate
rules requiring servicers to establish error resolution procedures to
allow borrowers to inquire about errors related to their student loans
and obtain timely resolution of such errors.
``(i) Additional Servicing Standards.--The Director of the Consumer
Financial Protection Bureau, in consultation with the Secretary, may
establish additional servicing standards to reduce delinquencies,
assignments to collection, and defaults, and to ensure borrowers
understand their rights and obligations related to their student loans.
``(j) Promulgation of Rules.--The Director of the Consumer
Financial Protection Bureau, in consultation with the Secretary, shall
promulgate rules implementing this section.'';
(2) in section 433 (20 U.S.C. 1083)--
(A) in subsection (b)--
(i) in paragraph (12), by striking ``and''
after the semicolon;
(ii) in paragraph (13), by striking the
period at the end and inserting ``; and''; and
(iii) by adding at the end the following:
``(14) a statement that--
``(A) the borrower may be entitled to servicemember
and veteran benefits under the Servicemembers Civil
Relief Act (50 U.S.C. App. 501 et seq.) and other
Federal or State laws; and
``(B) a Servicemember and Veterans Liaison
designated under section 493E(f) is available to answer
inquiries about servicemember and veteran benefits,
including the toll-free telephone number to contact the
Liaison pursuant to section 493E(f).''; and
(B) in subsection (e)--
(i) in paragraph (2), by adding at the end
the following:
``(D) A statement that--
``(i) the borrower may be entitled to
servicemember and veteran benefits under the
Servicemembers Civil Relief Act (50 U.S.C. App.
501 et seq.) and other Federal or State laws;
and
``(ii) a Servicemember and Veterans Liaison
designated under section 493E(f) is available
to answer inquiries about servicemember and
veteran benefits, including the toll-free
telephone number to contact the Liaison
pursuant to section 493E(f).'';
(ii) in paragraph (3), by adding at the end
the following:
``(F) A statement that--
``(i) the borrower may be entitled to
servicemember and veteran benefits under the
Servicemembers Civil Relief Act (50 U.S.C. App.
501 et seq.) and other Federal or State laws;
and
``(ii) a Servicemember and Veterans Liaison
designated under section 493E(f) is available
to answer inquiries about servicemember and
veteran benefits, including the toll-free
telephone number to contact the Liaison
pursuant to section 493E(f).''; and
(iii) by adding at the end the following:
``(4) Notification of repayment options and alternatives to
default.--The Secretary shall require eligible lenders to, not
later than 1 year after the date of enactment of the Student
Loan Borrower Bill of Rights--
``(A) notify borrowers, in writing, in simple and
understandable terms, about alternative repayment
options, including income-based repayment, income
contingent repayment, consolidation, and forgiveness
options, as well as servicemember or veteran benefits
under the Servicemembers Civil Relief Act (50 U.S.C.
App. 501 et seq.) or other Federal or State laws;
``(B) provide borrowers, in writing, in simple and
understandable terms, information about alternative
repayment plans, including all terms, conditions, and
fees or costs associated with such repayment plans in a
format that allows the borrower to compare the current
repayment plan with alternative repayment plans; and
``(C) offer to enroll such borrowers in alternative
repayment plans, if eligible.''; and
(3) in section 455(d) (20 U.S.C. 1087e(d)), by adding at
the end the following:
``(6) Notification of repayment options.--The Secretary
shall carry out, not later than 1 year after the date of
enactment of the Student Loan Borrower Bill of Rights, the
activities described in subparagraphs (A), (B), and (C) of
section 433(e)(4) with respect to loans made under this
part.''.
SEC. 4. KNOW BEFORE YOU OWE.
(a) Amendments to the Truth in Lending Act.--
(1) In general.--Section 128(e) of the Truth in Lending Act
(15 U.S.C. 1638(e)), as amended by section 2, is further
amended--
(A) by striking paragraph (3) and inserting the
following:
``(3) Institutional certification required.--
``(A) In general.--Except as provided in
subparagraph (B), before a creditor may issue any funds
with respect to an extension of credit described in
this subsection, the creditor shall obtain from the
relevant institution of higher education where such
loan is to be used for a student, such institution's
certification of--
``(i) the enrollment status of the student;
``(ii) the student's cost of attendance at
the institution as determined by the
institution under part F of title IV of the
Higher Education Act of 1965; and
``(iii) the difference between--
``(I) such cost of attendance; and
``(II) the student's estimated
financial assistance, including such
assistance received under title IV of
the Higher Education Act of 1965 and
other financial assistance known to the
institution, as applicable.
``(B) Exception.--Notwithstanding subparagraph (A),
a creditor may issue funds, not to exceed the amount
described in subparagraph (A)(iii), with respect to an
extension of credit described in this subsection
without obtaining from the relevant institution of
higher education such institution's certification if
such institution fails to provide within 15 business
days of the creditor's request for such certification--
``(i) notification of the institution's
refusal to certify the request; or
``(ii) notification that the institution
has received the request for certification and
will need additional time to comply with the
certification request.
``(C) Loans disbursed without certification.--If a
creditor issues funds without obtaining a
certification, as described in subparagraph (B), such
creditor shall report the issuance of such funds in a
manner determined by the Director of the Consumer
Financial Protection Bureau.''; and
(B) by adding at the end the following:
``(16) Provision of information.--
``(A) Provision of information to students.--
``(i) Loan statement.--A creditor that
issues any funds with respect to an extension
of credit described in this subsection shall
send loan statements, where such loan is to be
used for a student, to borrowers of such funds
not less than once every 3 months during the
time that such student is enrolled at an
institution of higher education.
``(ii) Contents of loan statement.--Each
statement described in clause (i) shall--
``(I) report the borrower's total
remaining debt to the creditor,
including accrued but unpaid interest
and capitalized interest;
``(II) report any debt increases
since the last statement; and
``(III) list the current interest
rate for each loan.
``(B) Notification of loans disbursed without
certification.--On or before the date a creditor issues
any funds with respect to an extension of credit
described in this subsection, the creditor shall notify
the relevant institution of higher education, in
writing, of the amount of the extension of credit and
the student on whose behalf credit is extended. The
form of such written notification shall be subject to
the regulations of the Consumer Financial Protection
Bureau.
``(C) Annual report.--A creditor that issues funds
with respect to an extension of credit described in
this subsection shall prepare and submit an annual
report to the Consumer Financial Protection Bureau
containing the required information about private
student loans to be determined by the Consumer
Financial Protection Bureau, in consultation with the
Secretary of Education.''.
(2) Definition of private education loan.--Section
140(a)(7)(A) of the Truth in Lending Act (15 U.S.C.
1650(a)(7)(A)) is amended--
(A) by redesignating clause (ii) as clause (iii);
(B) in clause (i), by striking ``and'' after the
semicolon; and
(C) by adding after clause (i) the following:
``(ii) is not made, insured, or guaranteed
under title VII or title VIII of the Public
Health Service Act (42 U.S.C. 292 et seq. and
296 et seq.); and''.
(3) Regulations.--Not later than 365 days after the date of
enactment of this Act, the Director of the Consumer Financial
Protection Bureau shall issue regulations in final form to
implement paragraphs (3) and (16) of section 128(e) of the
Truth in Lending Act (15 U.S.C. 1638(e)), as amended by
paragraph (1). Such regulations shall become effective not
later than 6 months after their date of issuance.
(b) Amendments to the Higher Education Act of 1965.--
(1) Program participation agreements.--Section 487(a) of
the Higher Education Act of 1965 (20 U.S.C. 1094(a)) is amended
by striking paragraph (28) and inserting the following:
``(28)(A) Upon the request of a private educational lender,
acting in connection with an application initiated by a
borrower for a private education loan in accordance with
section 128(e)(3) of the Truth in Lending Act (15 U.S.C.
1638(e)(3)), the institution shall within 15 days of receipt of
a certification request--
``(i) provide such certification to such
private educational lender--
``(I) that the student who
initiated the application for the
private education loan, or on whose
behalf the application was initiated,
is enrolled or is scheduled to enroll
at the institution;
``(II) of such student's cost of
attendance at the institution as
determined under part F of this title;
and
``(III) of the difference between--
``(aa) the cost of
attendance at the institution;
and
``(bb) the student's
estimated financial assistance
received under this title and
other assistance known to the
institution, as applicable;
``(ii) notify the creditor that the
institution has received the request for
certification and will need additional time to
comply with the certification request; or
``(iii) provide notice to the private
educational lender of the institution's refusal
to certify the private education loan under
subparagraph (D).
``(B) With respect to a certification request
described in subparagraph (A), and prior to providing
such certification under subparagraph (A)(i) or
providing notice of the refusal to provide
certification under subparagraph (A)(iii), the
institution shall--
``(i) determine whether the student who
initiated the application for the private
education loan, or on whose behalf the
application was initiated, has applied for and
exhausted the Federal financial assistance
available to such student under this title and
inform the student accordingly; and
``(ii) provide the borrower whose loan
application has prompted the certification
request by a private education lender, as
described in subparagraph (A)(i), with the
following information and disclosures:
``(I) The availability of, and the
borrower's potential eligibility for,
Federal financial assistance under this
title, including disclosing the terms,
conditions, interest rates, and
repayment options and programs of
Federal student loans.
``(II) The borrower's ability to
select a private educational lender of
the borrower's choice.
``(III) The impact of a proposed
private education loan on the
borrower's potential eligibility for
other financial assistance, including
Federal financial assistance under this
title.
``(IV) The borrower's right to
accept or reject a private education
loan within the 30-day period following
a private educational lender's approval
of a borrower's application and about a
borrower's 3-day right to cancel
period.
``(C) For purposes of this paragraph, the terms
`private educational lender' and `private education
loan' have the meanings given such terms in section 140
of the Truth in Lending Act (15 U.S.C. 1650).
``(D)(i) An institution shall not provide a
certification with respect to a private education loan
under this paragraph unless the private education loan
includes terms that provide--
``(I) the borrower alternative repayment
plans, including loan consolidation or
refinancing; and
``(II) that the liability to repay the loan
shall be cancelled upon the death or disability
of the borrower or co-borrower.
``(ii) In this paragraph, the term `disability'
means a permanent and total disability, as determined
in accordance with the regulations of the Secretary of
Education, or a determination by the Secretary of
Veterans Affairs that the borrower is unemployable due
to a service connected-disability.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the effective date of the regulations
described in subsection (a)(3).
(3) Preferred lender arrangement.--Section 151(8)(A)(ii) of
the Higher Education Act of 1965 (20 U.S.C. 1019(8)(A)(ii)) is
amended by inserting ``certifying,'' after ``promoting,''.
(c) Report.--Not later than 24 months after the issuance of
regulations under subsection (a)(3), the Director of the Consumer
Financial Protection Bureau and the Secretary of Education shall
jointly submit to Congress a report on the compliance of institutions
of higher education and private educational lenders with section
128(e)(3) of the Truth in Lending Act (15 U.S.C. 1638(e)), as amended
by subsection (a), and section 487(a)(28) of the Higher Education Act
of 1965 (20 U.S.C. 1094(a)), as amended by subsection (b). Such report
shall include information about the degree to which specific
institutions utilize certifications in effectively encouraging the
exhaustion of Federal student loan eligibility and lowering student
private education loan debt.
SEC. 5. REPORT ON STUDENT LOAN SERVICERS.
Not later than 1 year after the date of enactment of this Act, the
Director of the Consumer Financial Protection Bureau, in consultation
with the Secretary of Education, shall submit a report to the Committee
on Banking, Housing, and Urban Affairs of the Senate, the Committee on
Health, Education, Labor, and Pensions of the Senate, the Committee on
Financial Services of the House of Representatives, and the Committee
on Education and the Workforce of the House of Representatives on
private and Federal student loan servicers, including--
(1) any legislative recommendations to improve student loan
servicing standards; and
(2) information on proactive early intervention methods by
servicers to help distressed student loan borrowers enroll in
any eligible repayment plans.
<all>
Introduced in Senate
Read twice and referred to the Committee on Health, Education, Labor, and Pensions. (text of measure as introduced: CR S8669-8673)
Committee on Banking, Housing, and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection. Hearings held. With printed Hearing: S.Hrg. 113-445.
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