The state Department of Financial Services proposed a new regulation intended to provide additional protections for New York student loan borrowers. The proposal would require companies that service student loans held by New Yorkers to meet new standards.
Under the proposed regulation, student loan servicers will be required to:
- provide clear and complete information concerning fees, payments due and terms and conditions of loans;
- apply payments in borrowers’ best interest, rather than in ways that maximize servicer fees;
- inform borrowers of income-based repayment and loan forgiveness options;
- maintain and provide to consumers a detailed history of their account;
- when a borrower’s loan is transferred to a new servicer, ensure all necessary servicing information is transferred with the loan so the borrower’s repayment is not disrupted;
- provide accurate information to credit reporting agencies; and
- provide timely and substantive responses to consumer complaints.
The proposed regulation will also prohibit servicers from defrauding or misleading borrowers, engaging in any unfair, deceptive, abusive or predatory act or practice, or misapplying borrowers’ payments.
“While the federal administration ignores the growing problem of student loan debt, New York is taking action to protect borrowers,” Gov. Cuomo said in the press release. “This measure will help curb unscrupulous practices of the student loan servicing industry and empower borrowers to make better informed choices about how to finance their education.”
The proposed regulation is subject to a 60-day comment period.
To learn more, view the DFS press release.